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Better Buy: Gilead Sciences vs. Pfizer

By Keith Speights - Nov 23, 2020 at 6:12AM

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Both drugmakers are at critical crossroads with new COVID-19 programs. Which has the stronger prospects?

Two healthcare giants have been at the forefront in the fight against COVID-19. Gilead Sciences ( GILD 0.09% ) was among the first companies to win FDA emergency use authorization (EUA) for an antiviral therapy targeting SARS-CoV-2, the novel coronavirus that causes COVID-19. Pfizer ( PFE -0.62% ) hopes to soon win the first EUA for a coronavirus vaccine.

You might think that Gilead and Pfizer would have delivered tremendous stock returns this year with their respective COVID programs racking up successes. That hasn't been the case, though, with both stocks in negative territory year to date. 

Which of these two drug stocks is the better pick going forward? Here's how Gilead and Pfizer stack up against each other in several key areas.

Gloved hands holding two test tubes

Image source: Getty Images.

Current products

Gilead is best known for its antiviral drugs. Its HIV franchise really put the biotech on the map. Gilead's HIV drugs continue to generate huge revenue, especially its best-selling HIV therapy Biktarvy. However, sales are declining for the company's older Truvada-based drugs as Truvada faces generic competition. 

COVID-19 therapy Veklury (remdesivir) has emerged as a big winner for Gilead. In its first full quarter on the market, the drug raked in sales of $873 million. It remains to be seen how durable these strong sales will be, though, with the World Health Organization recently recommending against the use of Veklury in treating COVID-19. The company now has another new product with significant potential, though, with the pickup of breast cancer drug Trodelvy with the recent acquisition of Immunomedics.

It's a mixed bag with Gilead's other products. The company's once-mighty hepatitis C virus franchise continues to flounder. Gilead's pulmonary arterial hypertension drug Letairis and chest pain drug Ranexa are losing market share to generics. However, the biotech's cancer cell therapies Yescarta and Tecartus continue to pick up momentum.

Pfizer has several blockbuster drugs that are generating solid growth. Its top-selling breast cancer drug Ibrance and blood thinner Eliquis stand at the top of the list. Autoimmune disease drug Xeljanz, prostate cancer drug Xtandi, and rare disease drug Vyndaqel are also stars in the drugmaker's current lineup.

However, Pfizer has its fair share of trouble spots. Sales for autoimmune disease Enbrel outside the U.S. and Canada continue to fall. The company also faces headwinds for several other products, notably including its Chantix smoking cessation products and Sutent cancer chemotherapy.

Pipelines

Gilead's pipeline includes six late-stage candidates. The most promising of these is probably long-acting HIV therapeutic candidate lenapavir. Gilead recently reported positive results for the experimental drug from a phase 2/3 study in heavily treatment-experienced individuals.

Filgotinib stands as arguably the riskiest of Gilead's late-stage candidates. The FDA issued a complete response letter turning down approval for the drug in treating rheumatoid arthritis (RA) earlier this year. Gilead awaits an approval decision for filgotinib in treating RA from the European Medicines Agency. It also continues to evaluate the experimental drug in late-stage studies as a potential treatment for several other autoimmune diseases.

Pfizer has six programs awaiting regulatory approval and another 21 in late-stage testing. The most heavily anticipated candidate by far is BNT162b2, the COVID-19 vaccine developed in partnership with German biotech BioNTech. Assuming the vaccine candidate wins EUA from the FDA, it will quickly become rake in billions of dollars in sales within a short period.

Many of Pfizer's late-stage programs target additional indications for drugs already on the market. The drugmaker's most promising new candidates include pain drug tanezumab and pneumococcal vaccine PF-06482077. However, Pfizer's pneumococcal vaccine lags behind Merck's V114. 

Dividends

Now for a relatively easy comparison. Gilead's dividend yield currently stands at close to 4.5%. That's well above Pfizer's dividend yield of around 4.1%.

Also, Pfizer's dividend will soon decline a bit. The company recently spun off its Upjohn unit, which merged with Mylan to form a new entity, Viatris. This transaction reduced Pfizer's cash flow and will cause the company's dividend to be lower. 

Better stock to buy?

My view is that Pfizer offers better overall prospects over the next few years. Gilead faces considerable uncertainty with Veklury and filgotinib. Pfizer, on the other hand, seems to be in its strongest position in years. The Viatris deal removed older drugs that were holding back Pfizer's growth. BNT162b2 is poised to become a megablockbuster. Pfizer's other drugs and pipeline candidates should enable the big pharma stock to return to solid growth. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$51.40 (-0.62%) $0.32
Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
MRK
$73.21 (1.29%) $0.93
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$69.71 (0.09%) $0.06
BioNTech SE Stock Quote
BioNTech SE
BNTX
$291.94 (-3.55%) $-10.75
Viatris Inc. Stock Quote
Viatris Inc.
VTRS
$12.43 (0.24%) $0.03

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

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