(JNJ) Archives - Page 9 of 29 - Mad Hedge Fund Trader

Not Now, But Soon

During times of market turbulence, many investors may find themselves hesitant to participate due to the uncertainty and risks involved. However, one potential strategy to weather the storm could be to seek out dividend stocks.

By investing in these types of equities, individuals can find a sense of stability and security, as they often offer a reliable source of income regardless of market fluctuations. In short, dividend stocks can serve as a safe harbor amid a choppy investment climate.

If you're looking for a healthcare stock with some serious street cred, check out Johnson & Johnson (JNJ).

Before delving into the company, knowing that JNJ’s stock price isn't exactly bargain-bin material is crucial. Still, it's not the most expensive pharmaceutical company out there, either. Novo Nordisk (NVO) and Eli Lilly (LLY) are commanding higher valuations, while JNJ’s peers like Amgen (AMGN), Gilead Sciences (GILD), AbbVie (ABBV), and Bristol-Myers Squibb (BMY) are trading at a lower price-to-free-cash-flow ratio.

Let's not forget that JNJ isn't just a one-trick pony in the pharmaceutical game.

With around 30% of its revenue from medical devices, we can't compare it apples-to-apples with other pharma companies. Peers in the medical devices sector typically trade at higher valuation multiples, so it's essential to keep that in mind when evaluating JNJ's price-to-free-cash-flow ratio.

Moreover, this mega-brand dominates both the pharmaceutical and consumer goods scenes. With fingers in many pies - pharma, med tech, and consumer goods - JNJ has made quite the name for itself.

Despite being a seasoned player, Johnson & Johnson (JNJ) still has some spring in its step; come year-end, the company will be shaking things up with a spin-off of its consumer segment into a new entity, Kenvue.

JNJ’s upcoming spin-off is about sharpening its focus on what matters - its pharma business. And for good reason - this is where the big bucks are made.

The healthcare giant’s immunology and cancer drugs are outperforming the rest of the pack, with two key players, Stelara and Tremfya, delivering some serious sales growth last year. Together, they raked in a cool $12.3 billion, proving that sometimes, less really is more.

JNJ’s pharma segment is crushing it. Darzalex, the multiple myeloma med, racked up an impressive $8 billion in sales, a 32% boost from the previous year. Meanwhile, prostate cancer drug Erleada wasn't far behind, with a 45.7% increase in sales to $1.9 billion.

All in all, JNJ's pharma segment hauled in a massive $52.5 billion in revenue in 2022. Not too shabby.

Looking deeper into its performance in fiscal 2022, JNJ reported a slight increase of 1.2% YoY in sales, reaching $94.9 billion, but currency effects had a negative impact. However, adjusted earnings per share increased by 3.6% YoY, with operational growth at 9.2%.

The "Consumer Health" segment reported a 0.5% decline in revenue, but adjusted operating growth was 3.6%.

The "Pharmaceuticals" segment, responsible for more than half of revenue, increased sales by 1.7% YoY to $52.6 billion, with operational growth at 6.7%.

The "MedTech" segment increased revenue by 1.4% YoY to $27.4 billion, with operational growth at 6.2%.

For fiscal 2023, Johnson & Johnson is expecting revenue growth of 4.5% to 5.5% and adjusted earnings per share growth of 3% to 5%.

Despite the positive reports, JNJ investors are still anxious about the future primarily because of the impending patent expirations of existing products. Unfortunately, the company is heading towards a patent cliff, as it faces the challenge of replacing revenue from products with expiring patents.

Stelara generated $9.7 billion in revenue in fiscal 2022 and will lose patent protection in 2023. Simponi, which generated $2.2 billion in revenue in fiscal 2022 and will lose patent protection in 2024, are two of the biggest concerns.

These two products account for 12.5% of the company's total revenue and 22.5% of the pharmaceutical segment revenue. Replacing these sales will not be an easy feat.

