Pfizer Inc
reported a better-than-expected first-quarter profit on Tuesday, as cost-cutting helped offset sharply lower sales of its Lipitor cholesterol fighter and its Chantix smoking-cessation drug.

Lipitor sales were hurt by competition from inexpensive generic forms of Merck & Co's Zocor and AstraZeneca Plc's potent Crestor.

Sales of Chantix, a relatively new drug that Pfizer had hoped would become an engine of profit growth, crumbled on concerns it causes agitation and suicidal thoughts.

The world's largest drugmaker said net profit fell 2 percent to $2.73 billion, or 40 cents per share. That compared with $2.78 billion, or 41 cents per share, in the year-earlier quarter, when Pfizer took acquisition-related charges.

Excluding special items, Pfizer earned 54 cents per share. Analysts on average expected 49 cents per share, according to Reuters Estimates.

Company global revenue fell 8 percent to $10.87 billion, about $180 million below Wall Street expectations. Revenue would have fallen only 3 percent if not for the strengthening dollar, which lowers the value of overseas sales when converted back into U.S. currency.

Adjusted, selling, informational and administrative expenses and the cost of goods declined significantly, bolstering results. But taxes rose 6 percentage points due to costs of financing Pfizer's planned purchase of smaller U.S. rival Wyeth , crimping overall profit.

Pfizer's operating expenses were $1 billion lower than expected, wrote Sanford Bernstein analyst Tim Anderson in a research note.

Lipitor sales fell 13 percent to $2.72 billion. Chantix sales dropped 36 percent to $177 million.

Sales of oncology drugs fell 13 percent to $552 million, as colon cancer treatment Camptosar began facing generic competition. The drug's sales plunged 43 percent to $109 million. Sutent, which treats kidney and stomach cancer, rose 7 percent to $202 million.

One of the few other important drugs posting higher revenue was Lyrica, a treatment for neuropathic pain which rose 17 percent to $684 million.

Pfizer has been one of the most poorly performing drugmakers over the past decade, its sales and shares ravaged by an inability to develop big-selling new medicines despite costly mergers with U.S. rivals Warner-Lambert and Pharmacia.

The struggling giant is back on the mega-merger trail, with plans later this year to scoop up Wyeth in a deal valued at $68 billion when announced in late January. It is hoping Wyeth's drugs will offset expected plunging sales of Lipitor, when Pfizer's biggest product faces generic competition in 2011.

To complete the Wyeth deal, Pfizer said it would halve its dividend, effective with its second-quarter payout.

Pfizer, confronted with expected sharply lower 2009 earnings, has vowed to cut 15 percent of the combined company's workforce of about 130,000 employees and close some manufacturing sites. As with big past deals, that would provide huge cost savings that will prop up earnings for awhile.

The question is whether Pfizer's laboratories will be able to break out of their long funk, and deliver big-selling new products needed for long-term company growth.

Shares of Pfizer rose 19 cents to $13.69 in premarket activity.

(Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Derek Caney)