When it comes to ‘Big Pharma’, they don’t come any bigger than GlaxoSmithKline (LSE: GSK) and AstraZeneca (LSE: AZN) – well in the UK at least. Valued at around £68bn and £50bn, respectively, they’re both more than twice the size of the only other FTSE 100 listed pharmaceutical company Shire plc (LSE: SHP). So which is the best investment?

Joint venture boost

GlaxoSmithKline is one of the world’s leading pharmaceutical research companies. The company was created out of the merger between GlaxoWellcome and SmithKline Beecham in 2000 to create one of the UK’s largest listed companies, and the country’s most gigantic drugs giant.

Glaxo’s full year results announced last month revealed an increase in revenues to £24bn, up from £23bn, and a sharp rise in pre-tax profits to £10.5bn, up from £3bn the previous year. This was mainly due to its deal with Swiss pharmaceutical giant Novartis, where Glaxo sold cancer drugs, acquired a vaccines business and set up a joint venture in consumer healthcare.

The outlook for the firm looks good, with our friends in the City expecting earnings to rise by 13% this year, followed by a further improvement of 6% earmarked for 2017. Dividends are forecast at 82.03p per share for this year, falling slightly to 80.36p next year, offering prospective yields of 5.9% and 5.8% for the next two years.

Glaxo trades on 16 times forecast earnings for this year, falling to 15 for the year ending 31 December 2017. That may not make them a bargain but the shares look fairly priced given the earnings outlook, while the strong dividend and defensive qualities should tempt income investors.

Losing its patents

AstraZeneca is another leading pharmaceuticals group created by a merger, in this case the 1999 merger of Sweden’s Astra and the UK’s Zeneca, which had itself been de-merged from chemicals group ICI in 1993.

Astra has its problems. Announcing its annual results last month, the company reported a 7% drop in revenues to $24.7bn as sales of its major drugs slowed due to generic competition. And while pre-tax profits were up from $1.2bn to $3bn, this was mostly as a result of cost-cutting.

Astra faces a tough year ahead too with the patent for its most important drug, the anti-cholesterol statin Crestor, expiring in May. Consequently, analysts in the Square Mile expect earnings to be 5% lower this year, with a further 1% decline pencilled-in for 2017. But dividends are forecast at 193.59p per share for this year, rising slightly to 194.15p next year, offering prospective yields of 5% for the next couple of years.

AstraZeneca trades on 14 times forecast earnings for this year, rising slightly to 14.1 for the year ending 31 December 2017. The firm’s P/E rating is moderate and on a par with GlaxoSmithKline, but the shares offer a strong dividend that should be attractive to income hunters, despite the firm’s challenges.

What next?

In my opinion Glaxo edges past Astra given the stronger earnings outlook and slightly higher dividend yield. So which should you buy?  How about both? Each continues to offer strong defensive qualities and healthy income, which is why many UK-based portfolios have either or both of these pharmaceutical giants as core holdings.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.