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.
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.
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.
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.
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.