Amgen Vs Abbvie Stock: Which Is Best?

Amgen Vs Abbvie Stock: It’s a good time to be in biotech. New technology has made it possible to solve complex problems in record time, allowing the industry to deliver dramatic advances in preventing, diagnosing, and treating debilitating and deadly health conditions.

Biotech firms shaved years off the previous record for vaccine development when COVID-19 set the world on fire. They are applying the same sense of urgency to cutting-edge therapies for everything from cancer and heart disease to cystic fibrosis and muscular dystrophy. 

Investors are trying to get in on the action, but choosing the right stock is a tough call. Even the most promising new drugs are more likely to fail than succeed during the clinical trial process.

Some investors choose to reduce risk and accept less impressive returns by purchasing shares of large, established companies with diverse product lines. Others are willing to risk it all on unproven biotech startups in hopes of winning big on a long-shot advance. 

In either case, making the best possible decision requires careful review of the basics: 

• Is there a strong market if the company succeeds in its development of a new therapy? 
• Does the company have industry partners? 
• Are pipelines robust? 
• Is the company financially stable? 
• Are business leaders well-qualified to manage the science and the strategy? 

While a good showing in these areas doesn’t guarantee returns, it does reduce investment risk. Comparing promising companies can help narrow down which shares to buy. In the case of Amgen vs. Abbvie stock, which is best?

Is Amgen Stock A Buy?

Amgen was one of the first in the biotech space, and today, it has grown into one of the largest companies of its kind in the world.

It offers a varied collection of products that are widely used in the treatment of cardiovascular disease, neurological issues, inflammation, and cancer. 

Some of Amgen’s biggest wins include acquisition of the wildly successful Otzela, which is used in the treatment of autoimmune disease. Aimovig, an effective migraine therapy, is also showing strong results, as is Prolia – a drug prescribed to patients with osteoporosis. 

Amgen reported $6.4 billion in revenue for the third quarter, which represents an increase of 12 percent year-over-year.

Perhaps more importantly, that figure exceeded analysts’ expectations, which shows Amgen is successfully navigating the pandemic’s complexities.

Net income came in at $2.02 billion, which translates to $3.43 per share (non-GAAP). GAAP earnings were reported at $1.97 billion, which breaks down to $3.27 per share. 

Generally speaking, most industry experts consider Amgen stock a buy, however there are important risks to consider before investing in these shares.

What Are The Risks Of Buying Amgen Stock?

Since the start of the pandemic, there has been a lot of focus on healthcare, but unfortunately for Amgen, that focus is limited to COVID-19.

Patients have been neglecting other types of preventative care and disease management, which depressed demand for many of Amgen’s top-selling products.

This issue is only temporary, but exactly how temporary is unclear. That makes Amgen a poor choice for investors in search of short-term gains. 

The second big risk facing Amgen and its shareholders is a political one. Drug pricing models have been heavily criticized in the United States, and Amgen is considered one of the biggest offenders.

Congress has discussed taking up the issue for years, and legislation capping drug prices is certainly possible – if not likely – in the next four years.

These sorts of regulations are certain to have a negative impact on Amgen’s profits, and that will show up in share prices.

AbbVie Won Warren Buffett’s Vote, Here’s Why

AbbVie is best known for the extraordinary success of its anti-inflammatory drug Humira. In the last quarter alone, Humira was responsible for 40 percent of AbbVie’s sales, and that’s after it lost exclusivity outside of the United States.

Exclusivity in the US will expire in 2023, but AbbVie is well-prepared to meet that challenge. It’s working on new, more advanced versions of Humira that may be more effective, and it is building its drug portfolio and pipeline. 

One of AbbVie’s strategic moves to expand beyond Humira includes the purchase of Allergan, the company behind Botox.

It is also putting plenty of cash into research and development of more than a dozen drug candidates that could start coming to market just two years from now. In other words, business leaders haven’t been resting on the success of Humira.

They have made it a priority to grow, expand, and diversify. Perhaps that is one of the reasons investing genius Warren Buffett chose to add AbbVie shares to the Berkshire Hathaway portfolio. 

AbbVie’s third quarter results were positive, with revenue growth of 52.1 percent year-over-year, totaling $12.9 billion.

Net income increased by 22.9 percent to total $2.31 billion, and earnings per share rose 21.5 percent to $2.83.

AbbVie also announced another dividend increase, marking eight consecutive years of dividend growth. Beginning in 2021, dividends will be paid at $1.30 per share. 

The combination of AbbVie’s pipeline, its financial strength, and its dividends makes these shares a smart buy. 

Humira Exclusivity A Primary Challenge For AbbVie

While AbbVie is ready to face the competition when Humira loses exclusivity in the US, there is no guarantee that its carefully crafted strategy will be successful.

As with any biotech firm, there is always a substantial risk that drugs won’t perform as expected during clinical trials. AbbVie is counting on the approval of at least some of the candidates in its pipeline.

In the unlikely event that few or none come to market, AbbVie will struggle to rebuild its portfolio. 

To a lesser extent, AbbVie could also be impacted by legislation aimed at stabilizing drug prices. While this issue is less risky for AbbVie than it is for Amgen, it can’t be ignored altogether.

With that said, AbbVie shares are relatively inexpensive, which could prove a mitigating factor if new drug pricing regulations impact stock prices. 

AbbVie Vs Amgen Stock: The Bottom Line

Realistically, both AbbVie and Amgen are good choices for investors interested in biotech shares. Both are growing, both pay respectable dividends, and both have solid strategic plans in place for the next five years and beyond.

AbbVie’s growth prospects appear slightly more promising, particularly in the short-term. However, it will only prove to be a better buy in the long run if it is successful in meeting the challenge of Humira competition. 

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.