AbbVie Inc. (NYSE:ABBV) closed at $262.82 on October 2, and Bristol Myers Squibb Company (NYSE:BMY) at $61.15. Both spent the last few years doing the same difficult thing. Replacing a drug that was about to lose its patent with something new, before the revenue disappeared.
AbbVie is widely seen as having pulled it off and Bristol Myers as still trying. The share prices tell a different story.
READ ALSO: Robert Hunter Named UnitedHealth (UNH) Insurance President
AbbVie Replaced Humira Faster Than Anyone Expected:
The AbbVie case is the stronger operating story, and it is not close. Humira was the best-selling drug in the world and lost exclusivity. Most companies in that position shrink for years. AbbVie did not, because Skyrizi and Rinvoq grew fast enough to cover the hole.
Revenue reached $64.39 billion over the past twelve months and grew 10.20% in the most recent quarter, which is faster than Bristol Myers at 5.70% and faster than most of the sector. The operating margin is 40.04%, against 34.42% at Bristol Myers. AbbVie generated $16.87 billion of levered free cash flow, roughly double its rival.
That is what a successful patent transition looks like, and the market has recognized part of it. The cost was debt. AbbVie carries $70.88 billion in debt against $6.57 billion in cash, because replacing a blockbuster meant buying the companies that had the replacements.
DON’T MISS: Here is Why Tripadvisor (TRIP) is a Bad Investment at Today’s Price
Bristol Myers Is Cheaper, Pays More, and Has Outperformed:
Bristol Myers shares are up 35.23% over twelve months, more than three times AbbVie’s gain. The market has been repricing the supposed laggard, not the success story.
The underlying numbers support it. Bristol Myers converts 18.87% of revenue into net profit against 9.80% at AbbVie, and earns a 46.60% return on equity.
That net margin gap is the key to the comparison. AbbVie earns the wider operating margin but far less of it reaches the bottom line, because of the amortization and interest that came with the acquisitions.
The valuations reflect none of this. Bristol Myers trades at 9.36 times next year’s estimates against 16.39 times for AbbVie, and yields 4.10% against 2.66%.
Bristol Myers has its own patent cliff ahead, with Eliquis and Revlimid both facing erosion, so the discount is not unearned. But an investor is paying a little over half the multiple for better net margins, a higher return on equity, and more income.
There is a drugmaker growing faster than both and trading below either multiple. Check out our 10 Best Stocks to Buy for High Returns in 2026.
The Valuation Case:
AbbVie’s growth is the more sustainable of the two. Skyrizi and Rinvoq are in the early years of their patent protection, while Bristol Myers is closer to its own cliff.
Price points the other way. Bristol Myers trades at 9.36 times forward earnings and AbbVie at 16.39 times, against roughly 19 times for the S&P 500. Note that AbbVie’s trailing multiple of 74.88 times is distorted by acquisition charges and should be ignored.
Set both against the rest of large-cap pharma. Pfizer trades at 9.67 times forward while growing 2.60% and yielding 6.19%. Merck trades at 15.29 times while growing 5.10%, and is up 62.50% over twelve months. Bristol Myers at 9.36 times is the cheapest of the four, and the only one combining that multiple with a double-digit net margin.
Conclusion:
AbbVie is the better business. It replaced the world’s biggest-selling drug without shrinking, grows faster at 10.20%, earns a 40.04% operating margin, and produces $16.87 billion of free cash flow. However, Bristol Myers is the better-priced stock. It trades at little more than half the forward multiple, converts nearly twice as much revenue into profit, returns 46.60% on equity, and pays 4.10% while doing it. Buyers of AbbVie are paying a premium for a transition that has already happened.
Market Sentiment:
AbbVie Inc. was held by 88 hedge funds with a combined stake value of about $8.56 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 87 hedge fund holders with a cumulative investment value of around $4.25 billion in the previous quarter.
Bristol Myers Squibb Company was held by 74 hedge funds with a combined stake value of about $4.79 billion at the end of the same quarter. This is down from 83 hedge fund holders with a cumulative investment value of around $5.97 billion three months earlier.
READ NEXT: What is Johnson & Johnson’s (JNJ) Economic Moat, and is it Widening or Narrowing? and Amgen (AMGN) Sells its Deerfield Campus for $151 Million and Leases it Back
This article is originally published at Insider Monkey.
