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Monday, August 07, 2017 1:28:46 PM
Although J&J is a well-rounded company from the perspective of geographic and operational diversification, it has, in recent years, placed far more emphasis on its pharmaceutical segment. In 2012, Johnson & Johnson was deriving 37.7% of its total sales from pharmaceuticals, while its recently released second-quarter report showed that 45.8% of sales now comes from pharmaceuticals. Pharma is a ticket to strong pricing power, rapid growth, and high margins, so it's no wonder J&J has chosen to turn its attention to drug development.
But it's not just pharmaceuticals in general that'll be pulling the weight for J&J. Instead, the company will be placing its faith in specialty medicines to drive growth, especially in the oncology segment.
Few, if any, prescription therapies have more pricing power than cancer drugs. J&J has witnessed sales of relatively new multiple myeloma drug Darzalex, which was licensed from Genmab, soar. On a year-over-year basis, Darzalex sales climbed to $299 million worldwide in the second quarter from $108 million in Q2 2016. This puts Darzalex on track to easily become a blockbuster this year, and to potentially tack on bigger gains if its label is further expanded.
J&J is also benefiting from the rapidly rising sales of blood cancer drug Imbruvica. Recognized sales of Imbruvica rose 55.1% on an operating basis (excluding currency movements) in the second quarter to $450 million worldwide. J&J shares Imbruvica's net sales with AbbVie, which acquired Pharmacyclics, the original developer of Imbruvica, for $21 billion. J&J licensed Imbruvica years before the purchase and receives a healthy minority stake of the drugs' net sales. Imbruvica sales could peak at $7 billion annually, per analyst estimates.
Look for new specialty drug approvals, and organic growth via volume and price increases in specialty medicines, to be major growth drivers over the next decade.
https://www.fool.com/investing/2017/08/04/johnson-johnsons-3-biggest-sources-of-growth-over.aspx
Know What You Own. My posts should not be construed as investment advice.
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