Despite facing a steep patent cliff, pharmaceutical firm Bristol-Myers Squibb (BMY) posted decent fourth-quarter results Thursday morning. Revenue declined 23% year-over-year to $4.2 billion, slightly better than the consensus prediction. Operating earnings per share declined 11% year-over-year to $0.47, which was also better than consensus estimates.
2012 was expected to be a tough year for the company, as it had US patents expire on Plavix and Avapro/Avalide, and total sales fell 23% for the quarter. However, strong international growth of 6% allowed the company to achieve 12% revenue expansion, excluding the aforementioned drugs. Costs were also reduced substantially, as the firm cut advertising and product-promotion spending 26% year-over-year to $212 million and slashed SG&A spending 6% year-over-year to $1.1 billion.
There weren't too many new updates on the product pipeline. Eliquis was approved by the FDA to reduce the risk of stroke in patients with nonvalvular atrial fibrillation, and Forxiga was approved in the EU for treatment of Type-2 diabetes-one of the world's fastest growing health issues, which we highlighted in our piece on Johnson & Johnson (JNJ) earlier this week. The company mentioned that 30-40% of its R&D budget in 2013 will be spent on late-stage drug development and that R&D spending will grow at a low-single-digit pace in 2013. Bristol-Myers expects earnings per share of $1.78-$1.88 in 2013, roughly in line with consensus, on sales of $16.5-$17 billion, also in line with consensus.
We like the firm's juicy annual dividend yield of 3.9% at current levels, as well as its commitment to growing its payout. We also think the firm will tap its buyback program, re-affirming its desire to return cash to shareholders. We're strongly considering adding shares of the company to the portfolio of our Dividend Growth Newsletter, but we're waiting for a more attractive valuation.
Additional disclosure: JNJ is included in our Dividend Growth portfolio.