Bristol-Myers Squibb ( BMY) investors have only to wait until Thursday for the next shoe to drop.

The last one fell in October when the drugmaker said a generic equivalent of Plavix cut the anticoagulant's third-quarter sales to $630 million, down 36% from the year-ago quarter. Plavix is the company's biggest source of revenue.

Bristol-Myers Squibb had already warned that a generic version of Plavix would harm earnings for 2006, even though a Canadian company sold it for only three weeks in August.

The New York company has said generic Plavix might affect 2007's first quarter because it doesn't know how much of the copycat drug was shipped. The generic's sales were halted by a judge who issued an injunction.

A clearer picture will emerge Thursday as Bristol-Myers issues fourth-quarter and fiscal 2006 results as well as guidance for 2007. Its most recent 2006 earnings prediction is $1.02 to $1.07 a share, excluding one-time items. Analysts polled by Thomson First Call forecast $1.05 for the year and 16 cents for the fourth quarter.

The company's most recent prediction is better than the 95-cent figure it issued in September as the Plavix fiasco unfolded, but the guidance is lower than the range of $1.15 to $1.25 a share offered before the generic Plavix reached the market.

Bristol-Myers Squibb licenses Plavix for U.S. marketing from Sanofi-Aventis ( SNY). Both companies tried to make a deal with Canada's Apotex to head off a patent challenge in exchange for payments. But state attorneys general rejected the agreement, and Apotex began selling generic Plavix. The bungled deal cost Bristol CEO Peter Dolan his job and provoked an investigation by the Justice Department, which is continuing.

The Plavix companies returned to court Monday to pursue a patent infringement suit vs. Apotex, and many analysts believe they will win.

"Our model presumes that Bristol will prevail in the patent trial and that Plavix sales will continue to rise through 2011 when the patent expires," says Morningstar analyst Brandon Troegle in a recent report. "Plavix sales were approximately 20% of the company's revenue in 2005, and this percentage grows moderately in our forecast until 2011." Troegle doesn't own shares, and his firm doesn't have an investment banking relationship with the company.

Standard & Poor's believes Bristol-Myers Squibb has a "solid chance" of winning the patent case, say credit analysts Arthur Wong and David Lugg in a Jan. 17 review. "Still, as with any patent litigation case, the outcome is highly uncertain." A victory could raise S&P's outlook to stable from negative; however, a loss would cause a "multi-notch rating downgrade" from the current A-plus rating, they say.

The Hope of Added Growth

Despite the patent uncertainty, Plavix's sales should be aided by recent actions of the Food and Drug Administration and a coalition of medical groups.

In August, the FDA approved an additional use for patients who have had a type of heart attack caused by a sudden, total blockage of an artery. Citing American Heart Association data, the FDA says 500,000 Americans a year experience this ailment, called acute ST-segment elevation myocardial infarction.

First approved by the FDA in late 1997, Plavix is prescribed for people who have had a recent heart attack or stroke and for patients with acute coronary syndrome, which causes chest pain due to inadequate blood supply to the heart.

Plavix is prescribed for these problems because it prevents blood platelets from sticking together. Platelets are needed to stop excessive bleeding after an injury, but they also can create arterial clots if they coagulate next to a buildup of cholesterol-caused plaque.

Anti-platelet activity also makes Plavix important for recipients of drug-coated stents, the mesh-like tubes inserted into arteries that have been cleared of plaque. These stents improve blood flow, and they release a drug slowly to prevent a reclogging of arteries. However, these devices can cause dangerous clots.

In mid-January, five medical groups, including the American Heart Association, said patients with drug-coated stents should take anti-platelet drugs for at least a year rather than the currently recommended three to six months. "Stopping anti-platelet therapy too early after a stent is placed is the leading independent predictor of stent thrombosis -- blood clots that frequently lead to heart attack and/or death," the medical groups say.

Plavix is the most prescribed anti-platelet drug; the second is Ticlid from Roche. Ticlid is prescribed less often because it has many more side effects and carries several "black box" warnings on its label, the strongest alert issued by the FDA.

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