Drug makers Bristol-Myers Squibb Co. (BMY) and Wyeth (WYE) reported higher second-quarter earnings, helped by cost cuts and rising sales of top products, and continued an industry streak of exceeding Wall Street expectations.

Both companies faced headwinds from unfavorable currency-exchange rates, the weak economy and competition from cheaper generic drugs. But like some other drug makers this week, Wyeth and Bristol reported higher-than-expected earnings and boosted their financial forecasts for full-year 2009.

Wyeth and Bristol are taking very different strategic directions, though. Wyeth, of Madison, N.J., has agreed to be acquired by Pfizer Inc. (PFE) in a deal originally valued at about $68-billion, expected to close by the end of the year.

New York-based Bristol, however, has stayed independent, and late Wednesday announced a $2.4 billion purchase of biotechnology-drug developer Medarex Inc. (MEDX), or $2.1 billion net of Medarex's projected cash. The deal is designed to advance Bristol's strategy of stocking up on biotech drugs and helping to prepare for the loss of market exclusivity for its top-selling drug, the blood thinner Plavix, next decade.

"This deal is expected to give us increased leadership in the area of biologics," Bristol-Myers Chief Executive James Cornelius told analysts on a conference call. "It vastly expands the scope of our pipeline in oncology and immunology."

While some analysts said Medarex's price tag - a 90% premium to its closing share price Wednesday - might be viewed as hefty, Medarex has assets including royalty streams that could prove valuable to Bristol, even if the acquired experimental drugs don't fully pan out. Johnson & Johnson (JNJ), for example, will pay royalties for its use of Medarex technology in two new drugs for psoriasis and rheumatoid arthritis.

And if Medarex's lead compound, ipilimumab for melanoma, does successfully reach the market, "the deal will seem particularly smart," said Credit Suisse analyst Catherine Arnold. Bristol-Myers said it might submit that drug for regulatory approval next year - the original planned filing target of 2008 was postponed after Bristol and Medarex learned the Food and Drug Administration wanted more data.

Bristol shares recently rose 42 cents, or 2.07%, to $20.71, while Medarex shares shot up 89% to $15.87. Wyeth shares rose 31 cents to $47.17.

For the three months ended June 30, Bristol said earnings rose 29% to $983 million, or 49 cents a share, from $764 million, or 38 cents a share, a year earlier. The latest quarter included charges for Bristol's ongoing cost-cutting program and other items; excluding these, earnings were 56 cents a share, well above the 47-cents-per-share mean estimate of analysts surveyed by Thomson Reuters.

Bristol's sales rose 3% to $5.38 billion. Unfavorable currency rates reduced sales growth by about five percentage points. Bristol's biggest unit, biopharmaceuticals, had 4% sales growth, while sales for the Mead Johnson Nutrition Co. (MJN) nutritionals unit declined 1%.

Bristol posted an 11% increase in sales of Plavix, to $1.54 billion. Bristol co-markets Plavix with Sanofi-Aventis SA (SNY) of France. Plavix sales could soon take a hit because Eli Lilly & Co. (LLY) and Daiichi Sankyo Co. (4568.TO) are about to launch a competing drug, Effient, in the U.S. Bristol and Sanofi are due to lose U.S. patent protection for Plavix in 2012.

Sales of Bristol's antipsychotic Abilify rose 22% to $643 million, while HIV drug Sustiva had an 11% increase, to $312 million. Sales declined for hypertension drugs Avapro and Avalide, and for cancer drug Erbitux.

Bristol raised its 2009 earnings forecast range, excluding one-time items, to $1.95 to $2.05 a share, from $1.85 to $2 per share. The Medarex deal is expected to reduce earnings by 2 cents to 3 cents a share this year.

For the three months ended June 30, Wyeth had net income of $1.27 billion, or 94 cents a share, versus $1.12 billion, or 83 cents a share, a year earlier. The latest quarter included charges of $52 million, or 4 cents a share, related to a cost-cutting program and merger costs. Excluding these, earnings were 98 cents a share, well ahead of the 85-cents-per-share mean estimate of analysts surveyed by Thomson Reuters.

Wyeth's sales declined 4% to $5.7 billion from $5.9 billion a year earlier, as a six-percentage point hit from unfavorable exchange rates more than wiped out a 2% operational increase.

A culprit in the overall sales decline was the blockbuster antidepressant Effexor, sales of which plunged 25% to $772 million. Wyeth attributed this to increased generic competition outside the U.S. Sales of antibiotic Zosyn and hormone therapy Premarin also declined.

But sales of the Prevnar vaccine, which prevents pneumococcal disease in children, jumped 13% to $783 million, continuing its strong growth. Wyeth's sales of arthritis drug Enbrel outside the U.S. and Canada rose 6% to $736 million, and it booked alliance revenue from the U.S. and Canada of $304 million, up 7%. Wyeth exclusively markets Enbrel in many countries outside the U.S. and Canada, and co-promotes within the U.S. and Canada with Amgen Inc. (AMGN).

"The diversity of our businesses has limited our exposure to some of the global market conditions that we see," Joseph Mahady, head of Wyeth's pharmaceutical unit, told analysts on a conference call. "And of course prudently managing our [spending] has yielded further benefit on the bottom line."

Wyeth's nutritional sales inched up 1% to $436 million. Sales of Centrum vitamin products and Advil products declined in the single digits on a percentage basis.

Wyeth's takeover by Pfizer is expected to close by the end of the year. Wyeth's shareholders voted in favor of the deal Monday and it's still subject to antitrust clearance in the U.S. The European Commission cleared the deal last week, conditioned upon the divestiture of certain animal-health assets in Europe because Pfizer and Wyeth have overlapping businesses.

Wyeth raised its full-year earnings view to $3.48 to $3.58 a share, from $3.33 to $3.53 a share, excluding one-time items.

-Peter Loftus; Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com

(Andrew Morse contributed to this article.)