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Better Buy: GlaxoSmithKline vs. Pfizer

By Rachel Warren – May 20, 2020 at 8:11AM

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Both companies are weathering the bear market well as they lead the race to develop the coronavirus vaccine. But which is the better buy?

GlaxoSmithKline (GSK -1.35%) and Pfizer (PFE -2.33%) have both been in the headlines lately as they lead the way in the race to develop a coronavirus vaccine. While it hasn't been an easy year for many household names in the big-pharma space, these two companies entered the coronavirus bear market from a position of strength and have continued to show consistent, healthy gains since the stock market's low in March. 

It's clear that both companies have a lot going for them, but which is the better buy? 

Rising lines on stock chart

Image source: Getty Images.

The case for GlaxoSmithKline

GlaxoSmithKline reported its first-quarter 2020 earnings at the end of April, beating analysts' estimates with a 19% year-over-year revenue rise for a total of nearly $12 billion. Sales in the respiratory division were one of the lead drivers of GlaxoSmithKline's revenue in the first quarter, up nearly 40% on a year-over-year basis to over $1 billion. Sales for the company's shingles vaccine, Shingrix, were also a huge factor in its revenue boost, with earnings for the vaccine up by over 80% from the year prior to bring in more than $783 million in the first three months of 2020. 

Consumer healthcare segment sales boomed in Q1, much of which can be attributed to increased demand due to the coronavirus -- GlaxoSmithKline reported an astounding 46% revenue boost in the division. The company held to its prior adjusted earnings-per-share estimate, which called for a decline of up to 4% due to the coronavirus. 

In the press release released with its Q1 report April 29, Chief Executive Officer Emma Walmsley said, "Responding to the COVID-19 pandemic is at the heart of our purpose as a company and GSK's portfolio is both highly relevant and needed ... Our primary aim is to develop multiple adjuvanted COVID-19 vaccines ["adjuvants" are substances that make the body's immune system respond more strongly to an antigen], and we are working with companies and institutions across the world to do so."

Not only is GlaxoSmithKline's diversified product portfolio of particular relevance during this pandemic, but the company's recently announced partnership with French multinational pharmaceutical company Sanofi (SNY -2.31%) to develop a coronavirus vaccine is of particular interest to its growth story. GlaxoSmithKline is combining the vaccine adjuvant technology used in its Pandemrix, which was previously used to treat patients during the H1N1 pandemic, with Sanofi's S-protein antigen, which helps boost the long-term efficacy of antigens. Phase 1 human trials are expected to start within a matter of months, and the companies are targeting for a vaccine to be on the market before the end of 2021. 

In addition to GlaxoSmithKline's wide variety of product offerings, which are particularly germane during these unprecedented times, the potential vaccine could mean billions of dollars in additional revenue on the company's top and bottom line. Not surprisingly, GlaxoSmithKline's stock has been on an upward trajectory since it announced this unprecedented collaboration with Sanofi on April 14, with shares up by 8% on the date of the press release. The company's 4.9% dividend yield isn't too shabby, either, especially next to the S&P's average of 2%. 

The case for Pfizer

Pfizer is also one of the top contenders in the ongoing race to get a coronavirus vaccine from clinical trials into the hands of consumers at lightning speed. The company has joined forces with cancer treatment company BioNTech to develop a vaccine, leveraging GlaxoSmithKline's research and development expertise and BioNTech's established mRNA program. The prospective vaccine is currently called BNT162. 

Pfizer and BioNTech received approval from German regulatory authorities to start phase 1 and 2 clinical trials at the end of April, and on May 5, Pfizer announced that it was dosing its first phase 1 and 2 clinical trial participants in the United States. The first group of participants in the German trials concluded dosing the week prior. 

Pfizer and BioNTech are currently working on four candidates for the vaccine with varying degrees of the mRNA component and antigen type. Pfizer's collaboration with BioNTech is effecting an extraordinary ramp-up of the COVID-19 vaccine timeline. The company has said that it expects millions of vaccines to be distributed before the close of 2020, with hundreds of millions more in the hands of consumers by 2021.

As for Pfizer's financials, the company entered 2020 on a high note, with revenue of nearly $52 billion in 2019, and it looks like it will stay there. The company reported its first-quarter results for 2020 on April 28. The company saw 12% operational growth in its biopharma sector, largely driven by sales of drugs like its anticoagulant medication, Eliquis, and targeted cancer therapy Ibrance. Pfizer's $12 billion in sales in the first quarter of the year exceeded analysts' expectations but represented a 7% decline from Q1 2019. 

The company has maintained its financial guidance for the rest of the year, expecting earnings of up to $42 billion. Pfizer is still moving forward with the merger of its subsidiary, Upjohn, with Mylan (MYL), which will bring an extensive roster of drugs into the company's product portfolio and is factored into financial guidance for the remainder of 2020. For dividend investors, Pfizer's current 4% yield is another reason to like this stock.

The bottom line 

Both companies have impressive product portfolios that have fueled healthy sales during a time when many drugmakers have floundered amid the pandemic. Each company has a solid dividend yield, and both are at the front of the pack among the companies racing to create a coronavirus vaccine. 

At the end of the day, it comes down to your tolerance for risk. GlaxoSmithKline has consistently experienced declines in sales for certain drug groups, such as respiratory medication Advair; sales in its established pharmaceuticals segment dropped by 7% in Q1 2020. Pfizer's impressive product portfolio and drug pipeline, coupled with the fact that the company could very well be one of the first to have a COVID-19 drug on the market, make this stock hard to pass up. For the more risk-averse, I maintain that Pfizer is the better buy.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$43.09 (-2.33%) $-1.03
GSK Stock Quote
$30.00 (-1.35%) $0.41
Sanofi Stock Quote
$38.90 (-2.31%) $0.92
Mylan Stock Quote

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