These days, investing in hepatitis C drug stocks is challenging since sales of drugs that treat the infection are expected to decrease dramatically. Gilead Sciences, for instance, sold $14.8 billion worth of hepatitis C drugs in 2016, but management forecasts sales will drop to between $7.5 billion and $9 billion in 2017. Differentiating value stocks from value traps in this kind of environment is difficult, and investors' best move is likely to look at the different characteristics of the companies when deciding which hepatitis C drug stock to buy.

Company

Hepatitis C Drugs

Gilead Sciences (NASDAQ:GILD)

Harvoni, Sovaldi, and Epclusa

Merck (NYSE:MRK)

Zepatier

AbbVie (NYSE:ABBV)

Viekira, Technivie, and Viekirax

Enanta Pharmaceuticals (NASDAQ:ENTA)

paritaprevir  

Data sources: Company websites.

Best opportunity to buy growth

Gilead Sciences wins this category hands down with $34 billion in the bank at the end of the first quarter. While the big biotech's revenue takes a major blow from lower hepatitis C sales due to fewer patients starting medication and lower prices as competition increases, Gilead has an opportunity to buy growth through a large acquisition.

When an acquisition will occur is anyone's guess, but its nest egg keeps getting larger as its hepatitis C franchise continues to throw off a ton of free cash.

Best opportunity outside of hepatitis C

Merck fits the bill here with its cancer drug Keytruda. Sales of the drug, which spurs the immune system to attack cancer cells, jumped to $584 million in the first quarter, up 134% year over year.

And there's plenty of additional sales growth ahead with recent U.S. approvals to market the drug as a treatment for Hodgkin lymphoma, non-small cell lung cancer, and urothelial carcinoma. Last month, Merck secured a first-of-its-kind approval to treat patients with tumors with specific genetic mutations regardless of which tissue the tumor originated from. In the EU, Keytruda was recently approved to treat non-small cell lung cancer and for Hodgkin lymphoma.

Eye glasses on a paper with a desecription of hepatitis c

Image source: Getty Images.

Best opportunity to capture more market share

AbbVie has had a hard time competing with Gilead's franchise, especially in the U.S., where sales of Viekira amounted to just $38 million in the first quarter. The company doesn't even bother breaking out sales of its other two hepatitis C drugs.

Fortunately the pharma has a new medication -- a combination of glecaprevir and pibrentasvir -- that's under review by regulators in the U.S. and EU. Unlike Viekira, AbbVie has data for glecaprevir/pibrentasvir in all six of the major hepatitis C genotypes, many of which can be cured with just eight weeks of treatment, making it easier to compete against Gilead.

AbbVie is shooting for launching glecaprevir/pibrentasvir this year, assuming it's approved by the FDA, so it won't be long before investors know how much additional market share AbbVie can take.

Best play on a hepatitis C sales rebound (or maybe even a stabilization)

Unlike the other drugmakers, Enanta Pharmaceuticals derives all of its revenue from hepatitis C drugs, specifically from royalties on AbbVie's drugs through its contribution of paritaprevir, which is a component of Viekira, Technivie, and Viekirax. A turnaround in the hepatitis C market would have a major effect on Enanta's revenue.

Even a stabilization of the market could be a major boost to Enanta since the company helped develop the glecaprevir half of AbbVie's aforementioned regimen that's under regulatory review. Because glecaprevir makes up half of the new regimen, Enanta's deal with Abbvie calls for a double-digit royalty on 50% of net sales of the new medication, compared to 30% of net sales of Viekira.

Best overall winner

While each of these hepatitis C drugmakers has opportunities, Merck looks like the best investment because of its clear ability to benefit from Keytruda sales growth in addition to a potential opportunity in the hepatitis C market.

Brian Orelli has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short June 2017 $70 calls on Gilead Sciences. The Motley Fool has a disclosure policy.