In a decade, Eli Lilly could be in the same place that Pfizer finds itself in today.Eli Lilly (LLY +3.44%) is executing very well right now, and Wall Street is aware of that. The stock's price-to-earnings (P/E) ratio of 50 is below its five-year average of 54, but very high on an absolute basis. For reference, the S&P 500 index has a P/E ratio of 28.5. Before you buy shares in Lilly, think about what might happen over the next decade.Why is Eli Lilly doing so well right now?The big story around Eli Lilly is ...

December 12, 2025 05:02 AM GMT Biopharma | North America 2026 Outlook: Policy in the rearview, fundamentals in the driver's seat As we head into 2026 we expect many of the policy overhangs that dominated the Biopharma conversation to wane, bringing the focus back to fundamentals, where the balance lies with new products+pipelines+M&A vs. LOE's. Policy overhangs (specifically most-favored nation (MFN) drug pricing dynamics) were front and center throughout the majority of 2025. In our opinion that overhang h ...

Pfizer and Bristol Myers Squibb are deeply out-of-favor drugmakers, but one could be the better turnaround candidate if you think long term.Even very well-run companies will eventually fall upon hard times. That's the backstory you need to keep in mind when you examine Bristol Myers Squibb (BMY +2.99%) and Pfizer (PFE +0.29%). Here's why contrarians and turnaround lovers will likely find Pfizer the better turnaround play. Comparisons are importantBenjamin Graham is often considered the father of fundamental ...

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].

These three drugmakers are all well off their recent highs. Is this a sign of opportunity or risk?The pharmaceutical industry is highly competitive, and currently, the leading company in the sector is likely Eli Lilly (LLY 0.41%). That's driven by the fact that Eli Lilly makes the weight loss drugs Zepbound and Mounjaro, which together account for over 50% of the company's revenue. That's an interesting statistic because it highlights both the risk and opportunity that exists in the drug sector.If you own o ...

Core Thesis - Merck & Co., Inc. is at a critical juncture due to the impending patent expiration of Keytruda, which generated nearly $29.5 billion in 2024, accounting for about half of the company's total revenue [2][3] Revenue Challenges - Keytruda's primary patents are set to expire in 2028, leading to a potential significant decline in earnings [2] - Other key products like Lenvima (2025), Januvia (2026), Lynparza (2027), and Gardasil (2028) also face loss of exclusivity, compounding revenue pressures [3] - In Q3 2025, Keytruda's sales increased by 10% year-over-year to $8.1 billion, while Gardasil's revenue fell by 24% due to decreased demand in China [3] Strategic Response - To address the 2028 patent cliff, Merck is implementing a three-pronged strategy: launching Keytruda Qlex to retain patients, developing new growth pillars through drugs like Winrevair and Ohtuvayre, and pursuing Welireg for renal cell carcinoma [4] - The company is diversifying its portfolio with over 80 late-stage programs and next-generation antibody-drug conjugates [5] Financial Outlook - Merck is targeting $3 billion in cost savings by 2027 and plans to cut 6,000 jobs to streamline operations [5] - The stock is trading at approximately 11 times earnings, compared to the sector's average of 18 times, indicating that the market may be pricing in worst-case scenarios regarding Keytruda [5] - The company offers a 3.8% dividend yield, which may attract investors during the transition period [5] Historical Context - Previous bullish analyses highlighted Merck's strong revenue growth and disciplined execution, with the stock appreciating approximately 23.34% since April 2025 [6]

