Pfizer Plans New Cost Cuts

Updated from 3:20 p.m.

Warning that annual revenue will be flat for the next two years, Pfizer (PFE) says it will begin another round of cost-cutting in 2007.

The company also said Thursday that it expects to achieve its earnings guidance of roughly $2 a share, excluding items, this year. Pfizer predicted "high-single digit" EPS growth in 2007 and 2008, again before items.

Generic competition, the strengthening of the U.S. dollar and pricing restrictions in large European markets have prompted Pfizer to revise its forecast from "modest revenue growth" to no revenue growth through 2008.

"Right now, we're facing a pretty tough operating environment," said Jeffrey Kindler, the CEO who replaced Hank McKinnell in July. "Our revenue growth will be constrained in the short-term."

Making his debut in a quarterly financial conference call, Kindler said Pfizer would take a "comprehensive look" at costs and implement a plan next year to reduce expenses during 2007 and 2008.

Kindler, who already has restructured top management, didn't provide details and didn't forecast how much Pfizer might save. He'll reveal the plan in January when Pfizer issues its fourth-quarter and fiscal-year results.

Kindler said the new cost-cutting plan will be different than the existing program, which McKinnell initiated last year, and is expected to achieve $4 billion in cost-savings by 2008. The company expects $2.5 billion in savings by the end of this year.

The current program has focused on squeezing costs primarily related to the acquisitions of Warner-Lambert and Pharmacia, Kindler said. In an effort to become more efficient, the new plan will do more than emphasize one-time reductions, he said.