Johnson & Johnson (NYSE: JNJ), a major component of healthcare sector exchange traded funds, will enjoy greater sales of its specialized drugs.
“Based on second-quarter-to-date IMS data, we see the potential for outperformance from several of Johnson & Johnson’s key U.S. drugs–including Invokana/Invokamet [type 2 diabetes], Xarelto [blood thinner], Invega Sustenna [schizophrenia]and Remicade [Crohn’s disease and others]–that in aggregate could deliver some modest upside in the quarter, although we expect this strength to be largely offset by weaker-than-expected Olysio [chronic hepatitis C]sales,” according to Wells Fargo analysts.
Consequently, Wells Fargo has placed an outperform rating on the pharmaceuticals giant.
Johnson & Johnson’s outlook bodes well for the healthcare sector as the company stock is a major component in both healthcare and pharmaceutical sector ETFs.
For instance, the Health Care Select Sector SPDR (NYSEArca: XLV) includes a 9.6% tilt toward JNJ while iShares U.S. Healthcare ETF (NYSEArca: IYH) holds a 9.1% position in JNJ. The pharmaceuticals sub-sector makes up 42.5% of XLV and 40.6% of IYH.
Additionally, JNJ is 9.3% of iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE) and 8.2% of Market Vectors Pharmaceutical ETF (NYSEArca: PPH).
Supporting the pharma space, recent Nielsen data revealed in-line or better performance in the U.S. consumer segment. Additionally, currency risk has diminished after the euro improved marginally against the USD since mid-April while the yen only depreciated modestly. The analysts calculate that for the full year, net exchange-rate impact worsened by less than $10 million.