Please ensure Javascript is enabled for purposes of website accessibility

Better Buy: Pfizer Inc. vs. Eli Lilly and Company

By Keith Speights - Jul 1, 2017 at 2:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Which big pharma stock wins in a head-to-head matchup between Pfizer and Lilly?

Pfizer (PFE 1.17%) might be more than twice as big as fellow drugmaker Eli Lilly and Company (LLY 1.91%), but Lilly has been the better investment choice for quite a while. Lilly stock has outperformed Pfizer over the last 10 years, the last five years, the last 12 months, and so far in 2017.

But will Lilly's dominance in the stock market continue -- or is Pfizer now the better buy for long-term investors? Here's how these two big pharma stocks compare.

Two scientists in lab

Image source: Getty Images.

The case for Pfizer

Pfizer's problems over the last several years have largely been the result of several key drugs losing patent exclusivity. However, the company appears to be finally getting past these issues.

In 2016, Pfizer had eight drugs that achieved double-digit percentage sales growth. The most impressive performance belonged to cancer drug Ibrance, which saw sales soar from $723 million in 2015 to $2.1 billion last year. Analysts think that Ibrance could reach peak annual sales between $3 billion and $5 billion, so there could potentially be plenty of growth ahead. 

Two other fast-growing drugs that are key to Pfizer's fortunes are anticoagulant Eliquis and rheumatoid arthritis drug Xeljanz. Eliquis, which is co-marketed by Bristol-Myers Squibb, made nearly $2.2 billion last year, while Xeljanz generated revenue of $927 million.

New drugs gained from acquisitions should also help Pfizer significantly. The company won FDA approval for atopic dermatitis drug Eucrisa in December 2016. Pfizer picked up the drug from its buyout of Anacor last year. Prostate cancer drug Xtandi, which Pfizer added to its lineup as a result of the Medivation acquisition, also has a lot of potential.

Pfizer's pipeline includes a whopping 32 late-stage programs. Nine of those are for studies of cancer drug Bavencio. Pfizer already won FDA approval for the drug in treating Merkel cell carcinoma and awaits regulatory decisions in Europe for this indication and in the U.S. for treatment of second-line urothelial carcinoma.

Wall Street analysts project that the combination of Pfizer's current products and new products on the way should allow the drugmaker to grow earnings by close to 6% over the next five years. That's not extremely high, but it's three times faster than Pfizer's earnings growth in recent years. Pfizer's nice dividend yield of 3.79% adds quite a bit to the total return investors can expect. 

The case for Eli Lilly

Lilly's current product lineup includes five blockbuster drugs and four that could reach $1 billion in annual sales in the not-too-distant future. Among the current blockbusters, osteoporosis drug Forteo is demonstrating the most impressive growth, with an 11% jump in sales last year.

The drug with the fastest-growing sales for Lilly, though, is Cyramza. Sales for the cancer drug grew 60% in 2016 and nearly 31% year-over-year in the first quarter of this year. Other up-and-coming drugs include diabetes medication Trulicity and psoriasis drug Taltz.

Lilly and partner Incyte had hoped to win U.S. approval for its rheumatoid arthritis drug Olumiant earlier this year. However, the FDA requested further data on the drug. Still, the two companies did receive approval for Olumiant in Europe and hope to eventually gain U.S. approval. If the drug does win FDA approval, analysts think it could reach peak annual sales of around $2 billion.

There are 19 late-stage programs in Lilly's pipeline (including one diagnostic agent). Four of Lilly's late-stage programs are for additional indications for Cyramza. If the drug ultimately wins approval in all targeted cancer indications, it could reach peak annual sales of around $700 million.

One of the most promising new candidates is experimental migraine drug lasmiditan, which Lilly picked up with its acquisition of Colucid earlier this year. Lilly also hopes to achieve big success with pain drug tanezumab, on which the company is collaborating with Pfizer.  

Wall Street analysts project that Lilly will be able to grow its annual earnings by nearly 13% over the next five years. In addition, the drugmaker pays a dividend with a current yield of 2.5%. 

Better buy

At first glance, Lilly looks like the better pick. Its earnings growth estimates are more than double estimates for Pfizer. However, in my view, Pfizer gets the nod between these two stocks. Why?

For one thing, I'm not sold on Lilly's pipeline prospects. That's especially the case for its two experimental Alzheimer's disease drugs. I also think that Olumiant won't have an easy time competing in an already-crowded rheumatoid arthritis market -- and that's assuming it does win U.S. approval eventually.

I like Pfizer's pipeline better. On top of that, the company's essential health business segment could actually be a growth engine in a few years. Investors should be able to count on Pfizer's attractive dividend yield while the big drugmaker returns to solid growth.

Keith Speights owns shares of Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$49.15 (1.17%) $0.57
Eli Lilly and Company Stock Quote
Eli Lilly and Company
LLY
$322.77 (1.91%) $6.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.