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How Johnson & Johnson (JNJ) Would Fare In 2013

 January 07, 2013 03:32 PM

The fundamentals of Johnson & Johnson (NYSE: JNJ) are expected to improve in 2013 as the pharmaceutical business being driven by recent and new drug launches.

Johnson & Johnson, or J&J, is one of the largest and most diverse healthcare products companies in the world generating approximately $67 billion in annual sales. J&J is the world's largest medical devices company, the eighth largest pharmaceutical company, and the sixth largest biotech company.

For the past several years, J&J has weathered through patent expirations, a general slowdown in utilization trends, and challenges with its OTC businesses.

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"As we look ahead to 2013, we believe JNJ will see improving trends. We expect recent and new drugs to continue to drive pharma sales," Deutsche Bank analyst Kristen Stewart said in a client note.

In recent years, J&J has been active on the portfolio management front, particularly on the Pharma side with several acquisitions and licensing agreements that have enhanced the pipeline.

Over the past year, J&J has had success with its Pharma pipeline, has worked through the exit of its drug-eluting stent business, integrated Synthes, and has made progress on its McNeil OTC issues.

"We believe with these actions, J&J can now focus on its businesses and is well positioned to drive future growth," Stewart said.

J&J's immunology franchise continues to perform well, and the company is pursuing additional indications for Simponi and Stelara. Prezista continues to drive the infectious disease franchise and the company should start seeing more meaningful contributions from its newer Edurant and Incivo products.

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In oncology, Zytiga sales have tripled this past year, and growth is expected to remain in the double digits over the next few years. The company recently received a FDA label expansion to chemo-naïve patients.

"As we look ahead to 2013, we believe all three of J&J's divisions should see steady-to-improving trends. Within pharmaceuticals, the new products have already started to accelerate growth and we expect additional pipeline milestones ahead," the analyst noted.

In Medical Device & Diagnostics, the integration of Synthes seemingly is going well and to the extent utilization trends slightly improve which should accelerate growth across several of J&J's franchises.

Within Consumer, the worst is likely behind for the McNeil OTC franchises, and it should move from a headwind to a contributor in 2013.

J&J's canagliflozin for the treatment of type 2 diabetes was filed in May 2012 and will go before a FDA advisory panel on January 10. The company has also filed a fixed dose combination with Metformin in December.

"We expect the product to receive approval in 2Q13 and have included nearly $600 million sales in 2016 assumes utilization primarily as a third line OAD therapy in patients with good renal function," Stewart noted.

In December, J&J was also granted accelerated FDA approval for SIRTURO (bedaquiline) for the treatment of multi-drug resistant tuberculosis. In 2013, the company is anticipating filing simeprevir for hepatitis C treatment naïve and relapsed patients.

For 2013, Wall Street expects J&J to earn $5.49 a share on revenue of $72.18 billion, according to analysts polled by Thomson Reuters. The consensus estimates suggest earnings growth of 8 percent and revenue upside of 7 percent from 2012.



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