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J&J's Promising Pharma Pipeline

Zacks Equity Research

Johnson & Johnson (JNJ) recently provided an update on its pharmaceutical business. The company is looking to strengthen its pharma product portfolio and plans to file for approval of more than 10 new products and more than 25 line extensions in the next 4 years.

According to IMS Health, the worldwide pharma market, which was worth about $963 billion in 2012, is slated to grow about 4.5% per annum to approximately $1.2 trillion by 2017. Moreover, IMS Health reported that Johnson & Johnson’s pharma business was the fastest growing in the US, Europe and Japan in 2012.

The company has also almost doubled its footprint in emerging markets in the last five years. Johnson & Johnson intends to continue working on strengthening its pipeline in Japan as well as China.

Johnson & Johnson spent about $7.7 billion on research and development in 2012. The company’s main focus areas include: Neuroscience; Cardiovascular and Metabolism; Immunology; Oncology and Infectious Diseases/Vaccines.

Key candidates in the Neuroscience segment include fulranumab (osteoarthritic pain), esketamine (phase II for treatment-resistant depression) and an every-three-month formulation of Invega Sustenna (phase III ongoing for schizophrenia with results expected in late 2014).

Within the Cardiovascular and Metabolism segment, the company is looking to expand the labels of Xarelto and Invokana.

Sirukumab, a key candidate in the Immunology pipeline, which has delivered products like Remicade, Simponi and Stelara, is being studied for rheumatoid arthritis and lupus nephritis.

Johnson & Johnson is also working on expanding Remicade’s label into post-operative Crohn’s disease. Meanwhile, Simponi is currently under review in the EU for ulcerative colitis and rheumatoid arthritis (IV formulation) in the US and is being evaluated for juvenile idiopathic arthritis and axial spondylitis.

Finally, Stelara is under review for psoriatic arthritis and is being evaluated for additional indications like Crohn’s disease, pediatric psoriasis and rheumatoid arthritis.

The Oncology pipeline has candidates like daratumumab (refractory multiple myeloma), ibrutinib (mantle cell lymphoma, chronic lymphocytic leukemia, Waldenström’s macroglobulinemia, follicular lymphoma) and siltuximab (Castleman’s disease). Zytiga is a notable successful launch in the company’s oncology portfolio.

The key candidate in the Infectious Diseases and Vaccines pipeline is hepatitis C virus (:HCV) treatment, simeprevir, which is currently under regulatory review in the US. The company is also seeking approval in the EU and Japan.

Johnson & Johnson’s new product launch track record has been good with new product sales accounting for 17% of total pharma sales in 2012, up from 9% in 2009. The company expects new products to account for almost 50% of total pharma sales by 2017.

The company’s target of filing for approval of more than 10 new products and more than 25 line extensions by 2017 should help lessen the impact of the genericization of key products in the pharma portfolio.

Johnson & Johnson’s Pharmaceuticals business, which posted sales of $25.4 billion in 2012, accounted for 39% of the company’s total revenues.

Johnson & Johnson currently carries Zacks Rank #3 (Hold). Right now, companies that look well-positioned include Jazz Pharmaceuticals (JAZZ), Santarus, Inc. (SNTS) and Salix Pharmaceuticals, Ltd. (SLXP). All three are Zacks Rank #1 (Strong Buy) stocks.

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