It's a big drugmaker with a blockbuster immunology drug as its top-selling product. It pays an attractive dividend. And it faces some uncertainties. This description fits Amgen (NASDAQ:AMGN), but it applies just as well to Johnson & Johnson (NYSE:JNJ).
So far in 2018, Amgen has been the bigger winner for investors. The biotech stock is up more than 10% year to date, while J&J stock is down nearly 9%. But which of these two drug stocks is the better choice for long-term investors? Here's how Amgen and Johnson & Johnson compare.
The case for Amgen
Let's first address the challenges Amgen faces. Sales for the company's top-selling products are slipping. Enbrel competes in a crowded market. Neulasta now must battle head to head against a new biosimilar from Mylan. But Amgen also claims rising stars that should help offset some of these declines.
Sales for calcium-reducing drug Sensipar and osteoporosis drug Prolia are rising steadily. Momentum is also picking up for Amgen's other osteoporosis drug, Xgeva. International sales for multiple myeloma therapy Kyprolis are growing. Cholesterol drug Repatha is gaining significant traction as well.
Amgen has also received plenty of positive news from regulatory agencies recently. Potential blockbuster migraine drug Aimovig, which the company co-markets with Novartis, won FDA approval in May. Prolia picked up U.S. and European approvals for a new indication soon afterward.
While biosimilars could take market share away from some of Amgen's current products, the biotech has its own biosimilars that could generate growth. Amgen's biosimilar to Humira, Amjevita, will launch in Europe this October. The company awaits European approval for Kanjinti, a biosimilar to chemotherapy Herceptin.
Market research firm EvaluatePharma ranked Amgen's pipeline among the top five in the industry. This high ranking included the great prospects for Aimovig, which hadn't been approved by the FDA when EvaluatePharma conducted its analysis. However, Amgen's pipeline also includes other promising candidates, including atopic dermatitis drug tezepelumab, which the company is developing with AstraZeneca.
Income investors should like Amgen's dividend yield of 2.72%. The company has boosted its dividend payout by more than 180% over the last five years.
The case for Johnson & Johnson
Johnson & Johnson also has its own headaches resulting from biosimilar competition. The healthcare giant's top-selling product, Remicade, has lost market share to new biosimilars. But J&J has a strategy to overcome challenges for Remicade.
The company claims several other strong immunology drugs. Sales for Simponi, Stelara, and Tremfya continue to climb. J&J's oncology lineup is also impressive, with star performers like Imbruvica (which the company co-markets with AbbVie), Darzalex, and Zytiga. And thanks to its acquisition last year of Swiss drugmaker Actelion, Johnson & Johnson now has three pulmonary hypertension drugs with rising sales.
J&J's pipeline includes several dozen late-stage clinical programs. Most of the company's phase 3 clinical studies are targeting additional indications for already approved drugs, including Darzalex, Imbruvica, and anticoagulant Xarelto. However, J&J also has some promising new candidates, notably including prostate cancer drug apalutamide.
It's important to remember that Johnson & Johnson isn't just a big drugmaker. The company is a leader in consumer healthcare and medical devices as well. Although these two segments don't generate as much growth as the company's pharmaceutical business does, they still provide a lot of cash for J&J.
One important way Johnson & Johnson uses its cash is to fund its dividend program. J&J's dividend currently yields 2.86%. The company has increased its dividend for 56 consecutive years, making Johnson & Johnson a longtime member of the elite group of Dividend Aristocrats.
Forget the stocks for a minute. If you could own either of these businesses lock, stock, and barrel, which would you pick? I'd go with Johnson & Johnson.
J&J is a cash cow with a broad range of products spanning multiple areas of healthcare. The company might not generate awe-inspiring growth, but it doesn't do too shabbily for a $340 billion giant. Amgen is also a cash cow, but several of the products that allowed the biotech to earn that designation won't produce as much cash in the future.
Over the long run, a solid business should translate to a stock that performs pretty well. I think that will be the case for Johnson & Johnson.