You wouldn't have gone wrong buying and holding either Amgen (NASDAQ: AMGN) or Celgene (NASDAQ: CELG) stock over the past 10 years. Both big biotech stocks soared 220% or more during the period. Amgen has been the better performer in recent years, although that's primarily because of a meltdown of Celgene stock in the fourth quarter of 2017.
But which of these two biotech stocks is the better buy now? Amgen and Celgene face significantly different prospects over the next few years. Here's how the two stocks compare.
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The case for Amgen
Let's first address some of the knocks against Amgen. Those knocks are named Aranesp, Enbrel, Epogen, Neulasta, and Neupogen. Sales for each of these drugs fell in 2017 from the prior year. Enbrel's 9% year-over-year sales decline hurt the worst, because it's Amgen's top-selling product.
While Amgen clearly has work to do to offset the revenue shortfall from these longtime winners, the biotech also has several rising stars. At a healthcare conference in January, Amgen CEO Bob Bradway identified five products that would be long-term growth drivers for the company.
At the top of Bradway's list was Prolia. In 2017, sales for the osteoporosis drug topped $1.6 billion, up 20% from the prior year. Next up was Repatha. The cholesterol drug saw the strongest year-over-year sales gain last year, with revenue more than tripling to $319 million. Multiple myeloma drug Kyprolis was also on Bradway's list, with sales in 2017 jumping 21% to $835 million.
Bradway identified a couple of long-term growth drivers that aren't contributing to growth yet. Amgen and partner Novartis expect FDA approval of migraine biologic Aimovig by May 18, 2018. He also pointed to the company's biosimilar program as a source of revenue growth in the future. Amgen has won regulatory approval for biosimilars to Humira and Avastin, but hasn't launched either product yet. It's also waiting on approval for a biosimilar to Herceptin.
Even though Enbrel and other older drugs aren't providing growth these days, they're still generating a lot of cash flow. Amgen returns a significant part of that cash flow to shareholders through stock buybacks and dividends. The company's dividend yields 2.82%. The biotech has increased its dividend payout every year since the dividend program began in 2011.
Amgen is also sitting on a large cash stockpile of nearly $41.7 billion, including cash, cash equivalents, and marketable securities. Bob Bradway hasn't been shy about acknowledging that the company is on the lookout for potential acquisitions in its current therapeutic areas of focus.
The case for Celgene
Celgene was flying high until October. That's when the biotech's once-promising Crohn's disease drug, GED-0301, failed in a late-stage study. It's also when Celgene reported disappointing third-quarter results and cut its full-year 2017 and long-term outlook.
Despite the string of bad news, there are plenty of reasons to like the stock. Most important, Celgene appears to be in good position to grow earnings by nearly 20% annually over the next several years. The company's flagship product, Revlimid, was the No. 2 best-selling drug in the world last year, with sales of nearly $8.2 billion. Sales should continue to increase for the blood cancer drug.
Although Revlimid still generates over 60% of Celgene's total revenue, the biotech has several other products that are stepping up. Sales for multiple myeloma drug Pomalyst increased 23% in 2017 to $1.6 billion. Otezla, which treats psoriasis and psoriatic arthritis, grew sales by nearly 26% in 2017 to almost $1.3 billion. In addition, cancer drug Abraxane came just short of reaching blockbuster status last year, with sales of $992 million.
Celgene also claims a strong pipeline. The biotech awaits FDA approval of ozanimod in treating relapsed multiple sclerosis. Results from a couple of late-stage studies of luspatercept in treating myelodysplastic syndromes (MDS) and beta-thalassemia are expected later this year. Including these two candidates, Celgene thinks it has 10 potential blockbusters that could be launched by 2022.
The company has also been active recently on the acquisitions front. Celgene announced on Jan. 7 that it was buying Impact Biomedicines. On Jan. 22, the company said it was also acquiring Juno Therapeutics. The latter deal gave Celgene full ownership of Juno's promising CAR-T cell therapy program, including lead candidate JCAR017.
I like both of these biotech stocks over the long run -- but for different reasons. Amgen's cash and cash flow should enable it to be a winner for years to come. Celgene's current products and pipeline should also be successful.
But which is the better stock to buy right now? In my view, the decision boils down to getting the best bang for the buck. That means Celgene is the better pick.
Celgene's growth prospects are significantly better than Amgen's are. And while both stocks are relatively inexpensive, Celgene is dirt cheap, with shares trading at only 9 times expected earnings. If you're looking for growth at a great price, you won't find too many better stocks than Celgene.
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