Two very different drugmakers have recently joined the elite group of companies with coronavirus vaccines in late-stage testing. Johnson & Johnson (JNJ -0.56%) initiated a global phase 3 clinical study of JNJ-78436735 (also known as Ad26.COV2.S) on Sept. 23. Novavax (NVAX -6.50%) started a phase 3 test of its COVID-19 vaccine candidate in the U.K. the following day.
Novavax has been the bigger winner so far this year. But which of these coronavirus stocks is the better pick now?
The case for Johnson & Johnson
There's a real possibility that Johnson & Johnson could have the most successful coronavirus vaccine over the long run. Why? Unlike the other leading COVID-19 vaccine candidates, JNJ-78436735 requires only one dose. This could give J&J a big leg up if its late-stage testing goes well.
We won't have to wait too long to know if that will be the case. Johnson & Johnson expects to submit for Food and Drug Administration (FDA) emergency use authorization in early 2021. The company is already cranking up its manufacturing capacity to be able to produce 1 billion doses of its coronavirus vaccine annually.
But J&J's earnings won't be helped by JNJ-78436735, even if it sails through late-stage testing -- at least not initially. The company has committed to making its vaccine available at cost while the pandemic is ongoing. The pandemic will eventually end, though, setting the stage for J&J to profit from its coronavirus vaccine.
In the meantime, there are several other reasons to buy Johnson & Johnson stock. For one thing, it's a Dividend Aristocrat, with 58 consecutive years of dividend increases. J&J's dividend currently yields more than 2.7%.
J&J also stands out as one of the most resilient businesses around. It's the largest healthcare company in the world. J&J is one of the most diversified healthcare companies, as well, with multibillion-dollar business segments in consumer health, medical devices, and pharmaceuticals.
The company might not deliver jaw-dropping earnings growth over the next few years. However, J&J should generate solid single-digit-percentage earnings growth that could be boosted by key acquisitions.
The case for Novavax
Novavax also has a very good shot (no pun intended) at tremendous success with its coronavirus vaccine candidate. Cantor Fitzgerald and J.P. Morgan analysts even think that Novavax's NVX-CoV2373 could be the best of the leading COVID-19 vaccines in development.
The biotech has already lined up big supply deals with the U.S. and the U.K. It's also reached an agreement, in principle, with Canada to supply 76 million doses of its COVID-19 vaccine if late-stage testing goes well.
Novavax is behind Johnson & Johnson in moving forward with a late-stage study of its coronavirus vaccine candidate in the U.S. However, the company expects to begin a phase 3 trial in the U.S. this month.
In addition to NVX-CoV2373, Novavax's pipeline includes another promising late-stage candidate, NanoFlu. The nanoparticle-based influenza vaccine compared favorably against Sanofi's market-leading flu vaccine FluZone Quadrivalent in a phase 3 study that wrapped up earlier this year. Novavax aims to file for FDA accelerated approval of NanoFlu once it's completed a lot consistency clinical trial.
If approved, NanoFlu could generate peak annual sales of around $1.7 billion. NVX-CoV2373 is likely to rake in even higher sales if it wins regulatory approvals. The potential for these two vaccines makes Novavax's current market cap of less than $7 billion look quite attractive.
Better coronavirus stock?
Johnson & Johnson definitely is less risky than Novavax. However, the latter has much greater growth prospects than the former does -- assuming its pipeline candidates go on to obtain approval.
I think that these stark differences make J&J a better coronavirus stock for more conservative investors. Retirees, in particular, should like the big healthcare stock with its steady and growing dividends.
On the other hand, I think that Novavax is the better pick for aggressive investors. Although there's still a possibility that neither NVX-CoV2373 nor NanoFlu make it to market, my view is that the odds are in Novavax's favor with both vaccine candidates. I suspect that Novavax will continue to be a bigger winner than J&J over the next few years.