Will Johnson & Johnson (NYSE:JNJ) New Investments Pay Off?
Johnson & Johnson (NYSE:JNJ) has been one of the safest investments in the healthcare industry over the years. The company’s sheer size has been a key factor in ensuring that investors have continuously received value by holding JNJ stock.
The company has recently decided to focus more on the pharmaceuticals industry, which exposes it to the inherent risks and volatility, which characterize the industry. However, several factors are working in JNJ’s favor, which could see the company shareholders receive excellent results from its investments in the pharmaceuticals industry.
Johnson & Johnson has a significant advantage over its closest competitors, Pfizer Inc. (NYSE:PFE) and Novartis AG (ADR) (NYSE:NVS) in terms of its much larger market capitalization. JNJ’s operating structure is also quite enviable as the company is composed of over 250 subsidiaries, which makes JNJ quite nimble in affecting changes within its operations.
The pharmaceuticals industry is characterized by significant volatility, but given that, JNJ has some drugs in the market such as Xarelto, Stelara and Darzalex, which are doing quite well, the company’s position in the market is quite secure. The recent acquisition of Actelion also gave JNJ access to two hypertension drugs, Opsumit and Uptravi, which have the capability to each cross $2 billion in sales.
Another factor that works in JNJ’s favor is that the company’s profits in the pharmaceuticals industry are derived from sales volumes and not high prices. This is crucial to the company’s future success, as the US government examines ways to reduce the prices of the very expensive pharmaceutical drugs.
Investors in the company should also be well cushioned from the volatility experienced in the pharmaceuticals industry given that, the other sectors in which JNJ operates such as consumer health are largely immune to changes in the economy.
JNJ has a history of developing blockbuster drugs that deliver billions in revenue for the company, and given that the company recently announced that it has several blockbuster drugs under development, it is easy to believe that the company shall deliver on this promise.
JNJ’s investments in the pharmaceuticals industry hold the potential for the company’s future growth. The question remains whether JNJ shall continue to deliver value to its investors over the long-term.
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