Merck (MRK 0.26%) and Pfizer (PFE 3.64%) compete against each other in several markets, from cancer to vaccines. The big drugmakers also work together from time to time. But which of these big pharma stocks is the better pick for long-term investors? Here's how Merck and Pfizer compare.

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The case for Merck

You could probably sum up the argument for buying Merck stock in one word: Keytruda. Prospects for the cancer drug are that good. Merck made $919 million in sales from Keytruda in the first nine months of 2016, but that's just the start. Peak annual sales for the drug could reach close to $8 billion.

While Keytruda is on track to becoming the top-selling drug in Merck's lineup, there are other reasons to like the stock. The company is seeing solid growth for its vaccines, which are on track for combined sales of over $5.6 billion in 2016. 

Merck's pipeline also looks pretty good. The company is awaiting regulatory approval for four programs. Merck has 24 late-stage programs, 10 of which are studies evaluating Keytruda for additional indications. There are also 12 mid-stage programs in development (with five of them featuring Keytruda). 

Finally, Merck's dividend remains attractive as usual. The dividend yield currently stands just over 3%, thanks to a small increase announced in November 2016. 

What's not to like about Merck? Sales for several of the company's drugs are slipping, including cardiovascular drug Vytorin and autoimmune disease drug Remicade. Merck also no longer has patent protection for respiratory drug Singulair. Overall, though, I expect the big drugmaker will be able to grow earnings over the next few years largely on the strength of Keytruda.

The case for Pfizer

I don't think we can condense the investment thesis for Pfizer into just one word. Like Merck, Pfizer has a fast-growing cancer drug on its hands with Ibrance. However, peak annual sales for Ibrance are expected to be somewhere between $3 billion and $5 billion -- much lower than what analysts expect for Keytruda.

As a result of its acquisition last year of Medivation, Pfizer has another cancer drug in its lineup that's a rising star. Medivation's prostate cancer drug Xtandi could reach peak annual sales upwards of $3 billion.

Another 2016 acquisition gave Pfizer one more arrow in its quiver. Pfizer bought Anacor in June, picking up crisaberole (now branded as Eucrisa) in the process. The FDA approved the atopic dermatitis drug in December. Pfizer thinks that peak annual sales for Eucrisa could top $2 billion.

Other drugs in Pfizer's current portfolio are also performing well, particularly Lyrica, Xalkori, and Xeljanz. On the other hand, some aren't. Sales are slipping for Enbrel and Viagra, among others. Pfizer's legacy drugs business also continues to generate lower revenue.

Pfizer's pipeline is loaded. The company has 33 late-stage programs -- and that's not counting several drugs awaiting regulatory approval. Another 17 programs are in mid-stage clinical studies. One of the drugs waiting to get a green light from the FDA is avelumab, which ultimately could compete against Merck's Keytruda. The two companies are partnering, though, on late-stage diabetes candidate ertugliflozin.

If you're looking for a nice dividend, Pfizer should be quite attractive. Its dividend yield currently falls just shy of 4%. And don't worry about the company's high dividend payout ratio. Pfizer's dividend shouldn't be in jeopardy anytime soon.

Better buy

Which is the better stock for long-term investors? It's not an easy decision. 

Merck absolutely has a winner with Keytruda. I like Merck's pipeline and its dividend. However, taking everything into consideration, I think the nod goes to Pfizer. The prospects appear to be great for Ibrance, Eucrisa, and Xtandi. Pfizer's pipeline also has huge potential. And it's just hard to beat a dividend yield of close to 4%. Merck isn't a bad pick, but Pfizer wins for now.