Times are certainly changing for Gilead Sciences (GILD 0.07%) and Amgen (AMGN -0.19%).
Both of these big biotechs are shifting their therapeutic focuses. Both hope to change their future prospects for the better in the process. Which of these biotech stocks is more likely to be the bigger winner for investors? Here's how Gilead and Amgen stack up against each other.
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The case for Gilead Sciences
Arguably the best reason to buy Gilead Sciences stock is for what's not changing with the company, mainly its dominance in the HIV market. Gilead's Biktarvy is cruising along on a path to become the most successful HIV drug in history. The biotech's pipeline also features potential HIV winners of the future, notably including long-acting capsid inhibitor lenacapavir.
Another thing that isn't changing with Gilead is the company's commitment to its dividend program. Investors should really like Gilead's dividend yield of nearly 4.4%. They should also like that the biotech has increased its dividend payout by 58% since 2015 (when Gilead first initiated a dividend) and appears to be in a good position to deliver more dividend hikes.
But there are also reasons to consider Gilead related to what is changing with the biotech. The company's COVID-19 therapy Veklury (remdesivir) stands atop the list. The drug seems destined to become another blockbuster for Gilead this year. Gilead is also evaluating an inhaled version of remdesivir in an early stage clinical study. If successful, it could open up an even bigger opportunity in treating COVID-19 patients in outpatient settings.
The most significant transformation for Gilead, though, is the company's move into the oncology market. Gilead's 2017 acquisition of Kite propelled the big biotech into the lead position in the cancer cell therapy arena. More recently, the company's planned acquisition of Immunomedics for $21 billion could put Gilead front and center in the breast cancer treatment market.
There's still a question mark, however, in another area where Gilead hopes to expand. The company won European and Japanese regulatory approvals for Jyseleca (filgotinib) in treating rheumatoid arthritis last week. But the U.S. Food and Drug Administration denied approval for the drug in August. It's still possible that Gilead could eventually secure FDA approval for filgotinib.
The case for Amgen
In the past, Amgen's biggest winners included autoimmune disease drug Enbrel and bone marrow stimulants Neulasta and Neupogen. Sales have declined for these drugs, though, and continue to do so in the face of intense competition. But Amgen is pivoting to newer drugs to generate growth.
The most important addition to the company's lineup is Otezla. Amgen acquired the anti-inflammatory drug from Celgene to help remove an obstacle for Bristol Myers Squibb's acquisition last year. Otezla was the main driver of Amgen's revenue growth in the second quarter of 2020.
Prolia remains Amgen's top osteoporosis therapy, but Evenity is rapidly gaining momentum in the indication. Sales are steadily climbing for new migraine drug Aimovig and cholesterol drug Repatha. Amgen also is a leader in biosimilars, with strong sales growth for Amjevita, Kanjinti, and Mvasi (biosimilars to Humira, Herceptin, and Avastin, respectively).
Amgen hasn't been known for its cancer expertise in the past, but that could be changing. Leukemia drug Blincyto is Amgen's first bispecific T-cell engager (BiTE) therapy on the market. The biotech's pipeline is loaded with other BiTE candidates in early stage testing to target several types of cancer.
One constant for Amgen is its dividend. The company's dividend yield currently stands at close to 2.6%. Amgen has raised its dividend every year since initiating its dividend program in 2011 for a total increase during that period of 471%.
Better buy
If the FDA hadn't given a thumbs-down to filgotinib, I'd probably go with Gilead over Amgen. But the agency's rejection of the potential blockbuster drug changes the dynamics considerably.
I think that Amgen gets the nod over Gilead for now. Amgen scored legal wins in the summer that protect Enbrel from biosimilar competition in the U.S. for several more years. That's important because it gives the company time for its newer drugs and its pipeline candidates to gain momentum.
While my view is that Amgen is now the favorite over Gilead, I'm not sold on either biotech stock at this point. I think there are others that offer more attractive risk-reward propositions than Amgen and Gilead.
