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Better Buy: Amgen vs. Bristol Myers Squibb

The Motley Fool logo The Motley Fool 10/18/2020 Keith Speights
a group of people in a room: Better Buy: Amgen vs. Bristol Myers Squibb © Provided by The Motley Fool Better Buy: Amgen vs. Bristol Myers Squibb

Amgen (NASDAQ: AMGN) and Bristol Myers Squibb (NYSE: BMY) share quite a few things in common. Both, of course, are big drugmakers with several successful products on the market. They're nearly exactly the same size in terms of market cap. Both Amgen and BMS have delivered disappointing returns for investors so far this year.

Which stock is the better pick going forward? Here's how Amgen and BMS compare in four key areas.

a group of people in a room: Two scientist working in a lab © Getty Images Two scientist working in a lab

Current product lineup

Ironically, Amgen's biggest growth driver is Otezla, a drug the company acquired from Celgene last year to pave the way for BMS' acquisition of Celgene. Without Otezla in its lineup, Amgen's total revenue would have declined year over year in the second quarter of 2020.

Sales are sliding for several of Amgen's other biggest moneymakers, including autoimmune disease drug Enbrel, white blood cell stimulant Neulasta, and osteoporosis drug Prolia. However, Amgen also has some rising stars, with cholesterol drug Repatha, migraine drug Aimovig, and its biosimilars Kanjinti and Mvasi especially standing out. 

Meanwhile, BMS is getting a big boost from several products it gained with the acquisition of Celgene. These include blockbuster cancer drugs Revlimid, Pomalyst/Imnovid, and Abraxane, plus newer market entrants such as multiple sclerosis drug Zeposia and anemia drug Reblozyl.

BMS's lineup also features winning drugs it already owned prior to buying Celgene. Blood thinner Eliquis continues to expand its market share. Sales of autoimmune disease drug Orencia are growing, albeit modestly. Blockbuster cancer immunotherapy Opdivo has seen sales decline recently. However, recent FDA approvals of the drug, especially in combination with Yervoy as a first-line treatment of non-small cell lung cancer (NSCLC), could spur growth in the near future. 

Pipeline

Amgen's pipeline includes over 50 programs in clinical testing. Sixteen of them are in late-stage clinical studies. Most of these late-stage studies are evaluating already-approved drugs in new indications. For example, Amgen hopes to add five new approved indications for Otezla and another two indications each for Kyprolis, NPlate, Prolia, and Repatha.

The big biotech does have some new candidates in late-stage testing, though. Amgen and AstraZeneca teamed up to advance tezepelumab as a potential treatment of severe asthma. Sotorasib could be promising in treating NSCLC. Amgen also hopes to ultimately win approvals for new biosimilars to cancer drug Rituxan/Mabthera, eye-disease drug Eylea, and rare-disease drug Soliris. 

BMS has over 160 programs in clinical testing featuring more than 50 compounds. Over 50 of these programs are in late-stage testing. Like Amgen, BMS' late-stage pipeline includes many of its already-approved drugs for which the company is pursuing additional approved indications. Opdivo is being evaluated in more than 30 late-stage studies as either a monotherapy or in combination with another drug.


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There are also several promising new candidates in BMS' late-stage pipeline. Cancer cell therapies ide-cel and liso-cel are two, in particular, that hold the potential to become blockbusters if approved.

Dividend

Amgen is something of a rarity among biotech stocks in that it pays a dividend. Its dividend yield currently stands at close to 2.7%. Amgen has increased its dividend payout by more than 470% in total since initiating a dividend program in 2011. 

Bristol Myers Squibb's dividend yields a little over 2.9% right now. The company has paid a dividend for decades. However, BMS' dividend hasn't grown as much as Amgen's has: The drugmaker raised its dividend by 36% over the last 10 years.

Valuation

Amgen's shares trade at close to 14 times expected earnings. The stock's price-to-earnings-to-growth (PEG) ratio is 1.5, which isn't bad although it doesn't reflect a bargain.

BMS, on the other hand, appears to be cheap no matter how you look at it. The stock trades at only eight times expected earnings. Its PEG ratio of 0.8 is also really low.

Better buy?

My view is that Bristol Myers Squibb beats Amgen in most of the above categories. But there's also another area that we haven't discussed yet -- acquisitions. BMS recently announced that it plans to acquire MyoKardia for $13.1 billion. This deal will give the big drugmaker a promising pipeline of cardiovascular drugs, featuring MyoKardia's lead candidate, mavacamten.

I suspect that it's only a matter of time before Amgen pulls the trigger to make a big purchase of its own. The company had a cash stockpile totaling $11.4 billion as of June 30, 2020. It's possible that Amgen could strike a deal that changes the dynamics with comparing these two stocks. For now, though, I think that Bristol Myers Squibb is clearly the better pick.

Keith Speights owns shares of Bristol Myers Squibb. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

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