Core Viewpoint - Bristol Myers Squibb (BMY) offers a high dividend yield of 5.4%, significantly above the S&P 500 average of 1.2%, but concerns about the sustainability of this dividend arise due to the company's declining stock performance and future growth challenges [2][3]. Financial Performance - Over the past five years, Bristol Myers has experienced a total return of negative 9%, contrasting sharply with the S&P 500, which has roughly doubled in value during the same period [3]. - The company anticipates revenue between $47.5 billion and $48 billion for the current year, indicating a slight decline from the previous year's $48.3 billion [4]. - Bristol Myers has generated $15.3 billion in free cash flow over the last 12 months, exceeding the $5 billion paid in dividends during that timeframe, suggesting current dividend sustainability [5]. Dividend Safety - The payout ratio for Bristol Myers is around 84%, which is considered high but still sustainable given the company's profitability [5]. - Despite the current safety of the dividend, concerns exist regarding its long-term viability due to the company's substantial net debt of $32 billion, which raises questions about future dividend cuts if financial conditions worsen [6][9]. Market Position and Valuation - Bristol Myers has a market capitalization of $100 billion and is currently trading at a forward price-to-earnings (P/E) multiple of less than 8, indicating it may appear undervalued [7][8]. - The company is investing in growth with around 50 compounds in development, but faces significant risks from upcoming patent expirations for key drugs like Opdivo and Eliquis, which could adversely affect revenue [7][8]. Investment Outlook - While the stock may seem cheap, it is viewed as a potential value trap rather than a solid investment opportunity at this time, especially given the high debt load and growth challenges [8][9]. - A cautious approach is recommended, as there are safer dividend-generating stocks available in the market [9].

Core Insights - Merck & Co. has agreed to acquire Cidara Therapeutics for $9.2 billion, which is part of its strategy to expand its respiratory portfolio [1] Company Summary - The acquisition of Cidara Therapeutics is aimed at enhancing Merck's capabilities in the respiratory sector as it faces the impending loss of exclusivity on certain products [1]

Core Viewpoint - Pfizer offers a high dividend yield of 7%, but Merck's lower yield of 3.7% may be more attractive for conservative dividend investors due to its lower payout ratio and financial stability [2][5][12] Company Overview - Merck has a market cap of $210 billion, while Pfizer's market cap is $135 billion, positioning both as significant players in the pharmaceutical industry [2] - Both companies face challenges related to high research and development costs and the complexities of drug approval processes [3] Financial Metrics - Merck's current dividend payout ratio is approximately 40%, whereas Pfizer's payout ratio exceeds 100%, indicating a riskier dividend situation for Pfizer [5][12] - Merck's debt-to-EBITDA ratio is lower than Pfizer's, providing Merck with greater financial flexibility [12] Acquisition Strategies - Pfizer's recent acquisition of Metsera involved an initial cash payment of $65.60 per share, highlighting its aggressive strategy to enhance its drug pipeline [7][9] - The acquisition is seen as critical for Pfizer, but it raises concerns about the sustainability of its dividend given the high payout ratio and potential for a dividend cut [10][13] Market Position and Future Outlook - Both companies are expected to survive current challenges, but Merck's lower yield and more conservative financial management make it a potentially safer choice for income-focused investors [13]

Core Viewpoint - Pfizer's dividend remains attractive to income investors despite a decline in stock price, supported by a strong forward dividend yield of 7% and positive developments in its financial outlook [2]. Group 1: Earnings Outlook - Pfizer's adjusted earnings per share (EPS) decreased by 18% year over year in Q3, primarily due to a one-time charge related to a licensing deal, but adjusted EPS would have slightly increased without this charge [3][5]. - The company raised its full-year adjusted diluted EPS guidance to a range of $3.00 to $3.15, reflecting management's confidence in Q4 performance [6]. Group 2: Cost Reductions - Pfizer is on track to achieve at least $4.5 billion in cumulative net cost savings by the end of 2025, with expectations of around $7.7 billion in savings by the end of 2027 [7]. - Approximately $500 million of the identified cost savings will be reinvested in R&D, while the majority will be available for capital allocation priorities, including funding the dividend [8]. Group 3: Patent Cliff Strategy - Pfizer's strategy to address the patent cliff appears effective, with strong sales momentum from recently acquired products and internal R&D efforts [9]. - Revenue from recent launches and acquired products increased by 9% year over year in Q3, which is expected to offset the negative impact of upcoming patent expirations [11]. Group 4: Management Support for Dividend - Pfizer's management reiterated its commitment to the dividend during the Q3 earnings call, emphasizing a capital allocation strategy that includes maintaining and growing the dividend over time [12][13]. - The company has reduced leverage from around 4 times to 2.7 times, providing increased flexibility to support both business development and dividend growth [14].