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Johnson & Johnson (JNJ): Three Things You Need to Watch

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Earnings season’s in full throttle now, and Johnson & Johnson (NYSE:JNJ) stepped up and released its quarterly data Tuesday. The company’s results were good enough to please investors — shares jumped more than 2% on the day after Johnson & Johnson (NYSE:JNJ)’s profit (excluding items) topped analyst projections and jumped year-over-year. That’s as good as it gets for shareholders on earnings day.

The data’s in the books and in the past now, however, so what does the data say you should be looking forward to for the future of health care’s largest player?

Johnson & Johnson (NYSE:JNJ)

A bright future from pharmaceuticals
Johnson & Johnson (NYSE:JNJ)’s pharmaceutical division fueled this most recent quarter’s growth, as sales from the unit jumped more than 11% at a common currency. The business has been doing quite well, growing 4% last year after boasting 8.8% sales growth in 2011. More and more, Johnson & Johnson (NYSE:JNJ)’s pharmaceutical branch has become the financial workhorse of the company.

While Johnson & Johnson (NYSE:JNJ)’s standout blockbuster Remicade continues to churn out billions of dollars in annual sales, investors need to expect more from the company’s other drugs. So far, so good: Despite patent expirations cutting into sales of therapies such as Levaquin, some of J&J’s newer medications are growing at a nice clip. Immunology drug Stelara continues to impress, earning a 57% year-over-year rise in sales in the most recent quarter. The drug hit blockbuster status last year, and the earliest results of 2013 indicate more growth to come.

Expect Stelara to emerge as a staple of J&J’s pharmaceutical business this year and as one of the core drugs of its foundation. Watch for steady growth from other promising medications as well: Prostate cancer drug Zytiga has exploded out of the gate since its approval a few years back and nearly hit blockbuster status last year.

Newly approved diabetes drug Invokana is another drug that investors need to keep an eye on. The drug has already been favorably compared to Merck & Co., Inc. (NYSE:MRK)‘s diabetes behemoth Januvia — a drug that, along with similar diabetes treatment Janumet, posted a whopping $5.7 billion in sales in 2012. If Invokana landed even half of that, it’d provide a major boost to J&J’s future pharmaceutical sales.

A murky future for medical devices
That business will have to do well, because the company’s other divisions aren’t growing at anywhere near the same clip.

Medical devices in particular demand investor scrutiny. J&J’s medical device business grew in the quarter due to the acquisition of Synthes last year, but the company can’t rely on that purchase forever. Synthes’ acquisition also contributed to the growth of J&J’s orthopedics business in 2012, as sales grew more than 34% in the year. Outside of orthopedics, however, the company’s medical device business lagged.

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