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Better Buy: Bristol Myers Squibb vs. Gilead Sciences

By Rachel Warren – Jun 4, 2020 at 6:50AM

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Which of these household names is the better buy?

There are few names more well-known in the biopharmaceutical world than Bristol Myers Squibb (BMY -0.11%) and Gilead Sciences (GILD 0.15%). While neither stock was immune to the coronavirus bear market plunge in March, both companies managed to stave off much of the volatility impacting their competitors in the broader market.

Gilead has gained increasing attention in the news of late. In early May, the U.S. Food and Drug Administration (FDA) authorized the emergency use of the company's antiviral medication remdesivir to treat critically ill COVID-19 patients. Gilead is donating millions of doses of the drug globally, as more countries around the world have approved it for severely ill patients. Taiwan is the latest nation to clear the drug to treat COVID-19 patients. Bristol Myers has proffered its research capabilities and over 1,000 different compounds to companies collaborating on prospective COVID-19 solutions as its contribution to battle the pandemic.

Both Bristol Myers Squibb and Gilead Sciences have extremely solid pipelines of existing products and strong core financials. So today's burning question is, which stock is the better buy? 

Blue and green pills on conveyor belt.

Image source: Getty Images.

The case for Bristol Myers Squibb

Bristol Myers Squibb reported stellar Q1 2020 earnings results on May 7. In the first quarter of 2020, revenues neared $11 billion, an astonishing increase of 82% from Q1 2019. The lion's share of this earnings boost was due to the company's $74 billion acquisition of Celgene, which closed in November 2019.

The influence of the Celgene acquisition on Bristol Myers' top and bottom line was significant. The slew of new drugs that Celgene contributed to Bristol Myers' product portfolio comprised over 70% of the earnings growth the company experienced in the first three months of 2020. Bristol Myers' Q1 earnings report also noted that sales of its existing products received a $500 million boost due to increased demand during the coronavirus pandemic.

Bristol Myers Squibb was one of the very few healthcare stocks where first-quarter revenues remained largely untouched by the COVID-19 pandemic. In the U.S. alone, Bristol Myers' revenue totaled nearly $7 billion, a landmark rise of 96% on a year-over-year basis. In the international market, the company's revenue rose by over 60% to reach $4 billion in Q1 2020. 

Apart from the acquisition of Celgene's portfolio of drugs, one of the primary drivers of Bristol Myers' Q1 earnings was its anticoagulant medication Eliquis. Sales for Eliquis jumped by nearly 40% from Q1 2019, totaling almost $3 billion. Another big winner for Bristol Myers in the first three months of 2020 was its chemotherapy drug Sprycel. Sales for the drug grew by 14% in Q1 2020, or over $520 million.

In addition to its many victories in the first quarter of the year, Bristol Myers Squibb has reported some promising moves in its product pipeline. The most notable development was the FDA's acceptance of the company's supplemental Biologics License Application (sBLA) to combine Opdivo and Yervoy for use alongside restricted cycles of chemotherapy as a first-line treatment for individuals with metastatic cancer. The FDA has granted Bristol Myers' application a Fast-Track designation and is expected to reach a determination by early August.

Bristol Myers Squibb anticipates its 2020 earnings to fall somewhere between $40 billion and $42 billion. As for Bristol Myers' response to the coronavirus pandemic, the company noted the following in its Q1 2020 report: 

Working with researchers, the biotech community and the broader life sciences industry on ways we together can accelerate therapies for COVID-19. This includes evaluating medicines in our portfolio that may have an impact on the inflammatory immune response associated with COVID-19.

Another bright spot for investors is the company's dividend, which is currently paying out around 3%. Bristol Myers also has an impressive history of increasing its dividend on an annual basis and has done so four times in the past five years, with an average increase of over 2% each time.

The case for Gilead Sciences 

Gilead Sciences released its Q1 results on April 30. The results weren't quite as groundbreaking as Bristol Myers' but were positive nonetheless.

