Johnson & Johnson’s Experimental Automated Insulin Delivery System Holds Big Potential

Last week, Johnson & Johnson (NYSE:JNJ) presented the results of its experimental automated insulin delivery pump at the American Diabetes Association’s annual meeting in Chicago. ^[1] This device aims to help those with diabetes who may need insulin at night if their blood sugar drops to unsafe levels. The 20 person study showed that the blood sugar levels stayed in safe ranges 90% of the time.

While the results are on a very small sample, they are still encouraging, and the company has already received approval for 3rd feasibility study. If J&J manages to successfully launch this product, it can make the lives for many with diabetes much easier and help sales in a big market. Johnson & Johnson has plenty of experience in diabetes care devices such as glucose meters and strips, and insulin pumps. The revenues from these devices stood at close to $2.6 billion in 2012. ^[2]

We estimate that this business accounts for more than 5% of Johnson & Johnson’s value based on our current revenue forecasts. However, the company’s interest in the diabetes market is not just limited to devices. It received a major boost a few months back when its blockbuster potential type 2 diabetes drug, Invokana (commonly known as Canagliflozin), was granted FDA approval. Johnson & Johnson will look to expand in the lucrative diabetes market in order to ease the pressure on other business areas such as cardiovascular, which have become highly competitive.

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With obesity on the rise, diabetes is affecting more people globally. In the U.S. alone, roughly 26 million people suffer from the condition. ^[3] The global diabetes drug market has seen rapid growth in the last couple of years. According to GBI Research, a leading business intelligence provider, the type 2 diabetes drug market is expected to grow from $26 billion in 2011 to $50 billion in 2021, in developed markets including the U.S., Japan and Europe. ^[4] Type 2 diabetes drug market constitutes a significant chunk of the total diabetes drug market.

Our price estimate for Johnson & Johnson stands at around $85, roughly in-line with the market price.

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

1. J&J’s Pump Automatically Adjusts Insulin Levels for Diabetics, Bloomberg, June 21 2013 [↩]
2. J&J’s SEC Filings [↩]
3. National Diabetes Fact Sheet, 2011, CDC [↩]
4. The Type 2 Diabetes Drug Market Will Almost Double Over The Next Decade, Increasing From $26 Billion In 2011 To Nearly $50 Billion In 2021, Decision Resources, Oct 15, 201 [↩]