Two of the biggest biotechs in the world haven't exactly had a great 2016. Shares of Amgen (NASDAQ:AMGN) and Biogen (NASDAQ:BIIB) are both down year to date. Which of these two stocks is the better pick for investors headed into the new year? Here's how Amgen and Biogen compare.
The case for Amgen
First, the bad news for Amgen: Sales of its top drug, Enbrel, were flat in the last quarter compared with the prior-year period. The problem appears to be that competitors are taking away market share. However, the situation is even worse for bone-marrow stimulants Neulasta and Epogen. Sales are falling for both drugs.
So why consider buying Amgen's stock? The biotech continues to have a couple of blockbuster products with strong growth. Sales for both bone-disease drug Prolia and secondary hyperparathyroidism treatment Sensipar jumped 18% year over year in the third quarter.
Amgen also has high expectations for two drugs that aren't yet blockbusters but could be at some point. Cholesterol drug Repatha got off to a slow start, primarily because of payer restrictions on reimbursement. Kyprolis is seeing solid growth in treating multiple myeloma, especially as a second-line treatment.
The biotech's pipeline features a dozen late-stage clinical studies. Probably the most important of these for Amgen's future is a major cardiovascular outcomes study of Repatha. Results from this study are expected to be announced in early 2017. If the data looks good, it could help persuade more payers to loosen their purse strings.
Development of biosimilars has been a priority for Amgen as well. The company won regulatory approval for a biosimilar to leading anti-inflammatory drug Humira. However, legal hurdles have kept Amgen from bringing the biosimilar to market. Amgen has also announced positive results for biosimilars to cancer drugs Herceptin and Avastin.
There are a couple of other things to really like about Amgen: its dividend and its cash. Amgen's dividend yield stands at a quite respectable 2.75%. The company also reported cash, cash equivalents, and marketable securities totaling nearly $38 billion at the end of September. That's plenty of money to keep the dividends and share buybacks going and also perhaps make some strategic acquisitions.
The case for Biogen
Like Amgen, Biogen has some weak spots. Sales are slipping for its interferon products, Avonex and Plegridy. As a results, the company's total revenue increased only 6% year over year in the third quarter.
However, Biogen's current product lineup also has its bright spots. Sales for multiple sclerosis drugs Tecfidera and Tysabri continue to grow. Biogen's hemophilia drugs Eloctate and Alprolix are rocking.
Biogen won't be able to count on having its hemophilia drugs contributing to its earnings growth for too much longer, though. The company plans to spin off its hemophilia business early next year into a separate entity, to be called Bioverativ.
Probably the biggest reason for investors to consider Biogen is its pipeline. The biotech is waiting on regulatory approval for promising spinal muscular atrophy drug Spinraza. If it's approved, Biogen will launch the drug by early 2017. Analysts think Spinraza could reach peak annual sales of $1.7 billion.
Another multiple sclerosis drug, Ocrevus, is also awaiting regulatory approval. However, Roche owns the commercialization rights to the drug. If Ocrevus wins approval, Biogen will be entitled to receive tiered royalty payments.
Biogen's Alzheimer's disease pipeline candidates could be the real wild cards. Aducanumab is in a late-stage study, while BAN2401 is in a phase 2 study. Both are monoclonal antibodies that help reduce amyloid plaque. That's the same approach used by Eli Lilly's solanezumab, which proved unsuccessful in a late-stage study. It's uncertain if Biogen will have better luck.
Unlike Amgen, Biogen doesn't pay a dividend right now. Biogen does have plenty of cash -- over $7.4 billion as of the end of September, including cash, cash equivalents, and marketable securities. That's significantly less than Amgen has, though.
If the decision on which stock to buy was strictly about current growth prospects, I'd give the edge ever so slightly to Biogen. There's still a lot of uncertainty about the biotech's pipeline, however.
I wouldn't make this choice solely on potential growth, though. You have to look at the big picture. Both of these are solid stocks that should produce decent returns over the long run. However, my take is that Amgen is the better pick.
In my view, Amgen's cash and dividends make the difference. I think Amgen will make more acquisitions down the road that could boost its growth prospects. And what investor doesn't love dividends? Amgen increased its dividend by a whopping 27% at the end of last year. I expect more dividend increases in the future.