Gilead Sciences (GILD 2.18%) and Abbott Laboratories (ABT 2.47%) don't compete against each other. Gilead is best known for its blockbuster HIV and hepatitis C virus franchises. Abbott sells a line of older drugs, mainly in emerging markets, but makes even more money from its nutritional products, diagnostics systems, and medical devices.
Both Gilead and Abbott have become major players in the fight against novel coronavirus disease COVID-19 this year, albeit in different ways. For much of the year, Gilead's stock performance handily topped Abbott's. However, the dynamics have changed over the last month. Which of these coronavirus stocks is the better pick now?
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The case for Gilead Sciences
Medical professionals struggled early on to find COVID-19 treatments that would be both safe and effective. One experimental drug stood out from the crowd -- Gilead's remdesivir. Today, remdesivir has won regulatory approvals in several countries. It also is available in the U.S. through an emergency use authorization and awaits full FDA approval.
Remdesivir will almost certainly become a megablockbuster for Gilead in the near term. The biotech has an even greater market opportunity with the drug if its clinical studies evaluating an inhaled version that could be used in outpatient settings are successful.
Gilead's HIV franchise will remain the biggest moneymaker for the company, though. Biktarvy continues to gain momentum and appears to be on track to become the biggest-selling HIV drug to date. Gilead has another promising HIV drug in its pipeline as well with long-acting capsid inhibitor lenacapavir.
The company is also already a leader in cancer cell therapies with Yescarta and Tecartus. Gilead could expand its presence in the oncology market thanks to a string of acquisitions and partnerships orchestrated by CEO Daniel O'Day.
Most biotechs don't offer dividends, but Gilead is an exception. The company's dividend yield of over 4% is likely to capture investors' attention. Gilead has boosted its dividend payout by 58% over the last five years.
The case for Abbott Labs
It wasn't surprising that Abbott Labs quickly emerged as one of the top players in the COVID-19 diagnostics market. The company now has six coronavirus tests on the market in the U.S. In the first half of 2020, the company's COVID-19 tests generated sales of $652 million.
That total will almost certainly increase significantly thanks to Abbott's newest product. The company recently announced FDA emergency use authorization for a rapid COVID-19 antibody test, BinaxNOW. This test is priced at $5, provides results in 15 minutes, and doesn't require any instrumentation.
While BinaxNOW could turbocharge Abbott's coronavirus-related revenue, the healthcare giant claims several other growth drivers. Freestyle Libre 2 ranks at the top of the list. The integrated continuous glucose monitoring system (iCGM) won FDA clearance in June. Its predecessor racked up sales of nearly $1.2 billion in the first half of 2020, up 50% year over year.
Other products are also important to Abbott's growth, including mitral regurgitation device MitraClip and the Alinity line of diagnostics systems. In addition, growth in emerging markets should drive Abbott's nutritional and established pharmaceuticals sales higher over the next decade and beyond.
Abbott belongs to a select group of stocks known as Dividend Aristocrats -- S&P 500 members that have raised their dividends for at least 25 consecutive years. The company's track record is more impressive than most Dividend Aristocrats, with Abbott increasing its dividend payout in each of the last 48 years. Its dividend currently yields around 1.4%.
Better coronavirus stock
Gilead's remdesivir should be a big winner, but it could face significant competition from other treatments in the near future. The availability of COVID-19 vaccines, perhaps as earlier as late 2020, could reduce the market size for remdesivir over time. I'm also less optimistic about Gilead's overall growth prospects after the FDA's recent rejection of approval for filgotinib in treating rheumatoid arthritis.
My view is that Abbott Labs is now clearly the better coronavirus stock of the two. Abbott has a clear path to growth that's diversified across multiple products. The company has demonstrated its ability to innovate quickly. With a solid and steadily increasing dividend thrown in, I think that Abbott should deliver market-beating returns over the next few years.
