Plodding and plunging. That's maybe the best way to summarize 2019 so far for Gilead Sciences (GILD 0.46%) and Biogen (BIIB +1.42%), respectively.
Gilead Sciences continues to plod along with its stock range-bound throughout the year. The big biotech did, however, return to revenue growth after a long stretch of declining sales. Biogen, meanwhile, saw its shares plunge in March after experimental Alzheimer's disease drug aducanumab flopped in late-stage clinical testing.
Which of these biotech stocks is the better pick for long-term investors now? Here's how Gilead and Biogen stack up against each other.
Image source: Getty Images.
The case for Gilead Sciences
Gilead Sciences continues to dominate the HIV therapy market. Biktarvy appears to be well on its way to becoming the biggest HIV drug in history. Sales for the drug skyrocketed 503% year over year and 41% sequentially in the second quarter to $1.16 billion. The only downside is that Biktarvy is cannibalizing the sales of a few of Gilead's other HIV drugs to some extent.
While Biktarvy is the big story for Gilead, the company actually has some good news from a previous sore spot. Gilead's hepatitis C virus (HCV) franchise appears to have stabilized after a few years of steep sales declines. Although sales are much lower than they were in the past, the biotech's HCV drugs contribute significantly to Gilead's solid cash flow.
It's a mixed bag for Gilead's other products. Cell therapy Yescarta continues to pick up momentum but could take a while to reach blockbuster sales status. However, angina drug Ranexa and pulmonary arterial hypertension drug Letairis now face generic competition, with sales of Ranex plummeting in Q2.
Gilead's pipeline could deliver positive news in the near future. The biotech expects FDA approval soon for Descovy as a pre-exposure prophylaxis (PrEP) treatment for HIV after an advisory committee voted 16-2 in favor of recommending approval. Gilead also plans to file for approval of filgotinib in treating rheumatoid arthritis within the next few months.
Looking further into the future, Gilead could see more fruit from its pipeline. The company has clinical studies in progress evaluating Yescarta and filgotinib in treating additional indications. It's testing a couple of experimental drugs that target nonalcoholic steatohepatitis (NASH). Gilead also has an early stage long-acting HIV drug that RBC Capital analyst Brian Abrahams thinks could be a game changer.
In addition, Gilead has a huge cash stockpile of over $30 billion that new CEO Dan O'Day could put to use in acquiring new pipeline assets. The company also pays out an attractive dividend that currently yields 4%.
The case for Biogen
Probably the best argument for buying Biogen is that the stock is the cheapest that it's been in several years. Biogen's shares trade at less than seven times expected earnings. The biotech should also deliver modest earnings growth in the future.
The company's multiple sclerosis (MS) franchise remains Biogen's top moneymaker, with total sales climbing 3% year over year to $2.2 billion in the second quarter. Tecfidera generated over half of that total, and Biogen's top-selling drug continues to deliver solid sales growth.
Biogen's blockbuster with the fastest-rising sales, though, is Spinraza. The spinal muscular atrophy (SMA) drug raked in $488 million in Q2, up 15% from the prior-year period. Biogen CFO Jeffrey Capello stated in the company's Q2 conference call that Biogen hasn't "seen a meaningful impact" from Novartis' SMA gene therapy Zolgensma on sales of Spinraza so far.
Another rising star for Biogen is its biosimilars program. The biotech currently markets biosimilars to Enbrel, Humira, and Remicade outside the U.S. While these three biosimilars contribute only a little over 6% of Biogen's total revenue right now, their combined sales soared 45% year over year in the second quarter.
Admittedly, the loss of aducanumab left a big hole in Biogen's pipeline. However, the biotech awaits FDA approval of Vumerity, an MS drug that Biogen picked up from Alkermes. Biogen's pipeline includes five other late-stage programs. It also has a very promising mid-stage MS candidate with opicinumab.
The company recently completed the acquisition of Nightstar Therapeutics, which focuses on gene therapies targeting genetic eye diseases. It wouldn't be surprising for Biogen to make additional deals to beef up its pipeline as well.
Better buy
I think that Gilead's core HIV franchise is stronger than Biogen's core MS franchise. Approval for Vumerity will help Biogen incrementally but could also ding sales for Tecfidera. Even though Spinraza appears to be holding up pretty well with Zolgensma now on the market, its growth is likely to slow considerably.
I'm also concerned that two of Biogen's five late-stage candidates target Alzheimer's disease -- a notoriously difficult indication to succeed in (as Biogen well knows). Meanwhile, I think the odds of approval for Gilead's Descovey in HIV PrEP are really great, and the chances for approval of filgotinib look pretty good.
Then there's Gilead's fantastic dividend. Even if the stock delivers only modest gains, throwing in a 4% yield would give investors a nice total return.
With the risk of clinical and regulatory setbacks, investing in biotech stocks isn't for the faint of heart. But I think that the overall picture for Gilead looks promising. My view is that Gilead is the clear winner between these two biotech stocks.
