By Ransdell Pierson Jan 28 Pfizer Inc reported better-than-expected fourth-quarter results on Tuesday, helped by higher sales of drugs for cancer, nerve pain and arthritis, and forecast 2014 earnings in line with Wall Street estimates. The biggest U.S. drugmaker said it earned $2.57 billion, or 40 cents per share, in the fourth quarter. That compared with $6.32 billion, or 86 cents per share, in the year-earlier quarter when the company recorded a $4.8 billion gain from selling its nutritional products business to Swiss food group Nestle SA. Excluding special items, Pfizer earned 56 cents per share. Analysts, on average, expected 52 cents per share, according to Thomson Reuters I/B/E/S. JP Morgan analyst Chris Schott said quarterly results were solid and driven by unexpectedly strong sales and lower-than-expected expenses. Schott said investors remain focused mainly on the company's pipeline of experimental drugs, including a treatment for advanced breast cancer called palbociclib and studies to determine whether Pfizer's blockbuster Prevnar vaccine against pneumococcal bacteria can prevent pneumonia in adults age 65 and older. "We believe Pfizer shares could see meaningful upside in the event of positive data for palbociclib," Schott said. Some analysts expect the drug, which has been granted a "breakthrough" drug designation from the U.S. Food and Drug Administration, to garner annual sales of more than $5 billion if ongoing trials succeed and it is approved. REALLY HUGE OPPORTUNITY "It's a really huge opportunity," Pfizer research chief Mikael Dolsten said in an interview on Tuesday, adding that palbociclib could also hold promise in treating newly diagnosed and recurrent breast cancer, melanoma, lung cancer and other malignancies. Novartis AG and Eli Lilly are also racing to develop drugs similar to palbociclib, which is meant to stunt growth of cancer cells by blocking two enzymes, cyclin-dependent kinases 4 and 6. Other drugmakers, including Merck & Co and Bristol-Myers Squibb Co, are racing to develop a different class of cancer drugs called PD-1 inhibitors that enable the immune system to recognize cancer cells and attack them. Dolsten said Pfizer's own experimental immuno oncology drugs might be able to be used in combination with PD-1 inhibitors and other cancer drugs that target specific proteins. They include vaccines and antibody drug conjugates, which are antibodies that carry payloads of other drugs. Oncology has become one of Pfizer's biggest priorities, with the introductions of Xalkori for lung cancer in 2011, and approvals in 2012 of Inlyta for kidney cancer and Bosulif for chronic myelogenous leukemia last year. But the company's oncology program suffered a setback on Monday when Pfizer said an experimental treatment for lung cancer, dacomitinib, failed to meet its goals in two late-stage studies among patients who had received prior treatment for advanced non-small cell lung cancer. Pfizer's effective tax rate fell 2 percentage points to 27.7 percent in the fourth quarter, largely related to audit settlements with overseas governments, bolstering quarterly results. Global company revenue fell 2 percent to $13.56 billion, hurt by competition from cheaper generic forms of its medicines. But they topped Wall Street forecasts of $13.35 billion. Revenue would have grown 1 percent if not for the stronger dollar, which lowers the value of sales in overseas markets. Pfizer said it expects full-year earnings in 2014, excluding special items, of $2.20 to $2.30 per share. That is roughly in line with Wall Street expectations of $2.28 per share, and assumes that Pfizer buys back $5 billion worth of its common stock during the year. Inlyta and Xalkori sales doubled in the quarter, to $102 million and $89 million, respectively. Sales of Lyrica, a Pfizer treatment for nerve pain that is its biggest product, rose 11 percent in the fourth quarter to $1.26 billion, while sales of Prevnar rose 3 percent to $1.1 billion. Sales of Enbrel, a treatment for psoriasis and arthritis, rose 5 percent to $1 billion. And Celebrex, used to treat pain and arthritis, rose 6 percent to $798 million. But sales of impotence treatment Viagra fell 14 percent to $476 million, hurt by sharply lower sales in overseas markets. Company shares rose 3 percent to $30.54 in afternoon trading on the New York Stock Exchange, amid a 1.1 percent advance for the ARCA Pharmaceutical Index.