3 Things About to Move Johnson & Johnson Stock
May 30th 2013 8:04PM
Updated May 30th 2013 9:00PM
Johnson & Johnson may be involved in everything from hip implants to pharmaceuticals, but it's the latter that brings in the majority of the profits and fuels any share movements. Don't be duped into thinking that its complexity takes away from its success: Johnson & Johnson owned the fastest-growing top 10 pharmaceutical business in the United States, Europe, and Japan in 2012. To get a better idea of how it affects the company, let's take a look at three things that will move Johnson & Johnson stock in 2013.
1. Invokana launch and sales
The company recently launched its first type 2 diabetes treatment Invokana. The market for treatments may be saturated, but Invokana is a next-generation drug that has analysts and investors buzzing. It works by inhibiting the SGLT2 protein and has shown a smooth safety profile in clinical trials, although a study analyzing long-term safety is currently under way. The first-in-class treatment went head-to-head with the top dog in type 2 diabetes, Januvia from Merck , and beat it handily.
It is too early to call the fight, but Invokana's initial launch will be aided by several market factors. Januvia sales regressed in the first quarter of 2013 for the first time in a very long time. Whether it was a new study linking DPP-4 inhibitors Januvia and Byetta from Bristol-Myers Squibb to an increased risk of pancreatitis or just an outlier period for inventory -- as management insists -- is unknown at this point. But it could aid Invokana's reception with doctors who hold reservations about prescribing new therapies. Keep an eye out for its start out of the gates.
2. Expanded indication for Simponi
Simponi is one of the lucky, uber-successful drugs hailing from the class of TNF-alpha inhibitors. Sales in the first quarter of 2013 grew 104% over the year ago period to $237 million. That was only good for 10th in Johnson & Johnson's product portfolio and well below other successful TNF-alpha inhibitors, but growth and an expanded indication should help immensely. Already approved for moderate to severe rheumatoid arthritis, active psoriatic arthritis, and active ankylosing spondylitis, Simponi was recently approved for moderate to severe ulcerative colitis.
Broad use is extremely important for any drug. After all, market-leading TNF-alpha inhibitor Humira from AbbVie is approved for seven different indications. Simponi may get a stranglehold on the ulcerative colitis market, though, as it is the only drug in its class approved "to induce and maintain clinical response and improve endoscopic appearance of the mucosa during induction." With 700,000 Americans affected by the disease, Johnson & Johnson should have no problem capturing more sales.
3. Post-2008 drug launches
I find this next statistic fascinating. Products launched since 2009 accounted for just 17% of pharmaceutical sales last year, but will grow to account for nearly half of sector sales by 2017. The trend will be driven by Invokana, Simponi, autoimmune drug Stelara, Zytiga for prostate cancer, anticoagulant Xarelto, and multidrug resistant tuberculosis therapy Sirturo, among others. That gives Johnson & Johnson stock a healthy stable of near-perpetual catalysts in the next five years -- and doesn't include anticipated launches in the late-stage pipeline.
Foolish bottom line
You may overlook Johnson & Johnson for its broad operations throughout the health-care industry, but make no mistake about it: Pharmaceutical sales will continue to drive the stock higher. The company's focus on biologics in the pipeline -- and their cumulative success in clinical trials -- will continue to pay dividends for years to come. Literally. I believe this company is a solid pharma play with a bright future, but you may still be wondering...
Is bigger really better?
Involved in everything from baby powder to biotech, Johnson & Johnson's critics are convinced that the company is spread way too thin. If you want to know if J&J is nothing but a bloated corporate whale -- or a well-diversified giant that's perfect for your portfolio -- check out The Fool's new premium report outlining the Johnson & Johnson story in terms that any investor can understand. Claim your copy by clicking here now.
The article 3 Things About to Move Johnson & Johnson Stock originally appeared on Fool.com.Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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