So far, some stocks of coronavirus vaccines have offered investors huge gains in a short period of time. For example, Modern (NASDAQ: MRNA) shares rose more than 400% last year, with investors betting on their experimental vaccine. At the same time, Pfizer (NYSE: PFE) fell by less than 1% last year – although the company led the vaccine race together with Moderna. In fact, Pfizer’s vaccine ended up becoming the first to obtain Emergency Use Authorization (USA). Moderna gained its USA about a week later.
Investing in any of these companies for their COVID-19 vaccines has yielded very different results. Now, let’s look at the next company that will possibly enter the market. Johnson & Johnsonin (NYSE: JNJ) the candidate is currently undergoing phase 3 testing and provisional data is expected later this month. If all is positive, Johnson & Johnson could be the third to cross the finish line of the vaccine race. Should investors think about buying shares in the pharmaceutical giant for that reason? Let’s look more closely.
Image source: Getty Images.
A single dose vaccine
Johnson & Johnson is studying its vaccine candidate in two phase 3 trials now. The first trial, called “Ensemble”, examines the use of a dose to prevent COVID-19. The second, “Set 2”, explores the use of the candidate vaccine in two doses.
Here, I will focus on the “Ensemble” test – this is what is expected to generate data in the coming weeks. It is also what could support a US order as early as next month. And finally, what makes this study something to talk about is the dosage regimen. Moderna and Pfizer vaccines require two doses. Other rivals close to the market, such as AstraZeneca (NASDAQ: AZN) and Novavax (NASDAQ: NVAX) also developed candidates for two doses.
If the Johnson & Johnson experimental vaccine proves to be safe and effective, the dose regimen can give you a significant advantage. Of course, patients will like the idea of a jab instead of two. But the most important thing is that this regime makes it easier to vaccinate more people. For example, Moderna intends to produce one billion doses of the vaccine this year – but that will only cover 500 million people. Johnson & Johnson’s promise of one billion doses a year will be enough to immunize one billion people.
Johnson & Johnson also has another advantage over Pfizer. The candidate vaccine can be stored at refrigerator temperature for at least three months. The Pfizer vaccine requires ultra-low temperatures for transportation and storage, which poses a challenge to many potential customers.
So far, the first data has been positive. In phase 1, the vaccine produced neutralizing antibodies in 90% of trial participants, regardless of age, from day 29 onwards. These antibodies were at the same levels as those of recovered coronavirus patients. Neutralizing antibodies are essential because their role is to block the infection.
Considering these points, the situation looks bright for Johnson & Johnson. Now, let’s examine the revenue potential. Like AstraZeneca, Johnson & Johnson promised to offer its non-profit vaccine during the pandemic. This means that it sells the vaccine at the product’s manufacturing price and the company will not make a profit on sales. Therefore, we cannot count on the vaccine increasing gains in the near future. But, post-pandemic, the company could raise the price and start to benefit from sales. The pandemic is considered closed when the virus is no longer prevalent globally. It is too early to say when that will be. But Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, said in December that it is possible that we can return to “normality” by the end of 2021, according to The Harvard Gazette. If that happens, Johnson & Johnson could start benefiting from vaccine sales in 2022.
So, what does this mean for investors?
Johnson & Johnson may well become a leader in the coronavirus vaccine market if the single-dose vaccine obtains regulatory authorization from the FDA and other health agencies worldwide. But I don’t expect big gains in stock prices from the news. As we saw with the companies Moderna and Pfizer, the shares of biotechnology companies in the clinical stage skyrocketed, while those of pharmaceutical rivals did not. That’s because smaller players will depend on the vaccine’s revenue (and will make an immediate profit). Larger companies, with their wide range of marketed products, will not do so. And the size of Johnson & Johnson – with a market capitalization of more than $ 421 billion – means that its shares rarely make big moves.
Still, over time, Johnson & Johnson’s stock profit, revenue and share prices have increased. (Lower prices for some of its products and lawsuits related to its talcum powder weighed on annual earnings and stock performance in 2018.)
JNJ Net Income (Annual) data by YCharts
And investors can count on Johnson & Johnson for dividends. The company is a Dividend King, which means it has increased its dividends annually, at least for the past 50 years. The annual dividend is now $ 4.04 per share, yielding 2.55%.
I would not buy Johnson & Johnson shares only for your coronavirus candidate vaccine. (And buying shares for just one product is not the best idea, anyway.) But I would buy shares in Johnson & Johnson for its overall product portfolio and its increasing dividend payout to investors.