While Pfizer and BioNTech's Comirnaty and Moderna's COVID-19 vaccine have dominated the discussion surrounding COVID-19 vaccines, Johnson & Johnson's (JNJ 0.67%) COVID-19 vaccine has also positioned itself for blockbuster status. For instance, Johnson & Johnson's COVID-19 vaccine is expected to bring in $2.5 billion for the pharma stock this year alone.
But with COVID-19 vaccines being the hype of the vaccine industry, investors may have missed the recent news that Johnson & Johnson advanced its respiratory syncytial virus (RSV) vaccine candidate into phase 3 clinical trials. Let's discuss the clinical results of Johnson & Johnson's RSV vaccine candidate to date, as well as its sales potential to understand why this could be Johnson & Johnson's next blockbuster vaccine.
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A potential breakthrough vaccine
RSV is a common and highly contagious respiratory virus that affects millions of Americans each year. As is the case with many respiratory viruses, RSV hits older adults, young children, and those with underlying health conditions the hardest. The Centers for Disease Control and Prevention (CDC) estimates that 177,000 adults 65 years of age and up are hospitalized due to RSV and that approximately 14,000 succumb to the virus each year. For a recurring virus that has this significant of an impact on the U.S. healthcare system each year, it may be surprising to learn that as of this year, there are no RSV vaccines that have been approved by the U.S. Food and Drug Administration (FDA).
Weeks after Pfizer's RSV vaccine candidate, known as RSVpreF, entered into phase 3 clinical trials, Johnson & Johnson announced that its RSV vaccine candidate also began phase 3 clinical trials at the end of last month. As one would imagine, Johnson & Johnson's announcement that it was advancing its RSV vaccine candidate to phase 3 clinical trials was based on encouraging phase 2b clinical results.
Johnson & Johnson enrolled nearly 6,000 adult participants aged 65 and older in its phase 2b clinical trials across 40 sites in the U.S. to receive a single dose of its RSV vaccine candidate. The phase 2b clinical trial results found that Johnson & Johnson's RSV vaccine candidate demonstrated an 80% efficacy against RSV. The company also indicated that the vaccine was well-tolerated among the participants of the clinical trial.
Bonafide blockbuster potential
Johnson & Johnson's phase 2b clinical trial results suggest that its RSV vaccine candidate could help quite a bit in reducing the burden of RSV on the U.S. healthcare system. But what level of sales can be expected if the RSV vaccine is eventually approved?
Well, the company will first have to follow 23,000 adult participants aged 60 and up this RSV season and next RSV season into the beginning of 2023. If Johnson & Johnson can come close to replicating its phase 2b results in its ongoing phase 3 clinical trials, the company could have a legitimate blockbuster on its hands.
That's because Geoffrey Porges, from an investment bank that concentrates on healthcare known as SVB Leerink, forecasts that the RSV vaccine market will be worth $10 billion annually by 2030. Based on the fact that Pfizer, GlaxoSmithKline, and Sanofi each have viable RSV vaccine candidates, Porges justifiably expects that the RSV vaccine market will be competitive. Even so, I believe that Porges' expectation of Johnson & Johnson attaining 16% of the RSV vaccine market by 2030 is realistic. This implies $1.7 billion in annual peak sales potential for Johnson & Johnson's RSV vaccine candidate by the start of the next decade.
A fairly priced Dividend King
The fact that Johnson & Johnson could have yet another blockbuster vaccine on the market by the end of 2023 is a testament to the robust culture of innovation at the company.
Johnson & Johnson has dedicated $6.6 billion to research and development through the first half of this year to discover, develop, and commercialize its next generation of consumer healthcare, pharmaceutical, medical device, and vaccine products. This represents over 14% of Johnson & Johnson's $45.6 billion in first-half revenue, which is why analysts are expecting 9% annual earnings per share (EPS) growth from the stock over the next five years.
The company has raised its dividend for 59 consecutive years, which makes it one of just 30 other stocks that have raised their dividends for at least 50 years straight, called Dividend Kings. And at less than 17 times this year's EPS forecast, Johnson & Johnson is a reasonably priced Dividend King with a dividend yield that is double the S&P 500's 1.3% at 2.7%.
