Bristol Myers Squibb trades at seven times earnings, with multiple growth drivers. By Dan Victor

For Big Pharma, the triumph of developing a new lifesaving blockbuster drug that generates billions in revenue is inevitably followed by the reality that drug patents have an expiration date. Competition from generics entering the market can quickly erode demand and roll back years of success.

It's a challenge that Bristol Myers Squibb is navigating in real time as it faces a sharp drop in sales of Revlimid, a leading treatment for multiple myeloma that lost patent protection in 2022. Other flagship products approaching their loss of exclusivity in 2028 include Eliquis, a blood thinner, and the intravenous formulation of the cancer immunotherapy Opdivo. These uncertainties over the company's growth engine have weighed on the stock, which dropped 40% over the past three years. Recent setbacks, including failed clinical trials for experimental drugs and disappointing attempts to expand indications in some existing products, haven't helped.

Still, any notions that the Princeton, N.J.--based company is on life support are almost certainly exaggerated. Its new generation of therapeutics supports a more positive long-term outlook. Investors today have the opportunity to buy this beaten-down innovator that appears fundamentally undervalued. Trading at just 7.5 times earnings, and with a hefty 5.4% dividend yield, shares of Bristol are a good bet for portfolios.

A major 2024 restructuring, targeting $3.5 billion in cost savings by 2027, is starting to bear fruit. The company recently reported its third-quarter financials, highlighted by a 3% year-over-year increase in revenue, a figure that beat expectations, and a record $6.3 billion in operating cash flow. The result was particularly impressive considering that sales of Revlimid fell 59% in the quarter.

The company's strength lies in its diversification, with its portfolio of more than 30 products and an extensive pipeline across hematology, oncology, cardiology, immunology, and neuroscience. Growth products now represent a majority of the business, accounting for 57% of total sales and $6.9 billion in revenue in the third quarter. That's an increase of 18% year over year, more than offsetting a 12% decline from the legacy portfolio, which posted $5.4 billion in revenue.

Management's strategy is twofold: Maximize legacy drug profit while aggressively accelerating new therapeutics adoption. The company aims to convert 30% to 40% of its Opdivio business ahead of the loss of exclusivity to a new patent-protected subcutaneous formulation known as Opdivo Qvantig, which introduces several patient-centric enhancements. With Eliquis, Bristol plans to offer deep discounts in a direct-to-patient program to preserve sales volume even as generics arrive.

In terms of new growth drivers, Bristol's Breyanzi has emerged as its newest oncology blockbuster, crossing $1 billion in annualized sales this year and a 60% revenue increase in the third quarter.

The early success of its antipsychotic Cobenfy is also promising. The treatment has been approved to treat schizophrenia and is being tested for Alzheimer's. Unlike traditional antipsychotics that block dopamine receptors, Cobenfy targets separate proteins to indirectly modulate dopamine system hyperactivation, a groundbreaking mechanism that avoids some serious side effects and the dreaded black box warning of increased mortality common in existing treatments. The total addressable market for schizophrenia treatments is estimated at $17 billion by 2031.

Cobenfy has already delivered $105 million in revenue thus far in 2025, with a rapidly rising number of prescriptions as physicians transition patients. Piper Sandler analyst David Amsellem has a constructive view. "There is more upside potential associated with favorable data than downside risk associated with negative results in light of the magnitude of the opportunity," he wrote in a recent note.

At the same time, Amsellem argues that the market's narrative about Bristol should cover more than any single therapeutic. A handful of Phase 3 readouts from smaller "under the radar" products like Admilparant and Mezigdomide are pending for 2026. Piper Sandler maintains an Overweight rating on the stock with a price target of $62, implying 35% upside from a recent price of $45.79.

It's fair to say that Bristol is a complex company with many moving parts. Key risks include management's ability to execute its growth strategy or a negative regulatory surprise. Either of these could force an outlook reassessment.

The bullish investment case is simple. Expectations are low, with a sense that the most pessimistic scenarios are more than priced in. According to Wall Street estimates, the company is expected to achieve adjusted earnings per share of $6.50 this year, a level that is seen declining modestly from 2026 to 2028, given the shifting portfolio profile. Earlier this year, CEO Christopher Boerner set a goal for the company to "exit the decade as one of the sector's fastest-growing companies," promising to bring 10 new medicines to the market by 2030.

The kicker: Bristol's forward price/earnings ratio of 7.5 stands out as a bargain next to pharmaceutical peers like AbbVie, Amgen, Merck, Pfizer, and Sanofi, which trade with an average earnings multiple of 12.5. In essence, Bristol is discounted to the point where investors are essentially paying for the growth portfolio, while getting the legacy products as a bonus. To the upside, faster-than-expected growth could propel the stock as it rerates significantly higher. Shares of Bristol also offer a compelling dividend yield, well above the industry average of less than 4% for major drugmakers. A solid and underleveraged balance sheet provides confidence that the payout is sustainable, making it an attractive income idea.

Ultimately, Bristol Myers Squibb is far from perfect, but it's positioned to reward shareholders as it evolves into a high-growth biopharma leader.

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November 21, 2025 21:31 ET (02:31 GMT)

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