Xiaoma maintains Johnson & Johnson (JNJ.US) “neutral” rating: data on the two new anti-cancer drugs is impressive, but the valuation premium limits upward space

The Zhitong Finance App notes that the European Society of Medical Oncology's Annual Meeting (ESMO) has just come to an end. This is one of the most important academic conferences in the global field of oncology. The data published at the conference often directly affects the stock prices and pipeline expectations of relevant pharmaceutical companies. Johnson & Johnson (JNJ.US) has become one of the most watched targets in the large pharmaceutical sector. J.P. Morgan Chase determined in a research report released on October 25 that early data released by Johnson & Johnson on the two major indications of prostate cancer and head and neck cancer provided potential differentiated competitiveness for its innovative drug pipeline.

The core focus is on the candidate drug for prostate cancer codenamed JNJ-6143. The technology platform is Halda Riptac. This is an ongoing treatment for metastatic castration-resistant prostate cancer (mCRPC). This indication usually refers to patients who progress after treatment with androgen receptor pathway inhibitors, and is an advanced group of people with unmet clinical needs. The current phase 1 clinical data is quite impressive. The patients enrolled are highly advanced. The median has previously received four-line treatment, and more than 30% have previously used yew chemotherapy and radioligand therapy.

In the 50 mg dose group selected for phase II clinical trials, the objective response rate (ORR) reached 75%. After 5.6 months of median follow-up, 71% of patients continued to receive treatment, and efficacy was not affected by genomic characteristics. What is more critical is safety. The incidence of adverse events associated with grade 3 treatment and above in the 50 mg dose group was zero.

Analyst Chris Short believes that these data mean that JNJ-6143 may have differentiating advantages in terms of efficacy and tolerability, and was highly appreciated by the live panelists. Based on this, Johnson & Johnson will advance the drug to phase III clinical trials and simultaneously expand in the direction of metastatic castration-sensitive prostate cancer and combined medication. Analysts expect the huge prostate cancer market to give the company considerable room for growth by the 2030s.

The other main line is head and neck cancer. The fifth cohort of the origami-4 trial of Rybrevant (Rybrevant) combined with pabolizumab (Keytruda) and chemotherapy showed that in patients with head and neck cancer unrelated to HPV (human papillomavirus), the objective remission rate of the combined regimen reached 77% (sample 22 cases), which was significantly higher than the remission rate of approximately 36% of patients with pabolizumab combined chemotherapy in this indication. Johnson & Johnson has submitted a marketing application for leventumab second-line head and neck cancer indications, and first-line phase III clinical trials are progressing simultaneously. The report suggests that the drug is expected to occupy an important position in the field of head and neck cancer unrelated to HPV.

Even so, the report's attitude towards Johnson & Johnson shares is still quite restrained. Analysts pointed out that Johnson & Johnson is still the target of relatively clean fundamentals among large pharmaceutical companies. The innovative drug business is leading the way with high single-digit growth rates, and the medical technology business is also moving to high-growth segments.

J.P. Morgan maintains Johnson & Johnson's “neutral” rating, and its latest price target is $285. As measured by the estimated earnings per share in 2027, the company's valuation has reached 21 times, and is in a clear premium range. Compared with other targets in the same group, there is limited room for stock price growth. This also explains why analysts are still cautious about stock prices while being optimistic about fundamentals.