Pfizer (NYSE:PFE) and Regeneron Pharmaceuticals (NASDAQ:REGN) are both high-quality healthcare giants that have minted fortunes for their long-term shareholders. But which one of these two stocks is the better bet for new money today?
Let's take a closer look at the bull case for each company to see if we can figure out the answer.
The bull case for Regeneron Pharmaceuticals
Regeneron has been growing like a weed over the last few years thanks primarily to the blockbuster success of just one drug: Eylea. It's used to treat wet age-related macular degeneration (AMD) and diabetic macular edema (DME), both of which are diseases of the eye.
Eylea has been on the market for several years now but it's still very much in growth mode. Last quarter, U.S. sales grew by 44%, and the company believes that sales growth for the full year will eclipse at least 20%. That puts it on pace to ring up roughly $5 billion in worldwide sales.
That extreme success is both a blessing and a curse. If another drug was to come along and knock Eylea of its perch, Regeneron's growth story would seriously be threatened.
Thankfully, the company has made a number of moves that promise to help diversify its revenue. Regeneron and its partner Sanofi (NYSE:SNY) are in the middle of launching Praluent, a new type of cholesterol-lowering drug. There's no doubt that this drug could turn into a blockbuster, but initial sales have been disappointing. Thankfully, that could change in a hurry if upcoming data from a long-term cardiovascular outcomes study show that using Praluent reduces the risk of having a heart attack or stroke. Physicians should get a look at that data within the next few quarters, and if it looks good then sales of Praluent could take off.
If the data shows no significant difference in cardiovascular outcomes, then it's possible that Praluent could turn out to be a dud, but that doesn't mean that this company's growth story will be over. Right now, Regeneron has two other potential blockbuster drugs that could hit the market in the not-too-distant future.
The first is sarilumab, which is pending FDA approval as a potential treatment for rheumatoid arthritis. The company should have a go/no go decision in hand by October, which means that it could launch before before the end of the year.
The second drug is dupilumab, which holds promise as a treatment for moderate to severe atopic dermatitis. Regeneron believes that dupilumab will be in the FDA's hands before the end of this quarter, which should put it on pace for a regulatory decision by the middle of 2017, and a launch soon thereafter.
Regeneron could have up to four blockbuster drugs on the market in less than two years. That could not only go a long way toward diversify its revenue stream, but also set the company up for explosive growth in the years ahead.
With its shares trading for only 25 times next year's earnings, growth investors will want to watch this company closely.
The bull case for Pfizer
The days of super-fast growth at Pfizer are probably long gone, but that doesn't mean that this company can't be a great investment from here.
Sales at Pfizer have finally started to head in the right direction again thanks to a number of highly successful product launches. The company's oncology franchise is posting particularly strong growth thanks to its recently launched breast cancer drug, Ibrance. Sales should exceed $1.6 billion this year, which is an impressive result for a new product, and will go a long way toward fueling company-wide revenue growth.
Another drug that is knocking the cover off the ball is Prevnar 13, a pneumococcal vaccine. Prevnar 13 has become a true cash cow for Pfizer, with first quarter sales hitting $1.5 billion. That was up a strong 19% over the year-ago period, which hints that there is plenty of room left for this vaccine to run.
Looking down the road a bit, Pfizer has positioned itself quite nicely to be a major player in the biosimilars market. Last year, the company shelled out $17 billion to acquire Hospira and grab a leadership position in this space.
Pfizer got off to an impressive start to the year with total revenue growth of 26%. That allowed the company to project that full-year revenue will come in above $51 billion mark, allowing the company to show at least $2.38 in EPS. Pfizer's shares are currently trading for about 15 times that number, which isn't too pricey for a company that should be able to grow in the high-single digits over the long term. When adding all of its opportunities together, and factoring in Pfizer's juicy 3.27% dividend yield, it's not hard to be bullish on this company's stock.
Which stock is the better buy?
There are plenty of reasons to consider owning both of these stocks for the long-term, so which one you choose to buy really depends more on your appetite for risk more than anything else.
Personally, I'm far more interested in growth stocks at this stage of my life, which is why I decided to buy shares of Regeneron Pharmaceuticals just last week. The company's shares are certainly trading for a premium price when compared to Pfizer's, but if Praluent, sarilumab, or dupilumab works out as planned, its shares promise substantial upside.
Still, if you're after a lower-risk income stock, I think Pfizer is a solid choice.
Brian Feroldi owns shares of Regeneron Pharmaceuticals. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.
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