AbbVie (NYSE:ABBV) and Pfizer (NYSE:PFE) have a lot in common. Both big drugmakers have a cancer drug with soaring sales. Both pay great dividends. And both stocks have turned in nearly identical performances over the past 12 months. But which is the better buy now? Here's how AbbVie and Pfizer compare.
The case for AbbVie
What would be the characteristics of the ideal biopharmaceutical stock? Here are some of the most important ones: growing sales of existing products on the market, strong pipeline, and a high dividend yield. AbbVie checks off all these boxes.
AbbVie's biggest product by far continues to be Humira. The autoimmune disease drug generated sales of over $16 billion last year. That's nearly 15% higher than the prior year. The increase would have been even higher adjusting for currency fluctuations.
Sales for Imbruvica are growing at a frantic pace. The cancer drug, which AbbVie co-markets with Johnson & Johnson, brought in revenue of $1.8 billion in 2016 -- more than doubling prior-year sales.
The only blockbuster product in AbbVie's lineup that isn't doing very well is hepatitis C drug Viekira. Although the drug made over $1.5 billion last year, sales slipped 7% from 2015. AbbVie also has eight other drugs with combined sales of nearly $5 billion in 2016, slightly below results in the prior year.
AbbVie's pipeline includes around 50 clinical programs. Twelve of those are in late-stage development. Several of those late-stage candidates have the potential to become blockbusters, including elagolix, veliparib, and Venclexta.
Few biopharmaceutical stocks can claim a better dividend than AbbVie. Its dividend yield currently stands at 4.18%. There's no doubt about the company's commitment to paying dividends, either. Since the company was spun off from parent Abbott Laboratories in 2013, AbbVie's dividend has grown by 60%. Counting the time that it was part of Abbott Labs, AbbVie has increased its dividend annually for more than 25 consecutive years.
The case for Pfizer
How does Pfizer stack up using those same criteria? It's something of a mixed bag when it comes to growth for current products, but Pfizer scores well in the other two categories.
The big drugmaker can boast of strong growth for several products in its lineup. Put cancer drug Ibrance at the top of the list. Sales are also soaring for autoimmune disease drug Xeljanz. In addition, Pfizer is seeing solid revenue growth for other drugs, including Chantix, Lyrica, and Xalkori.
However, Pfizer's legacy drugs business isn't performing as well. Revenue is slipping, in large part due to sliding sales for cholesterol drug Lipitor.
New products should help Pfizer's overall results improve. The company bought Medivation last year, picking up fast-growing prostate cancer drug Xtandi. Pfizer's 2016 acquisition of Anacor should also begin to pay off now that atopic dermatitis drug Eucrisa won U.S. regulatory approval.
Few drugmakers have as large of a pipeline as Pfizer does. The company counts over 90 clinical programs in its pipeline. More than 40 of those are drugs either awaiting approval or in late-stage studies.
Pfizer hopes to gain additional indications for some currently approved drugs, including Xeljanz and Lyrica. However, the company also has some new candidates that could be big winners, including experimental cancer drug avelumab and tafamidis meglumine, which targets treatment of rare genetic disease transthyretin familial amyloid polyneuropathy.
Pfizer's dividend yield currently is 4.09% -- just below AbbVie's, but still very attractive. Pfizer can't claim the long track record of consecutive dividend increases that AbbVie can. However, the company appears to be committed to paying a dividend, with its CFO recently underscoring how important the dividend is to the "investing thesis" for Pfizer's stock.
My view is that either of these stocks is a good choice for long-term investors. If I could only pick one, though, my pick would be AbbVie.
AbbVie should have stronger growth over the next few years than Pfizer will. That, in turn, should allow AbbVie to increase its dividend at a faster rate than Pfizer. The biggest challenge for the company will be when Humira's sales begin to taper off due to competition. I think that's still a few years away, however. In the meantime, AbbVie should deliver a solid total return for investors.