GlaxoSmithKline (GSK 0.31%) and Eli Lilly (LLY 3.77%) are two big pharmaceutical companies that appear to be on different paths. Glaxo posted disappointing fourth-quarter results earlier this month and predicted a loss for the full year 2020. Lilly, on the other hand, wowed investors with its Q4 results and upped its full-year 2020 guidance.
But the performance over one quarter -- and even over one year -- can be deceiving. What really matters are the long-term prospects for a company. Which of these two big pharma stocks is the better pick for long-term investors? Here's how GlaxoSmithKline and Eli Lilly compare.
The case for GlaxoSmithKline
To be sure, GlaxoSmithKline is in a state of transition right now. The drugmaker is dealing with the loss of exclusivity for blockbuster respiratory drug Advair. Sales are also declining for other key drugs, including Relvar/Breo Ellipta and Lamictal. GlaxoSmithKline is also preparing to spin off its consumer business in a joint venture with Pfizer.
However, the company has several growth drivers for the future. At the top of the list is its vaccine business. Sales continue to soar for shingles vaccine Shingrix. Glaxo's meningitis vaccines Bexsero and Menveo are performing well. Even older vaccine products such as Infanrix, Pediarix, and Boostrix continue to enjoy solid sales growth.
GlaxoSmithKline is also more than offsetting the impact of Advair with newer respiratory drugs. Both Trelegy Ellipta and Nucala are picking up strong momentum.
The company remains a leader in the HIV market. Although sales are slipping a bit for HIV drugs Tivicay and Triumeq, Juluca and Dovato are picking up the slack.
Glaxo is building its presence in the immunology and oncology markets as well. Sales are soaring for lupus drug Benlysta. Ovarian cancer drug Zejula, which the company picked up with its acquisition of Tesaro, is also picking up steam.
More growth could be on the way from GlaxoSmithKline's pipeline. The company awaits regulatory approvals for several promising candidates, including multiple myeloma drug belantamab mafodotin and HIV drug fostemsavir. It's also pursuing additional approved indications for several existing drugs.
We can't leave out Glaxo's juicy dividend. The company's dividend yield currently stands north of 5.5%. While there have been worries about the dividend program in the past, Glaxo appears set to keep the dividends flowing well into the future.
The case for Eli Lilly
Eli Lilly has its challenges, too. Sales are plummeting for erectile dysfunction drug Cialis with the drug facing generic competition. Osteoporosis drug Forteo is also losing market share after losing exclusivity in late 2019. Lower prices are weighing on revenue generated by cancer drug Alimta.
But there's a lot more good news than bad news for Lilly these days. The company is still a juggernaut in the diabetes market. Sales continue to soar for diabetes drugs Trulicity and Jardiance and for Lilly's Basaglar insulin injection.
And although Alimta is struggling somewhat, it's a different story for some of Lilly's other cancer drugs. Cyramza is delivering solid double-digit-percentage sales growth. Breast cancer drug Verzenio is picking up impressive momentum.
Meanwhile, Lilly has become a major player in the immunology market. Taltz is on a roll, delivering 37% year-over-year sales growth in Q4. Sales are also skyrocketing for rheumatoid arthritis drug Olumiant, which Lilly licensed from Incyte. On a different front, migraine drug Emgality performed reasonably well in its first full year on the market in 2019.
Lilly hopes to soon win additional approvals for several of its existing drugs, including Olumiant in treating atopic dermatitis and a new formulation of Trulicity. The company also has new candidates awaiting regulatory approvals, notably including pain drug tanezumab.
In January, Lilly announced that it plans to acquire Dermira for $1.1 billion to boost its pipeline even further. The crown jewel of the deal is lebrikizumab, which is being evaluated in late-stage studies for treating atopic dermatitis.
Lilly's dividend yield of 2.1% isn't nearly as high as GlaxoSmithKline's. However, Lilly should be in a better position to increase its dividend in the future than Glaxo is thanks to a lower dividend payout ratio and stronger earnings growth prospects.
In my opinion, it's pretty easy to pick the winner between these two pharma stocks. It's Eli Lilly.
Lilly simply has more approved products that are generating consistent sales growth. The company also has fewer headwinds than GlaxoSmithKline does. Lilly should be able to deliver earnings growth of close to 11% over the next several years. With its dividend thrown into the mix, the stock could very well beat the market this decade.