Biotechnology Stock Wins

Johnson & Johnson NYSE: JNJ Over the last decade, pharmaceutical companies have been aggregating years of research and development data into medical databases, while payors and providers have digitized their patient records. The Dow Jones Industrial Average (^DJI) is trading up 67 points (+0.4%) at 15,587 as of Wednesday, Jul 31, 2013, 11:35 a.m. ET. During this time, 162.3 million shares of the 30 Dow components have changed hands vs. an average daily trading volume of 586.1 million. The NYSE advances/declines ratio sits at 1,462 issues advancing vs. 1,418 declining with 117 unchanged.  Investors understand that R&D spending means more growth returns than they pay for.  R&D expenditures are beginning to embrace a new approach. Pressure with success in R&D is forcing CEOs to make more and quicker decisions on R&D propositions than ever before.

According to TheStreet.com, “Johnson & Johnson JNJ, which is sporting an 87-cent gain (+0.9%) bringing the stock to $94.04. This single gain is lifting the Dow Jones Industrial Average by 6.58 points or roughly accounting for 9.8% of the Dow's overall gain. Volume for Johnson & Johnson currently sits at 3.5 million shares traded vs. an average daily trading volume of 9.9 million shares. Johnson & Johnson has a market cap of $261.82 billion and is part of the health care sector and drugs industry. Shares are up 32.9% year to date as of Tuesday's close. The stock's dividend yield sits at 2.8%. Johnson & Johnson, together with its subsidiaries, engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. “

What Is The Potential?

Investors are optimistic about big data’s potential to transform health care but structural issues may pose obstacles. Privacy issues will continue to be a major concern. McKinsey estimates $300 billion to $450 billion in reduced health-care spending could be conservative, as many insights and innovations are still ahead.

For investors, big data today offers more incentives and access to big data information. “Big data possibilities will soon lead to the elimination of most curable diseases. Health-care expenses now represent 17.6 percent of GDP nearly $600 billion more than the expected benchmark for a nation of the United States’s size and wealth.  Big data has arrived in biotechnology. Investors will worry that pharmaceutical companies won’t be completely forthright about the risks of their programs. To build trust, management teams must therefore support thorough due diligence, just as they would expect it themselves. They’ll also have to explain their motives for wanting to share particular risks and to share in fair value. It seems there are numerous questions unresolved. Is senior management able to significantly impact by, and address to guide appropriate R&D investment decisions to its organizations? Over the last decade, pharmaceutical companies have been aggregating years of research and development data into medical databases, initiating overhauls of its R&D and selling, general and administrative (SG&A) segments for Pharma. A company willing to build their capabilities, and open to a new view of value will likely achieve better outcomes. Investors should pay attention to low price-to-R&D ratios with modest price/earnings ratios.