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Better Buy: bluebird bio vs. Gilead Sciences

By Keith Speights – Updated Apr 13, 2019 at 11:52PM

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Which stock wins in a battle between this up-and-coming biotech and a giant that dominates the HIV market?

You might not think that bluebird bio (BLUE 11.05%) and Gilead Sciences (GILD -2.19%) are even in the same league. After all, Bluebird doesn't have any products on the market yet and continues to lose over $100 million every quarter. Gilead, on the other hand, claims nine blockbuster drugs and typically measures its quarterly profit in the billions of dollars.

So far in 2019, though, there's no contest regarding which stock is the bigger winner -- it's Bluebird. But which of these two biotech stocks is the better pick for long-term investors? Here's how Bluebird and Gilead Sciences stack up against each other. 

Scientist wearing a mask in front of a dropper and test tubes.

Image source: Getty Images.

The case for Bluebird

Bluebird might not have any approved drugs yet, but that could soon change. The biotech hopes to win European approval for LentiGlobin in treating transfusion-dependent beta-thalassemia (TDT) later this year. Bluebird expects that U.S. approval in the TDT indication could follow in 2020.

The company has another gene therapy waiting in the wings. Lenti-D appears to be on track for potential approval in the U.S. and in Europe next year for treating cerebral adrenoleukodystrophy (CALD), also known as Lorenzo's Oil disease. The only treatment option for CALD patients currently is allogeneic hematopoietic stem cell transplant (HSCT).

Bluebird fully owns worldwide rights to both LentiGlobin and Lenti-D, but its biggest winner could be with a drug that the biotech licensed to Celgene (CELG) -- bb2121. Bluebird and Celgene are currently evaluating bb2121 as a fourth-line treatment for multiple myeloma. If all goes well, the anti-BCMA chimeric antigen receptor (CAR) T-cell therapy could win Food and Drug Administration (FDA) approval in 2020.

Some analysts think that bb2121 could generate peak annual sales of $5 billion if it's approved as an earlier-line treatment for multiple myeloma, which seems quite possible. Bluebird and Celgene will split U.S. sales 50/50. Bluebird will receive royalties and milestone payments on sales of bb2121 outside of the U.S.

In addition, Bluebird has a couple of promising early-stage pipeline candidates. The biotech's gene therapy targeting sickle cell disease is in phase 1/2 studies. Bluebird and Celgene are also collaborating on next-generation anti-BCMA CAR-T therapy bb21217.

Bluebird clearly has a lot of potential, which is why it already claims a market cap of $7.3 billion. If its lead candidates are successful, Bluebird could be worth a lot more. 

The case for Gilead Sciences

It's been a long time since Gilead Sciences didn't have a product on the market. The big biotech skyrocketed years ago with powerful HIV drugs. Along the way, Gilead expanded into several other therapeutic indications.

HIV is still the biggest moneymaker for the company, though. Gilead's HIV drugs generated $14.6 billion in sales last year, and the biggest blockbuster is Genvoya. However, Laura Hamill, Gilead's head of worldwide commercial operations, said at the J.P. Morgan Healthcare Conference in January that Biktarvy is "setting the record for the most successful HIV launch in the industry."

While Biktarvy continues to pick up momentum, Gilead is looking to expand its lead in HIV. The biotech hopes to win approval for Descovy as a pre-exposure prophylaxis (PrEP) therapy and is also evaluating a drug in early-stage testing that could even be a cure for HIV.

Gilead's hepatitis C virus (HCV) drugs have also been enormously successful. Over the last few years, though, the biotech's HCV sales have plunged due to lower patient starts -- as a result of so many patients being cured -- and new rival drugs. Now, however, Gilead thinks that its HCV sales should stabilize and continue to contribute to the company's strong cash flow.

Thanks to its acquisition of Kite Pharma in 2017, Gilead has the leading CAR-T therapy currently on the market with Yescarta. Gilead expects sales to continue to pick up steam for Yescarta, especially as it wins approvals for additional indications.

Check out the latest Gilead earnings call transcript.

The big biotech also plans to expand into new areas. Gilead is evaluating promising JAK1 inhibitor filgotinib in late-stage studies targeting Crohn's disease, rheumatoid arthritis, and ulcerative colitis. It also still hopes that selonsertib can be successful in treating non-alcoholic steatohepatitis (NASH) despite the drug failing in its first late-stage study in improving fibrosis without worsening of NASH.

Gilead's huge cash stockpile of $31.5 billion (including cash, cash equivalents, and marketable securities) gives the company ample flexibility to boost its pipeline through acquisitions. The company also pays a solid dividend that currently yields 3.82%.

Better buy

Which of these two biotech stocks is the better pick? You probably need to answer another question first: What kind of investor are you?

Conservative investors will likely prefer Gilead Sciences. It's a cash cow and pays a great dividend. Even a clinical setback like the one Gilead had recently with selonsertib barely impacted its stock price. That's the kind of stability that many investors would rather have.

However, if you're a more aggressive investor, Bluebird is probably more up your alley. If its lead candidates win approval, the stock will almost certainly skyrocket. The big risk, of course, is that they won't win approval. Overall, though, I like the prospects for Bluebird and think that it should be a big winner over the long run.

Keith Speights owns shares of Celgene and Gilead Sciences. The Motley Fool owns shares of and recommends Bluebird Bio, Celgene, and Gilead Sciences. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$61.69 (-2.19%) $-1.38
bluebird bio, Inc. Stock Quote
bluebird bio, Inc.
$6.33 (11.05%) $0.63
Celgene Corporation Stock Quote
Celgene Corporation

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