Top biotechs Amgen (NASDAQ:AMGN) and Biogen (NASDAQ:BIIB) have both produced exceptional returns on capital for investors over the past 10 years. In fact, these two companies have crushed the performance of the broader markets during this period. 

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However, Amgen and Biogen are both in a transitional period because of the entrance of several novel competitive threats that could dampen their growth and profitably in the next decade. With this theme in mind, I think now is the perfect time to consider which of these elite biotechs is better positioned to overcome these risk factors to continue delivering market-beating returns. Let's dig in to find out. 

Top-line growth

Amgen's top line is currently moving in the wrong direction, because of two main factors. First off, the company's megablockbuster white-cell booster, Neulasta, is set to start losing market share in a significant manner, perhaps putting upwards of 20% of Amgen's top line at risk, because copycat drugs known as biosimilars are now set to come online in full force over the next year. And that's only the latest blow to the company's product portfolio that's seen multiple former star drugs face generic competition over the past few years.

Next up, Amgen's new cholesterol-lowering drug, Repatha, hasn't gotten off to the type of blistering start that would be capable of picking up the slack. Repatha's commercial trajectory is forecast to start gaining momentum soon as more payers agree to provide coverage, but the drug remains well behind schedule from a commercial standpoint. 

The net result is that Amgen's annual sales are projected to head into negative territory this year and dip even further by a modest amount in 2019. And that negative trend is expected to hold even after the biotech and partner Novartis launch their newly approved migraine drug, Aimovig, that's widely expected to generate over $1 billion in annual sales -- illustrating just how serious the emerging Neulasta biosimilar threat is to Amgen's top line.

Perhaps more concerning is that Amgen is counting heavily on its pivot to the unproven biosimilar market as one of its core growth drivers in the next decade. This risky strategy might turn out to be a wise move, but that's far from a given.  

DNA molecules floating in a blue background.

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As for Biogen, this biotech's top-line growth has become increasingly concentrated around a single product in recent years -- the spinal muscular atrophy drug Spinraza, which it co-developed with the antisense drugmaker Ionis Pharmaceuticals (NASDAQ:IONS). Biogen's core multiple sclerosis franchise has been hit with a number of new competitive threats, and the company has refused to buy revenue through a bolt-on acquisition.

Spinraza's sales are projected to begin to flatten out soon, because of both a limited patient population and new therapies coming to market. Biogen's recent double-digit growth is therefore expected to begin to taper off heading into the back half of this year and slump to a mere 3% as soon as next year.

Longer term, the biotech is primarily counting on its high-risk, high-reward Alzheimer's disease collaboration with Japan's Eisai to deliver the bulk of its top-line growth in the next decade. That's a strategy that could more than double the biotech's revenues from current levels, but it's widely considered a moonshot effort based on the exceptionally poor clinical track record of Alzheimer's disease drug candidates in general. As proof, EvaluateGroup thinks that Biogen won't even crack the top 20 biopharma companies in terms of prescription drug sales in 2024.  

Fundamentals

Amgen sports one of the best cash positions across the biopharmaceutical industry, with over $32 billion in its coffers. However, the biotech is also straddled with a significant amount of debt, resulting in a highly unattractive debt-to-equity ratio of 140. The good news is that its business did throw off a staggering $10.5 billion in positive free cash flows last year, which is more than sufficient to both service its debt and top-notch shareholder rewards program. Amgen's free cash flows are also expected to be fairly stable, even as its top line begins to erode to some degree. 

The long and short of it is that Amgen's fundamentals are largely in line with the rest of the industry. Like nearly all of its large-cap biotech peers, for instance, Amgen has arguably been overly aggressive when it comes to taking on debt, but the company's core product portfolio has also consistently generated ample free cash flows because of the highly profitable nature of biotech products at large.

As such, investors probably shouldn't be overly concerned about the sustainability of the company's dividend program that currently sports a respectable yield of 2.72%, or its ability to repay its long-term debt, for that matter. That said, the biotech also doesn't really have the financial flexibility to make much of a splash on the M&A scene because of its debt burden, and that lack of maneuverability could become a major problem if Neulasta's sales fall faster than predicted.  

Biogen, for its part, had a respectable $5.9 billion in cash in the bank at last count, and a fairly low debt-to-equity ratio of 47, thanks to management's conservative approach to business development. The company also generated $3.68 billion in positive free cash flows in 2017, and this figure should increase slightly this year and next. 

Biogen thus appears to be in sound shape from a fundamental perspective. Equally as critical, the biotech has the necessary financial capacity to execute a small to midsize acquisition in case its aspirations in Alzheimer's do go belly-up.  

Which stock is the better buy?

In this head-to-head matchup, I think Amgen comes out on top simply because it has a strong dividend program in place. Both biotechs are transitioning into their next suite of products, and that entails a lot of risk. Amgen, however, offers investors the ability to rack up dividend income while this long-tailed process plays out. Biogen, on the other hand, is a pure growth play, and the biotech's projected growth could evaporate overnight if its high-stakes bet on Alzheimer's disease doesn't work out. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Biogen and Ionis Pharmaceuticals. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.