Morningstar | J&J Provides Solid Update at Pharmaceutical Business Review Day With Analysts; Increasing FVE
On May 15, Johnson and Johnson hosted a pharmaceutical update with the investment community, highlighting key drugs in the pipeline, which led us to increase our fair value estimate to $134 from $130. The stock continues to trade close to our fair value, suggesting the growth prospects are incorporated into the current stock price. The increased visibility into the company's pipeline also strengthens our conviction in the company's wide moat, which rests largely on the firm's ability to develop innovative new drugs with strong pricing power.J&J highlighted key late-stage drugs that should reach the market within the next five years. The heavy focus in oncology (60% of the key late-stage drugs) should bode well for the company as pricing power, scientific advancements, and quicker development times are all typical of cancer drugs. Within the cancer drugs, we view the EGFR drugs JNJ-1937 and JNJ-6372 and multiple myeloma drugs JNJ-4528 and JNJ-7564 as well positioned for growth. While these drugs will be competing against other drugs with strong efficacy, early-stage data looks compelling. Other key drugs highlighted include acute myeloid leukemia drug JNJ-4550, gene therapy AAV-CNGB3 for retinal disease, prostate cancer drug niraparib, Crohn's disease drug JNJ-4500, depression drug JNJ-7922, and a vaccine for RSV. Notably, while multiple sclerosis drug ponesimod remains in development, J&J didn't highlight the drug as a key drug with potential of over $1 billion in annualized sales.
Outside of new drug launches, the pipeline also includes development for new indications for existing drugs. A six-month dosing version of Invega for schizophrenia, new indications for Tremfya (psoriatic arthritis, Crohn's disease, ulcerative colitis) and expanding cancer labels for Darzalex, Imbruvica, Erleada, and Balversa should drive future growth for these important drugs. While all these drugs face increasing competition, the expanded labels should help drive sales.
For a complete review of J&J's pipeline, please see "Annual Drug Pipeline Report: Moats Remain Secure as Innovation Counters Pricing and Generic Headwinds, but M&A Accelerating."
Johnson & Johnson is a holding company engaged in the research and development, manufacture and sale of a range of products in the health care field. The company has three business segments: Consumer, which includes a range of products focused on personal healthcare used in the beauty, over-the-counter pharmaceutical, baby care, oral care, women's health and wound care markets; Pharmaceutical, which is focused on six therapeutic areas: immunology, infectious diseases, neuroscience, oncology, cardiovascular and metabolism and pulmonary hypertension; and Medical Devices, which includes products used in the orthopaedic, surgery, interventional solutions, and eye health fields.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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