Additionally, in 2027, JNJ will lose patent protection for two other vital drugs - Xarelto and Imbruvica, which generated $2.5 billion and $3.8 billion in revenue in fiscal 2022.

To resolve these concerns, JNJ is putting its money where its mouth is regarding innovation. The company invested a whopping $14.6 billion in R&D in 2022 alone, and it looks like it's paying off. With plenty of promising drugs in the pipeline, JNJ is poised to continue its growth trajectory in the coming years.

When it comes to dividends, JNJ is royalty. With a 60-year track record of annual dividend increases, JNJ company has earned the coveted title of Dividend King.

JNJ boasts a healthy payout ratio of 41% and a juicy dividend yield of 2.8%, well above the S&P 500's average yield of 1.7%. The company's steady cash flow quickly covers these payouts, making it a solid choice for investors seeking reliable income.

While JNJ may be a top-notch investment option in the long run, the current market conditions make it a tad pricey. So, for now, just give it a spot on your watchlist and wait for the dip to go for a bargain. Remember, patience is not just a virtue but also a lucrative strategy in investing.

jnj

March 2, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 2, 2023
Fiat Lux

Featured Trade:

(AN UNBEATABLE STOCK REFORMING THE SECTOR)
(LLY), (JNJ), (SNY), (NVO)

An Unbeatable Stock Reforming The Sector

Biotech Letter

After starting 2023 with such great promise, practically all major stock indexes in the United States fell last month. Stocks dipped because of the unrelentingly rising inflation, which economists anticipate to lead to another round of seemingly unstoppable interest rate hikes later in the year.

What can stock investors do in this climate?

The ideal stocks in this situation are those defensive in nature because they tend to be less reactive or sensitive to macroeconomic conditions. As a result, defensive stocks deliver relatively solid price performance in bear and bull markets.

Defensive stocks are companies whose products or services are considered essential or necessary, regardless of economic conditions. These companies typically provide products or services that people and businesses cannot easily do without, such as healthcare, utilities, and consumer staples. Because these companies are less susceptible to fluctuations in the economy, they are often viewed as a safe investment option during times of market uncertainty.

Eli Lilly (LLY) stands out as one of the best defensive stocks in the biotechnology and healthcare sector today.

With over 38,000 employees across the globe and products commercially available in at least 120 countries, the company is no doubt a dominant presence in the industry. It is a global pharmaceutical organization that develops, manufactures, and markets drugs for a wide range of medical conditions, including diabetes, cancer, and autoimmune disorders.

The company has been in operation for over 140 years and has a strong reputation for innovation and research. Apart from Johnson & Johnson (JNJ), Eli Lilly’s market capitalization of roughly $327 billion makes it the most prominent pharmaceutical business worldwide.

Meanwhile, Eli Lilly pays out a dividend that yields around 1.1%. Over the trailing decade, this giant drugmaker’s dividend has experienced a consistent increase of about 130%.

Given that Eli Lilly is a healthcare company that produces medicines for life-threatening and chronic conditions, it can be considered a defensive stock.

In 2022, the company’s shares gained approximately 32.4% thanks to its solid organic growth and deep and diverse new treatments and drugs pipeline. Considering its history and track record combined with the market's volatility, Eli Lilly also benefited from its image of being a “safe” stock.

Despite the uncertainties, Eli Lilly looks to be poised for another healthy run in 2023. In terms of growth, the company is projected to climb higher courtesy of its newly approved diabetes and obesity drug, Mounjaro, which shows impressive potential. The company also has a promising pipeline, with several high-value candidates in the immunology and dermatology segments expected to gain approval this year.

Recently, Eli Lilly announced that it would put a cap on the out-of-pocket expenses for insulin at $35 per month for uninsured patients and those covered by commercial insurance. The company also surprised the public by announcing its plan to lower the price of this highly controversial drug by 70%.

After drugmakers jacked up the price of insulin in the past years, this drug became the symbol of out-of-control healthcare costs.

