Despite soaring share prices in the pharmaceutical space over the past five years, the stocks of Gilead Sciences (GILD -1.92%) and Teva Pharmaceutical Industries (TEVA 1.01%) both managed to lose ground during this particularly fruitful period for the industry. 

Gilead's woes stemmed from its rapidly declining hepatitis C franchise, the tepid launch of its costly CAR-T franchise, as well as a string of high-profile clinical failures. Teva, for its part, was hit by falling sales of its flagship multiple sclerosis (MS) drug Copaxone, a plummeting U.S. generic drug market, and an ill-timed acquisition that caused the drugmaker's debt load to skyrocket. 

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On the plus side, these two top biopharma stocks are now at extremely attractive valuations. Gilead, for instance, is trading at less than 10 times next year's projected earnings, which is dirt cheap for a blue-chip biotech stock -- especially one that sports a dividend yield of nearly 4% at current levels. Teva, for its part, is trading at right around six times its 2020 projected earnings. That's one of the absolute lowest valuations within the large-cap pharma space right now.

Should bargain hunters take advantage of these depressed valuations? Let's dig deeper.

Gilead scores a big win

Last week, Gilead and its partner Galapagos NV (GLPG -1.03%) unveiled two major clinical updates for their anti-inflammatory medicine filgotinib in patients with rheumatoid arthritis. These two late-stage trials, known as FINCH 1 and FINCH 3, both met their primary endpoints. But more important is that they also provided some compelling evidence that filgotinib might be the safest of all the JAK1 inhibitors vying for a chunk of the multibillion-dollar rheumatoid arthritis market.

What's at stake? Filgotinib, if approved, would likely be the fourth JAK inhibitor to enter the market for rheumatoid arthritis. Even so, the drug's potentially superior safety profile over AbbVie's upadacitinib, Eli Lilly's Olumiant and Pfizer's Xeljanz could enable it to grab a significant share of this high-value indication. Gilead, in turn, might finally have its next megablockbuster product. 

Turning to the specifics, Wall Street has filgotinib's peak sales ranging from a low of $1.1 billion all the way up to a healthy $3.7 billion, and that's just for the drug's rheumatoid arthritis indication. Follow-on studies in psoriatic arthritis, ankylosing spondylitis (spinal arthritis), and Crohn's disease could tack on another $3 billion to this tally.

In all, this top biotech stock is far too cheap based on filgotinib's megablockbuster prospects -- a fact that the market will probably start to realize in the weeks ahead. 

Teva's next-gen growth drivers are making headway

Teva's enormous debt load (which topped $34 billion at its peak) and the rapid descent of its former star MS medicine Copaxone have weighed heavily on its shares of late. Even a sizable investment from Berkshire Hathaway and the recent approval of its next-generation migraine medication Ajovy have failed to provide much of a lift this year. The net result is that Teva's stock is now trading at near historical lows from a forward-looking P/E perspective. 

While the drugmaker's turnaround is far from complete, there are a number of green shoots that indicate that sunnier days could be ahead. First and foremost, Ajovy has an exceedingly bright future. As one of the top new migraine medications to hit the market, the drug should eventually achieve sales of at least $1.6 billion per year.

Teva's Huntington's disease medicine Austedo is also expected to contribute significantly to the drugmaker's turnaround in the near future. The drug's peak sales are forecast to reach as high as $1.3 billion within the next three years.

Over the past two years, Teva has also managed to slash around $7 billion from its total outstanding debt. It hasn't been easy from an organizational standpoint, but the company's restructuring and cost-saving efforts are producing tangible results. 

Lastly, the U.S. generic drug market is starting to show signs of stabilizing after a lengthy downturn. So while generic drugs probably won't be an area of growth for the company anytime soon, Teva should at least be able to count on moderately lower to flat sales from this core business segment as soon as 2020. And that's a big improvement over how this struggling unit has been performing in recent quarters.      

All told, Teva seems to be nearing an inflection point on several fronts. The U.S. generic drug market is nearing a bottom, the company's newer growth products are coming online, and Copaxone's sharp downturn seems to be already baked into the drugmaker's valuation. Teva's comeback won't materialize overnight, but this top pharma stock should turn out to be a great value pick for investors willing to let this story unfold over the better part of the next decade.