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Will J&J (JNJ) Continue to Tread Growth Path This Year?


Johnson & Johnson’s JNJ stock was up 21.3% in 2017, which compared favorably with a gain of 16.3% recorded by the industry.

Last year’s share price surge was supported by a series of positive news including promising data from several pivotal studies and rapid progress with its pipeline and line extensions. The positive trend is likely to continue this year as well.

What Drove the Stock in 2017?

Two new drugs were approved last year – Guselkumab/Tremfya in the United States as well as in the EU for plaque psoriasis and the first dual treatment for HIV, Juluca (dolutegravir + rilpivirine) in partnership with GlaxoSmithKline GSK in the United States. Juluca is under review in the EU.

J&J also gained FDA approval for several line extensions – a lower dose of Xarelto, two new indications of Simponi Aria, use in adolescents for Stelara, combination use of Darzalex with Celgene’s CELG multiple myeloma drug Pomalyst and the sixth indication for Imbruvica, among others. Please note that J&J markets Imbruvica in partnership with AbbVie, Inc. ABBV.

The line extensions can expand the eligible patient populations of these drugs and drive their sales higher in future quarters.

In 2017, J&J also submitted regulatory applications for label expansion of key drugs including Darzalex (in first-line setting for multiple myeloma), Xarelto (for chronic coronary artery disease and/or peripheral artery disease), Invokana (to include the cardiovascular indication), Zytiga (for earlier stages of metastatic prostate cancer). It might get FDA nod for these line extensions this year.

Factors Likely to Support the Rally in 2018

With several pivotal data readouts and regulatory milestones expected in 2018, the bullish run of the stock is likely to continue in 2018.

This year J&J expects to file for approval of depression candidate, esketamine while apalutamide for pre-metastatic prostate cancer and Symtuza, a darunavir-based once-daily single-tablet regimen for HIV could be approved by the FDA.

J&J’s domestic Pharma segment sales decelerated in the first half of 2017 as a number of key growth drivers like Remicade and Concerta faced competition. However, sales growth accelerated in the third quarter and we are likely to see the positive impact of the trend in fourth-quarter results and probably in 2018. We believe that new products in all segments, label expansion of drugs like Imbruvica, Xarelto, Stelara and Darzalex and contribution from recent acquisitions – mainly Actelion – will support top-line growth.

All these factors bode well for the stock. J&J carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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