In the US alone, over 30 million people suffer from diabetes. Of these patients, more than 7 million need to take insulin every day. The alarming part of this situation is that 1 in 7 patients who require insulin daily find their budget affected at “catastrophic” levels because of the medication’s cost. These patients allot a minimum of 40% of their disposable income to the treatment alone.

This is why Eli Lilly’s announcement marked a significant development in the sector after months of aggressive lobbying to lower the price of the drug. With the company’s decision, the pressure became more intense for other drugmakers to follow suit. Specifically, major insulin distributors like Sanofi (SNY) and Novo Nordisk (NVO) are urged to apply the same rule.

All in all, Eli Lilly has a virtually recession-proof model and a positive long-term outlook. I suggest you buy the dip.

February 14, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 14, 2023
Fiat Lux

Featured Trade:

(BETTER SAFE THAN SORRY)
(JNJ)

Better Safe Than Sorry

Biotech Letter

The market has been unstable but upbeat this year as a mix of optimistic investor sentiment and nagging concerns about the global economy has troubled investors. This is why investing in businesses on a long-term basis appears to be the trend these days.

After all, doing so makes it easier to get past near-term issues and enables investors to focus on excellent companies that can deliver significant returns in the course of more extended periods.

With these in mind, Johnson & Johnson (JNJ) emerges as one of the stable stocks worth consideration not only in the field of biotechnology and healthcare but also across the broader market.

JNJ is one of the biggest healthcare companies across the globe, and it will soon be split into two distinct entities. This spinoff is projected to be completed by November 2023, with both companies being publicly traded and aiming to pay out dividends.

A spinoff is in the works, with the company’s consumer health business turning into a new company named Kenvue. At the same time, its pharmaceutical and medical device sectors will continue under the central umbrella of JNJ.

The company’s consumer health segment historically records moderate growth, which fails to keep up with the more rapid growth experienced by its medical devices and pharmaceutical sectors.

In 2022, JNJ reported its total sales to be $95 billion, which was 1.3% higher than in 2021, with net earnings worth $18 billion. Broken down by division, the operational sales of consumer health climbed by 4%, while the pharmaceutical sector rose by 7%, and the medical devices sector increased by 6% compared to the prior year.

These results are somewhat expected considering the maturity of the consumer health segment along with the profit margins for the products in its portfolio. Nevertheless, having brands like Benadryl, Tylenol, Listerine, and Motrin would undoubtedly boost the consumer health arsenal. These widely known brands would enable this segment to sustain its growth, translating to stable ongoing gains over the long run.

JNJ’s move to buy Abiomed, the developer of the world-famous smallest heart pump, bolstered the company’s medical device sector.

Meanwhile, the company estimates its pharmaceutical sector to reach $60 billion in terms of revenue by 2025 courtesy of top-selling treatments such as cancer drug Erleada and Darzalex and plaque psoriasis medication Tremfya. In addition to the company’s robust pipeline, these projections propel JNJ’s top line forward.

Recently, JNJ increased its investment in biotech stock MeiraGTX (MGTX), lifting its stake from 3.7 million to 6.6 million shares. The two companies have been working together on the central nervous system, salivary glands, and eye treatments since 2019, with JNJ being the second-largest shareholder in this clinical-stage gene-therapy firm.

While its 2022 figures do not seem to be as impressive as others in the sector, it’s nothing to sneeze at either. In fact, it should be appreciated in the context of the longevity of JNJ’s business as well as the company’s long-established ability to continue delivering moderately-paced growth. Reviewing the last five years of JNJ, the business has grown its top and bottom line by approximately 17%.

The sheer size of JNJ and its leadership across practically all critical healthcare sectors ensured solid business and shareholder returns in the past years.

Over the last 10 years, this top-tier stock has delivered a total return of 190% for its shareholders. Meanwhile, its dividend, which the company has boosted for 60 consecutive years and counting, has climbed by 90%. Hence, investors on the lookout for a resilient company to buy and hold for a long time would be hard-pressed to find a more stable stock than JNJ.

