Pfizer Inc. (PFE) reaffirmed its full-year guidance Wednesday despite a 48 percent drop in second-quarter profit because of lagging sales of cholesterol drug Lipitor and generic competition for Zoloft and Norvasc.

A disappointing 13 percent drop in Lipitor sales marked a sharp turnaround from growth of 8 percent in the first quarter. Fluctuating wholesale inventory levels were to blame for both the first-quarter sales rise and about half of the second-quarter sales drop, the company said. Fluctuating inventory levels are not expected to impact Lipitor for the remainder of the year.

Net income slid to $1.27 billion, or 18 cents per share, from $2.42 billion, or 33 cents per share, a year ago. Excluding items, adjusted profit fell 20 percent to $2.94 billion, or 42 cents per share, from $3.66 billion, or 50 cents per share, a year ago.

Revenue dipped 6 percent to $11.08 billion from $11.74 billion in the prior-year period.

The results missed analysts' expectations for adjusted profit of 50 cents per share on revenue of $11.4 billion, according to a survey by Thomson Financial.

Pfizer's shares fell $1.02, or nearly 4 percent, to $24.94 in afternoon trading. The stock has traded between $22.33 and $28.60 over the last 52 weeks.

Chairman and Chief Executive Jeffrey B. Kindler, in a conference call following the results, said the "tough quarter" was due to several factors, including payments to Bristol-Myers Squibb (BMY) for a development partnership over the cardiovascular drug apixaban. Also, both Zoloft and Norvasc lost patent exclusivity last year and generic competition has eaten away at Pfizer's market share.

Meanwhile, the Lipitor sales drop came from the U.S. market, where there was a 25 percent decrease, while international sales rose 5 percent. Exubera sales registered a disappointing $4 million, while smoking cessation drug Chantix posted a positive $200 million. Sales of Lyrica rose 49 percent to $478 million.

Kindler and several other executives said the company remains on track with its strategy, set back in January, which called for restructuring the company and placing a stronger focus on pipeline development. While the company has cut costs elsewhere, research and development costs grew by 24 percent to $2.17 billion. Restructuring costs totaled $1.1 billion during the quarter.

"We had no illusions in January, and we have no illusions today, that these changes can occur overnight," Kindler said.

Looking ahead, Pfizer reaffirmed its fiscal 2007 outlook for adjusted profit of $2.08 to $2.15 per share on revenue of $47 billion to $48 billion, as well as adjusted earnings guidance for 2008 of $2.31 to $2.45 per share on sales of $46.5 billion to $48.5 billion. Pfizer plans to buy back another $5 billion in shares during the second half of the year.

On average, Wall Street is predicting 2007 earnings of $2.14 per share on revenue of $47.72 billion for fiscal 2007 and profit of $2.34 per share on revenue of $47.27 billion for fiscal 2008.