Better Buy: Biogen Inc. vs. Amgen Inc.

Keith Speights, The Motley Fool

Updated Fri, Mar 30, 2018, 4:33 AM

Current products

Both Biogen and Amgen have built solid franchises. Biogen's primary focus is in treating multiple sclerosis (MS). The company claims six MS drugs on the market, with four of them blockbusters.

Biogen's current top-selling product is Tecfidera. The MS drug generated revenue of $4.2 billion in 2017, up 6% from the prior year. But sales for Tysabri rose less than 1% last year to almost $2 billion. Biogen's interferon products, Avonex and Plegridy, saw a 5.8% decline in sales.

The reality is that Biogen's MS franchise isn't as dominant as it used to be. Roche's Ocrevus, which ironically was licensed from Biogen, has proven to be a formidable competitor. And more challengers could be on the way.

Biogen's brightest star right now is spinal muscular atrophy drug Spinraza, which it licensed from Ionis Pharmaceuticals. Spinraza raked in nearly $884 million in 2017. Peak sales for the drug are expected to be in the ballpark of $2.5 billion.

Amgen's product lineup includes seven blockbuster drugs. Osteoporosis drug Prolia generated the most growth last year, with sales climbing 20% to nearly $2 billion. Sales for calcium-lowering drug Sensipar and Amgen's other osteoporosis drug, Xgeva, grew by single-digit percentages in 2017.

The bad news, though, is that sales fell last year for four of Amgen's seven blockbusters, including its three top-selling drugs. Enbrel faces stiff competition in a crowded immunology market. White blood cell booster Neulasta lost patent exclusivity in 2015. Anemia drug Aranesp also has tough competition.

However, Amgen does have some promising products that haven't reached the magic $1 billion sales level. The company's CEO, Bob Bradway, listed five products that could be "compelling long-term growth drivers" earlier this year. Three of them were already-approved drugs -- Prolia, cholesterol treatment Repatha, and multiple myeloma therapy Kyprolis. Bradway also included Amgen's biosimilars, two of which are launching in Europe this year.

Pipeline

Biogen's pipeline includes three late-stage candidates. One of those candidates, though, could take market share away from Tecfidera -- ALKS 8700, which Biogen licensed from Alkermes. Another is an experimental Alzheimer's disease drug, E2609, which Biogen is developing in collaboration with Eisai. I don't have great expectations for the drug, since other BACE1 inhibitors haven't been effective at treating Alzheimer's disease.

But Biogen has another late-stage candidate targeting treatment of Alzheimer's disease that just might have a shot at being a game changer. Monoclonal antibody aducanumab, which the biotech is developing with Neurimmune, has showed promise in earlier clinical studies. Market research firm EvaluatePharma ranks the drug as the top pipeline asset in the entire biopharmaceutical industry.

What about Amgen? The company's pipeline has 11 late-stage programs. Most of them are pursuing additional indications for current drugs, including Kyprolis and Prolia. However, some are new drugs that have yet to win approval for any indication.

I especially like the prospects for a couple of Amgen's late-stage candidates. Migraine drug Aimovig, which Amgen developed with Novartis, could win Food and Drug Administration approval in May 2018. Tezepelumab, which is in a phase 3 study targeting treatment of asthma, also looks very promising. Amgen is developing the drug with AstraZeneca.

Financial

Biogen generated nearly $2.6 billion in free cash flow over the last 12 months. The company reported cash, cash equivalents, and marketable securities of more than $6.7 billion at the end of 2017.

Amgen, though, boasts even more impressive financial numbers. Its free cash flow over the last 12 months topped $10.5 billion. And Amgen's cash stockpile at the end of last year stood at $41.7 billion. The company uses some of its cash flow and cash to fund its dividend program. Amgen's dividend currently yields 3%. The biotech's executives have also expressed interest in making acquisitions.

Better buy

So which of these "ancient" biotechs is the better pick? Biogen's current product lineup appears to be in better shape overall right now, even though the company faces challenges for its MS franchise, but Amgen has the deeper late-stage pipeline. On the other hand, if aducanumab is successful, Biogen should be in great shape. My concern, however, is how much hinges on this one experimental drug.

Amgen clearly has the advantage from a financial standpoint. And that's what I think tips the balance in its favor. Amgen is the better buy, in my view. However, I'm not calling the stock as a buy, because of the headwinds it faces for its current lineup. Even an acquisition or two might not enable the company to quickly compensate for those challenges. While I see Amgen as preferable to Biogen, I also think there are better biotech stocks to buy.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alkermes and Ionis Pharmaceuticals. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.

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