Better Buy: GlaxoSmithKline plc vs. Bristol-Myers Squibb
There's no question which stock has performed better recently between GlaxoSmithKline plc (NYSE: GSK) and Bristol-Myers Squibb (NYSE: BMY). Whether you look at 2018 year to date, the last 12 months, the past three years, or the past five years, Bristol-Myers Squibb is the hands-down winner.
But the past is the past. Which of these big pharma stocks is the better choice for investors now? Here's how GlaxoSmithKline and Bristol-Myers Squibb compare.
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The case for GlaxoSmithKline
If we could take a snapshot right now, there would be three major arguments for buying GlaxoSmithKline stock. First, the company's dividend yields 6.88%. That's the highest yield among big pharma companies and one of the highest yields in healthcare. Although Glaxo hasn't increased its dividend in a while, at the current high level, it doesn't need to for investors to be happy.
The second main reason to buy GlaxoSmithKline stock is the company's HIV franchise. Sales for Tivicay soared 47% last year. Triumeq also performed exceptionally well, with year-over-year revenue growth of 42%. And the growth stemmed from across the globe, with big increases in U.S., European, and international markets. Together, the two HIV drugs raked in around $8 billion in 2017.
What's the third key factor in the investing thesis for Glaxo? Its newer respiratory products. Even with a 10% decline in sales for Seretide/Advair, total sales for the company's respiratory franchise increased by 7% last year. This growth stemmed from strong performances by newer drugs including Anoro Ellipta, Incruse Ellipta, and Relvar/Breo Ellipta.
Aside from those biggies, GlaxoSmithKline has several other things going for it. The company won U.S. regulatory approval for shingles vaccine Shingrix in October 2017. The vaccine could become Glaxo's next blockbuster. In addition, the company's pipeline includes eight late-stage programs and at least 30 mid-stage programs.
The case for Bristol-Myers Squibb
What are the three biggest reasons to buy Bristol-Myers Squibb stock? Opdivo has to be at the top of the list. The immunotherapy has already won FDA approval for 13 different indications, including advanced melanoma, lung cancer, and liver cancer.
In 2017, Opdivo generated sales of nearly $5 billion. Market research firm EvaluatePharma predicts that Opdivo will be the No. 2 top-selling cancer drug in the world by 2022, with annual revenue approaching $10 billion.
Another important plus for BMS is Eliquis, which the company co-markets with Pfizer. Bristol-Myers Squibb's portion of sales for the anticoagulant totaled nearly $4.9 billion last year, a 46% year-over-year increase.
The third key reason for investors to like BMS is its dividend, which currently yields 2.4%. That's not as high as GlaxoSmithKline's yield, but it's certainly not bad.
There are several other things to like about Bristol-Myers Squibb. The big pharma has two other blockbuster cancer drugs in addition to Opdivo -- Sprycel and Yervoy -- as well as a fast-rising star with multiple myeloma drug Empliciti. Arthritis drug Orencia has also been a success story for the company, with 2017 sales of nearly $2.5 billion.
Better buy
If we only looked at the cases for GlaxoSmithKline and Bristol-Myers Squibb, it might be a tough decision between these two stocks. However, there's more to the story for both companies.
It's entirely possible that GlaxoSmithKline cuts its dividend next year. The current level of payout is unsustainable without tremendous earnings growth. I'm skeptical about the prospects for such earnings growth, especially in light of major competition for Tivicay and Triumeq from Gilead Sciences' new HIV drug, Biktarvy.
Bristol-Myers Squibb also faces some challenges. Sales for its older antiviral drugs, including Baraclude, Sustiva, and Reyataz, are falling. Also, the company's fortunes depend heavily on Opdivo. Any clinical setbacks could hurt the stock.
On balance, though, I think Bristol-Myers Squibb is clearly the better choice over GlaxoSmithKline. The drugmaker's strong oncology lineup, combined with solid winners Eliquis and Orencia, should enable BMS to continue its success.
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Keith Speights owns shares of Gilead Sciences and Pfizer. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short May 2018 $85 calls on Gilead Sciences. The Motley Fool has a disclosure policy.
