Johnson & Johnson (NYSE:JNJ) — and JNJ stock — is in the limelight after the company made headlines for the recent approval of its Covid-19 vaccine. Analysts and physicians say that the one-dose vaccine is a game changer and testament to the company’s scientific prowess.
JNJ stock has been on the decline after the company lost patent exclusivity on some of its legacy drugs. However, a recent revamp of its business after shedding unprofitable business segments has investors and analysts optimistic about the company’s future. Here’s a look at how a new and improved business, coupled with sales of the vaccine, will help JNJ stock come out on top this year.
JNJ Stock Rises On Vaccine Approval
JNJ’s single-dose vaccine is a real breakthrough in the development of formulae to combat the coronavirus. Unlike the vaccines from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA), Johnson & Johnson’s formula has the ability to teach the immune system to identify the virus. This is in contrast to other vaccines that use mRNA technology. Moreover, JNJ’s vaccine is valid for two years when stored under -4 degrees Fahrenheit, as opposed to Moderna’s, which is only viable for 30 days when cooled.
The approval of JNJ’s vaccine for emergency use will serve as an important tool to combat the virus. At the current pace of the vaccine rollout, experts believe we are unlikely to reach herd immunity until Thanksgiving. But this vaccine will certainly help speed things up. According to the company, it has four million doses on hand and can produce a total of 20 million by March. It expects to meet its 100 million order for the U.S. government by June.
The approval of the vaccine makes JNJ a very attractive stock right now. This is because, as one of the largest pharmaceutical businesses in the world, it is not known for vaccine development. The fact that Johnson & Johnson was able to develop a successful formula when other vaccine makers fell short is a major win for the company. The revenue from vaccine sales coupled with a revamped pharmaceutical business makes this a great stock to buy right now.
A Pharmaceutical Revamp
Johnson & Johnson may be in the news for its vaccine breakthrough, but the company is a leader in the pharmaceutical business. In the long term, this segment is likely to drive a majority of its revenue growth. For the fiscal year 2020, pharmaceutical sales generated $45.6 billion and accounted for half of the company’s total revenue. This is a result of the company’s wide portfolio of drugs, which includes some legacy players like Stelara and Darzelex. The sale of these drugs helped the company offset the losses from its underperforming products.
However, the company’s current success is just a preview of what’s to come. There are several growth prospects that hint at a much brighter future for the company. For one, JNJ’s blockbuster drugs like Imbruvica are expected to double in sales from $4.45 billion to $9.51 billion by 2024.
It also has three ongoing trials, which could add significantly to its bottom line in the coming years. A second tailwind is pent-up demand for healthcare post-pandemic, which will help boost sales of JNJ’s medical devices and pharmaceuticals. Finally, the company is also experimenting with robotics-assisted surgical procedures. Although the industry is still in its early days, experts believe it will hit a market value of $14.8 billion by 2027.
The Bottom Line
JNJ stock had a rough couple of years, but things are really looking up for the company this year. The recent vaccine approval will serve as a major tailwind for the company as it fulfills orders at home and abroad. In addition, its revamped pharmaceutical business is poised for strong returns. Legacy drug sales coupled with new innovations will keep growth levels high in this segment. Developments in robotics-assisted surgery processes will cement its long-term success.
Investors looking for high-growth healthcare stocks that pay a dividend will find JNJ stock to be a worthy investment. Although the company does come with risks, such as pending lawsuits, it is still in a good position when assessing the long-term potential.
JNJ stock is on a dip right now, making it an ideal time to place your bets on the stock.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020.