Pharmaceutical companies Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) are two of the biggest players in the race for vaccination in the world against COVID-19. The Pfizer vaccine, produced in coordination with BioNTech, obtained the U.S. Food and Drug Administration (FDA) Emergency Use Authorization (USA) on December 11, giving it a head start on all other coronavirus vaccines in the U.S.
Vaccines typically take years to develop, not months. The Johnson & Johnson vaccine, which may be launched as early as February, may be the preferred option, however, for practical reasons and due to the company’s manufacturing strength as the largest pharmaceutical company in the world, with more than 130,000 employees. Let’s dig deeper to determine which coronavirus is the best choice today.
SOURCE OF IMAGE: GETTY IMAGES.
The race is a marathon, not a sprint
The Pfizer vaccine must be shipped at minus 70 degrees Celsius, requiring special freezers, before being thawed for use. Then, it is given in two doses approximately three weeks apart. It works by stimulating receptor bodies to produce peak proteins that mimic those of the virus, using instructions provided via messenger ribonucleic acid (mRNA). These proteins stimulate your immune systems to produce antibodies that will fight SARS-CoV-2, the virus that causes COVID-19.
The Johnson & Johnson vaccine candidate is still in a phase 3 trial, but could receive its US by the FDA as early as February, according to the Department of Health and Human Services. The J&J vaccine requires only one dose and can be stored in a regular refrigerator, creating fewer logistical problems. Instead of RNA, it depends on deoxyribonucleic acid (DNA) to lead the receptor to fight SARS-CoV-2; it does this by using a weakened version of a common cold virus, adenovirus 26, to transport genetic material from the spike protein found in SARS-CoV-2 to the body, causing the immune system to produce antibodies that defend it.
Pfizer obviously has a head start. Also according to USA today, only 6% of people in the United States received a coronavirus vaccine and only 1% have received two doses. Pfizer said it had produced more than 70 million doses by the end of December and, along with BioNTech, pledged to produce another 2 billion for the US by July.
The Johnson & Johnson vaccine, which has easier cold storage requirements and better portability and requires only a single dose, may well outperform its rivals. The company said this week that it is on track to produce 100 million doses of its vaccine by the end of June. The Pfizer vaccine has been shown to be 95% effective in preventing coronavirus infection. In provisional results, The new English medical journal reported only that the efficacy of the Johnson & Johnson vaccine was over 90%.
The Johnson & Johnson vaccine may have an advantage because it is almost as effective, but much more practical and easier to distribute.
Looking beyond the coronavirus side of things
If you are buying any of these pharmaceutical stocks exclusively for an increase in coronavirus, you are looking at them the wrong way. Both actions have great long-term potential.
Pfizer shares offer an annual dividend of $ 1.52 per share, one of the best dividends among the major pharmaceutical companies, with a current yield of 4.18%. The cash dividend payout ratio is 80.65, so there is concern that the dividend may be reduced, as it has increased by more than 171% in the past 10 years, which means that earnings growth has slowed compared to growth of the company’s dividends. One of the reasons why the yield is so high is that Pfizer’s revenue numbers have fallen for two consecutive years, and its shares have fallen more than 3.5% in the past year. In the third quarter, the company’s revenue was $ 12.1 billion, down 4% year on year. And during the first nine months of 2020, it was $ 35.9 billion, down 8% from the same period in 2019.
One thing that could be said about Pfizer is that it is selling at more discount, with a price / earnings (P / E) ratio of about 23 compared to 26 for Johnson & Johnson. However, when you look at the future P / E, which takes into account expected earnings, Johnson & Johnson is less expensive, 11 compared to Pfizer 18. This shows lower expected revenue growth for Johnson & Johnson.
Johnson & Johnson is a Dividend King, having increased its dividends for 58 consecutive years. Its annual dividend was $ 4.04 per share last year, after a 6.3% increase, giving it a current yield of 2.36% and a safe cash dividend distribution rate of 56.39. Johnson & Johnson’s shares rose more than 13% last year. J&J has just released its fourth quarter report, showing that the company had a solid quarter, with reported revenue of $ 22.5 billion, an 8.3% year-over-year increase. Its annual revenue, despite the headwinds of the pandemic, has increased for the fifth consecutive year – although annual net revenue has fallen 2.7%, in part because of $ 5.1 billion in net litigation expenses related mainly to cases of opioids.
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Of the two actions, I would choose the safest choice from Johnson & Johnson. We are still in the early stages of sales of the coronavirus vaccine, and Johnson & Johnson will have little trouble achieving it because their vaccine will be more adaptable and useful, given current distribution capabilities. Looking beyond concerns about the coronavirus, while Pfizer is primarily a pharmaceutical company, J&J is much more diverse; its pharmaceutical segment leads the way, but its other two divisions – consumer health and medical devices – are major revenue generators that, although slowed by the pandemic, are likely to return when the pandemic subsides. The diversification of Johnson & Johnson has allowed it to overcome the pandemic and, if its vaccine takes off (as many expect), the company could have a record year.