For a more targeted approach to the healthcare sector, Johnson & Johnson also makes up a large portion of pharmaceutical sector-specific funds, including 10.0% of iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE) and on 8.3% of Market Vectors Pharmaceutical ETF (NYSEArca: PPH). Both ETFs track the largest pharma companies in the industry. IHE has a 0.45% expense ratio and PPH has a 0.35% expense ratio.
Moreover, J&J believes it will sustain above-industry compound annual growth through 2019 – the industry average compound growth rate is expected to be around 3% for the period.
Looking ahead, industry growth will be propelled by a slew of niche or specialized drugs with a targeted application for specific diseases.
“From an innovation standpoint, drug companies are focusing most on specialty care,” according to Morningstar analyst Robert Goldsborough. “As a result, pharmaceutical and biotech firms are targeting smaller patient populations, particularly in oncology, virology, and immunology. Innovating in areas of previously-unmet needs should offer higher odds of approval by U.S. regulators and better pricing power for drug firms.”
For more information on the healthcare sector, visit our healthcare category.
Max Chen contributed to this article.