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Pfizer Plans New Cost Cuts

It also pledges $10 billion in buybacks.

Updated from 3:20 p.m.

Warning that annual revenue will be flat for the next two years,

Pfizer

(PFE) - Get Pfizer Inc. Report

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.

The cost-cutting goal is to drive next year's operating expenses below those of 2006 and to further reduce them going forward, said Vice Chairman David Shedlarz. "We are leaving no stone unturned as we look hard at all aspects of our operations to become more flexible and agile," he said.

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Shedlarz added that Pfizer "expect

s to continue to pay a growing dividend" and that the company plans to repurchase up to $10 billion in stock next year. Pfizer bought back $4.5 billion in stock during the first nine months of 2006 and will buy another $2.5 billion by year-end.

Additionally, Pfizer will look at "targeted" acquisitions, Kindler said. Although Pfizer agreed to sell its

consumer-products unit to

Johnson & Johnson

(JNJ) - Get Johnson & Johnson (JNJ) Report

, Kindler said he will keep the animal-health division. As for new products, he told analysts to stay tuned for a Nov. 30 meeting when R&D and product-development strategies will be unveiled.

By late afternoon, Pfizer's stock had slipped 17 cents to $27.93.

The comments came as Pfizer posted third-quarter profits that easily beat analysts' expectations. For the three months ended Sept. 30, Pfizer reported earnings of 54 cents, excluding items, topping the consensus estimate by 9 cents. Revenue of $12.3 billion exceeded the Wall Street average estimate of $11.38 billion.

Once all items were factored in, Pfizer earned $3.36 billion, or 47 cents a share. For the same period last year, it earned $1.59 billion, or 22 cents a share, on revenue of $11.26 billion.

Executives warned that the fourth-quarter earnings, excluding special items, will decline year over year. Revenue will likely be flat.

Pfizer didn't specifically predict fourth-quarter earnings per share, but it said profits will take a hit as the full impact of generic competition for Zoloft, the antidepressant that lost U.S. patent protection earlier this year, is felt. During the third quarter, Zoloft sales sank 43% to $459 million.

Among major products, Pfizer continues to predict it will achieve full-year sales of $13 billion for Lipitor, the cholesterol fighter, and $2 billion for Celebrex, the arthritis treatment.

For the third quarter, Lipitor, the world's best-selling prescription drug, achieved sales of $3.32 billion, up 15% worldwide. The U.S. component grew 19% to $2.07 billion.

"We continue to see aggressive competition from branded and generic agents, which will further intensify in the fourth quarter of 2006," Pfizer said. A big challenge will come later this year when multiple generic versions of

Merck's

(MRK) - Get Merck & Co., Inc. (MRK) Report

Zocor hit the U.S. market. Lipitor sales will grow next year "but at a lower rate than in 2006," Pfizer said.

Sales of Celebrex sales reached $537 million for the third quarter, up 20% from the same period last year. Celebrex is a COX-2 inhibitor, the same type of drug as Vioxx, which Merck removed from the market two years ago over concerns about its cardiovascular risk. The COX-2 controversy knocked down Celebrex's sales to $1.73 billion last year from 2004's peak of $3.3 billion.

The impotence drug Viagra saw its sales gain 10% to $423 million, while sales of Lyrica, for two types of nerve pain and epilepsy, more than quadrupled to $324 million.

Pfizer's second-biggest drug, the blood-pressure medication Norvasc, grew by 7% to $1.21 billion. Norvasc has less than 12 months of U.S. patent life left. Pfizer is suing

Mylan Laboratories

(MYL) - Get Mylan N.V. (MYL) Report

for patent infringement in a case scheduled for trial in late November.

On Thursday, Mylan said a federal judge granted its motion to dismiss one of two contested patents from the trial. The Food and Drug Administration has given Mylan approval to sell three dosage strengths of generic Norvasc.