"In the quarter, and in the past year, we've taken decisive action as a BioPharma leader to become leaner and more agile," said James M. Cornelius, chairman and chief executive officer. "I'm particularly pleased by our global commercial teams in presenting our value proposition to customers and payers. We've executed with speed and rigor against our strategy. Results this quarter continued to be strong, capping off an outstanding year.
"We are reaching our objectives in all areas. Our favorable cash position expedites our business development efforts. Our 'String of Pearls' grows more valuable with each asset and alliance we add. And we're becoming more productive, as seen in our growing profit margins.
"In 2009, we expect to deliver on our promises to advance our innovative pipeline, execute our business development plans, grow margins and meet our productivity goals. We are well on-track to fulfill our commitments to patients and shareholders, and to navigate the challenges of coming years."
U.S. pharmaceutical net sales increased 13% to $2.8 billion in the fourth quarter of 2008 compared to the same period in 2007. International pharmaceutical net sales decreased 9% to $1.7 billion. This decrease was due primarily to an 8% unfavorable foreign exchange impact and the divestiture and erosion of some mature brands in Latin America, Middle East and Japan.
Gross profit as a percentage of net sales improved to 71.0% in the fourth quarter 2008 compared to 66.1% in 2007. This improvement was mostly driven by higher manufacturing rationalization charges in 2007, cost improvements, favorable product mix and price increases.
Marketing, selling and administrative expenses increased by 2%, or 7% excluding foreign exchange impact, to $1.3 billion in the fourth quarter of 2008 compared to the same period in 2007.
Advertising and product promotion spending decreased by 3%, or was flat excluding foreign exchange impact, to $449 million in the fourth quarter of 2008, compared to the same period in 2007.
Research and development expenses increased by 29%, or 31% excluding foreign exchange impact, to $1.1 billion in the fourth quarter of 2008 compared to the same period in 2007. The increase was due to upfront and milestone payments to Exelixis in 2008 as part of an expansion of the collaboration between the companies.
The effective tax rate on earnings from continuing operations before minority interest and income taxes was 22.5% for the fourth quarter of 2008, and includes the full-year impact of the research and development tax credit.
The company reported fourth quarter net earnings from continuing operations of $1.2 billion or $0.61 per diluted share, compared to net loss of $192 million or $0.10 per diluted share for the same period in 2007. The fourth quarter 2008 net earnings include a $582 million after tax gain, or $0.29 per diluted share, mainly attributed to the proceeds from the sale of our stake in ImClone Systems.
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