Morgan Stanley Has 'Cautious Optimism' On Johnson & Johnson

In a report published Friday, Morgan Stanley analysts maintained an Equal-Weight rating on Johnson & Johnson JNJ, with a price target of $108. Johnson & Johnson achieved strong organic pharmaceutical growth over the last two quarters. Despite this, its stock underperformed the S&P 500 so far this year owing to fears of increased competition from branded and biosimilars drugs in the 2016-2018 period. In the report Morgan Stanley mentioned," "We note in particular the competitive risks facing Stelara ($2.1Bn, ~6.4% of total pharma sales) and Zytiga ($2.2Bn, ~7% of pharma sales) as well as the biosimilar risks to Remicade and Procrit ($7.9Bn, ~25% of total pharma sales). Offsetting these risks are continued strength in Imbruvica ($0.5Bn for J&J in '15, with $3Bn US sales by '20), continued penetration of SGLT-2s which benefits Invokana ($1.2Bn in '15), and Xarelto ($1.5Bn) where J&J has had success in indication expansion." Johnson & Johnson's ability to provide a roadmap for sustainability of its successful franchises, demonstrate the value of its pipeline and offer a growth path will determine investor sentiment in the near future. Referring to the company's pipeline, the analysts said, "Our analysis of J&J's pipeline prior to further insights from the May 20th Analyst Day shows a balanced risk reward." The company's strength in the oncology segment is expected to offset the mute expectations around immunology.