The world needs a COVID-19 vaccine, and the number of projects underway to develop one is astounding. Currently, 45 coronavirus vaccine candidates are in human trials, and 11 of those are have reached phase 3, when the vital questions of whether they work in the real world -- and if so, how well -- will be answered. Russia and China have already approved six vaccines for limited use, but none of those has completed testing in a large-scale phase 3 clinical trial.
The clearest way to evaluate companies producing vaccine candidates -- and the financial gains that will likely follow -- is to compare those candidates. How are they designed to work? Do they work? When will they be available? And how important is a successful vaccine to a given company's financial outlook?
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How they work
Several of the leading candidates use the adenovirus approach. A genetically modified virus like the common cold is used to transport a gene from SARS-CoV-2 into the body. Once there, it triggers cells to make the spike proteins that are a signature feature of the coronavirus. These should generate an immune response, and confer a degree of protection from the coronavirus.
One of the leading candidates of this type was developed by Johnson & Johnson (JNJ +0.32%), and another is from the University of Oxford working with AstraZeneca (AZN +0.00%). But if these two candidates work in similar ways, how can one gauge which is the better stock to buy for investors looking to profit from the possibility of a successful vaccine?
Do they work?
The AstraZeneca vaccine demonstrated its immunogenicity in phase 1 and 2 trials. It produced a fourfold increase in immune response in 95% of recipients one month after they were inoculated. T-cells -- white blood cells that "remember" an antigen and can lay dormant until needed to fight an infection -- were present two months after injection. The company's vaccine is being tested on 50,000 to 60,000 people around the world.
The Johnson & Johnson vaccine is being studied in two age cohorts, an 18-to-55 group and a 65-and-older group.This is notable because members of the latter group are most at risk of developing severe cases of COVID-19.
The biggest difference between Johnson & Johnson's vaccine candidate and most others is that it uses a one-dose rather than a two-dose regimen. This would significantly increase the number of people who could get inoculated initially. It also eliminates a risk that would be unavoidable with other vaccines -- that individuals who get one dose might skip the necessary booster dose. (Some clinical trial participants are being given second doses of Johnson & Johnson's vaccine for research purposes.)
Johnson & Johnson's vaccine produced strong immunogenicity, too, in both age groups during phase 1 and 2 trials. In fact, 99% of participants showed an immune response. Phase 3 trials began in early September and will enroll 60,000 volunteers across 200 sites.
When will they be ready?
Unfortunately, both companies' clinical trials are currently on hold in the U.S. The pause for Johnson & Johnson occurred this week, and not a lot is known yet about the circumstances. One of the participants in a clinical trial developed an unexplained illness. In such cases, trials are paused so doctors and an independent board can evaluate whether the patient's condition is in any way connected to the vaccine being tested.
Assuming its vaccine proves sufficiently safe and effective, Johnson & Johnson had expected to start selling it early in 2021, with management expecting to produce enough of it to vaccinate 1 billion people each year.
More is known about the circumstances that have paused the U.S. arm of AstraZeneca's clinical trial for more than a month. Two neurological events occurred among study participants in the U.K., generating concern that they were serious side effects of the vaccine. All of the trials for the candidate outside the U.S. have restarted, including in Brazil, Japan, and South Africa, as well as the United Kingdom. The U.S. trial could resume as early as this week, according to a federal official. It actually took a month for the U.S. Food and Drug Administration (FDA) to get the necessary data from the company, because of data formatting differences between its records and those kept by Europe's regulatory body. In September, the company said an approval for its vaccine was still possible this year if regulators moved fast. Clearly, they have not.
How important is it to the company?
Both Johnson & Johnson and AstraZeneca have agreed to sell their vaccines at no profit, but only during the pandemic. In April, the University of Oxford offered to donate the rights to its COVID-19 vaccine candidate to any drugmaker with the goal of making the vaccine free of charge or cheap. A few weeks later, the university reversed course, signing an exclusive deal with AstraZeneca for sole rights with no constraints on pricing. Still, some patents for that candidate are held by Vaccitech, a for-profit spinoff that is owned 50% by Oxford and 5.25% by two researchers with Oxford.
AstraZeneca has committed to providing 2 billion doses to governments and other agencies, including 400 million doses to the European Union. It has also signaled that its vaccine may only cost "a few dollars" a dose, which would still significantly impact its top line. The company had a little more than $24 billion in revenue in 2019.
Johnson & Johnson, on the other hand, has an incredibly diversified business of drugs, medical equipment, and consumer products that brought in $82 billion in revenue last year. The blue-chip company is widely regarded as one of the safest investments you can make. The U.S. Department of Health and Human Services has already inked a deal to buy 100 million doses of Johnson & Johnson's coronavirus vaccine for $1 billion, if it's approved, with an option to order 200 million more. Although that would be a significant amount of revenue, it would not greatly affect the company's overall performance.
Which to choose
With so many vaccine candidates being investigated, the landscape is confusing, to say the least. However, two of the largest, most stable pharmaceutical companies in the world offer investors opportunities to profit from a potential COVID-19 vaccine without everything riding on those programs' success.
Even if AstraZeneca and Johnson & Johnson do not turn out to be big winners in developing a coronavirus vaccine, an investment in either should be safe. That begs the question: Which one is a better coronavirus stock?
Johnson & Johnson shines in this comparison thanks to its manufacturing capacity, single-dose advantage, and lack of complicated financial arrangements. It's slated to produce hundreds of millions of doses, and whatever profits it generates from them won't be split with research partners -- they'll flow directly to its Janssen subsidiary. Although both vaccine trials are currently paused in the U.S., Johnson & Johnson is better positioned to reap a financial windfall from its potential coronavirus vaccine.
