Gilead vs. Abbvie Stock: Which is Best?

Gilead vs Abbvie Stock: The COVID-19 pandemic has killed tens of thousands, and its impact on the world economy has been devastating. Many businesses are closed, and the few that remain open are scrambling to be part of the solution.

Biopharmaceutical companies are in a unique position to save the world, quite literally, by identifying effective treatments and developing a vaccine for the novel coronavirus. Two major US players, Gilead Sciences and Abbvie, are working hard to do just that.

For investors, the question comes down to which stock is a better buy – both in the short term and for the long haul.

Is Gilead Stock a Buy?

Gilead Sciences may already have a drug capable of taking on COVID-19. Remdesivir, an antiviral, has shown promise in several preliminary studies.

While a more recent Chinese study wasn’t able to duplicate earlier results, the scientific community hasn’t given up yet.

More research is underway to determine whether remdesivir can relieve the most deadly symptoms of COVID-19. If so, it could be a game-changer.

Investors have pinned their hopes on the promise of remdesivir, and share prices have increased 24 percent since the start of the year. That makes Gilead a little pricier than usual, which is giving new investors pause.

After all, if it turns out that remdesivir isn’t the miracle COVID-19 solution everyone hopes it will be, share prices are likely to drop.

Of course, Gilead was developing groundbreaking therapies long before COVID-19 came into the picture. One of the most exciting is an HIV treatment that is seeing dramatic sales growth. The drug, Biktarvy, delivered a 400 percent increase in sales year over year, with total sales reaching $4.7 billion.

Some industry experts believe that figure could hit $7 billion by 2024.

In addition to the promising antiviral and its suite of HIV therapies, Gilead recently submitted a strong rheumatoid arthritis therapy candidate to the US Food and Drug Administration for approval. A decision is expected this summer, and if approved, could offer a significant new source of revenue.

These three areas have solid potential for driving the company’s growth in coming years, which makes Gilead a good pick for any portfolio.

Should You Invest in Abbvie Stock?

Abbvie is best-known for its wildly successful anti-inflammatory drug Humira, which has produced a substantial percentage of the company’s profits for years.

When the books closed on the most recent fiscal year, Abbvie reported that sales of Humira brought in $19 billion – or 60 percent of the company’s total annual revenue.

However, biosimilars are now coming to market in Europe, and they may arrive in the United States as early as 2023. That means it is time for Abbvie to branch out and diversify.

To that end, Abbvie is in the process of acquiring Allergan, the company that makes Botox. The combined organization will be less reliant on Humira, as the drug will make up an estimated 40 percent of annual revenues.

Abbvie has projected that the combined company will see 10 percent growth in its adjusted earnings per share during the first full year that the integrated company is in operation.

Despite the possibilities for greater profits, the proposed Allergen acquisition hasn’t impressed investors so far. Since the start of the year, Abbvie’s share prices have come down about 7 percent.

That may change once the deal receives final approval from the United States’ Federal Trade Commission, which is expected within the next two to three months.

Gilead vs. Abbvie Stock: Pros and Cons

Gilead has three major items in the pros column. First, it has an impressive portfolio of first-line drugs, with more on the way.

Second, the company pays a great dividend, which is relatively unusual for biopharma companies.

Third, even with recent share price increases, Gilead offers a good value for those interested in adding pharmaceutical companies to investment portfolios.

Abbvie’s pros are similar to Gilead’s, in that this is another company that offers higher-than-expected dividends to shareholders.

At the moment, Abbvie’s dividend yield is 6.3 percent. If its predecessor, Abbott Labs, is included in its dividend history, it would be accurate to say that Abbvie has raised its dividend for 47 consecutive years.

That includes periods of economic uncertainty, such as the stock market crash of 1987 and the financial crisis of 2009. Given the current economic circumstances, this sort of track record offers a bit of security.

Finally, as a result of the decline in share prices since the start of the year, Abbvie is a hard deal to pass up.

The biggest downside for both companies is the risk inherent in any biopharma stock. Current best-sellers will eventually be duplicated, and pipeline candidates may not make it through the rigorous evaluation process.

It’s possible to project the financial impact of expired patents, but it’s hard to tell which drug candidates will eventually be approved for use by the FDA. This is where most risk comes in – but for those willing to take on the risk, this is also where great rewards are possible.

Gilead vs. Abbvie Stock: The Bottom Line

Both of these biopharma leaders offer solid growth prospects, and either makes a smart addition to a well-diversified portfolio. For those who can only choose one, the decision boils down to risk tolerance and financial goals.

In a head-to-head matchup between Gilead and Abbvie, Gilead appears to have a greater chance of sudden breakthroughs that create significant short-term growth. However, there is always the possibility that those breakthroughs will never materialize.

On the other hand, Abbvie has a history of steady growth that – while not dramatic – is likely to continue its upward trajectory. When considered in conjunction with its low price and high dividend, Abbvie is the better choice.

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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.