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Standard & Poor's took another piece out of its rating of

Bristol-Myers Squibb

(BMY) - Get Bristol-Myers Squibb Company Report

on Monday, citing the company's "diminished ability to generate meaningful earnings and cash flow growth over the next few years." The ratings firm kept its negative outlook on the New York-based drug company.

S&P's action wasn't a surprise, having put Bristol-Myers on its CreditWatch list in March, which means it was considering reducing the company's ratings. Monday's action on long-term ratings to A-plus from AA-minus means it will be more expensive for Bristol-Myers Squibb to borrow money. The ratings firm also reduced its short-term credit rating on the company to A-1 from A-1-plus.

Bristol-Myers Squibb still enjoys what S&P calls an above-average investment grade rating. The firm's highest rating is AAA, something which Bristol-Myers Squibb had two years ago, when its rating was first cut.

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S&P said Monday that it remained concerned about "several looming major product patent expirations" and about the company's ability to replace revenue that will be lost to generic competition with sales from big, new products or healthy existing products.

Arthur Wong, S&P's credit analyst, praised the company for a diverse product portfolio. However, he said the certainty of patent expirations on big-selling drugs and the uncertainty of how well new drugs will perform contributed to the ratings downgrade.

Last week, Moody's Investor Services issued an analysis of seven large drugmakers, citing Bristol-Myers Squibb as an example of a Big Pharma company whose patent expirations on important products is outrunning the company's development of new products. Moody's has tagged Bristol-Myers Squibb with a negative outlook. Moody's said the company's had a "low strength" pipeline.

The most immediate hit to Bristol-Myers Squibb comes this year when Paraplatin, a treatment for ovarian cancer, goes off patent. Then in 2006, generic companies will be able to attack Pravachol, a cholesterol-fighting drug. Last year, those drugs produced $3.7 billion in sales. The cancer drug Taxol, which already has lost U.S. patent protection, will continue to suffer from patent expirations in other major markets, causing a reduction in revenue to last year's $934 million.

Bristol-Myers Squibb's stock closed Monday at $22.94, up 24 cents, or 1.1%. Wall Street analysts still remain wary of the stock. According to Thomson First Call, there are only two buy recommendations vs. 15 hold ratings and nine sell recommendations.

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