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Better Buy: Exelixis, Inc. vs. Novartis

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Last year Exelixis, Inc. (NASDAQ: EXEL) was one of the best-performing stocks in biotech, notching a 164% gain. With essentially one drug driving growth, though, it looks a bit risky. Conversely, shares of the diverse pharma giant Novartis (NYSE: NVS) sank about 15% last year. Yet a couple of recently launched drugs could turn the tide in 2017 for Novartis, and earlier-stage programs could allow its growth story to continue for years.

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Image source: Getty Images.

In stark contrast, Novartis sports a dizzying array of moving pieces. Recent launches and new drugs advancing through clinical-stage development give it a chance to overcome losses to generic competition and finally return its bottom line to growth. At about 25.4 times trailing earnings, and 14.9 times forward estimates, this big-pharma stock isn't in deep-value territory, but investors don't need to fret over the trajectory of a single new-drug launch.

Novartis has treated its shareholders to annual dividend increases (in Swiss francs) since 1996, and another bump would offer a yield of 3.7% or more at recent prices and exchange rates. Exelixis might be more fun to watch this year, but I think the big pharma's sensible valuation, steady dividend, and diverse pipeline make it a slightly better buy right now.

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Cory Renauer owns shares of Johnson and Johnson. You can follow Cory on Twitter @coryrenauer or LinkedIn for more biopharma investing insight.

The Motley Fool owns shares of and recommends Exelixis. The Motley Fool recommends Johnson and Johnson. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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