On Friday, Johnson & Johnson (NYSE: JNJ)
released early results from the Phase 1/2 a clinical trial for its COVID-19 vaccine. One dose appeared to produce a strong immune response in 99% of the participants. There were some mild side effects, such as fever, headache, and fatigue, but they resolved after a couple of days.
JNJ’s vaccine, called Ad26.COV2. S, is currently the only Phase 3 COVID-19 vaccine trial in the U.S. that is testing a single-dose of the vaccine.
Is JNJ Going to Win the Race for a COVID-19 Vaccine?
But either way, the company stacks up well against competitors. Moderna (NASDAQ: MRNA), for example, is ahead of JNJ in the race for a vaccine. But this may be a case of the tortoise and the hare if you dig a little deeper:
JNJ’s Ad26.COV2. S vaccine uses a proven technology that has been used for JNJ’s Ebola, Zika, HIV and RSV vaccines to vaccinate more than 180,000 people. Moderna’s mRNA technology is promising but unproven.
Johnson & Johnson was founded in 1886 and the company is a proven commodity with a long track record. On the other hand, it’s impossible to know if Moderna has the operational chops to manufacture and distribute over a billion doses of a COVID-19 vaccine – assuming it develops the vaccine first.
Of course, Moderna isn’t the only competitor for a COVID-19 vaccine. AstraZeneca Plc (NYSE: AZN) Pfizer Inc (NYSE: PFE) are just two of several others – and they are two that have much longer track records than Moderna.
But the point is, don’t give up on JNJ’s vaccine. It could be first to market. And even if it isn’t first, it still has the potential to take market share. This isn’t a winner-take-all proposition, after all.
And even if JNJ doesn’t make much from its COVID-19 vaccine, this is still an excellent company to invest in.
Tough Q2, But Encouraging Signs
JNJ’s Q2 numbers were down substantially yoy, but beat estimates. Revenue dipped 10.8% and net income fell 35.3%. Here are a few of the highlights:
- Consumer health segment sales fell 7% yoy.
JNJ’s revenue in this segment missed expectations and the company attributed it to “consumers stocking products during the first quarter and lower consumption due to government lockdowns during the second quarter.” There was clearly a bit of a hangover after the pantry-loading craze that occurred in the early stages of the pandemic. Look for consumer health sales to even out in Q3.
- Worldwide medical device sales declined 32.7% to $4.3 billion.
This fall was caused by people putting off elective procedures due to the coronavirus. The good news is that Johnson & Johnson noticed month-by-month improvement in this segment over the course of Q2. And that makes sense as people are adjusting to the new-normal and will only put off elective procedures for so long.
- Over-the-counter (OTC) medicines & skin, health and beauty franchise show that a lot of this is temporary.
In Q2, sales of OTC medicines grew by 30% in the U.S., with two-thirds of the growth attributed to the pandemic. JNJ noted strong demand for Tylenol.
The skin, health and beauty franchise sales dipped 14.3% yoy. People are going out less, which leads to less spending on skin care.
Outlook is Mostly the Same for JNJ
JNJ is trading right around pre-pandemic levels for a reason: the long-term outlook for JNJ’s core businesses remains very similar to before.
Another thing in the “nothing has changed” category is the dividend. JNJ has raised its dividend for each of the past 57 years. And those increases have been sizeable of late, with JNJ increasing its dividend by an annual rate of 6% over the past 10 years. Its 2.69% dividend yield is even more attractive compared to what you’ll find elsewhere.
What has changed is the COVID-19 vaccine potential.
And what you should do is take this as an opportunity to invest in an excellent company. A company that can offer a solid ROI if the vaccine doesn’t come to fruition – and a very nice ROI if it does.
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The Next 5 Retailers on the Edge of Bankruptcy
Through no fault of theirs, the novel coronavirus has put some retailers on the edge of bankruptcy. And as you’ve seen, many have fallen over that edge including iconic names like Nieman Marcus, J.C. Penney and J.Crew.
In fact, according to the American Bankruptcy Institute, there were 560 commercial Chapter 11 filings in April. That was a 26% increase over last year. And executive director, Amy Quakenboss, suggests that there are more to come.
“As financial challenges continue to escalate amid this crisis,” observes Quakenboss, “bankruptcy is sure to offer a financial safe harbor from the economic storm.”
With no revenue walking through the door, many retailers are seeing a semblance of revenue from e-commerce sales. But for some retailers, the shutdown is more impactful because they didn’t have a strong e-commerce structure. That means that they rely more than others on brick-and-mortar sales.
The real question now is will there really be the pent-up demand that some analysts still swear is just waiting to be unleashed. It may indeed exist. Time will tell. But time is not a commodity many of these retailers have. And we’ve identified five retailers for which the clock is not in their favor.
View the "The Next 5 Retailers on the Edge of Bankruptcy".