Yesterday Millennium Pharmaceuticals (NASDAQ:MLNM) announced second-quarter financial results and prepared investors for a blast from the past with higher expenditure guidance for the year.

Revenue was down 6% in the quarter year-over-year. A 6% U.S. net sales gain of multiple myeloma treatment Velcade couldn't stem the lost royalties from the cessation of a supply agreement with Schering-Plough (NYSE:SGP) for Integrilin. The GAAP net loss rose to $17 million compared the first quarter's $7 million shortfall. 

In June Millennium released a gaggle of new data on the efficacy and safety of Velcade in a variety of disease settings. If Millennium is going to become earnings positive in the intermediate term, then the top-line growth needed to get there will come from increased Velcade sales due to the publication of more positive clinical trial results.

In the conference call Millennium's management didn't sound optimistic for future royalty growth from Schering-Plough's sales of Integrilin, and guided that it expects to receive only the minimum royalty amount in 2007.

Even if the financials aren nothing to get thrilled about, the third quarter could be an exciting one on the R&D front. Millennium has guided to release interim results from one of its studies testing Velcade in frontline use for multiple myeloma this quarter. If the results are positive then a possible regulatory filing to expand the Velcade label is expected by the end of the year. In September results from a study testing one of its earlier-stage compounds, MLN1202, as a treatment for multiple sclerosis will be released.

Combined SG&A and R&D expenses are expected to be at least $465 million in 2007. Having a stable of eleven drugs in development is nice, but most of these compounds are in early stages and will only suck up more cash as they progress in the pipeline.

Millennium needs to take some action with its earlier-stage compounds to limit their expenses and drag on the bottom line, or else it will never get to sustained GAAP profitability. This makes Millennium a good candidate for activist investors like Third Point, which has become quite adept at buying up shares of other drugmakers, like PDL BioPharma (NASDAQ:PDLI) and CV Therapeutics (NASDAQ:CVTX), with huge expenses and then trying to rectify the situation.

Millennium, CV Therapeutics, and PDL BioPharma are Rule Breakers selections.You can check out all our recommendations as well as get access to our message boards and exclusive content with a 30-day free trial.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.