February 9, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 9, 2023
Fiat Lux

Featured Trade:

(AN EMERGING KING OF BIOSIMILARS)
(AMGN), (ABBV), (JNJ), (BAYG), (AZN), (REGN)

An Emerging King of Biosimilars

Biotech Letter

Patience is one of the key attributes that long-term investors need to cultivate, but practicing it is challenging. Stock markets are entirely unpredictable, and their ups and downs tend to rattle even the most experienced investors.

However, it’s essential to keep a calm mind and to be confident that the businesses you invest in have the fortitude to overcome even the most challenging economic or market downturn.

The biotechnology industry is an excellent place to search for stocks that can overcome market turmoils and succeed in the long run because the treatments they develop are so crucial to the lives of their clients.

Amgen (AMGN) is a biotech that would make an excellent long-term investment.

This business, which has been a leader in the biotech sector since the 1980s, is among the largest in the world.

Amgen is also a member of the renowned Dow 30 companies, with a focus on oncology, biosimilars, and inflammatory diseases. In the past 10 years, it has established a strong track record and solid revenue growth trajectory.

The company recently released its fourth-quarter results, and they looked a tad flat on the surface. The report disclosed a total revenue growth of only 2%, which could have been caused by the pressures linked to pricing and competition around the company’s top-selling cholesterol-lowering treatment Repatha, migraine drug Aimovig, and immunology medications Otezla and Enbrel.

Still, Amgen continues to be a solid profit-making business, holding an A+ grade in terms of profitability. It sustains considerable pricing power on its treatments under exclusive patents and from its up-and-coming portfolio of biosimilar candidates.

Amgen has maintained a BBB+ rated balance sheet. It also pays a respectable dividend yield of 3.5%, with a well-protected payout ratio of 44%.

The company has also recorded consecutive growth in this aspect for 11 years. Looking at these figures, Amgen has scored primarily As in terms of consistency, growth, dividend, and yield.

Notably, the company’s foray into the biosimilar landscape would make long-term investors of the company quite happy soon.

Its long-awaited biosimilar version of the No. 1 selling drug worldwide, AbbVie’s (ABBV) Humira, has recently been launched to market.

Amgen’s version, called Amgevita, is the leading biosimilar in this market to date. It already has a five-month lead over the next competitor, arming it with a lot of time to establish a more competitive standing.

Beyond this candidate, Amgen has at least six more biosimilars that it plans to launch in the US and across the globe from 2023 until the end of 2030. This timeline would give the company excellent visibility in the long run.

Another potential biosimilar blockbuster is ABP 654, which is a biosimilar of Johnson & Johnson’s (JNJ) top-selling immunology treatment Stelara.

Amgen also has biosimilar versions of Bayer's (BAYG) and Regeneron’s (REGN) eye disorder drug Eylea and AstraZeneca’s (AZN) rare kidney disease treatment Soliris.

Basically, biosimilars are knock-offs for biologic drugs. They cost less because the manufacturers do not spend less in the research, trials, and approval stages. The processes are also shorter and less risky.

Biosimilars provide a way for patients and the whole healthcare system to save billions of dollars, signaling a bright future for this segment. They offer more affordable options to patients, which is an excellent response to the rising prices of medicines.

This means biosimilar development is far less speculative than creating a new drug, as manufacturers only need to replicate the already established results and success of the existing “original” drug.

Moreover, biosimilars bring with them a degree of pricing power. Unlike traditional treatments, no two biosimilars are allowed to carry the same biologic profile and should still undergo a stringent FDA assessment prior to gaining approval.

Overall, Amgen is a good option for long-term investors on the lookout for a quality biotech to add to their portfolios. Thanks to its burgeoning portfolio of potentially top-selling biosimilars, it has long-term solid revenue growth catalysts. These factors make Amgen a compelling buy on the drop.

