The biggest healthcare company in the world has some really big news on the way. Johnson & Johnson (NYSE:JNJ) should announce results from a late-stage study of its COVID-19 vaccine candidate, JNJ-78436735, any day now.
What makes J&J's results so highly anticipated is that its vaccine requires only a single dose instead of two doses as coronavirus vaccines already on the market require. This could give J&J a significant competitive advantage over its rivals.
With a potentially momentous announcement imminent, should you buy Johnson & Johnson stock before the big news hits? The answer is a little complicated.
Playing devil's advocate
Let's first make the case against buying shares of J&J. Probably the most compelling reason not to plunge in now is that there's a real possibility that the results for JNJ-78436735 might not be as good as hoped.
J&J's COVID-19 vaccine candidate could prove to be both safe and effective in late-stage testing, yet still fail to impress investors. Pfizer and Moderna have set the efficacy bar very high. If the single-dose regimen of JNJ-78436735 doesn't at least deliver efficacy of 80% or higher, I suspect the vaccine could be seen as a disappointment.
Keep in mind, also, that Johnson & Johnson has committed to selling JNJ-78436735 at cost during the pandemic. Even if the vaccine passes its late-stage testing with flying colors, it's going to be a while before J&J's bottom line receives a boost.
J&J's sheer size also works against it. Successful late-stage results for a COVID-19 vaccine would provide a major catalyst for smaller biotech stocks. However, Johnson & Johnson generates more than $80 billion in annual revenue already. A new blockbuster product would be nice for the healthcare giant, but isn't likely to move the needle enough to cause its shares to skyrocket.
The other side of the story
Sure, the late-stage results for JNJ-78436735 could be disappointing. However, there are reasons to expect good news. For example, J&J reported results from its phase 1/2a study that showed neutralizing antibodies against SARS-CoV-2 were produced in more than 90% of participants 29 days after receiving a single dose of the vaccine. A full 100% of participants between the ages of 18 and 55 had neutralizing antibodies at day 57. This bodes well for the prospects that JNJ-78436735 could achieve a high efficacy.
I wouldn't be overly concerned about J&J's decision to not make a profit from its COVID-19 vaccine during the pandemic, either. The company should have plenty of opportunities to generate significant profits over the long run from JNJ-78436735, especially if COVID-19 requires annual booster shots.
But what about the argument that even positive results for JNJ-78436735 won't be enough to provide a solid catalyst for J&J's shares? My response is that it depends on the data. If J&J's vaccine has a high efficacy with a single dose, I wouldn't underestimate how excited investors could be on the news.
A nuanced answer
So should you buy Johnson & Johnson stock before its big COVID vaccine news? I think the best answer to the question is a nuanced one.
If you're looking for aggressive growth, J&J probably isn't going to be a great pick for you even if JNJ-7843673 is a rousing success story. However, if you're a more conservative investor, the stock could be quite attractive regardless of how good the late-stage results for J&J's COVID-19 vaccine are.
I wrote earlier this month that if I could only buy one coronavirus vaccine stock, it would be Johnson & Johnson. My reasoning actually had little to do with the company's vaccine. J&J provides a highly diversified way to invest in healthcare. It's a Dividend King with a sterling track record of dividend increases.
If you're a long-term investor looking for income along with more modest growth, you can buy J&J before its results for JNJ-78436735 or after they're announced. With a solid stock like Johnson & Johnson, the timing of when you buy simply doesn't matter very much.