So far, some coronavirus vaccine stocks have offered investors huge profits in a short period of time. For example, Modern (NASDAQ: MRNA) ‘s share climbed more than 400% last year as investors bet on their research vaccine. At the same time, Pfizer (NYSE: PFE) fell by less than 1% last year – although the company, along with Moderna, led the vaccination race. In fact, Pfizer’s vaccine eventually became the first to gain emergency use authorization (EUA). Moderna obtained his EUA about a week later.
Investing in one of the companies for their COVID-19 vaccines has yielded quite a few different results. Let’s now look forward to the next company to possibly enter the market. Johnson & Johnsonsay (NYSE: JNJ) candidate is currently in Phase 3 trials, and interim data are expected later this month. If all goes well, Johnson & Johnson could be the third to cross the finish line on the vaccine. Should investors therefore consider buying shares of the pharmaceutical giant? Let’s take a closer look.
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A single dose of vaccine
Johnson & Johnson is currently studying its vaccine candidate in two phase 3 trials. The first trial, called “Ensemble”, examined the use of one dose to prevent COVID-19. The second, “Ensemble 2”, examines the use of the vaccine candidate in two doses.
Here I focus on the “Ensemble” trial – this is the one that is expected to generate data in the coming weeks. It is also the one that could support an EUA request as early as next month. And lastly, what this trial is something to talk about is the dosage regimen. The Moderna and Pfizer vaccines both require two doses. Other competitors that are close to the market, such as AstraZeneca (NASDAQ: AZN) and Novavax (NASDAQ: NVAX) also developed two-dose candidates.
If the Johnson & Johnson research vaccine proves to be safe and effective, the single-dose regimen could give it a significant edge. Of course, patients will like the idea of one jab instead of two. But most importantly, this treatment makes it easier to vaccinate more people. For example, Moderna aims to produce one billion doses of vaccine this year – but it will only cover 500 million people. Johnson & Johnson’s promise of one billion doses a year will suffice to immunize one billion people.
Johnson & Johnson also has another advantage over Pfizer. The vaccine candidate can be stored at refrigerator temperatures for at least three months. Pfizer’s vaccine requires ultra-low temperatures for transportation and storage, which presents a challenge to many potential customers.
So far, early data have been positive. In phase 1, the vaccine produced neutralizing antibodies in 90% of the participants in the trial, regardless of age, from day 29. These antibodies were at the same levels as those of coronavirus patients recovered. Neutralizing antibodies are the most important because they have the role of blocking infection.
Taking these points into account, the situation for Johnson & Johnson seems clear. Let’s now look at revenue potential. Like AstraZeneca, Johnson & Johnson promised to offer the vaccine on a non-profit basis during the pandemic. This means that it sells the vaccine at the price it costs to manufacture the product and that the company will not make any profit on the sales. We can therefore not count on the vaccine contributing to earnings in the near future. But after the pandemic, the company can increase the price and benefit from sales. The pandemic is being considered if the virus is no longer present worldwide. It is still too early to say when it may be. But Dr Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, said in December that it was possible that we could return to ‘normality’ by the end of 2021, according to The Harvard Gazette. If that happens, Johnson & Johnson could benefit from the sale of vaccines in 2022.
What does this mean for investors?
Johnson & Johnson could very well become a leader in the coronavirus vaccine market if the single-dose vaccine gets regulatory approval from the FDA and other health care institutions around the world. But I do not expect the share price to be big with the news. As we have seen with players Moderna and Pfizer, the shares of clinical biotech companies have skyrocketed, while those of pharmaceutical competitors have not. This is because the smaller players are dependent on the income of vaccines (and will immediately make a profit). Larger companies, with their large range of commercialized products, will not do so. And the large size of Johnson & Johnson – with a market capitalization of more than $ 421 billion – means that its shares rarely make big moves.
Yet Johnson & Johnson’s profits, earnings and share price have risen over time. (Lower prices for some of its talcum powder products and lawsuits outweighed the annual profit and share performance in 2018.)
JNJ Net Income (Annual) Data by YCharts
And investors can rely on Johnson & Johnson for dividends. The company is a Dividend King, which means that it has increased its dividend annually for at least the past 50 years. The annual dividend is now $ 4.04 per share, with a return of 2.55%.
I would not buy shares in Johnson & Johnson only for the coronavirus vaccine candidate. (And buying just one stock for one product anyway is not the best idea anyway.) But I would buy shares of Johnson & Johnson for its overall product portfolio and the increasing dividend payments to investors.