Which of these two stocks is most likely to provide great returns to investors over the long run? Here's how Gilead and Celgene compare on several key criteria.
Current product lineup
Gilead's primary strength lies in its HIV franchise. Biktarvy is on pace to become the biggest new drug launched in 2018, with sales of $606 million in the first three quarters of the year. It joins five other blockbuster HIV drugs in Gilead's lineup, with Genvoya leading the pack.
On the other hand, sales for Gilead's hepatitis C virus (HCV) drugs continue to slide. The good news, though, is that Gilead expects HCV revenue to stabilize as it squares off in a one-on-one battle for market share with AbbVie.
Gilead also has several other drugs that don't generate the level of revenue that its HIV and HCV franchises do. The most important of these drugs is Yescarta, a cell therapy the biotech picked up with its acquisition of Kite Pharma last year. Gilead's commercial launch for Yescarta has slowly picked up momentum. Analysts think the drug could achieve peak annual sales of more than $2.5 billion.
Meanwhile, Celgene claims the No. 2 best-selling drug in the world in 2017 -- Revlimid. The blood cancer drug raked in $7.1 billion in the first three quarters of this year, accounting for 63% of Celgene's total revenue. There's a fly in the ointment for Revlimid, though: Generic competition is on the way by March 2022.
Celgene's lineup includes a couple of other blockbuster drugs with solid growth. Sales for immunology drug Otezla continue to soar. Multiple myeloma drug Pomalyst also has strong sales momentum. In addition, Celgene's cancer drug Abraxane appears likely to reach blockbuster status this year with moderate year-over-year growth.
Gilead's top pipeline candidates could open the door for the biotech to become a major player in two new arenas. The company expects to announce results from additional late-stage studies of filgotinib in treating rheumatoid arthritis in the first half of 2019. Gilead is also evaluating the drug in phase 3 studies targeting Crohn's disease and ulcerative colitis. Filgotinib could generate peak annual sales of up to $6 billion if approved for all three indications.
Liver disease non-alcoholic steatohepatitis (NASH) is another promising new area for Gilead. Some industry observers predict that NASH will become a $35 billion market in the future. Gilead should report results from a late-stage study of its lead NASH candidate, selonsertib, in early 2019. The drug has blockbuster potential and could be joined by Gilead's two other NASH candidates, FXR agonist GS-9674 and ACC inhibitor GS-0976.
Market research company EvaluatePharma thinks that Celgene has the third-best pipeline in the biopharmaceutical industry. Leading the way for Celgene is ozanimod. The biotech expects to submit the drug in early 2019 for approval in treating multiple sclerosis. Celgene is also evaluating ozanimod in late-stage studies for treating Crohn's disease and ulcerative colitis. The drug could eventually generate peak annual sales in the ballpark of $5 billion.
Celgene also hopes to extend its leadership in hematology with fedratinib, luspatercept, and CC-486. The company intends to join Gilead in the cell therapy market as well, with two other promising candidates that could be launched by 2020 -- liso-cel and bb2121.
Other important factors
While Gilead's and Celgene's current products and pipelines will drive growth in the years to come, there are also important factors for investors. One is Gilead's solid dividend, which currently yields nearly 3.3%.
Another is the two companies' cash positions. Gilead's cash, cash equivalents, and marketable securities stood at $30.8 billion at the end of the third quarter. Celgene reported a cash stockpile of $4.4 billion.
Both stocks appear to be attractively valued. Gilead trades at close to 10 times expected earnings, while Celgene trades at a little over nine times expected earnings.
In some ways, Celgene is the riskier of these two stocks. It relies on one drug for most of its revenue -- and that drug could be threatened within a few years. Celgene's future rests largely on success for its pipeline candidates, but the biotech has run into some pipeline setbacks over the last couple of years.
However, I think Celgene still is the better buy at this point. The stock has been beaten down more than is justified, in my view. Celgene has tremendous growth prospects with Otezla, Pomalyst, its promising pipeline candidates, and Revlimid. Yes, I fully expect that Revlimid will continue to reign as one of the best-selling drugs in the world and generate solid growth for years to come.