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Better Buy: bluebird bio vs. Gilead Sciences

By Prosper Junior Bakiny – Jun 11, 2020 at 5:55AM

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Which of these two biotech companies is the better stock pick today?

Gilead Sciences (GILD -2.19%) has been leading the hunt to find a treatment for COVID-19. As a result, shares of the company have performed well of late and are up by 18.7% since the year began. Meanwhile, bluebird bio (BLUE 11.05%) a biotech company that develops treatments for rare diseases, hasn't had the best of luck recently, with its shares down by 21.9% year to date.

Even with this poor performance, I think there are good reasons to consider buying shares of Bluebird, but is it a better stock pick than Gilead Sciences at the moment? Let's look at both companies' operations and decide which is the better biotech stock to buy today.

Stock chart

Image Source: YCharts

The case for Gilead Sciences

Gilead Sciences is one of the leaders in the market for HIV treatment, and sales of the company's HIV products -- such as Descovy and Biktarvy -- continue to perform well. During the first quarter, sales of Gilead's HIV products were $4.1 billion, up from the $3.6 billion recorded during the prior-year quarter.

The company's HIV products are recouping some of its losses within its chronic hepatitis C virus (HCV) segment, resulting from lower average net selling price. The company's HCV revenue has been decreasing over the past several quarters. During the first quarter, Gilead's HCV sales were $729 million, a 7.7% year-over-year decrease.

Fortunately, the company has several promising pipeline candidates. First, there's its antiviral drug remdesivir, which remains one of the most promising potential treatments for COVID-19. The company recently released results from a phase 3 study investigating the drug as a treatment in patients with mild symptoms of the disease. According to the study, a five-day treatment course of remdesivir "resulted in significantly greater clinical improvement versus treatment with standard of care alone." Gilead has committed to donating nearly 1 million existing doses of the drug to U.S. hospitals.

Then there's filgotinib, a potential treatment for rheumatoid arthritis that Gilead submitted to the U.S. Food and Drug Administration (FDA) in December 2019. The medicine, which is also being evaluated for other conditions such as Crohn's disease, could become a blockbuster drug.

Doctor giving a thumbs-up

Image source: Getty Images.

Lastly, Gilead Sciences has collaboration arrangements in place that could help the company replenish its pipeline. For instance, it recently announced a 10-year partnership with Arcus Biosciences (RCUS 2.47%) to develop and market cancer treatments.

As part of this arrangement, Arcus received an upfront payment of $175 million, a $200 million equity investment, and additional funding that could reach up to $1.6 billion. In exchange, Gilead now has access to Arcus Biosciences' "current and future investigational immuno-oncology products." This partnership further strengthens Gilead's pipeline, which along with the company's strong HIV lineup, makes the company's stock a buy. 

The case for bluebird bio

Bluebird currently has just one product on the market, Zynteglo, a treatment for a rare blood disorder called transfusion-dependent beta-thalassemia (TDT) that was approved in June of last year by the European Medicines Agency (EMA). The company put a rich price tag on this treatment: It will cost about 1.58 million euros. But it is worth noting that this treatment provides great value to patients. 

Before the approval of Zynteglo, patients suffering from this rare condition had to receive regular blood transfusions to survive. Thanks to Zynteglo, these patients -- at least those TDT patients who are eligible for it -- now have another option. Bluebird has been launching Zynteglo throughout Europe, and the company's financial results should start to reflect at least some of the effects of this treatment in the coming quarters. The company is going after other difficult targets, too, including another rare blood disorder called sickle cell disease (SCD). The company's candidate for SCD is currently in phase 2/3 testing.

Lastly, through a collaboration arrangement with Bristol Myers Squibb (BMY -0.86%), Bluebird is developing ide-cel, a potential treatment for several forms of cancer. In March, the two companies submitted ide-cel to the FDA for review as a potential treatment for multiple myeloma patients who have received at least three prior therapies. Bluebird's stock could take off if the company's Zynteglo is successful, and if it manages to earn approval for one -- or more -- of its other products, such as ide-cel.

Which is the better buy?

In my view, Gilead Sciences is the better stock pick at the moment. It's a more established business with a robust lineup, a rich pipeline, and much stronger financial results. During the first quarter, Gilead posted revenue of $5.5 billion and a net income of $1.6 billion, and the company had $24.3 billion in cash and cash equivalents. By contrast, Bluebird's revenue during the first quarter was $21.9 million, the company reported a net loss of $202.6 million, and it had $1.02 billion in cash and cash equivalents. 

Further, Gilead Sciences' forward price-to-sales ratio remains relatively reasonable at 4.3, while Bluebird is currently trading at more than 24 times its future sales. Better product lineup, stronger financial results, and a more attractive valuation all tip the scales in Gilead's favor, although I also believe that Bluebird is worth considering. 

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bluebird Bio, Bristol Myers Squibb, and Gilead Sciences. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$61.69 (-2.19%) $-1.38
bluebird bio, Inc. Stock Quote
bluebird bio, Inc.
BLUE
$6.33 (11.05%) $0.63
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$71.09 (-0.86%) $0.62
Arcus Biosciences, Inc. Stock Quote
Arcus Biosciences, Inc.
RCUS
$26.16 (2.47%) $0.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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