Longtime leaders, short-term laggards. That's a quick rundown of how Johnson & Johnson (JNJ -0.04%) and Eli Lilly (LLY -0.36%) stocks have performed. While both big pharma stocks have delivered impressive gains for investors over the long run, they've both turned in disappointing results so far in 2019.
There's still plenty to like with J&J and Lilly, but which is the better pick moving forward? Here's how the two stocks compare.
The case for Johnson & Johnson
Sure, Johnson & Johnson has taken a few blows this year related to opioid legislation and allegations that its talc-based products were contaminated by asbestos. But J&J appears to be in a reasonably good position to move past both issues, especially as testing conducted by the company last month found no traces of asbestos in its baby powder products.
If there's one stock that reflects the breadth of the healthcare spectrum, it's Johnson & Johnson. The company operates more than 260 companies across the world in three multibillion-dollar business segments.
The biggest moneymaker for J&J is its pharmaceutical segment. This segment claims several key growth drivers, notably including immunology drugs Stelara and Tremfya, along with cancer drugs Darzalex and Imbruvica. Depression drug Spravato, which was approved by the FDA earlier this year, should be another big winner. J&J also hopes to submit at least 14 new drugs for U.S. regulatory approval over the next three years.
Johnson & Johnson's pharmaceutical segment has its challenges, though. Sales continue to slide for top-selling immunology drug Remicade as it faces competition from biosimilars. Other key drugs are also experiencing sales declines, including cancer drugs Velcade and Zytiga.
The company's other segments aren't performing as well. In the third quarter, J&J's medical device segment revenue fell 3.1% year over year, while its consumer health segment revenue climbed only 1.6%. However, the impact of divestitures caused lower Q3 revenue for the medical device segment. Both segments appear to be in good shape for long-term success.
One of the biggest reasons to like J&J is its dividend. The company has increased its dividend for 57 consecutive years, qualifying J&J as a Dividend King -- S&P 500 stocks that have boosted their dividends for at least 50 years. J&J's dividend currently yields north of 2.8%.
The case for Eli Lilly
Most drugmakers can only dream of having seven products that are generating year-over-year sales growth of more than 20%. For Lilly, this dream is a reality. And some of the company's products are delivering much-stronger growth. Sales for diabetes drug Jardiance, for example, soared 44% year over year in the third quarter, while breast cancer drug Verzenio's sales skyrocketed 86%.
With so many big winners, you might wonder why Lilly's shares haven't performed very well in 2019. One reason is disappointing sales for Taltz. Although the anti-inflammatory drug delivered year-over-year sales growth of 29% in Q3, it wasn't enough to satisfy Wall Street analysts.
In addition, some of Lilly's drugs are experiencing significant sales declines. Cialis lost patent exclusivity. The company withdrew sarcoma drug Lartruvo from the market earlier this year following a late-stage clinical failure.
Lilly has several new drugs that are rising stars. Migraine drugs Emgality and Reyvow, along with rheumatoid arthritis drug Olumiant, are key to the company's future fortunes.
The big pharma company also has 15 programs in late-stage clinical development. Several of these programs are pursuing approvals of additional indications for currently approved drugs. However, Lilly also has promising new pipeline candidates such as immunology drug mirikizumab and pain drug tanezumab.
Lilly offers an attractive dividend as well. Its dividend yield currently stands at close to 2.3%. The company has increased its dividend by 24% over the last three years, a bigger jump than J&J's dividend increase of nearly 19% over the same period.
My colleague Dr. Brian Orelli pointed out several years ago that "Johnson & Johnson is always a buy (if you hold long enough)." I think Brian was and still is exactly right on this point. And it's why I think that J&J is the better buy over Lilly.
No, Johnson & Johnson isn't likely to deliver mind-blowing growth. But with its sure-and-steady dividend, it will probably generate solid total returns over the long run. J&J's enviable financial position also enables the company to make acquisitions when it needs to fuel growth. That's exactly what the company has done this year with its medical device segment, buying robotics surgical company Auris Health for $3.4 billion.
J&J is the kind of stock that you can buy and hold practically forever. It might hit a few bumps in the road along the way, but you can bet that it will always keep moving forward.