Biogen is a great company, even though it's hit hard times lately since the revelations that the company's biggest blockbuster, Tecifdera, might cause progressive multifocal leukoencephalopathy (PML) -- a potentially deadly brain infection. The multiple sclerosis (MS) drug's growth has slowed considerably. I'm bullish on the stock's potential with incoming data readouts from its exciting next wave of potential mega-hit drugs -- nusinersen, anti-LINGO, and aducanumab (for spinal muscular atrophy, multiple sclerosis, and Alzheimer's, respectively). That's why I'm a proud shareholder. But for investors looking to increase their healthcare exposure, there are three stocks I think are better buys today: Gilead Sciences , Celgene Corporation , and Johnson & Johnson .
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Gilead's stock is stupid cheap
According to analysts polled by S&P Global Market Intelligencediscounts to maintain an eye-popping 90% market share in U.S. hepatitis C salessimtuzumab, which has blockbuster potential in nonalcoholic steatohepatitis
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Celgene has fewer question marks
Celgene Corporation is heavily levered to its multiple myeloma drug Revlimid (which represented 63% of company revenue in Q1 2016), but management is projecting strong growth for the company's other major drugs over the next few years. The cancer drug Abraxane is expected to bring in about $1 billion in 2016 (around 9% of total anticipated revenue), and the autoimmune treatment Otezla is on a fast ramp, with over $1 billion in sales expected in 2016. Unlike Biogen, Celgene doesn't have a couple of tent-pole drugs in its pipeline that centralize its risk; management has done a great job of diversifying the pipeline through a number of licensing agreements
Johnson & Johnson is more diversified (and stable)
With its recently announced spinoff of its hemophilia business, Biogen's management is slimming the company down to focus more on multiple sclerosis and developing its diverse pipeline (particularly nusinersen and aducanumab). People usually like management focusing where they're experts...but Johnson & Johnson is a huge exception to that rule. The conglomerate is diversified across medical devices, pharma, and consumer products (like Band-Aids and Tylenol), and it continually chugs out slow, steady, reliable growth. With anticoagulant Xarelto posting 29% year-over-year sales growth last quarter, and Invokana/Invokamet up 18%, pharma continues to drive the company's overall growth. Johnson & Johnson is a Dividend Aristocrat (meaning a stock that has grown its dividend for at least 25 consecutive years), and its dividend yields 2.8%. For the income-focused investor, it's hard to argue that Biogen would be a better pick.
If you only had to buy one...
My money's on Gilead. Truth be told, I own every stock I'm talking about in this article. I think all four of them are great businesses with lots of interesting opportunities ahead of them. But Gilead's valuation has gotten so out of whack with the stock's substantial business prospects -- and management's superb history of capital allocation
The article Forget Biogen: These 3 Stocks Are Better Buys