When you think of biotech investing, you might focus on small companies that are years away from product revenue. They may eventually offer great rewards -- but at the moment, risk is high. If you're more of a cautious investor, that may not be your thing. That doesn't mean you have to avoid biotech, though. Some biotechs are actually quite advanced -- and bringing in billions of dollars in revenue.
Two great examples are Biogen (BIIB 0.36%) and Vertex Pharmaceuticals (VRTX 0.53%). They have several products on the market, are profitable, and have full pipelines to potentially deliver growth down the road. Which of the two is a better big biotech buy right now? Let's find out.
1. Biogen
Biogen is known for its blockbuster multiple sclerosis drugs, including top seller Tecfidera. The problem is that this portfolio is aging, and today even Tecfidera finds itself facing generic competition. Biogen's immunology drug, Rituxan, has also seen sales slip due to biosimilars in the market. As a result, Biogen's annual revenue has been on the decline.
BIIB Revenue (Annual) data by YCharts
The big biotech has set its sights on Alzheimer's disease treatment to renew growth. Its first attempt, Aduhelm, failed as trial data wasn't strong enough to bring doctors on board.
But Biogen and partner Eisai recently submitted their second candidate -- Leqembi -- to the U.S. Food and Drug Administration (FDA) for full approval. The FDA has already granted Leqembi accelerated approval. But only full approval may lead to Medicare coverage of the product. Leqembi might have a better shot at acceptance by regulators and doctors. That's because clinical trial results were more straightforward than the Aduhelm studies.
Leqembi might bring in more than $7 billion in worldwide sales by 2030. This could be big for Biogen, even considering that it shares profit with Eisai. The FDA is expected to decide on Leqembi in July. Biogen is also waiting for a regulatory decision on a candidate for major depressive disorder -- zuranolone -- in August.
So, if all goes well during regulatory review, Biogen may be at the start of a new wave of growth.
2. Vertex Pharmaceuticals
Vertex's story is quite different from Biogen's. Vertex's specialty is cystic fibrosis (CF), and its earnings from the products are on the rise. The newest, Trikafta, launched in 2019. And Vertex expects to dominate the CF market through at least the 2030s. In fact, the candidate that might eventually unseat Trikafta is one Vertex is developing.
All this sounds great. But in recent years, investors worried that Vertex would struggle to expand beyond CF. The company may be on its way to showing them it can indeed expand -- and successfully. Vertex and partner CRISPR Therapeutics recently completed regulatory requests for exa-cel, their investigational treatment for blood disorders.
Exa-cel is based on CRISPR's gene editing technology and works as a one-time curative treatment for adults with beta thalassemia or sickle cell disease. Today, treatment options are limited for these disorders. So patients and doctors may be very interested in trying exa-cel.
The companies are also studying exa-cel in a phase 3 trial in pediatric patients. This could result in an even broader audience for the treatment.
Vertex hasn't stopped there, though. The company's pipeline includes promising candidates in other big treatment areas such as type 1 diabetes and pain management. All of this could boost growth over time.
Biogen or Vertex?
Now, let's look at valuation. Vertex is trading a bit higher than Biogen in relation to forward earnings estimates.
BIIB PE Ratio (Forward) data by YCharts
That's not surprising, considering Vertex's CF program is still booming. So there's reason to pay more for Vertex shares right now.
Biogen clearly represents more of a risk than Vertex. Its revenue is on the decline -- and a lot is riding on the full approval and uptake of Leqembi. If Biogen scores a win in those areas, it could pop. If it stumbles, the shares could do the same.
So, unless you're a high-risk investor, I would favor Vertex right now. The company delivers solid revenue growth, and that's set to continue thanks to its CF strength. A potential approval outside of the CF program would be like icing on the cake.
