Biogen (BIIB 3.40%) and Celgene (CELG) claimed similar market caps earlier this year. That's not the case now, though. In March, Biogen announced that it was halting late-stage clinical studies for its once-promising Alzheimer's disease drug, aducanumab. The biotech's shares collapsed. Celgene's market cap now stands well above Biogen's.
But with Celgene months away from being gobbled up by Bristol-Myers Squibb (BMY 0.30%) and Biogen's valuation taking a shellacking, which of these two biotech stocks is the better pick for investors now? Here's how the companies compare in three key areas.
Biogen ascended to stardom in the biotech world on the strength of its multiple sclerosis (MS) franchise. This franchise includes blockbuster drugs Tecfidera, Tysabri, Avonex, and Plegridy. However, sales for interferon products Avonex and Plegridy are slipping. Growth for Tecfidera and Tysabri has also slowed down dramatically as new competitors have entered the market.
The company's growth has been driven primarily by spinal muscular atrophy drug Spinraza, which Biogen licensed from Ionis Pharmaceuticals. But Spinraza also faces a new rival, Novartis' gene therapy Zolgensma, that is likely to threaten its growth.
Biogen's three approved biosimilars continue to gain some attraction. However, the combined sales of these drugs aren't enough to move the needle significantly for the biotech.
Celgene's Revlimid generates over 60% of the company's total revenue. The blood cancer drug continues to enjoy solid sales momentum, but generic rivals will enter the market beginning in 2023.
The biotech's lineup includes three other blockbuster drugs for which sales continue to soar. Multiple myeloma drug Pomalyst is on track to make close to $2.5 billion this year. Abraxane, which is approved for treating breast cancer, non-small-cell lung cancer, and pancreatic cancer, should pull in at least $1.2 billion. Immunology drug Otezla is Celgene's fastest-rising star and should generate sales approaching $2 billion this year.
However, there is one hitch with Otezla. Bristol-Myers Squibb plans to sell the drug to clear the way for regulatory approval of its pending acquisition of Celgene.
Celgene also recently won FDA approval for Inrebic (fedratinib) in treating myelofibrosis. The company projects peak annual sales for the drug of around $1 billion.
There's no question that the loss of aducanumab left a gaping hole in Biogen's pipeline. Two of the biotech's six late-stage programs also target Alzheimer's disease. It's probably fair to say that the chances of success with these drugs don't look all that great, either.
Biogen hopes to win FDA approval in the fourth quarter of 2019 for diroximel fumarate (BIIB098) in treating MS. The drug is similar to Tecfidera but could have better gastrointestinal tolerability.
Two of Biogen's other late-stage candidates target rare diseases. BIIB067, which Biogen is developing with Ionis, targets a rare form of amyotrophic lateral sclerosis. BIIB111 targets choroideremia, a rare genetic retinal disease. The biotech is also evaluating BIIB093 in a late-stage study for treating large hemispheric infarction, a severe form of ischemic stroke.
Meanwhile, Celgene's pipeline appears to be loaded with potential winners. Market researcher EvaluatePharma ranks cancer cell therapy liso-cel as the No. 4 most valuable pipeline drug in development right now. Celgene plans to file for approval of the drug later this year. The biotech plans to file for FDA approval of another cancer cell therapy, ide-cel (bb2121), in the first half of next year.
Celgene awaits FDA approvals for two important drugs. The agency is scheduled to make a decision on luspatercept in treating beta-thalassemia by Dec. 4. Another FDA decision for the drug in treating myelodysplastic syndromes (MDS) should be announced by April 4 of next year. Celgene also hopes to win FDA approval for ozanimod in treating MS by next March 25.
In addition, Celgene is evaluating CC-486 in late-stage studies targeting the treatment of MDS, acute myeloid leukemia, and T-cell lymphoma. Marizomib and tislelizumab are in late-stage testing for treating brain cancer and non-small-cell lung cancer, respectively. The company also has late-stage studies under way to hopefully pick up additional approved indications for Abraxane, Otezla, Revlimid, and lymphoma drug Istodax.
As a result of the big sell-off earlier this year, Biogen shares trade at a little over 7 times expected earnings. However, the biotech's earnings growth is likely to decline significantly, with Wall Street analysts projecting average annual growth of less than 5% over the next five years compared to average earnings growth of more than 16% over the last five years.
Celgene shares currently trade at less than 8 times expected earnings. Of course, Celgene's valuation is really tied to the terms of the pending acquisition by Bristol-Myers Squibb.
Assuming this acquisition closes as expected, Celgene shareholders will receive $50 in cash and one BMS share for every share of Celgene they own, the total of which is currently slightly above Celgene's share price. As a sweetener to the deal, Celgene shareholders will also receive one contingent value right (CVR) for every Celgene share owned. This CVR adds another $9 per share for Celgene shareholders if the FDA approves ozanimod and liso-cel by Dec. 31, 2020, and approves bb2121 by March 31, 2021.
Investing in biotech stocks isn't easy because of the wide range of outcomes that can happen with their pipeline candidates. However, in this case, I think there is a clear winner -- and it's Celgene.
Celgene has a stronger product lineup and pipeline than Biogen does. The only complicating factor is the BMS acquisition. But I think shareholders who buy Celgene stock now and hold on to their BMS shares will see solid long-term returns.