Eli Lilly (LLY 0.52%) and Pfizer (PFE 2.73%) have been two of the best-performing big pharma stocks over the past decade. Nonetheless, these two pharma titans have both run into serious trouble this year due to a mix of patent woes, headwinds from restructuring, and the raging prescription drug-pricing debate in the United States.
Which of these top pharma stocks is better positioned to rebound in 2020? To answer this all-important question, let's take a look at their respective product portfolios, late-stage clinical pipelines, and near-term growth prospects.
The case for Lilly
Lilly is a company in the midst of a long-winded product churn. After spinning off its animal healthcare business Elanco, the drugmaker has placed a heavy emphasis on driving top-line growth via high-demand human pharmaceuticals in the areas of cancer, diabetes, immunology, and neurology.
To this end, Lilly has brought several new therapies to market in these areas in recent years, and significantly expanded the labels of other key growth products as well. The net result is that the company now sports eight bonafide growth products, consisting of Trulicity, Taltz, Jardiance, Verzenio, Olumiant, Emgality, Basaglar, and Cyramza. As an added bonus, the company also grabbed regulatory approvals for two additional products with promising futures this year -- the acute migraine treatment Reyvow and the severe hypoglycemia medicine Baqsimi.
Perhaps the most impressive part of Lilly's story, though, is the company's late-stage pipeline. The experimental psoriasis medication mirikizumab and the pain drug candidate tanezumab could both turn into megablockbuster products in short order. So, even though Lilly is experiencing some hefty drop-offs with key medicines like Cialis and Humalog at the moment, the company should be able to push past these headwinds to continue delivering top-notch levels of growth for years to come.
The case for Pfizer
Pfizer is undergoing a metamorphosis. Pfizer and GlaxoSmithKline recently teamed up to carve out their respective consumer healthcare units into a stand-alone business. And now, the drugmaker is set to pair its legacy medicines unit Upjohn with generic drug giant Mylan by mid-2020. The cumulative effect of these two transactions is that Pfizer is set to morph into a smaller, growth-oriented biopharma company in the second half of next year.
What kind of growth can investors expect from this slimmed-down version of Pfizer? While the company has stated that it expects top-line growth of 6% on average for the next five consecutive years -- a figure that would make it the second-fastest growing large-cap biopharma, Wall Street isn't altogether convinced that Pfizer can achieve this lofty growth target.
Now, the drugmaker's current growth portfolio consisting of Ibrance, Xeljanz, Eliquis, Vyndaqel, Inlyta, and Xtandi are all strong earners and this encouraging uptrend should hold for at least a few more years. The problem is that analysts aren't entirely sold on the commercial prospects of Pfizer's late-stage pipeline.
To be fair, Pfizer does sport several intriguing product candidates in the areas of severe hemophilia A, growth hormone deficiency, and various cancers. But the company's lack of an heir apparent to former giants like Celebrex, Lipitor, and Lyrica isn't sitting well with some analysts.
Going deeper down this rabbit hole, Pfizer's management has also stated that the company isn't interested in pursuing a megadeal to bring in new growth drivers or clinical candidates. Instead, it will focus on smaller mergers and acquisitions, as well as internal pipeline development over the next several years.
Its newly revamped business strategy thus boils down to a "strength in numbers" approach to value creation. That's not a bad move in light of the company's protracted battle with the patent cliff over the last decade, the ongoing drug-pricingcing debate in the U.S., along with the host of problems associated with megablockbuster-centric growth.
Which stock is the better buy?
Although Pfizer and Lilly both sport exceptionally strong outlooks, Lilly is arguably the better buy right now. As things stand, Lilly simply has the better late-stage pipeline and it's much further along in the process of moving into the next stage of its life cycle. Pfizer, on the other hand, still has to prove to investors that its strategic decision to slim down is indeed the correct course of action. Lilly faces no such headwind -- giving its stock a far better chance of success in 2020.