Gilead reported a healthy year-over-year increase in gross revenue, with earnings totaling nearly $6 billion, which was 5% higher than revenues in Q1 of 2019. However, the company's net revenue of $1.6 billion represented a more than 20% decrease from the $2 billion net earnings reported in Q1 2019. Sales were up in domestic and international markets in the first three months of 2020, with Gilead raking in nearly $4 billion in U.S. sales alone and about $1.4 billion in combined sales in European and other markets worldwide.

HIV product sales boomed in the first quarter of 2020, surpassing $4 billion and up from Q1 2019 sales that totaled $3.6 billion. Sales of Gilead Science's chronic hepatitis C virus products were down from $790 million in Q1 2019 to $729 million in Q1 2020. The company reported $24 billion in cash flow by the end of March. Its dividend yield is about 3.5%.

The company's quarterly earnings were released on the heels of its April 29 announcement that phase 3 human studies of remdesivir on hospitalized coronavirus patients had shown positive results. The study revealed that critically ill COVID-19 patients who were administered remdesivir over the course of five days showed similar progress to patients given the drug over a treatment period of 10 days. These results were released congruously with more positive news that another remdesivir study spearheaded by the National Institutes of Allergy and Infectious Diseases (NIAID) had met its primary endpoint.

In the company's remdesivir announcement, Gilead Science's Chief Medical Officer Merdad Parsey stated: 

Unlike traditional drug development, we are attempting to evaluate an investigational agent alongside an evolving global pandemic. Multiple concurrent studies are helping inform whether remdesivir is a safe and effective treatment for COVID-19 and how to best utilize the drug. These study results complement data from the placebo-controlled study of remdesivir conducted by the National Institute for Allergy and Infectious Diseases and help to determine the optimal duration of treatment with remdesivir. The study demonstrates the potential for some patients to be treated with a 5-day regimen, which could significantly expand the number of patients who could be treated with our current supply of remdesivir. This is particularly important in the setting of a pandemic, to help hospitals and healthcare workers treat more patients in urgent need of care.

On May 1, Gilead announced that the FDA had issued the company an emergency use authorization (EUA) to treat severely ill COVID-19 patients with remdesivir. While the precise dose and length of the dosage have not yet been determined, the EUA allows for both the 10- and five-day dosage regimen, depending on whether the patient requires a ventilator or not. Gilead is also partnering with Swiss multinational healthcare company Roche on a placebo-controlled phase 3 human trial of 450 critically ill coronavirus patients. The trial will study the efficacy of remdesivir used with a placebo compared to combining remdesivir with Roche's immunosuppressive medication Actemra to treat COVID-19 patients.

As much as the latest updates concerning remdesivir have garnered the most attention from prospective investors in Gilead Sciences stock, these developments seem to have the least impact on the company's top and bottom line. Gilead is donating about 1.5 million doses of remdesivir, hoping to produce a minimum of 500,000 treatment courses by October and reach the 1 million mark by December. These treatment courses assume that patients will be administered remdesivir on the 10-day regimen.

The better buy

There's no question that both stocks have attractive qualities, with strong product portfolios and development pipelines. And Bristol Myers Squibb and Gilead Sciences have both handled the high highs and low lows of the coronavirus bear market better than most competitors in the biopharma space. 

The latest clinical findings and developments for Gilead's remdesivir developments look encouraging for healthcare workers on the front lines and patients battling COVID-19. But investors hoping that the drug will bring a major boost to the company's valuation could face disappointment on that score. Gilead Sciences is giving remdesivir away free of charge, and the drug currently only has emergency use authorization, so the long-term impact of remdesivir on Gilead's balance sheet remains uncertain. If and when a viable vaccine hits the market, it could quickly overshadow the demand for remdesivir. 

Gilead Sciences' stock has jumped more than 20% year to date, largely due to the current hype surrounding remdesivir. In my opinion, Gilead Sciences is more volatile at the moment. Therefore, for risk-conscious investors, Bristol Myers Squibb is the better buy.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb and Gilead Sciences. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
$70.16 (-0.11%) $0.08
Gilead Sciences Stock Quote
Gilead Sciences
$65.05 (0.15%) $0.10

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