Biogen (BIIB +0.83%) and Gilead Sciences (GILD 0.14%) don't compete against each other -- at least not yet. Both biotechs are interested in the oncology and autoimmune disease therapeutic areas, so there's always a chance they could become rivals.
The two stocks do already compete in a sense, though, for investors' affections. That's a battle where Biogen has come out on top over the last year. But which of these big biotech stocks is the better pick now? Here's how Biogen and Gilead Sciences compare.
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Biogen: Great new drug but plenty of challenges
For much of its history, Biogen was primarily known for its strong multiple sclerosis (MS) franchise. The biotech's MS drugs still generate most of its revenue, but there's a new drug on the market now that should emerge as a big winner: Spinraza.
Biogen exercised its option with Ionis Pharmaceuticals to market the spinal muscular atrophy drug in August 2016. Spinraza won approval from the U.S. Food and Drug Administration (FDA) in December. Analysts think the drug could reach peak annual sales of $2.5 billion.
If these estimates are on target, Spinraza will become one of Biogen's biggest drugs within the next few years. Success for Spinraza is critical for the biotech. Its current top-selling drug, Tecfidera, loses U.S. patent exclusivity in 2018. Another blockbuster MS drug, Tysabri, lost U.S. patent exclusivity last year.
Biogen doesn't have a huge late-stage pipeline ready to provide near-term help in offsetting revenue losses. The company has three candidates in phase 3 clinical studies. Two are experimental Alzheimer's disease treatments -- aducanumab and E2609. Gazyva is also being evaluated in a late-stage study for a potential new indication as a first-line treatment of non-Hodgkin's lymphoma.
The prospects for aducanumab look good right now, but the landscape is littered with once-promising Alzheimer's drugs that ultimately failed. Even if all goes well, Biogen still has several years before the monoclonal antibody completes late-stage testing. The same is true for BACE inhibitor E2609.
However, Biogen does claim a solid lineup of eight mid-stage candidates. The company's best hope for a new winner in its MS franchise is opicinumab, which blocks the LINGO-1 protein that inhibits growth of the protective sheath covering nerve fibers.
Gilead Sciences: Ready to buy growth
Gilead Sciences can also claim a strong new product on the market. Actually, the big biotech has several of them. Sales for new hepatitis C virus (HCV) drug Epclusa are soaring. Relatively new HIV drugs Genvoya, Descovey, and Odefsey are also performing well.
The problem for Gilead is that the success of these newer products isn't nearly enough to make up for plunging sales of its HCV drugs Harvoni and Sovaldi. The biotech expects its HCV franchise sales to drop from $14.8 billion last year to around $9 billion in 2017.
Gilead does have some promising late-stage candidates. Its bictegravir/F/TAF HIV combo should be a big winner. Filgotinib could be the company's first foray into the autoimmune disease market if the JAK1 inhibitor proves successful in any of the three late-stage clinical studies underway for the drug.
There's also tremendous potential in treating non-alcoholic steatohepatitis (NASH). Gilead's ASK-1 inhibitor GS-4997 is in a phase 3 study focused on the liver disease. The biotech also a couple of other experimental NASH drugs in mid-stage clinical trials.
Despite its having several new drugs on the market and a fairly large pipeline including eight late-stage programs and 16 mid-stage programs, progress won't come quickly enough for Gilead to return to growth. That's why the company is looking to make some acquisitions.
Gilead has over $32 billion and a strong cash flow to support its efforts in finding other companies and products that could help it grow revenue and earnings again. CEO John Milligan has indicated that he'd like Gilead to bolster its portfolio, especially in the oncology area.
Better buy
At first glance, Biogen might seem to be in better shape than Gilead Sciences: Biogen continues to grow, and the prospects for Spinraza are very good.
However, I think Gilead is the better pick for long-term investors. The stock is dirt cheap right now. Gilead will almost certainly make one or more acquisitions over the next year or so that will change the company's financial outlook. In the meantime, it pays a nice dividend with a current yield of over 3%. I suspect Gilead will put its cash to good use and reward shareholders who can be a little patient.