January 31, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 31, 2023
Fiat Lux

Featured Trade:

(A SAFE HARBOR IN TUMULTUOUS TIMES)
(JNJ), (AZN), (BGNE)

A Safe Harbor in Tumultuous Times

Biotech Letter

Investors are still determining what to expect in 2023. The stock market could either gradually make a recovery or plummet deeper. In any case, it’s an excellent plan to add some high-quality stocks to your portfolio.

When choosing which company to invest in, it’s good to keep in mind Warren Buffett’s advice: "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.”

A safe and reliable stock to bet on is Johnson & Johnson (JNJ).

JNJ recently disclosed its fourth quarter and full-year financial report, wrapping up a resilient showing in 2022 amid the macro headwinds. In fact, the stock is up compared to 2021, outperforming the broader market and underscoring JNJ’s position as an undisputed “blue-chip” leader.

Apart from highlighting JNJ’s position, this healthcare titan’s earnings typically serve as a bellwether for the rest of the companies in the biopharma space. This means that the relative rosiness of JNJ’s report could back up the belief that Big Pharma is one of the defensive havens in this tumultuous market environment.

In its fourth-quarter earnings call, JNJ shared some ambitious sales growth projections for the following years. For instance, pharmaceutical sales that reached $52.6 billion in 2021 are anticipated to hit $60 billion in 2025. While this is exciting for investors, the road to that goal would be challenging.

JNJ has recently been struggling with the declining sales of two major drugs. The first is its blood cancer treatment called Imbruvica, which has been losing its market share to newer drugs like AstraZeneca’s (AZN) Calquence and BeiGene’s (BGNE) Brukinsa.

On top of the falling sales for Imbruvica, JNJ would also need to battle it out with biosimilars of its top-selling anti-inflammatory injection called Stelara by the end of 2023.

Nonetheless, JNJ’s overall sales climbed by 6.2% in 2022, with the business’ pharmaceutical sector expanding a little faster at 6.8%. As for its medtech segment, it grew a bit slower at 6.1%.

Then, JNJ has the consumer health sector. The segment’s operational sales recorded only 3.9% growth, which was well below the company’s two key business units. Clearly, this division is holding back JNJ’s overall development.

In an effort to resolve this situation and enable the company to grow into a more streamlined business, JNJ plans to spin off the consumer health sector into a new and separate company. This will be Kenvue, which is expected to be launched by the second half of the year.

This move will turn JNJ into a nimbler and more rapidly growing business with a renewed focus on medtech and pharmaceuticals. Moreover, the planned spinoff could offer a short-term catalyst for JNJ stock.

On top of all these, JNJ will most likely announce its 61st consecutive annual dividend increase in April. It’s expected that the company will pay shareholders $4.52 per share every year, showing off a dividend yield of 2.67%. In comparison, the industry average is approximately 2.15%.

These issues cast some doubt on JNJ’s ability to hit its $60 billion target. Nevertheless, it reported a positive outlook for 2023. In its full-year guidance, JNJ projected sales to be between $96.9 billion and $97.9 billion. This indicates an annual growth rate of 5%.

Let’s circle back to the idea that JNJ serves as a good bellwether for the rest of the broader market. This Big Pharma leader is a part of the Dow Jones Industrial Average (DIA) and is included in the Top 10 names in the S&P 500. These are critical factors in using JNJ as an indicator for the rest of the companies.

If JNJ can deliver, or even exceed, EPS estimates and report positive earnings this 2023, then the projections are optimistic for other big companies expected to face similar headwinds.

Big Pharma notably outperformed the broader market in 2022, with investors looking into this segment as a safe harbor amid the economic and financial meltdowns. For context, the S&P 500 Pharmaceuticals industry sector increased by 5.6%. Meanwhile, the broader index fell by 19.4%.

Overall, JNJ is a top-quality stock that maintains a positive outlook in the long run amidst the short-term macro headwinds.

January 24, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 24, 2023
Fiat Lux

Featured Trade:

(A MARKET-BEATING HEALTHCARE STOCK)
(LLY), (ABBV), (AMGN), (BMY), (GILD), (JNJ), (MRK), (PFE), (MRNA)

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