Since yesterday’s showdown article, in which the three largest U.S.-based oil companies were tossed into the ring to fight it out, received such a positive response, I thought I would arrange for another grudge-match – this time among another favourite trio of U.S. companies, the three largest biotechs: Gilead Sciences Inc. (NASDAQ: GILD), Amgen Inc. (NASDAQ: AMGN), and Biogen Idec Inc. (NASDAQ: BIIB).
The purpose of these showdowns is to pit each company’s financials against the others’ using 31 separate metrics in 13 categories, including their stock price ratios, margins, returns, future earnings growth, analyst recommendations, and more. We then tally-up the rankings to see which company holds the most first place finishes, and which comes up dead last.
Analyses such as this are vital to making an informed decision on which stock to invest in. Sure, anyone can pick a stock just by looking at a graph of the past five years or so. But a sound selection must include the company’s financial figures and future growth prospects. Once the data are compiled, we can then place several companies’ stats side-by-side to see how they compare amongst their peers.
So let’s have at it. Today’s showdown among the three leading U.S. biotechs will begin with a brief overview of each company’s business, followed by their stock performance, financial data, and final score.
Meet America’s Three Largest Biotechs
• Gilead Sciences Inc, headquartered in Foster City, California, discovers, develops, and commercializes medicines in areas of unmet medical needs, offering such medicines as Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost, and Vitekta for the treatment of human immunodeficiency virus (HIV) infection, Harvoni, Sovaldi, Viread, and Hepsera for liver disease, Zydelig for blood cancers, Letairis for pulmonary arterial hypertension, Ranexa for chronic angina, Cayston for respiratory problems in cystic fibrosis patients, Tamiflu for influenza A and B, AmBisome for invasive fungal infections, and Macugen for neovascular macular degeneration. The company also has numerous drugs in various stages of development for HIV/AIDS, hepatitis B and C, inflammation/oncology, and serious cardiovascular and respiratory conditions.
• Amgen Inc, headquartered in Thousand Oaks, California, discovers, develops, manufactures, and delivers medicines for illnesses associated with oncology, hematology, inflammation, bone health, nephrology, cardiovascular, and general medicine, offering such products as Neulasta for infection in cancer patients, NEUPOGEN for reducing infection in patients with non-myeloid malignancies, Enbrel for rheumatoid arthritis, plaque psoriasis, and psoriatic arthritis, EPOGEN for dialysis, Aranesp for anemia, XGEVA for skeletal-related conditions, Prolia for osteoporosis, Sensipar/Mimpara for secondary hyperparathyroidism in chronic kidney disease patients, Kyprolis for multiple myeloma and small-cell lung cancer, and BLINCYTO for leukemia.
• Biogen Idec Inc, headquartered in Cambridge, Massachusetts, discovers, develops, manufactures, and markets therapies for the treatment of neurological, autoimmune, and hematologic disorders, offering such medicines as AVONEX for multiple sclerosis, TYSABRI for MS and Crohn’s disease, PLEGRIDY and TECFIDERA for MS, ELOCTATE for hemophilia A, ALPROLIX for hemophilia B, RITUXAN for non-Hodgkin’s lymphoma, rheumatoid arthritis, and chronic lymphocytic leukemia, GAZYVA for untreated chronic lymphocytic leukemia, and FUMADERM for plaque psoriasis. The company also has a number of drugs in clinical trials including ZINBRYTA for relapsing MS, TYSABRI for secondary progressive MS, ISIS SMN for spinal muscular atrophy, Anti-LINGO for optic neuritis and MS, Neublastin for neuropathic pain, TYSABRI for optic neuritis, ANTI-TWAEK for lupus nephritis, BAN2401 and E2609 for Alzheimer’s disease, STX-100 for idiopathic pulmonary fibrosis, BIIB037 for Alzheimer’s disease, ISIS DMPK for myotonic dystrophy, BIIB061 for MS, Anti-BDCA2 for systemic lupus erythematosus, and Anti-C for systemic lupus erythematosus.
As for their stocks’ past performance over the past six year since the economic crisis ended in early March of 2009 as graphed below, all three have beaten the S&P 500 [black], which is up 200%, as well as their industry benchmark as represented by the SPDR Healthcare Sector ETF (NYSE: XLV) [blue], which is up 225%. In order of best to worst we have: Biogen [orange] with gains of 850%, Gilead [beige] with gains of 350%, and Amgen [purple] with gains of 232%.
Source: BigCharts.com
But since we can’t drive safely looking only in our rear view mirror, we’ll need more than just a backward-looking graph of past performance. This is where the all-important company financials come into view.
Showdown Among Three Biotech Giants
I examined 13 different categories of data and ranked each of the three companies in order from best to worst, crediting the winner of each metric with a point (highlighted in green in the table below), and docking the loser of each metric by a point (highlighted in yellow in the table below). I then tabulated all the wins and all the losses to produce each company’s final score.
It was not a close gunfight at all. Here’s the play-by-play:
• Stock price ratios: Gilead has the cheapest stock price relative to forward earnings and 5-year PEG, while Amgen has the cheapest price relative to company book value.
• Cash: Amgen has the highest cash balance relative to market cap.
• Debt and Current Ratio: Biogen has the lowest debt relative to market cap, while Amgen has the highest current ratio (ability to repay its debts).
• Revenue: Amgen enjoyed the highest trailing 12 month revenues relative to market cap, while Gilead scores a point for having the highest trailing quarterly revenue growth.
• Margins: Gilead scores two more points for having the widest profit and operating margins.
• Returns: Gilead again scores two more points for generating the greatest returns on assets and equity.
• EBITDA: And again Gilead scores two more points for having the highest EBITDA as a percentage of market cap and revenue.
• Diluted Earnings Per Share: Gilead’s run is not over yet, winning two more points for having the highest DEPS percentage over its current stock price representing the best DEPS value for the amount of money invested, as well as for booking the highest quarterly earnings growth year-over-year.
• Future Earnings Per Share over current stock price: Gilead continues on its roll with shot after shot hitting its target, this time scoring four more points for having the highest future earnings estimates over current stock price.
• Future earnings growth rate: Biogen finally gets some shots out, scoring five points for having the highest future earnings growth percentages in all time frames.
• Dividend yield: Amgen’s pistol is heard for the first time in a while as it scores a point for having the highest dividend yield.
• Analyst price targets: Gilead lands two more hits for having the best high and mean price targets, while Amgen scores one point for having the best low price target.
• Analyst recommendations: Gilead finally puts its rivals to rest with two more points for having the most strong buy and buy analyst recommendation percentages.
After the smoke clears there is only one gunfighter left standing: Gilead Sciences with 19 first place finishes and 3 last place finishes netting a final score of +16, with Biogen and Amgen sprawled out on the ground with scores of -8 and -9 respectively.
The showdown among the three largest U.S.-based biotechs is a lop-sided affair, the clear winner being Gilead as it has the best financials backing its second best stock performance, potentially signifying that its stock has not climbed as high as it can be given such strong financial fundamentals.
Data Source: Yahoo! Finance
Joseph Cafariello
