Bristol-Myers Squibb

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reported a sharply lower profit in the third quarter as generic competition continued to eat away at drug sales and the company ratcheted up spending on research and development of new drugs.

Net income slid 16.3% to $ 758 million, or 38 cents a share, vs. $906 million, or 47 cents a share, in the year-ago period. Excluding items, the company earned 44 cents a share. Revenue increased 1% to $5.42 billion.

The Thomson First Call consensus forecast was $771.4 million, or 39 cents a share, on revenue of $5.3 billion.

Generic-drug competition continues to erode revenue, while up-and-coming products aren't coming up fast enough or strong enough.

'We are making good progress executing against our strategy and transforming our portfolio to build or strengthen our leadership position in 10 disease areas, " the company said in a statement. "As part of this strategy, we continue to increase investment in research and development, and expect that investment to grow in the 12% range for the year. Nevertheless, as we have discussed previously, our earnings will continue to be pressured through our portfolio transition to the end of 2006 as a result of exclusivity losses of higher margin products, as well as higher investments in R&D and key product support."

Worldwide pharmaceutical sales were flat at $3.8 billion, while U.S. sales decreased 2% to $2.1 billion. In particular, global sales of Paraplatin slid 28% to $177 million.

Worldwide sales of its No. 2 drug Plavix --which prevents blood platelets from coagulating, thus reducing the risk of stroke and heart attacks -- rose 30% to $902 million. Plavix was developed by


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, but Bristol-Myers Squibb has responsibility for North American, South American and Australian markets under a comarketing agreement.

R&D spending increased 9% to $615 million.

The company reaffirmed its previous full-year EPS guidance of $1.60 to $1.65 on an adjusted non-GAAP basis. Including items, the forecast is $1.39 to $1.44 a share.

Bristol-Myers Squibb, however, also repeated that it expects "substantial incremental sales losses" in 2005, 2006 and 2007, representing continuing declines in sales of the products that lost or will lose exclusivity protection in 2003 and 2004, and additional declines attributable to products that will lose exclusivity protection primarily in 2005 and 2006.

Shares ended at $24.01 Thursday.