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Barron’s has an article on this topic as well, coming to similar conclusions. It endorses Novartis (NVS), partly because it has a sizable toe in the generic drug business, which should benefit from a wave of expiring patents. See A Prescription for Profiting From Drug Stocks

An interesting, albeit speculative, graph of the effect of drug pipelines on revenue:

http://www.bnet.com/blog/drug-business/where-the-drugs-are-the-best-and-worst-pharma-r-d-pipelines/7450

The article also notes that Bristol-Meyers will have to spend a lot on research in order to achieve that result, and that “estimates are notoriously unreliable”. Still, they are equally unreliable across companies.

At first glance, BMY seems to be a good value, given that all these companies have similar valuations right now, as if the market is priced for similar growth prospects:

Bristol-Meyers Squibb (BMY)
Enterprise Value/Revenue (ttm): 2.32
Enterprise Value/EBITDA (ttm): 6.45

Novartis (NVS)
Enterprise Value/Revenue (ttm): 3.00
Enterprise Value/EBITDA (ttm): 10.30

Pfizer (PFE)
Enterprise Value/Revenue (ttm): 2.62
Enterprise Value/EBITDA (ttm): 6.97

Merck (MRK)
Enterprise Value/Revenue (ttm): 2.47
Enterprise Value/EBITDA (ttm): 6.97

Why, then, does BMY have the worst 5-year growth forecast???:

BMY
Next 5 Years (per annum) -1.60%

NVS
Next 5 Years (per annum) 4.78%

PFE
Next 5 Years (per annum) 2.81%

MRK
Next 5 Years (per annum) 4.23%

The data is inconsistent on BMY. Maybe expiring patents, in addtion to research expense, are the problem….

http://www.bnet.com/blog/drug-business/off-a-cliff-100-billion-in-revenues-will-disappear-from-drug-business-by-2013/8749

Combining the two graphs (like a Venn Diagram), suggests that MRK is the safest bet. BMY seems high risk/reward with additional risk coming from the inconsistency of data.