Is Johnson & Johnson an Underdog in the Coronavirus Vaccine Race?

The past month has been critical in the quest for a COVID-19 vaccine. Pfizer and its partner BioNTech earned emergency use authorization (EUA) Dec. 11 from the U.S. Food and Drug Administration for their candidate, BNT162b2. Moderna followed soon after with an EUA for its vaccine, mRNA-1273, on Dec. 18. At this writing, thousands of healthcare workers are already receiving doses of these vaccines.

That said, many other companies in the COVID-19 vaccine race have yet to receive regulatory approval for their candidates. One of them is Johnson & Johnson (NYSE:JNJ), the single largest healthcare company in the world by market cap. Johnson & Johnson is probably not used to being considered an underdog. But does that title fit the drugmaker in this race? Let’s dig into the company’s coronavirus-related efforts and find out.

Where Johnson & Johnson’s COVID-19 efforts stand

Johnson & Johnson’s candidate is called Ad26.COV2.S, and it’s an adenoviral vector vaccine. It works by introducing a gene from the SARS-CoV-2 virus, which causes COVID-19, into the recipient’s cells using another virus (an adenovirus), thereby instructing those cells to make the SARS-CoV-2 virus protein.

This triggers an immune response in the body that will protect vaccinated people from the actual SARS-CoV-2 virus if they come into contact with it. In preclinical studies, Ad26.COV2.S stimulated a strong immune response and provided protection in the lungs against the virus in nonhuman primates.

This candidate also delivered promising results in a phase 1/2a clinical trial; Johnson & Johnson first reported its interim data in late September. According to the drugmaker, Ad26.COV2.S was generally safe and well-tolerated during the trial, and was able to induce neutralizing antibodies in 98% of the study’s participants. Antibodies are proteins that defend healthy cells from pathogens.

Johnson & Johnson is currently running a phase 3 clinical trial with 45,000 participants to further evaluate the safety and efficacy of Ad26.COV2.S. The company said it expects results from this study by the end of January. The hope is that it will earn regulatory approval soon thereafter, provided it is safe and effective.

Johnson & Johnson’s candidate does have a major advantage over some of its competitors: Ad26.COV2.S is a single-dose vaccine. Both Moderna’s and Pfizer’s products require two doses several weeks apart. This factor should help Johnson & Johnson’s vaccine capture a decent share of this huge market, again provided its efficacy is comparable to that of the other vaccines that have already been approved.

More than just a coronavirus vaccine play

Johnson & Johnson could certainly go on to make a dent in the coronavirus vaccine market, but don’t invest in this healthcare company solely — or even primarily — for that reason. There are many more arguments for why this pharma stock deserves a place in your portfolio. For instance, consider Johnson & Johnson’s rich lineup of medications. The company currently boasts more than half a dozen blockbuster drugs.

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These include plaque psoriasis drug Stelara, whose sales in the first nine months of 2020 increased by 17.2% to $5.5 billion. Other notable products include psoriatic arthritis medicine Tremfya, which recorded $965 million in revenue during the first three quarters of 2020, a 30.2% increase over the year-ago period. Last but not least, cancer drugs Darzalex and Imbruvica are key growth drivers for Johnson & Johnson at the moment.

During the nine-month period ending Sept. 30, sales of Darzalex came in at $2.9 billion, a year-over-year increase of 35.5%. Meanwhile, Imbruvica’s revenue was $3 billion during the same period, 18.7% higher than the comparable period of 2019.

Doctor using a smartphone while standing in a pharmacy aisle

Image source: Getty Images.

Johnson & Johnson also has a rich pipeline, with more than two dozen ongoing phase 3 clinical trials. The path from phase 3 clinical trial to approval for a drug isn’t a sure bet, but some studies estimate the probability of success to be roughly 59%, so Johnson & Johnson’s current pipeline will likely yield at least a dozen new drugs (or new indications for existing drugs). That’s not to mention the company’s medical devices segment and its consumer healthcare segment, which sells over-the-counter healthcare products.

These two businesses help diversify Johnson & Johnson’s revenue base. Johnson & Johnson is also a Dividend King, having raised its dividend for more than 50 consecutive years. The company currently offers a yield of 2.49% — compared to a 1.55% yield for the S&P 500 — and a reasonable cash payout ratio of 56.4%. This makes Johnson & Johnson an attractive option for income-seeking investors.

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Worth serious consideration

Johnson & Johnson is not exactly an underdog in the coronavirus vaccine race. The company was one of the first selected to take part in Operation Warp Speed, an initiative undertaken by the U.S. government to speed up the development of vaccines and therapies for COVID-19.

Remember that Johnson & Johnson will likely release data soon from its ongoing phase 3 clinical trial for Ad26.COV2.S. And since that vaccine candidate requires just one dose to work, its convenience could make big waves in the market if it proves safe and effective.

In short, Johnson & Johnson is still a strong contender for investors seeking exposure to companies working on coronavirus vaccines. Also, the pharma giant boasts a rich lineup, a robust pipeline, and a diversified business, and offers an attractive dividend yield. All those factors make Johnson & Johnson a stock worth serious consideration.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


View more information: https://www.fool.com/investing/2021/01/11/is-johnson-johnson-an-underdog-in-the-coronavirus/

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