Gilead Sciences, Inc. (GILD 0.28%) and Biogen Inc. (BIIB -0.14%) enjoyed the admiration of investors for years as two of the brightest stars in the biotech universe. However, slumping sales for its hepatitis C virus (HCV) franchise dulled Gilead's luster. And Biogen has begun to experience challenges to its long-dominant multiple sclerosis (MS) franchise.
Both biotechs still have plenty of long-term potential. But which is the better pick for investors right now? Here's how Gilead Sciences and Biogen compare.
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The case for Gilead Sciences
Although Gilead continues to see sales declines for its HCV franchise, the company expects the situation to stabilize somewhat this year. Even with lower sales, HCV drugs Epclusa and Harvoni still generate nice cash flow for Gilead.
The biotech's strength is in treating HIV. Gilead currently claims seven blockbuster HIV drugs in its lineup. And that list doesn't include what could be the most critical drug for the company's future -- Biktarvy. Gilead won FDA approval for Biktarvy in February. Analysts think the drug could generate peak annual sales close to $6 billion.
Gilead has also made strides in expanding beyond HCV and HIV. The big biotech acquired Kite Pharma in 2017, picking up promising CAR-T cancer drug Yescarta. While the launch of Yescarta has been slow, that was expected because of the complexities involved with administering CAR-T therapies. Over the long run, Yescarta has the potential to become another blockbuster for Gilead.
Pipeline candidates could enable Gilead to venture into other indications. The biotech is evaluating selonsertib in a late-stage study targeting treatment of non-alcoholic steatohepatitis (NASH). Gilead also has a couple of other NASH candidates in mid-stage clinical studies. NASH could be the next major market for the company, with some experts projecting a potential annual market size of up to $35 billion for treatments of the disease.
Gilead also hopes to elbow its way into the crowded autoimmune disease market with filgotinib. The company is evaluating the JAK1 inhibitor in multiple late-stage studies targeting treatment of rheumatoid arthritis and inflammatory bowel disease. Filgotinib has the potential to achieve peak annual sales of around $3 billion if approved.
Aside from its successful HIV franchise and promising pipeline, there are two other reasons why investors might like Gilead. First, the biotech pays a nice dividend, which currently yields a little under 3%. Second, Gilead has strong cash flow and a large cash stockpile of $36.7 billion to fund more acquisitions that could fuel growth.
The case for Biogen
It's true that Biogen faces increased competition for its MS drugs. But the biotech continues to make plenty of money from them. Last year, Biogen's MS drugs combined for sales of nearly $9 billion, up 1.7% from the prior year.
The new big winner in Biogen's product lineup is spinal muscular atrophy drug Spinraza, which Biogen licensed from Ionis Pharmaceuticals. Spinraza raked in nearly $884 million last year and could be on its way to peak annual sales of around $2.5 billion.
Biogen's late-stage pipeline consists of three drugs targeting two indications. Aducanumab stands out as the most important candidate for the biotech's future. The drug is currently in late-stage testing for treating Alzheimer's disease. Market research firm EvaluatePharma ranked aducanumab last year as the most valuable pipeline asset in the biopharmaceutical industry. Goldman Sachs analysts think the drug could reach peak annual sales of $12 billion.
Another late-stage candidate, E2609, also targets Alzheimer's disease. E2609, which Biogen is developing in partnership with Eisai, inhibits the BACE1 enzyme to block amyloid production, which could slow progression of Alzheimer's. So far, though, other BACE1 inhibitors haven't proven to be successful in late-stage studies.
Biogen's third late-stage prospect could be its next MS drug on the market. The biotech licensed ALKS 8700, later renamed as BIIB098, from Alkermes. This prodrug, which metabolizes in the body and produces an active drug, could take away sales from Tecfidera, if approved. By striking a deal with Alkermes, Biogen removed this potential threat.
Although Biogen doesn't pay a dividend like Gilead does, the company could be in position to drive growth through further licensing deals or acquisitions. At the end of 2017, Biogen reported cash, cash equivalents, and marketable securities totaling more than $6.7 billion.
Better buy
In my view, Biogen's future fortunes hinge largely on one drug -- aducanumab. If the drug is successful, Biogen's current stock price will look like a bargain in retrospect. The problem, though, is that Alzheimer's disease has proved to be a minefield for once-promising treatments. There is a significant level of risk that aducanumab won't be successful.
I think Gilead Sciences has more paths to success. Biktarvy is probably destined to become one of the biotech's biggest drugs ever. Gilead should be in good position to become one of the leaders in treating NASH, particularly with combinations of its three drugs with each other and with other drugs. The big biotech also has the financial capability to make smart acquisitions to drive future growth.
Risks come with the territory when buying biotech stocks, though. It's possible that Gilead will run into roadblocks with its pipeline. Still, I think Gilead is the better pick for long-term investors.
