Johnson & Johnson (NYSE:JNJ) and its shareholders have had quite a remarkable year. Even though, the whole market has witnessed a strong year, the 21% year-to-date gain that has been posted by J&J (NYSE:JNJ) has added up nearly $50 billion to the market value. This ascend to newer heights is nowhere complete. The fiscal 2015 is expected to be even a better years, and there are several contributing factors that aid this success.
J&J (NYSE:JNJ) has branched their business in a way that they have several splendid opportunities to generate returns, but their biggest ever yield comes from their pharma category. J&J (NYSE:JNJ) have reported an exceptional 18% year-over-year increase in their pharmaceutical sales, while other consumer product sales delivered flat margins, closing at a 5% dip. This has a double impact on the returned figures, as pharma segments are considered more important than the other two commoditized categories.
J&J (NYSE:JNJ) has expanded its drug products by quite a mark. The latest drug Imbruvica, used in treatment for blood cancer that could take the company to new heights. This drug, licensed from Pharmacyclics (NASDAQ:PCYC) has been approved in the US, as a recommended treatment for chronic lymphocytic leukemia and mantle cell lymphoma. However, its scope is being extended to various other cancerous diseases.
So far, Imbruvica has shown excellent test phase development, and is expected to return a revenue figure around $9 billion in per annum peak sales.
Another factor that could contribute to J&J (NYSE:JNJ)’s 2015 success is its close ties with the Affordable Care Act, which is expected to be a driving force in terms of growth potential in healthcare. The Act works around the theory that as more Americans get insured, the doctor visits will eventually increase, which benefits hospitals, drug manufacturers, and medical-device producers.
It is too soon to say whether this will work, however, more interest in paying up to get insured will certainly point to the fact that this Act is gaining momentum and the concerned parties are more willing to invest, once the implementation uncertainty wades off. This could, however, show faster effect on the medical device branch of J&J (NYSE:JNJ)’s business, which have declined 6.5% on home grounds in Q3.
Furthermore, a Republican shift in the government might result in the end of the medical device excise tax, which is at 2.3% currently. This could give a further boost to J&J (NYSE:JNJ), which is marked as leading medical device makers.
The news of an impending break-up is also surfacing. It is still too soon to say, and the company might pull out of the idea at any time. However, with several peers following similar trends, might drive home the same idea. Breaking up a company is quite a challenging task, but often becomes value creator.
Once a company expands to the size that J&J (NYSE:JNJ) is now, it is a better idea to go for a divide, to give investors a better idea of how it earns its revenue. A breakup might make J&J (NYSE:JNJ) more transparent and a safer stock to invest in.