In the ever-evolving landscape of healthcare investing, the year 2026 promises to be a pivotal one for two pharmaceutical giants: Biogen and Novo Nordisk. While both companies are poised to benefit from new indications for approved therapies, their paths to success are distinct, each presenting unique opportunities and challenges. In my opinion, the choice between these two stocks is not an easy one, but for different reasons. Let's delve into the intricacies of each and explore why they might be compelling investments in the coming year.
Biogen: A Turnaround Story
Biogen, a Massachusetts-based pharmaceutical company, has been on a journey of transformation. With a focus on neurological conditions, Biogen has expanded its portfolio significantly. The company's recent acquisitions, such as Reata Pharmaceuticals and Apellis Pharmaceuticals, have brought in promising rare-disease treatments like Skyclarys and Empaveli, respectively. These additions not only broaden Biogen's pipeline but also mitigate the risks associated with its older blockbuster drugs facing generic competition.
One of the most intriguing aspects of Biogen is its turnaround potential. Despite declining revenue in its legacy MS portfolio, the company remains highly profitable. In Q1, Biogen's revenue rose 2% year over year to $2.5 billion, with earnings per share jumping 31% to $2.15. The gain was largely attributed to a 74% year-over-year rise in Leqembi sales, which is awaiting approval for a subcutaneous formulation to treat Alzheimer's patients. This formulation offers significant market expansion potential due to its ease of use.
However, the FDA's extended review period for Leqembi's subcutaneous autoinjector is a minor setback. The therapy has already received approval from over 50 regulatory agencies for IV dosing, and the subcutaneous version is expected to be approved eventually. This delay is unlikely to affect the drug's long-term sales potential, given the high prevalence of Alzheimer's disease.
Biogen's stock trades at just under 22 times earnings, which is a reasonable valuation considering its turnaround story and diverse pipeline. The company's ability to innovate and diversify makes it an attractive investment, especially for those seeking value-oriented plays in the healthcare sector.
Novo Nordisk: A Growth Machine
Novo Nordisk, based in Denmark, is a powerhouse in the markets for diabetes and obesity treatments. The company's GLP-1 agonists, including Ozempic and Wegovy, have driven significant growth. Demand for these drugs is so high that Novo Nordisk has expanded its manufacturing capacity to meet it. Over the past three years, annual revenue has risen by more than 108%, showcasing the company's impressive growth trajectory.
What makes Novo Nordisk particularly fascinating is its ability to stay ahead of the competition. The company secured FDA approval for the injectable form of Wegovy in June 2021, well before Eli Lilly's Zepbound was approved. This year, Wegovy was approved in pill form, followed by Lilly's GLP-1 pill, Foundayo. Novo Nordisk's early moves have given it a competitive edge, and its GLP-1 funds are helping it develop other therapies or acquire them.
Novo Nordisk's strong growth profile is further enhanced by its above-average dividend. The company has increased its dividend for six consecutive years, raising it by 37% this year to $1.04 per American depositary receipt (ADR). This makes it an attractive long-term investment for income-seeking investors.
The Choice: Biogen vs. Novo Nordisk
The choice between Biogen and Novo Nordisk is not an easy one. Biogen is well-priced and appears to be in the early stages of a turnaround, with a diverse pipeline and a strong focus on neurological conditions. On the other hand, Novo Nordisk has a stronger growth profile, trades at a more attractive valuation, and offers an above-average dividend. It is a growth machine with a diverse metabolic treatment portfolio and a competitive edge in the GLP-1 market.
From my perspective, both stocks are compelling investments, but for different reasons. Biogen is an attractive value-oriented play with a turnaround story, while Novo Nordisk is a growth machine with a strong dividend. The decision ultimately depends on an investor's risk tolerance, investment horizon, and specific financial goals. However, one thing is clear: both companies are well-positioned to benefit from the healthcare sector's growth in 2026 and beyond.
