Better Buy: Amgen Inc. vs. Pfizer Inc.

Keith Speights, The Motley Fool

Updated Sun, Jul 1, 2018, 4:32 AM

Amgen Inc. (NASDAQ: AMGN) and Pfizer Inc. (NYSE: PFE) actually have quite a bit in common. They co-market one of the world's best-selling drugs, Enbrel. They both face some headwinds with declining sales of older drugs. Each company has promising new drugs. And both stocks are up by nearly the same percentage over the last 12 months.

Do Amgen and Pfizer present the same opportunities for investors? No. One stock appears to have an edge, but which one? Here's how Amgen and Pfizer stack up against each other.

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The case for Amgen

You might think that Amgen's current status looks pretty dire if you only looked at its current top products. Mylan recently won FDA approval for a biosimilar to Amgen's best-selling drug, Neulasta. Amgen's other top blockbuster, Enbrel, faces stiff competition. Anemia drug Epogen now must compete against a new biosimilar on the market, which could impact sales for Aranesp as well. Secondary-hyperparathyroidism treatment Sensipar lost a key U.S. patent in March.

But while Amgen certainly faces challenges, the biotech also has a stable of products with solid growth prospects. Sales for osteoporosis drugs Prolia and Xgeva continue to enjoy strong momentum. Amgen's multiple myeloma therapy Kyprolis and its cholesterol drug Repatha should have plenty of upside potential. The biotech won FDA approval in May for Aimovig, a migraine drug that is projected to become a blockbuster for Amgen and partner Novartis.

Amgen hopes to profit from its biosimilar lineup as well. In October, the company will begin marketing Amjevita, a biosimilar to the world's top-selling drug, Humira, in European markets. Kanjinti, a biosimilar to chemotherapy Herceptin, received a recommendation for approval by the European Medicines Agency's Committee for Medicinal Products for Human Use.

Market research firm EvaluatePharma recently ranked Amgen's pipeline as the fifth-best in the biopharmaceutical industry. That ranking was finalized before Aimovig won FDA approval, so the drug played an important part in EvaluatePharma's projections. Tezepelumab, which is being evaluated in a phase 3 clinical study targeting asthma and a phase 2 study targeting atopic dermatitis, also looks like a strong candidate with blockbuster sales potential.

Amgen is one of only a handful of biotechs that pay a dividend. The company's dividend currently yields 2.85%. And the dividend has grown a lot: Amgen has boosted its dividend payout by 180% over the last five years.

The case for Pfizer

Pfizer also has its fair share of issues. The big drugmaker has seen sales declines for several of its older products that have lost patent exclusivity. Pfizer's sterile injectables business, acquired from Hospira in 2015, has been plagued by problems that have caused product shortages. However, these issues should weigh Pfizer down less over the next few years.

Like Amgen, Pfizer has some rising stars. Sales continue to soar for breast cancer drug Ibrance. Pfizer and partner Bristol-Myers Squibb claim a huge winner with anticoagulant Eliquis. Immunology drug Xeljanz is performing very well. Pfizer should also enjoy tremendous success for its diabetes drug Steglatro and its combination products.

Also like Amgen, Pfizer should get some help from its biosimilars. Inflectra, a biosimilar to Remicade, racked up sales of $145 million in the last quarter. Pfizer won FDA approval for another Remicade biosimilar in December 2017. The company is also now poised to compete directly against Amgen, with Retacrit -- a biosimilar to Epogen -- gaining FDA approval in May 2018.

Pfizer's pipeline appears to be solid as well. The company has 28 late-stage clinical programs. Several of these target additional indications for already-approved drugs. Pfizer also has some promising new candidates, with cancer drug talazoparib and pain drug tanezumab especially standing out.

Investors have long been attracted to Pfizer's dividend. The dividend currently yields 3.73%. Pfizer has increased its dividend by nearly 42% over the last five years.

Better buy

Which of these two big drug stocks is the better pick for long-term investors? My choice is Pfizer.

I think Pfizer's earnings growth will top Amgen's over the next several years. Amgen is just beginning to experience the challenges of declining sales for older products. Pfizer is moving past its similar challenges. I also look for better performance from Pfizer's pipeline than the company has seen in recent years. Pfizer's higher dividend yield also is an important consideration.

Amgen is a solid company that should be a winner over the long run. However, the big biotech could have its work cut out for it at a time when Pfizer appears to be ready to blossom.

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