Diversified health-care companies Johnson & Johnson (NYSE: JNJ) and Novartis (NYSE: NVS) reported results last week. Both companies may have beat Wall St. expectations, but one looks better-positioned for the future than the other.  

Generic drugs

Both J&J and Novartis have been dealing with ongoing sales-eroding patent expirations. But unlike J&J, Novartis has a not-so-secret weapon -- its own generic division, Sandoz, which experienced double-digit growth during the quarter. Sandoz is already marketing generic versions of some blockbusters, such as Sanofi-Aventis's (NYSE: SNY) Lovenox and Eli Lilly's (NYSE: LLY) Gemzar.

To minimize the effects of patent expirations, both companies also have diversified their businesses beyond pure pharmaceuticals. However, while Novartis's recently acquired Alcon eye-care business, as well as its consumer health division, contributed to strong sales growth, at J&J, the medical devices segment grew only 1.3% operationally. The company also took two large charges related to the unit: one related to the decision
to exit the drug coated stent business, and the other to cover the massive DePuy's hip replacement recall. J&J's consumer division is only now beginning to recover from over a year of recalls of its over-the-counter medicines.

Here, J&J seemed to have performed well. Its sales grew 12%, highlighted by sharp increases for arthritis med Remicade, HIV drug Prezista, and cancer treatment Velcade. Several recently launched products also helped the segment, including psoriasis treatment Stelara and antipsychotic Invega for schizophrenia. Also, the FDA approved three J&J drugs during the quarter, including prostate cancer drug Zytiga and HIV drug Edurant, which should boost future results.

Growth of Novartis's pharmaceutical sales looked similar, with significant contributions from recently launched products such as blood-cancer drug Tasigna, eye med Lucentis, and MS drug Gilenya. Novartis also had several drugs approved during the quarter, including pancreatic tumor treatment Afinitor. But Novartis also has a vaccines and diagnostics segment. While vaccines declined considerably in the quarter, the division offers generally promising growth and additional diversification.

If I had to choose between the two ...
J&J was once the absolute golden standard in management and product quality. These days, however, it is plagued with severe quality issues, and a lack of managerial oversight and clear direction. Liabilities from lawsuits related to several of its products are yet unknown. If its pharmaceutical business is to drive growth, the current R&D spending may not be enough. Instead, it seems the company is concentrating more energy on driving growth through its medical devices business with a planned $21 billion acquisition of Synthes , which could work.

J&J could be on the road to recovery, but investors still have an alternative. Novartis is diversified enough across segments and geographical areas to weather patent expirations better. Meanwhile, even as it enjoys growing generic revenue, it spends much more on R&D than J&J. Actually, only Pfizer (NYSE: PFE) and Merck (NYSE: MRK) currently spend more, and by 2016, Novartis will surpass them, too, according to Evaluate Pharma. EP also believes that Novartis will then vie for the top pharma spot.

So if I had to choose between the two, I'd wait till management proves itself again at J&J, and instead go with Novartis. Its clear strategic direction seems to offer the better choice.

Fool contributor Melly Alazraki owns no shares in any of the companies mentioned. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Novartis, Johnson & Johnson, and Pfizer and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.