Please ensure Javascript is enabled for purposes of website accessibility

Better Buy: Biogen Inc. vs. Celgene Corporation

By Keith Speights - Feb 23, 2018 at 6:04AM

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 biotech stock wins in a head-to-head matchup?

If you only made an investing decision based on recent stock performance, Biogen Inc. (BIIB 0.77%) would be a hands-down winner over Celgene Corporation (CELG). Both big biotech stocks are down around the same amount so far in 2018, but Biogen soared 22% last year while Celgene fell nearly 10%.

Of course, it wouldn't be smart to base any investing decision just on recent stock performance. It's much better to evaluate biotech stocks on the growth prospects for their current products and pipelines, as well as what you'd have to pay to buy that growth. Here's how Biogen and Celgene compare in these key areas. 

Test tubes with one containing cash

Image source: Getty Images.

Current products

Biogen's multiple sclerosis (MS) drugs generate nearly three-fourths of the company's total revenue. Leading the way is Tecfidera, which raked in $4.2 billion last year. The problem, though, is that sales aren't growing much overall for Biogen's MS franchise. Competition from Roche's Ocrevus is taking a toll, even with Biogen receiving royalties from the drug.

The brightest star for Biogen right now is Spinraza. Sales for the spinal muscular atrophy (SMA) drug came in at an impressive $884 million last year, Spinraza's first full year on the market. For now, Spinraza is the only Food and Drug Administration (FDA)-approved treatment for SMA. Competition could be on the way, but Biogen should have the market to itself for a few more years.

Biogen also is enjoying solid growth for its first biosimilar, Benapali. The biotech markets the biosimilar to Enbrel with its partner, Samsung BioLogics. In 2017, Benapali made over $370 million compared to $101 million the prior year.

Celgene's core strength is in its blood cancer drugs. Revlimid ranked as the No. 2 bestselling drug in the world last year, with sales totaling nearly $8.2 billion, up 17% year over year. Celgene's multiple myeloma drug Pomalyst generated revenue of $1.6 billion in 2017, a 23% jump from the prior year.

There is one concern for Revlimid, however. Several generic-drug companies are challenging Celgene's patents for its flagship drug. The company reached an agreement with Natco to allow a generic for Revlimid to be sold in the U.S. beginning in 2022 at limited volumes. While Celgene hopes to forge similar agreements with other challengers, there's no guarantee that it will be able to do so.

Celgene also claims a couple of other successful products in its current lineup. Sales for Otezla, which treats psoriasis and psoriatic arthritis, increased 26% year over year in 2017, to nearly $1.3 billion. Cancer drug Abraxane nearly made blockbuster level, with sales of $992 million last year.

Which biotech has the stronger product lineup right now? I think Celgene has the clear advantage. The company's blockbusters don't face the competitive challenges as Biogen's MS drugs.

Pipelines

Biogen's pipeline includes three late-stage candidates and nine phase 2 candidates. The single most important pipeline asset for the biotech is aducanumab. Market research firm EvaluatePharma considers the experimental Alzheimer's disease drug to be the most valuable pipeline candidate in the biopharmaceutical industry. The company's other late-stage Alzheimer's candidate is E2609, a BACE1 inhibitor being developed in collaboration with Eisai

A significant worry about these two pipeline drugs, though, is the abysmal track record for treatments of Alzheimer's disease. Earlier this month, Merck became the latest pharma company to experience a failure in treating the disease when its BACE1 inhibitor verubecestat failed in a late-stage study.

However, Biogen has another promising late-stage candidate -- multiple sclerosis drug BIIB098. The company licensed the drug from Alkermes in November. Biogen expects to file for approval of BIIB098 later this year.

Celgene, meanwhile, claims 15 late-stage programs and another 13 phase 2 programs. Ozanimod ranks as one of the most promising late-stage assets for the biotech. Celgene hopes to win FDA approval for the drug in treating MS later this year and is also evaluating ozanimod in treating inflammatory bowel diseases. The company thinks ozanimod could generate peak annual sales between $4 billion and $6 billion.

Luspatercept stands out as another top late-stage candidate for Celgene. The drug is being evaluated in phase 3 studies for treating myelodysplastic syndromes (MDS) and beta-thalassemia, and is also in a phase 2 study targeting treatment of myelofibrosis. 

Celgene thinks that it will launch 10 potential blockbusters over the next five years, including ozanimod and luspatercept. The company has picked up several of these potential winners through acquisitions and collaboration deals.

In my view, Celgene appears to have the better overall pipeline. Biogen could have the biggest winner of all with aducanumab -- but it also appears to have a much riskier pipeline than Celgene.

Valuation

Both of these biotech stocks look relatively inexpensive. Biogen's forward earnings multiple currently stands at less than 11, while Celgene stock trades at a little over nine times expected earnings.

It also is important to factor in the growth prospects for each company. Wall Street expects Biogen will grow earnings by around 7% annually over the next five years, a significant drop from the biotech's past growth. Analysts project that Celgene will grow earnings by nearly 20% annually over the next five years. 

Although Biogen's valuation is attractive, I think Celgene stock is a bargain at its current price. Therefore, Celgene again gets the nod in this category.

Better buy

You've probably figured out which of these two biotech stocks I think is the better buy. In my view, Celgene has the stronger product lineup, the better pipeline, and a more appealing valuation.

My biggest concern about Biogen is that much of its future potential lies in one candidate -- aducanumab. Even though Celgene currently depends on Revlimid for a significant portion of its revenue, the company has a good plan to reduce that dependence. Clinical setbacks could hurt either one of these biotechs, but I think Celgene offers the better overall risk-reward proposition.

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

Celgene Corporation Stock Quote
Celgene Corporation
CELG
Biogen Inc. Stock Quote
Biogen Inc.
BIIB
$213.57 (0.77%) $1.64
Alkermes plc Stock Quote
Alkermes plc
ALKS
$29.77 (0.20%) $0.06

*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
332%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

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.