2 Pharmaceutical Stocks to Buy at a Discount

Core Viewpoint - The pharmaceutical industry is currently overly focused on GLP-1 weight loss drugs, leading to irrational stock prices for companies not in this spotlight [1][12]. Group 1: Eli Lilly (LLY) - Eli Lilly is the leader in the GLP-1 drug market with products like Mounjaro and Zepbound, significantly boosting its performance [3]. - The company's price-to-earnings (P/E) ratio is nearly 50, slightly below its five-year average of 53, indicating a high valuation [5]. - Over 50% of Eli Lilly's revenue comes from its GLP-1 drugs, raising concerns about the sustainability of its market dominance [6]. Group 2: Merck (MRK) - Merck focuses on cardiovascular conditions, cancer, and infectious diseases, positioning itself outside the GLP-1 competition [7]. - The current P/E ratio for Merck is 13, significantly lower than its five-year average of 21, suggesting a more attractive valuation [8]. - Merck offers a dividend yield of 3.4%, appealing to dividend investors [8][10]. Group 3: Bristol Myers Squibb (BMY) - Bristol Myers Squibb also operates in areas like cardiovascular, cancer, and immune disorders, not competing directly with Eli Lilly [7]. - The P/E ratio for Bristol Myers Squibb is 17.5, which is still lower than Eli Lilly's, despite recent losses affecting its five-year average [8]. - The company has a dividend yield of 4.9%, which is attractive for conservative investors [10]. Group 4: Industry Insights - The pharmaceutical sector is characterized by the patent cliff phenomenon, where drugmakers must continually seek new drugs to maintain profitability [6]. - Merck and Bristol Myers Squibb are established companies with a history of long-term success, indicating they remain viable investment options despite current market trends [11].