JNJ Updates: Positives For Xarelto & Simponi

+10.24%
Upside
177
Market
195
Trefis
JNJ: Johnson & Johnson logo
JNJ
Johnson & Johnson

Johnson & Johnson‘s (NYSE:JNJ) drug Simponi has shown improved results for inflammatory-bowel disease ulcerative colitis, according to a new clinical trial. [1] This is an additional indication for Simponi over its already approved uses for rheumatoid arthritis, active psoriatic arthritis and active ankylosing spondylitis. Separately, JNJ’s Xarelto, a blood thinning drug, is found to reduce the risk of cardiovascular events including heart attacks. [2]

These are positives for JNJ as the drugs find applications for new indications which will help expand their respective patient bases. JNJ is a big pharma company which operates primarily through three segments – consumer, pharmaceuticals, and diagnostics.

We maintain a $72 price estimate for JNJ, which is nearly 15% above the market price largely based on our long-term outlook for the stock.

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Simponi success

Inflammatory bowel diseases (IBD) are autoimmune disorders caused by immune reaction to the body’s own intestinal tract. Common IBDs are ulcerative colitis and Crohn’s disease. Ulcerative colitis affects nearly 700K patients in the U.S. Simponi, riding on a positive clinical trial for ulcerative colitis, could look beyond its already approved indications such as severe rheumatoid arthritis, active psoriatic arthritis and active ankylosing spondylitis.

Other available medications for ulcerative colitis include JNJ’s Remicade, Abbott‘s (NYSE:ABT) Humira, and Wyeth’s Enbrel. Simponi, a subcutaneous injection, could be a new treatment option for ulcerative colitis patients who failed to respond to other treatments. [3]

JNJ is planning to get U.S. and European regulatory approval for Simponi as a treatment for ulcerative colitis in 2012. If approved, Simponi would drive growth in immunology segment. Remicade & Immunology division contributes nearly10% value to JNJ’s $72 Trefis price estimate. We expect JNJ’s market share in immunology drug market to decline beyond 2014. However, Simponi could help arrest the decline.

Xarelto finding new applications

Xarelto helps prevent blood clots and problems arising in patients with knee or hip replacements. Additionally, it was also approved for stroke prevention in people with abnormal heart rhythms. The FDA has recently recommended the drug for one more indication to help prevent heart attack and stroke in patients who have previously had chest pain or heart attack. However, the efficacy and safety of the drug is yet to be ascertained before approval.

The antithrombotics market includes other players as well. Eli Lily’s (NYSE:LLY) Effient, Bristol-Myers Squibb’s (NYSE:BMY) Plavix, AstraZeneca’s (NYSE:AZN) Brilinta are other drugs in this segment that compete with Xarelto. Xarelto’s closest competitor is Pfizer’s Eliquis, which has demonstrated better safety previously.

If the drug is successful, it can replace the long used Warfarin, which has been associated with serious side-effects, and hence poses a multi-billion dollar opportunity. Xarelto will help boost revenues in Procrit, Eprex & Velcade division of the company.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. J&J’s Simponi Helps Colitis Patients In Clinical Trial, wsj.com, May 21, 2012 []
  2. Johnson & Johnson’s Xarelto Should Be Given to More Patients, FDA Staff Says, minyanville.com, May 21, 2012 []
  3. J&J’s Simponi Helps Colitis Patients In Clinical Trial, foxbusiness.com, May 21, 2012 []