Pfizer Inc
showed further weakness in its main business of prescription medicines, sending shares down more than 3 percent on concern over future growth as the company prepares to divest better-performing non-pharmaceuticals businesses.

The world's largest drugmaker saw sales declines in primary care, specialty care, branded generic and oncology medicines during the second quarter. One of the few bright spots was that drug sales grew in emerging markets. (For a graphic on Pfizer's earnings, see: http://r.reuters.com/vuf92s )

That could mean it is more vulnerable ahead of the U.S. patent expiration in November on its top-selling Lipitor cholesterol fighter. Generic competition has already begun to chip away at overseas sales of the $10 billion-a-year drug.

Pfizer said global prescription drug sales fell 3 percent in the quarter to $14.64 billion, and were down 7 percent after stripping out the benefit of the weaker dollar. Lipitor worldwide sales fell 8 percent to $2.59 billion.

Those declines were partly offset by a stronger performance in its animal health and nutritional products business. But Pfizer plans to divest those units in the next year or two, through a sale or spin-off. The combined value of the businesses could exceed $16 billion.

We believe these businesses are worth more outside of Pfizer than in Pfizer, Chief Executive Ian Read said in an interview. He added the company was focusing instead on promising medicines now in development.

Pfizer earned $2.61 billion, or 33 cents per share in the quarter. That compared with $2.48 billion or 31 cents per share a year ago.

Excluding special items, Pfizer earned 60 cents per share. Analysts on average expected 59 cents, according to Thomson Reuters I/B/E/S. Results were helped by a lower effective tax rate of 29 percent, from 32 percent a year ago, due to extension of a federal research and development credit.

Total revenue fell 1 percent to $16.98 billion, matching Wall Street expectations, but would have fallen 5 percent if not for the weaker dollar, which boosts overseas sales.

Pfizer shares fell 3.5 percent at $18.36 in afternoon trade, leading a 1.7 percent decline for the drug sector.

Morningstar analyst Damien Conover said the stock was hurt by disappointment Pfizer did not report better-than-expected sales, as rivals like Bristol-Myers Squibb did in the quarter, and by a surprisingly high level of expenses.

PIPELINE POTENTIAL

Wall Street has been sour on Pfizer for much of the past five years due to its steadily falling earnings, plunging share price and its inability to create big-selling new medicines. But some investors had begun to look for new growth opportunities in an improving experimental drug pipeline and cost savings derived from its 2009 purchase of rival Wyeth.

Over the past year, Pfizer shares have risen 20 percent, twice the advance seen for the drug sector.

If you look at the pipeline there's a lot of exciting things going on, said CLSA analyst David Maris, referring to Pfizer's experimental drugs for rheumatoid arthritis, lung cancer and blood clots that are now in late-stage trials.

Upcoming data on Pfizer's rheumatoid arthritis drug tofacitinib is critical for the company, said Edward Jones analyst Linda Bannister.

The pill works by blocking a protein called Jak-3 and could be deemed more convenient than Johnson & Johnson's Remicade and other treatments that are injected or infused.

The big thing this year is the Jak-3, Bannister said. People are paying close attention to that.

For the first time, Pfizer's animal health products crossed the $1 billion mark, with sales jumping 18 percent to $1.06 billion -- bolstered by the company's recent acquisition of King Pharmaceuticals and its Alpharma brands.

Sales of consumer healthcare products, including its Robitussen cough medicines acquired through its purchase of Wyeth, rose 6 percent to $721 million. Revenue from nutritional products rose 4 percent to $493 million.

Pfizer earlier this year said it would cut as much as 25 percent of its $8 billion to $8.5 billion research budget to deliver on a 2012 profit forecast.

The drugmaker on Tuesday reaffirmed its 2011 profit forecast of $2.16 to $2.26 per share, excluding special items. It predicted earnings in 2012 of $2.25 to $2.35 per share -- reflecting stable or improved earnings the first full year Lipitor faces U.S. generics.

(Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Michele Gershberg, Dave Zimmerman and Matthew Lewis)