Personal Finance

Better Buy: Gilead Sciences, Inc. vs. Pfizer Inc.

Woman making decision with scale drawn on chalkboard

Your time horizon is important when comparing the performance of different stocks. Gilead Sciences (NASDAQ: GILD) , for example, handily beat Pfizer (NYSE: PFE) over the past five years. But Pfizer is the bigger winner over the last 12 months.

However, when picking a stock, past performance isn't nearly as important as what the future might hold. Which of these two drug stocks has an edge looking down the road? Here's what the outlooks are for Gilead Sciences and Pfizer.

Woman making decision with scale drawn on chalkboard

Image source: Getty Images.

The case for Gilead Sciences

Gilead's future doesn't appear to be too great as things stand right now. Sales are plummeting for its hepatitis C virus (HCV) drugs Harvoni and Sovaldi. That's a big problem, considering that the two HCV drugs generated over 40% of Gilead's total revenue last year.

The big biotech has also experienced several key clinical setbacks. In 2016, Gilead halted phase 2/3 clinical studies of GS-5745 in treating ulcerative colitis and decided against moving forward with a planned study of the experimental drug in treating Crohn's disease. It threw in the towel for GS-4997 in treating pulmonary arterial hypertension (PAH) and diabetic kidney disease (DKD) after mid-stage failures for both indications. Gilead also reported disappointing results from two late-stage studies of momelotinib in treating myelofibrosis.

It's not all bad news for Gilead, though. Gilead's HIV franchise continues to perform well, especially newer drugs Genvoya, Descovey, and Odefsey. Sales for its latest HCV drug, Epclusa, are climbing. The company is also awaiting regulatory approval for a new HCV combo.

Gilead's pipeline includes eight late-stage clinical programs. Three candidates in late-stage development hold the potential to launch Gilead into new therapeutic areas.

GS-5745 is being evaluated for treating gastric cancer. Although the experimental drug flopped in studies targeting autoimmune disease, Gilead has another quite promising candidate for treating rheumatoid arthritis, Crohn's disease, and ulcerative colitis with filgotinib. Perhaps the greatest opportunity, though, could come from GS-4997. The ASK-1 inhibitor recently advanced to a late-stage study for treatment of non-alcoholic steatohepatitis (NASH).

Unfortunately, Gilead's revenue and earnings are likely to keep falling over the next few years. Even if all its pipeline candidates succeed, the biotech won't launch new drugs quickly enough to offset declining HCV drug sales -- unless something changes.

There's a really good chance that something will change, though. Gilead has announced its intention to make acquisitions to bolster its portfolio. The right deals could dramatically change the outlook for the company.

In the meantime, investors can benefit from Gilead's share buybacks and dividends. Gilead spent $11 billion on stock repurchases last year. Its dividend yield stands just below 3%.

The case for Pfizer

In contrast to Gilead Sciences, Pfizer's future looks brighter than it's been in a while. Wall Street analysts project Pfizer's earnings to grow by an average annual rate of 6.5% over the next five years -- much better than the anemic 1.3% annual growth for the company during the past few years.

Pfizer's prospects have improved for several reasons. Several products in the company's current lineup are performing exceptionally well. Sales for cancer drug Ibrance and autoimmune disease drug Xeljanz are soaring. Smoking cessation aid Chantix and cancer drug Xalkori also chalked up nice revenue growth last year.

The drugmaker also claims a strong pipeline. Pfizer awaits regulatory approval for eight programs and has another 30 late-stage clinical studies under way. The company expects to announce results from 15 pivotal clinical studies over the next two years.

Acquisitions have played a huge role in Pfizer's resurgence. The company bought Medivation last year, picking up prostate cancer drug Xtandi. Pfizer also acquired Anacor Pharmaceuticals, gaining eczema drug Eucrisa. In 2015, Pfizer purchased Hospira, a leading provider of infusion technologies.

There are a few problem spots for Pfizer, though. Sales for some of the company's top-selling products fell in 2016, including the Prevnar 13 vaccine and Viagra. Pfizer's established products and its drugs that have either recently lost or will soon lose patent protection also lost ground last year.

One of things investors like most about Pfizer is its dividend. Pfizer's dividend yield of 3.82% is among the best of all pharmaceutical companies.

Better buy

I like both Gilead Sciences and Pfizer. I have owned Gilead stock for several years and recently bought Pfizer stock.

Even though things look bleak for Gilead right now, I'm confident that the biotech will turn things around by making some smart acquisitions. I don't plan to sell my shares anytime soon.

However, Pfizer has a better growth outlook than Gilead does. It boasts a higher yield than Gilead does. And Pfizer will likely make more acquisitions of its own in the not-too-distant future. In my view, Pfizer stands out as the better buy -- at least for now.

10 stocks we like better than Pfizer

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Pfizer wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Keith Speights owns shares of Gilead Sciences and Pfizer. The Motley Fool owns shares of and recommends Gilead Sciences. 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.

In This Story


Other Topics


Latest Personal Finance Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More