2 Pharmaceutical Stocks to Buy at a Discount
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By Reuben Gregg Brewer – Dec 10, 2025 at 10:00AMKey PointsWeight loss drugs are the big story in the pharmaceutical industry today, but other opportunities exist, too.Bristol Myers Squibb isn't focused on weight loss, has an attractive yield, and continues to cover its dividend.Merck is also focused outside of weight loss and has an attractive yield and a very strong dividend.These 10 Stocks Could Mint the Next Wave of Millionaires ›NYSE: BMYBristol Myers SquibbMarket Cap$103BToday's Changeangle-down(1.22%) $0.62Current Price$51.27Price as of December 10, 2025 at 10:45 AM ETInvestors are currently so focused on one type of drug that even good companies are being left on the sidelines.If you see news about the pharmaceutical industry today and it isn't directly about GLP-1 weight loss drugs, it's likely to include at least a mention of this new class of medications. GLP-1 drugs are an exciting development, for sure. However, Wall Street has a bad habit of getting so myopically focused on one thing that stock prices become irrational. This is why you might want to look at Bristol Myers Squibb (BMY +1.22%) and Merck (MRK +0.48%) today. Here's a look at each one. The GLP-1 poster child You need to have a reference point when you examine valuations. Right now, the best reference point is GLP-1 leader Eli Lilly (LLY +0.23%). There's no question the company is doing exceptionally well right now, having taken the pole position in a hot new drug niche with Mounjaro and Zepbound. Image source: Getty Images. However, investors are well aware of this fact and have pushed the share price up accordingly. Today, Eli Lilly's price-to-earnings ratio is just shy of 50, which is actually a hair below the five-year average of 53. But 50 is a shockingly large P/E. And it's important to recognize that the company's two GLP-1 drugs already make up more than 50% of revenue. That's a troubling number, noting that Eli Lilly took the pole position away from Novo Nordisk in the GLP-1 race, which shows that sustained industry dominance isn't guaranteed.Advertisement Two other options in the pharma sector A key fact in the pharmaceutical sector is that new drugs receive patent protection, which enables drugmakers to generate substantial profit. However, when those drugs lose their patent protections, the outsize profits come to an end. This is known as a patent cliff, and it's a common phenomenon within the pharmaceutical sector. In other words, all drug companies are on a continual quest for new drugs. Eli Lilly is in the spotlight today, but at some point in the future, other drugmakers will be more interesting. ExpandNYSE: MRKMerckToday's Change(0.48%) $0.47Current Price$97.36Key Data PointsMarket Cap$240BDay's Range$96.49 - $98.5052wk Range$73.31 - $105.84Volume121KAvg Vol13MGross Margin75.81%Dividend Yield3.34% This is why you might want to consider Merck and Bristol Myers Squibb as discounted alternatives to an in-the-spotlight drugmaker like Eli Lilly. Notably, Merck's focus is on cardiovascular conditions, cancer, and infectious diseases.
Bristol Myers Squibb is centered on cardio, cancer, and immune disorders drugs. They aren't really competing with Eli Lilly in the GLP-1 race, and thus, investors, broadly speaking, have been less attuned to what's happening at the companies. That's resulted in far more attractive valuations. Merck's P/E ratio is 13, below its five-year average of 21.
Bristol Myers Squibb's P/E is 17.5. The five-year average isn't meaningful because of recent losses, but the current P/E is still significantly below that of Eli Lilly. Merck's dividend yield is 3.4% while Bristol Myers Squibb's yield is 4.7%. Eli Lilly's yield, for reference, is just 0.6%. ExpandNYSE: BMYBristol Myers SquibbToday's Change(1.22%) $0.62Current Price$51.27Key Data PointsMarket Cap$103BDay's Range$50.33 - $51.3052wk Range$42.52 - $63.33Volume92KAvg Vol16MGross Margin64.33%Dividend Yield4.90% If you're a dividend investor, it would be wise to acquaint yourself with Merck and Bristol Myers Squibb. That said, Merck's dividend payout ratio of roughly 45% will be far more attractive to conservative investors than Bristol Myers Squibb's nearly 85% payout ratio. Still, either one of these stocks is going to be more attractive from a valuation standpoint than an in-the-spotlight stock like Eli Lilly. These industry leaders aren't going away The real key here, however, is that Merck and Bristol Myers Squibb are drug industry giants that have proved that they know how to survive and thrive over the long term. Just because Wall Street is enamoured of a specific type of new drug doesn't mean other drugmakers aren't interesting investments. While investors are rushing like lemmings into GLP-1 leader Eli Lilly, you might want to consider a contrarian move and examine discounted alternatives like Merck and Bristol Myers Squibb.About the AuthorReuben Gregg Brewer is a contributing Motley Fool stock market analyst covering energy, utilities, REITs, and consumer staples. He is the former director of research at Value Line Publishing, where he rose from mutual fund analyst to equity analyst before leading all research operations. Reuben holds a bachelor’s degree in psychology from SUNY Purchase, a master’s in social work from Columbia University, and an MBA from Regis University. He has been featured as a financial expert on CNBC and in the Financial Times, Barron’s, and InvestmentNews.TMFReubenGBrewerRead NextNov 30, 2025 •By Reuben Gregg Brewer2 Undervalued, High-Quality Companies to Buy Now and Hold ForeverNov 30, 2025 •By Prosper Junior Bakiny2 Top Dividend Stocks to Buy and HoldNov 29, 2025 •By David Jagielski, CPAShould You Buy Bristol Myers Stock for Its 5.4%-Yielding Dividend?Nov 12, 2025 •By Thomas Niel3 Healthcare Stocks Topping a 2025 List of Dividend YieldsSep 23, 2025 •By Cory Renauer1 Reason to Buy Bristol Myers Squibb StockJul 30, 2025 •By Motley Fool YouTubeBristol Myers Squibb: A Stock with Potential Amid Challenges