In 2021 alone, the SPDR S&P 500 ETF is up almost 10%, making it harder to find stocks that are priced fairly. In times like these, I turn to the healthcare sector. Pharmaceutical companies can experience periods where growth is flat or even negative because of short-term pipeline issues or drug competition, to name a few causes, encouraging a lot of investors to sell their stock. The list of pharma companies that are inexpensive buys today includes GlaxoSmithKline (GSK 0.97%) and Sanofi (SNY -0.30%). Still trading off their all-time highs, here's which stock might make the better buy for 2021.

1. GlaxoSmithKline

U.K.-based pharmaceutical giant GlaxoSmithKline currently sits nearly 50% off the all-time highs it set way back in 1999. Over its 300 year history , the company has been behind some of the most recognized consumer brands, including Sensodyne, AquaFresh, Polident, and Biotene. Now, with plans to spin off its consumer health segment, the company is looking to invest in its drugs pipeline, lower costs, and reinvigorate sales across its current set of products.

GlaxoSmithKline's pipeline looks underwhelming at the moment. In fact, the situation is so dire that the company has indicated that the dividend will be cut sometime in 2022 to divert capital to grow the pipeline.

The COVID-19 pandemic led the company to halt many of its clinical trials to divert resources toward creating a possible vaccine, which it's currently working on one with fellow pharma giant, Sanofi. In July, the U.S. government agreed to pay $2.1 billion, split between the two companies, for the development and production of their joint vaccine, which is currently in phase 3 trials.

Management has been looking to drive growth in its vaccine business even beyond COVID-19, submitting vaccines to both the U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) for consideration. GlaxoSmithKline is seeking approval to create a variety of vaccines to treat diseases like respiratory syncytial virus (RSV), HIV, and malaria. Outside of vaccines, the company's current pipeline has opportunity in treatments for certain cancers and autoimmune disorders, such as endometrial cancer and myeloma.

The company has also done a pretty decent job of growing revenue, even at a time when hospitals have been postponing a lot of surgeries and treatments due to the pandemic, which has led to lower demand for GlaxoSmithKline's procedure-related medications such as Zejula, a chemotherapy drug. The company's revenue estimate for the 2021 fiscal year is just shy of $47 billion, and analysts currently expect that number to grow to $49.23 billion for the next fiscal year.

GlaxoSmithKline is certainly in a state of transition, and is still trying to figure out a clear direction to take the company. The company has committed to investing heavily in research and development to bring new drugs and products to market. Its vaccine business brought in $9.87 billion in sales in 2020, accounting for about 20% of revenue. Due to the pandemic, management only expects non-COVID-19 vaccine revenue for 2021 to see flat to low-single-digit growth. As of now, GlaxoSmithKline is in a period of transition in its business and investors might want a bit more clarity before buying shares.

Two lab technicians doing work in a lab

Image source: Getty Images.

2. Sanofi

French pharmaceutical company Sanofi is poised for some great growth over the next few years. In its first-quarter 2021 earnings announcement on April 28, the company showed expansion across its various business lines.

The company's sales in Q1 were up 2.4% year over year, and earnings per share (EPS) rose by a tremendous 15% to reach 1.61 euros this quarter. One of its most successful products, Dupixent, saw sales rise by 46% year over year to 1.047 billion euros in just the first quarter of 2021. The company also boasts a very successful vaccine business. Its pertussis, polio, and haemophilus influenza (PPH) vaccine business grew by 15% year over year to 915 million euros in sales in the first quarter alone, providing a boost to the top-line. Remember that Sanofi is also in a partnership with GlaxoSmithKline to produce a COVID-19 vaccine, which is currently in phase 3 clinical trials. Hoping to make it available for wide use by the end of 2021, the companies already have a 60 million dose order from the United Kingdom. Investors will most likely only get to know the financial result from this venture in Q1 of 2022.

For 2021, Sanofi expects operating margin to be north of 30%, and high single-digit growth for EPS. The business looks to be positioned for some very good revenue expansion over the next few years. With its current products on the market as well as over 20 new patents being filed to expand the uses of some of its existing drugs, this is a great business to own for the long run. 

Which is the better buy?

Both GlaxoSmithKline and Sanofi are trading at very deep discounts, with forward price-to-earnings (P/E) ratios of 14.3 and 9.3, respectively. Considering the forward growth rates of each company, though, I would have to go with Sanofi as the better buy. Sanofi is projected to grow revenue at 5.76% while GlaxoSmithKline is expected to only grow revenue by 3.92%, with some lingering uncertainties about the future of the business.

Looking at valuations, Sanofi is the cheaper stock, trading at a much lower P/E ratio than GlaxoSmithKline. While GlaxoSmithKline boasts a higher dividend yield at 5.4% than Sanofi's 3.6%, Sanofi is still well above the S&P 500's average of under 2%. As mentioned, management has indicated that the dividend will be cut to reallocate capital to develop a greater pipeline after the spinoff of its consumer health segment.

Sanofi's current set of products and pipeline are at a much more advanced stage to position the company for greater growth over the next few years. GlaxoSmithKline is in a transitional stage, and as an investor, I would like a lot more clarity on the long-term vision of its businesses before building up a position. Both stocks offer possible upside over the long term, but I think that Sanofi is the better buy for 2021.