Patience isn't an especially abundant personality trait these days. If a stock doesn't handily beat its estimates and/or raise guidance, investors bail. For better or worse, owning shares in Bristol-Myers Squibb
Sales in the first quarter were weak, though this was largely expected. Total revenue declined 2% on the basis of a 2% benefit from foreign exchange and a 4% decline in sales volume. Total pharmaceutical sales were down about 4%, and U.S. pharmaceutical sales were down 10% for the quarter.
As was the case in the prior quarter, the drug portfolio in the March quarter could be characterized as "two Snow Whites" and a whole bunch of dwarves. Plavix -- marketed in partnership with Sanofi-Aventis
Bristol-Myers did have some strong growth in other compounds, although they contributed far less on a percentage-of-sales basis. The HIV drug Reyataz grew 99% in the quarter (to $149 million) and captured 30% of new protease inhibitor prescriptions in the U.S. Abilify (for schizophrenia) sales grew 63% to $188 million, and sales of the cancer drug Erbitux -- partnered with ImClone Systems
Looking ahead a little bit, there will be new products hitting the market from Bristol-Myers. Baraclude (entecavir) was approved by the FDA in March, and the company hopes to see approvals before year-end for muraglitizar (for diabetes) and abatacept (for rheumatoid arthritis). The two latter drugs are both first-in-class compounds. Muraglitizar, in particular, could be a billion-dollar drug. If approved, it will be co-marketed with Motley Fool Income Investor recommendation Merck
After getting smacked by generic competition almost across the board, it will take time for Bristol-Myers to get back on a growth track. But, that said, the shares don't really seem to be trading at a bargain-basement level. So here's where the patience comes in again. Investors who are willing to persevere can collect a pretty healthy dividend (a 4.3% yield), while waiting for new drugs to hit the market and hoping that one or more of them reaches blockbuster status.
There is, of course, a risk that the FDA will refuse to approve one or more of the company's new candidates. This is true for every pharmaceutical company -- and it's a risk factor with which investors must make their peace. Bristol-Myers isn't my favorite by any means, but I won't suggest that patient long-term investors won't see some rewards down the line for holding on to their shares.
More Foolish takes on the pharmaceutical sector:
- Thanks for the Ride, Transkaryotic
- Schering-Plough Back in Black
- Novartis' Triple Threat
- Wyeth Looking Healthier
Want to find other solid stocks that pay a hefty dividend? Try a free trial subscription to Motley Fool Income Investor. Fool contributor Stephen Simpson owns shares of Sanofi-Aventis. The Fool has a disclosure policy.