Should you buy Johnson & Johnson for their COVID vaccine?

So far, some stocks of coronavirus vaccine have offered investors huge gains in a short period of time. For example, Modern (NASDAQ: ARNM) The stock has climbed more than 400% last year as investors bet on its experimental vaccine. At a time, Pfizer (NYSE: PFE) fell less than 1% last year – even though the company led the vaccine race with Moderna. In fact, Pfizer’s vaccine ultimately became the first to obtain Emergency Use Authorization (EUA). Moderna got her EUA about a week later.

Investing in one of these companies for their COVID-19 vaccines has yielded very different results. Now let’s look to the future for the next company to possibly enter the market. Johnson & johnsonof (NYSE: JNJ) The candidate is currently in Phase 3 trials, and provisional data is expected later this month. If all is well, Johnson & Johnson could be the third to cross the finish line in the vaccine race. Should investors consider buying shares of the pharmaceutical giant for this reason? Let’s take a closer look.

A single dose vaccine

Johnson & Johnson is currently studying its vaccine candidate in two Phase 3 trials. The first trial, called ‘Ensemble’, examines the use of a dose to prevent COVID-19. The second, “Set 2”, explores the use of the two-dose vaccine candidate.

Here I will focus on the “Ensemble” trial – this is the one that is expected to generate data in the coming weeks. It is also the one who could support a request for EUA from next month. And finally, what makes this trial a topic of discussion is the dosing schedule. Moderna and Pfizer vaccines both require two doses. Other competitors close to the market such as AstraZeneca (NASDAQ: AZN) and Novavax (NASDAQ: NVAX) have also developed two-dose candidates.

If Johnson & Johnson’s experimental vaccine proves safe and effective, the single-dose regimen could give it a significant advantage. Of course, patients will like the idea of ​​one shot instead of two. Most importantly, this diet makes it easier to get more people vaccinated. For example, Moderna aims to produce a billion doses of vaccine this year – but that will only cover 500 million people. Johnson & Johnson’s promise of one billion doses per year will be enough to immunize a billion people.

Johnson & Johnson also has another advantage over Pfizer. Its vaccine candidate can be stored at refrigerator temperature for at least three months. Pfizer’s vaccine requires ultra-low temperatures for transportation and storage, which presents a challenge for many potential customers.

So far, the first data has been positive. During phase 1, the vaccine produced neutralizing antibodies in 90% of trial participants, regardless of age, on day 29. These antibodies were at the same levels as those in recovered coronavirus patients. Neutralizing antibodies are essential because their role is to block infection.

Considering these points, the situation looks bright for Johnson & Johnson. Now let’s look at the income potential. Like AstraZeneca, Johnson & Johnson is committed to donating its vaccine to a nonprofit during the pandemic. This means that he sells the vaccine at the price it costs to make the product and the company will not make any profit on the sales. So we cannot expect the vaccine to increase the benefits in the near future. But after the pandemic, the company could raise the price and start profiting from sales. The pandemic is considered over when the virus is no longer spread around the world. It is still too early to say when this will happen. But Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said in December that it was possible that we could return to “normalcy” 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 could very well become a leader in the coronavirus vaccine market if the single-dose vaccine obtains regulatory clearance from the FDA and other health agencies around the world. But I don’t expect big stock price gains on the news. As we’ve seen with players Moderna and Pfizer, shares of clinical-stage biotech companies have skyrocketed, unlike those of pharmaceutical competitors. This is because small players will depend on income from vaccines (and benefit immediately). Large companies, with their vast array of products marketed, will not do this. And the sheer size of Johnson & Johnson – with a market cap of over $ 421 billion – means its stocks rarely make huge moves.

Yet over time Johnson & Johnson’s profits, revenues and share price 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 that it has increased its dividend every year for at least 50 years. The annual dividend is now $ 4.04 per share, with a yield of 2.55%.

I would not buy shares of Johnson & Johnson only for its coronavirus vaccine candidate. (And buying a stock for just one product isn’t the best idea anyway.) But I would buy Johnson & Johnson stock for its overall product portfolio and growing dividend payouts to investors.