Bristol Myers Squibb's Growth Portfolio Now Brings In $7.7 Billion a Quarter. Here's Why That Changes the Stock's Story.

Bristol Myers Squibb (NYSE: BMY) has a problem, but it isn't an unusual problem. Simply put, the drug maker's older drugs will lose patent protection, resulting in revenue declines. That's why it is so important that the company's portfolio of newer drugs is already generating roughly $7.7 billion in revenue, which is more than its older drugs currently generate. Here's a deep dive into the math and why risk-tolerant investors may want to add this high-yield drug maker to their portfolios.

Nothing odd is going on with Bristol Myers Squibb

It is important to highlight that Bristol Myers Squibb is operating perfectly normally as a business. Pharmaceutical companies have to deal with patent expirations all of the time, which is why they are always on the lookout for new drugs. It is a constant race against the clock that impacts every single drug company. Ultimately, the real problem Bristol Myers Squibb is facing is a timing issue: new drug development doesn't follow a schedule, but patent expirations do.

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This really isn't a situation where a company has lost its way as a business. And Bristol Myers Squibb's new drug portfolio, which it calls its growth portfolio, highlights that fact. In the third quarter of 2026, this collection of more than a dozen drugs generated revenues of $7.66 billion. That's actually more revenue than the $5.42 billion the company's older drugs, which it calls the legacy portfolio, generated. On the innovation front, it is hard to argue that Bristol Myers Squibb isn't still at the cutting edge.

There's a nuance here that's important to keep in mind

To be fair, $5.42 billion is a lot of revenue, so it is reasonable for investors to be worried. That's part of the reason why the stock yields 4% while the average drug company yields 1.3%. The average healthcare stock offers roughly the same yield. Until the company works through its upcoming patent expirations, investors are likely to tread carefully here. But the risk runs one step deeper than comparing Bristol Myers Squibb's legacy portfolio to its growth portfolio.

Right now, the legacy portfolio generates $5.42 billion in sales. However, $4.69 billion of that total comes from a single drug, Eliquis. The U.S. patent on Eliquis is expected to end in 2028. So there's still more time for Bristol Myers Squibb to expand its already diverse growth portfolio. However, when the Eliquis patent does expire, the hit will be sizable. The size of that single patent cliff is really what has investors concerned.

Is Bristol Myers Squibb worth the risk?

Clearly, dividend investors would be remiss not to question the dividend's safety given the patent situation. But with a fairly reasonable trailing 12-month dividend payout ratio of 55%, the company isn't exactly stretching to cover the payment. And, notably, Bristol Myers Squibb's board has supported the dividend through difficult periods before, increasing the payment regularly, though not annually, for over three decades.

To be fair, Bristol Myers Squibb has more work to do before its growth portfolio can fully offset the loss of Eliquis revenues. So risk-averse investors may want to watch from the sidelines. However, if you understand the nature of the drug sector, there's really nothing shocking happening here. In fact, Bristol Myers Squibb is actually doing a very good job of preparing for the day when revenues from its legacy portfolio start to decline. If you are a more aggressive income investor, it could be an attractive addition to a diversified dividend portfolio, offering a high yield from a sector that generally offers much lower yields.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.