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J&J upside remains after Actelion acquisition: Credit Suisse

July 21, 2017

Johnson & Johnson JNJ shares are up about 20 percent since the company acquired Actelion back in January. However, despite the strong performance, Credit Suisse analyst Vamil Divan sees more upside ahead for the pharma giant.

On Thursday, Credit Suisse reinstated coverage of Johnson & Johnson stock with an Outperform rating and $148 price target. According to Divan, Johnson & Johnson has several key growth drivers ahead.


“Based on channel checks and detailed modeling we have done across various therapeutic areas, we see opportunities for significant upside from assets such as Xarelto, Darzalex and Imbruvica,” Divan wrote.


He noted that these growth drivers are not necessarily a result of the Actelion buyout. In fact, Divan said that at $29.1 billion, Johnson & Johnson likely overpaid for Actelion. Still, the deal certainly adds another long-term growth avenue for Johnson & Johnson.

In the near term, Johnson & Johnson has two potentially bullish catalysts ahead.

First, the company is expected to release COMPASS data for Xarelto at the European Society of Cardiology conference on August 29. Shortly thereafter, Johnson & Johnson has the PDUFA date for sirukumab in mod-sensitive rheumatoid arthritis on Sept. 22.

In addition, investors should look for the addition of more Remicade biosimilars in the second half of 2017, Divan said.

Over the long term, Divan sees the pharma business as the major growth driver. Credit Suisse estimates 5.8 percent compound annual growth from the pharma business through 2021 compared to just 3.7 percent annual growth for the medical devices business and 3.1 percent annual growth from the consumer business.

Credit Suisse’s $148 price target is based on 18.5x the company’s 2018 EPS forecast of $7.79.


Latest Ratings for JNJ

Date Firm Action From To
Jul 2017 Credit Suisse Reinstates Outperform
May 2017 JP Morgan Upgrades Neutral Overweight
Jan 2017 Wells Fargo Downgrades Outperform Market Perform


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