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Johnson & Johnson's 4 Biggest Catalysts in 2017

Biotech Clinical Researcher Microscope Getty
Biotech Clinical Researcher Microscope Getty

Image source: Getty Images.

Though it was a very difficult year for drugmakers, with the SPDR S&P Pharmaceuticals ETF losing just shy of a quarter of its value, the same can't be said of healthcare conglomerate Johnson & Johnson (NYSE: JNJ) , a company that leans heavily on its pharmaceutical segment for its growth and gross margin. Through Dec. 28, J&J is up a healthy 12% year to date.

While it's always nice to celebrate a good year, it's also important to keep your eyes on the horizon, because Wall Street places far, far more emphasis on what lies ahead instead of what's in the rearview mirror. As we ready to dive headlong into 2017, here are the four biggest catalysts that investors and shareholders should be eyeing.

1. Invokana's long-awaited CV study results

You could arguably take your pick for biggest catalyst in 2017, but my personal choice is the expected cardiovascular (CV) outcomes study data for SGLT-2 inhibitor Invokana, a treatment for type 2 diabetes that was approved in 2013.

Doctor Patient Dermatology Skin Autoimmune Disease Getty

Image source: Getty Images.

Two factors make guselkumab a drug you'll want to watch in 2017 . Firstly, because it ran circles around the placebo during its pivotal phase 3 trial. Guselkumab, which targets interleukein-23, a protein that has known specificity when it comes to immune response disorders of the skin, led to 85% of patients having clear or nearly clear skin after 16 weeks compared to just 6.9% of the patients in the placebo group. In terms of near-complete skin clearance, it was a 73% to 2.9% advantage for guselkumab over the placebo.

The other exciting aspect of guselkumab is that it also ran away from AbbVie 's(NYSE: ABBV) Humira, the best-selling drug in the world. At the 16-week mark, Humira led to near-complete skin clearance for almost 50% of patients, and at the 48-week mark this improved to 55%. However, guselkumab's 16-week effective rate was 73%, and it also improved to 81% by week 48. Humira has 10 approved indications, so it's not as if guselkumab is going push Humira into obsolescence, but when it comes to moderate-to-severe plaque psoriasis, guselkumab could be the next sheriff in town.

Expect an FDA ruling in the latter half of 2017.

4. Does Trump tackle drug pricing?

Finally, investors will want to keep their eyes on what Donald Trump does once in the Oval Office.

Image source: Disney-ABC Television Group, Flickr.

Trump has a number of big issues on the docket, including individual and corporate tax reform, as well as his campaign promise to repeal and replace of the Affordable Care Act. However, Trump has also intimated that he's going to tackle drug pricing, which both he and opponent Hillary Clinton viewed as too high. The real question to be answered is whether Trump was merely trying to gain the favor with an American public that's fed up with rising prescription drug costs, or whether he really plans to tackle drug-pricing reform.

Reforming drug pricing would be bad news for all drugmakers since their pricing power usually accounts for a substantial amount of their long-term growth. It would be an especially huge hit for specialty drugmakers since specialty drugs have been commanding the biggest price increases in recent years. For J&J, pricing reform could directly impact its cancer drug portfolio and slow growth for blood cancer blockbuster Imbruvica, which is also partly owned by AbbVie via its acquisition of Pharmacyclics in 2015.

If Trump is simply too busy to tackle drug reform in 2017, it would be viewed as a positive for J&J.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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