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Better Buy: Biogen vs. Gilead Sciences

Juggernauts. That's not a word most of us use very often. But it's a pretty good description of Biogen (NASDAQ: BIIB) in multiple sclerosis (MS). It's also applicable for Gilead Sciences (NASDAQ: GILD) in HIV.

Neither of these juggernauts performed particularly well for investors last year. But both have some potentially exciting developments on the way that could provide nice boosts to their stocks. Which of these two biotechs is the better buy? Here's how Biogen and Gilead Sciences stack up against each other.

Image source: Getty Images.

The case for Biogen

Biogen built its reputation in treating MS. That's still where the company makes most of its money. Although overall sales for Biogen's MS franchise are slipping, Tecfidera continues to enjoy modest growth. Biogen also could have a new MS drug in its lineup if the Food and Drug Administration approves Vumerity.

But the important thing to know about Biogen's MS drugs is that they generate impressive cash flow. Biogen states that one of its top goals is "maximizing the resilience of our core MS business." You can interpret that as milking the cash cow for as long as possible. And that's exactly what the biotech is likely to do.

In the meantime, Biogen's lineup includes a rising star in another therapeutic area. Spinraza is already a blockbuster in treating spinal muscular atrophy (SMA) after only a couple of years on the market.

The company's biosimilars are also generating impressive sales growth. Enbrel biosimilar Benepali and Remicade biosimilar Flixabi together brought in more than $500 million over the 12-month period ending Sept. 30, 2018. Biogen also launched its Humira biosimilar, Imraldi, in Europe in October.

If you're looking for the most compelling reason to buy Biogen, though, check out its pipeline. Sure, the biotech only has three late-stage programs. But one of them -- experimental Alzheimer's disease drug aducanumab -- ranks as market research company EvaluatePharma's No. 3 most valuable pipeline asset in the biopharmaceutical industry.

Biogen's pipeline also includes another late-stage Alzheimer's candidate, elenbecestat. The biotech could have a winner with BIIB093 in treating stroke. In addition, Biotech has several promising phase 2 candidates targeting neurological indications.

The case for Gilead Sciences

Gilead Sciences' shareholders have suffered through a rough three years. The culprit behind the big biotech's woes has been sharp sales declines for its hepatitis C virus (HCV) drugs. But Gilead says that 2018 was a "trough year" and things are about to get better.

One reason for the optimism is that the HCV market now is essentially a battle between Gilead and AbbVie. The market appears to be stabilizing, which is something that Gilead has eagerly anticipated for quite a while.

However, HIV drug Biktarvy provides an even greater reason for bullishness about Gilead Sciences. The biotech's head of worldwide commercial operations, Laura Hamill, said at the J.P. Morgan Healthcare Conference that Biktarvy is "setting the record for the most successful HIV launch in the industry."

Sales are also slowly but surely picking up for Yescarta, the cell therapy gained with Gilead's acquisition of Kite Pharma last year. Gilead expected the launch for Yescarta would be slow at first as it trained cancer centers on the drug's complex treatment process. 2019 could be an inflection point for the best-in-class cancer therapy.

Gilead hopes to have another big winner with filgotinib. The company should announce results from a late-stage study of the drug in treating rheumatoid arthritis in the first quarter of 2019. A regulatory filing could be made later this year. If approved for rheumatoid arthritis and other key indications, filgotinib could generate peak annual sales of up to $6 billion.

Nonalcoholic steatohepatitis (NASH) appears to be another area where Gilead will make its mark. The biotech expects to report results from two late-stage studies of lead NASH candidate selonsertib in the first half of 2019. Gilead also has a couple of other experimental NASH drugs being evaluated in phase 2 clinical studies.

There's also one other plus associated with buying Gilead stock: its dividend. Gilead's dividend currently yields nearly 3.4%.

Better buy

My view is that these two big biotechs are at very different stages in their journey. And Gilead Sciences is in a better stage.

Biogen faces the prospects of declining sales for its core MS franchise. It also could have competition in the near future for Spinraza. Aducanumab could be huge if it's successful. However, the pharma landscape is littered with Alzheimer's disease drugs that flopped in phase 3 studies.

Gilead, on the other hand, appears to have experienced the worst for its HCV franchise. The biotech should turn the corner in 2019 with a return to revenue and earnings growth. Biktarvy is a powerhouse. Yescarta is gaining momentum. Gilead's pipeline contains multiple winners that could begin contributing to top-line growth within the next couple of years.

Either of these companies could make acquisitions that change their stories. For now, though, I think Gilead is the better pick.

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Keith Speights owns shares of AbbVie and Gilead Sciences. The Motley Fool owns shares of and recommends Biogen and Gilead Sciences. The Motley Fool has a disclosure policy.

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