Better Buy: Biogen Inc. vs. Celgene Corporation

7/17/17

By Keith Speights, MotleyFool

Biogen (NASDAQ:BIIB) and Celgene (NASDAQ:CELG) have ranked among the most successful biotech stocks of the past decade. Biogen stock has soared more than 430% in the last 10 years, while Celgene's share price has jumped more than 340%.

But which of these two biotech stocks is the better pick for investors today? Here's how Biogen and Celgene compare on three key criteria.

Lots of pills with scientist holding one pill

IMAGE SOURCE: GETTY IMAGES.

Current products

Biogen continues to be a leader in the multiple sclerosis (MS) market. The company's MS drugs Tecfidera, Tysabri, Avonex, Plegridy, Fampyra, and Zinbryta combined for sales of $8.8 billion last year. However, Biogen faces some the potential of stiff competition for its MS franchise.

Ocrevus presents the most immediate threat. Although Biogen will get royalties from sales of the drug, Roche (NASDAQOTH:RHHBY) stands to rake in the bulk of profits. Ocrevus seems likely to take market share away from Tecfidera primarily.

Outside of MS, Biogen's best bet for growth comes from Spinraza. The spinal muscular atrophy drug won Food and Drug Administration approval in December 2016. Spinraza could achieve peak annual sales of around $2.5 billion.

Celgene's Revlimid is its top star. The blood cancer drug made nearly $7 billion last year, accounting for over 60% of the company's total revenue. Revlimid continues to enjoy strong sales growth. It's projected to be the top-selling cancer drug in the world five years from nowand hold the No. 2 position in sales among all drugs.

The company's current roster includes two other blockbusters -- Pomalyst and Otezla. Pomalyst is approved as a third-line treatment for multiple myeloma. Otezla is currently approved for treating psoriasis and psoriatic arthritis. In addition, Celgene markets a near-blockbuster with cancer drug Abraxane.

Advantage: Celgene

Scientists working in a lab

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Pipeline

Biogen's pipeline includes three late-stage candidates. Two are experimental Alzheimer's disease treatments. Aducanumab appears to be especially promising, with some analysts predicting annual sales of at least $10 billion and even up to $20 billion if the drug ultimately wins approval. However, there's a long way to go before approval -- and the pharmaceutical landscape is littered with failed Alzheimer's disease drugs.

The company's other late-stage program is targeting an additional indication for already-approved Gazyva. Biogen originally developed the cancer drug but licensed it to Roche. The biotech also has nine experimental drugs in phase 2 studies. One of the most intriguing is its anti-LINGO MS drug opicinumab.

Meanwhile, Celgene has 14 late-stage programs. Ozanimod could be one of the biotech's biggest pipeline winners. The drug is being evaluated in phase 3 studies for treating MS and ulcerative colitis. Blood disease drug luspatercept is another late-stage candidate with tremendous potential.

Celgene's mid-stage pipeline also includes 14 programs. The company thinks that it has 10 candidates with the potential for peak sales of $1 billion or more that could be approved by 2022.

Advantage: Celgene

Hand holding dollar sign

IMAGE SOURCE: GETTY IMAGES.

Valuation

Biogen stock trades at 17 times trailing-12-month earnings and at 12 times expected earnings. Celgene shares trade at nearly 50 times trailing earnings with a forward earnings multiple of 15.

At first glance, Biogen appears to have the edge when it comes to valuation. However, it's important to consider growth prospects as well. Analysts expect Biogen will be able to grow earnings by around 7% over the next few years, while projections are for Celgene to grow earnings by nearly 21%.

Advantage: Celgene

Better buy

Biogen could be a big winner over the long run, especially if aducanumab proves to be successful in treating Alzheimer's disease. However, it's pretty clear which of these two stocks I think is the better pick. Celgene wins in every category in my view.

Celgene faces some risks. It's highly dependent on Revlimid. There could be clinical setbacks along the way. I still think, though, that Celgene continues to be one of the best biotech stocks -- and best stocks overall -- on the market today.

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