Pharma stock investing: Biogen vs AstraZeneca

Biogen has had its breakthrough Alzheimer’s drug approved and AstraZeneca has several exciting drugs in development. Are these pharma stocks buys for me?

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US pharma stock Biogen (NASDAQ:BIIB) recently made history having its Alzheimer’s drug Aduhelm approved. It’s the first Alzheimer’s therapy drug to be approved in over 20 years. So, does this mean Biogen is worth adding to my Stocks and Shares ISA?

So much promise

While Aduhelm doesn’t cure Alzheimer’s, it claims to halt it, which promises a better quality of life for millions of sufferers. But its fast-tracked approval is a controversial decision, and many health professionals are unimpressed.

In fact, three FDA members have gone so far as to resign in response to the decision. That’s because it’s not completed all phases of trial that drugs usually have to go through. Accelerated approval appears to be triggered because those in need are desperately clinging to the hope it can bring.

Biogen will continue to pursue efficacy trials, but the results are likely to take years, and in the meantime, it’s free to sell and profit from the drug.

Unfortunately, like many new drugs, Aduhelm is expensive. But, at $56k a year, it’s eye-wateringly so. In fact, this is a new extreme for drug pricing and likely to receive extreme pushback from authorities in the future.

Nevertheless, approval is set to mean at least some sales. And these are predicted to reach between a potential $7.5bn and $50bn a year.

A boost to the Biogen share price

The Biogen share price has already soared in response. At almost $385, it’s up 33% in a week, but down 18% since its peak on 10 June. A year ago it was $260.

If the drug meets positive expectations, it could be a game-changer for Biogen and its stock price. But it remains under scrutiny, and if it doesn’t meet expectations, I think the share price is likely to take a hit.

With the Aduhelm news cushioning the share price, other bad news seems to be flying under the radar. In the past week, Biogen reported failed trial results in three pipeline drugs; another potential Alzheimer’s drug, an eye treatment, and a drug for depression. While the share price seems buoyant for now, these failures remind us of biotech shares’ risk.

It’s also a highly competitive industry, and other major players are lining up their versions of Alzheimer’s drugs for FDA approval.

When investing in biotech/pharma stocks, I prefer big established companies over growth stocks. For that reason, I’d potentially allocate a small number of Biogen shares to my portfolio. But I also like AstraZeneca (LSE: AZN) as a significant pharma player.

AstraZeneca has a lot to offer

AstraZeneca has seen its share price fluctuate in recent months. Today it’s trading around £83 a share, which is down 17% from its 52-week-high and up 24% from its 52-week-low.

Its collaboration with Oxford University to bring a Covid-19 vaccine to market has not gone as smoothly as hoped, which has affected the AZN share price along the way. Nevertheless, the FTSE 100 company has more to offer.

AstraZeneca has a highly revered division focused on developing cancer therapies. It also has a diabetes treatment, heart failure therapy, and respiratory drugs. Additionally, it’s in the process of acquiring Alexion, a company specialising in rare diseases.

Q1 results showed signs of growth and rising revenues. I think both companies have potential. But I’d choose AstraZeneca over Biogen as it feels like a steadier long-term investment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Biogen. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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