Bristol-Myers Squibb (BMY) is a highly respected pharmaceutical company. Technically speaking, the company was founded in 1989 through the merger of two older companies, both of which trace their origins back to the 19th century. As a time-tested survivor that has successfully navigated the highly complex and fiercely competitive pharmaceutical industry, the company’s current stock price appears quite attractive. But is its true value as cheap as it seems on the surface?
Currently, Bristol-Myers Squibb trades at a price-to-earnings ratio of about 16 times, well below the S&P 500’s 27 times and the pharmaceutical industry average of 24 times. At the same time, the company offers a dividend yield of 4.4%, compared to the S&P 500’s paltry 1.1% and the pharmaceutical industry average of roughly 1.7%. For value investors and income-focused dividend seekers, these figures hold strong appeal. The company’s 70% payout ratio is slightly on the high side but remains within a reasonable range.
For investors with a multi-decade investment horizon, Bristol-Myers Squibb may be worth holding, given its currently attractive valuation metrics. However, investors must prepare for uncertainty lasting at least through the end of 2028. The reason is that several of the company’s core drugs are approaching patent expirations. The cancer drugs Revlimid and Pomalyst will face challenges in 2026, while Eliquis, a cardiovascular drug co-marketed with competitor Pfizer (PFE), will face generic competition in 2028.
To be fair, Bristol-Myers Squibb has been advancing its drug pipeline. However, research and development work cannot adhere to a preset timeline, whereas patent expirations are fixed dates. This temporal mismatch could put substantial near-term pressure on Bristol-Myers Squibb’s revenue and profits. Thus, the stock appears cheap for good reason.
The most immediate concern is the daunting “patent cliff.” Sales of the blood cancer drug Revlimid have already declined sharply under the impact of generic competition. Two of the company’s best-selling products—the blood thinner Eliquis and the cancer immunotherapy Opdivo—will lose their U.S. patent exclusivity in 2028.
Bristol-Myers Squibb’s management places great emphasis on its growth product portfolio rather than its legacy drugs. In the first-quarter 2026 earnings update, management highlighted that the growth portfolio now accounts for the majority of the company’s total revenue. While this is true, the legacy portfolio still represents about 46% of revenue. With total revenue growing only 1% at constant exchange rates, there is genuine uncertainty about whether growth drugs can offset the losses from older blockbusters.
Do these risks mean Bristol-Myers Squibb is a stock to avoid? Not necessarily. Whether it is worth buying on the dip depends on an investor’s style and risk tolerance. For risk-averse investors and those with shorter investment horizons, it may be more appropriate to look for other stocks.
However, risk-tolerant and patient investors might find Bristol-Myers Squibb’s long-term prospects appealing. Income-focused investors may also be attracted by the company’s 4.2% dividend yield. Bristol-Myers Squibb may be a stock worth buying on the dip, but only for certain investors.
