The theme for the pharmaceutical industry's 2010 third-quarter earnings reports has been officially set: If you can't get it done through sales, just cut costs.
That's no way to help share price. Investors aren't stupid. They know companies can't cut costs forever and that revenue growth tells you where the company is headed.
That's not to say Bristol-Myers shouldn't have cut the costs; it certainly needs to. The loss of Plavix to generic competition at the end of next year is going to hurt. Cost-cutting is a necessary evil and it might as well start now.
But cost-cutting, in and of itself, isn't going to be enough to get Bristol-Myers to its goal of seeing adjusted EPS in 2013 higher than it was in 2009. Bristol-Myers needs post-Plavix revenue to reaccelerate quickly. That's only going to happen with a few solid hits from the pipeline.
In addition to a couple of potential expansions of drugs that are already on the market this week, Bristol-Myers has a pair of drugs that could make a major impact on revenue. Melanoma treatment ipilimumab is currently up for review at the Food and Drug Administration, with a decision expected near the end of December. Considering the lack of alternatives for skin cancer, the sales ramp-up for ipilimumab could be steep.
Apixaban is a little further back, but no less important. An application to market the anticlotting drug, which is partnered with Pfizer
Investors should give Bristol-Myers a pass on revenue for a few quarters, but if the pipeline can't produce winners soon, the drop off the patent cliff is going to hurt.
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