Best Coronavirus Stock: Johnson & Johnson vs. Pfizer
Pharmaceutical companies Pfizer (NYSE: PFE) and Johnson & johnson (NYSE: JNJ) are two of the biggest players in the race to vaccinate the world against COVID-19. Pfizer’s vaccine, produced in coordination with BioNTech, received Emergency Use Clearance (EUA) from the United States Food and Drug Administration (FDA) on December 11, giving it a head start over all other coronavirus vaccines in the United States. United States.
Normally, vaccines take years to develop, not months. Johnson & Johnson’s vaccine, which could be released as early as February, may ultimately be the preferred option, however, for practical reasons and due to the strength of the company’s manufacturing as the world’s largest pharmaceutical company with more than 130,000 employees. Let’s dig into what is the best coronavirus choice today.
Running is a marathon, not a sprint
Pfizer’s vaccine must be shipped at approximately 70 degrees Celsius negative, requiring special freezers, before it is thawed for use. It is then given in two doses about three weeks apart. It works by stimulating the bodies of recipients to produce advanced proteins that mimic those of the virus, using instructions provided via messenger ribonucleic acid (mRNA). These proteins cause their immune system to produce antibodies that will fight SARS-CoV-2, the virus that causes COVID-19.
Johnson & Johnson’s vaccine candidate is still in a Phase 3 trial, but it could receive its EUA from the FDA as early as February, according to the Department of Health and Human Services. J & J’s vaccine requires only one dose and it can be stored in a conventional refrigerator, which creates fewer logistical problems. Instead of RNA, it relies on deoxyribonucleic acid (DNA) to trick the recipient into fighting SARS-CoV-2; it does this by using a weakened version of a cold virus, adenovirus 26, to transport the genetic material of the spike protein found in SARS-CoV-2 into the body, which causes the immune system to produce antibodies that defend themselves against it.
Pfizer is obviously one step ahead. Yet according to USA today, only 6% of people in the United States have received an injection of the coronavirus vaccine, and only 1% have ever received two doses. Pfizer said it had produced more than 70 million doses by the end of December and, with BioNTech, pledged to produce 2 billion more for the United States by July.
Johnson & Johnson’s vaccine, which has easier cold storage requirements and better portability and only requires a single dose, could end up eclipsing its rivals. The company said this week that it was on track to produce 100 million doses of its vaccine by the end of June. Pfizer’s vaccine has been shown to be 95% effective in preventing coronavirus infection. In the intermediate results, The New England Journal of Medicine only reported that Johnson & Johnson’s vaccine was more than 90% effective.
Johnson & Johnson’s vaccine may have an advantage in being almost as effective but much more convenient and easier to distribute.
Look beyond the coronavirus side of things
If you buy any of these pharmaceutical stocks purely for a coronavirus bump, you’re looking at them the wrong way. Both stocks have great long-term potential.
Pfizer stock offers an annual dividend of $ 1.52 per share, one of better dividends among large pharmaceutical companies, with a current yield of 4.18%. The payout ratio of its cash dividend is 80.65, so there is concern that the dividend may be reduced, as it has increased by over 171% in the past 10 years, which means that the growth of earnings slowed relative to the company’s dividend growth. One of the reasons the return is so high is that Pfizer’s revenue has declined for two consecutive years and its stock has fallen more than 3.5% in the past year. In the third quarter, the company’s revenue was $ 12.1 billion, down 4% year-over-year. And in the first nine months of 2020, it was $ 35.9 billion, down 8% from the same period in 2019.
One thing that could be said for Pfizer is that it is selling for a lower price, with a price / earnings (P / E) ratio of around 23 versus 26 for Johnson & Johnson. However, when you look at the prospective P / E, which takes into account expected earnings, Johnson & Johnson is cheaper, at 11 to 18 for Pfizer. This indicates lower expected revenue growth for Johnson & Johnson.
Johnson & Johnson is a King of dividends, having increased its dividend for 58 consecutive years. Its annual dividend was $ 4.04 per share last year after increasing 6.3%, giving it a current yield of 2.36% and a safe cash dividend payout ratio of 56.39. . Johnson & Johnson shares have risen more than 13% in the past year. J&J just released its fourth quarter report, showing that the company had a strong quarter, with reported revenue of $ 22.5 billion, up 8.3% year-on-year. Its annual revenues, despite headwinds from the pandemic, increased for the fifth year in a row – although annual net income fell 2.7%, in part due to $ 5.1 billion in net litigation costs primarily related to opioid cases.
Of the two stocks, I would go for the safer Johnson & Johnson choice. We are still in the early stages of coronavirus vaccine sales, and Johnson & Johnson will have no problem catching up as their vaccine will be more adaptable and useful given current distribution capabilities. Beyond the coronavirus concerns, while Pfizer is primarily a pharmaceutical company, J&J is much more diverse; its pharmaceutical segment is leading the way, but its other two divisions – consumer health and medical devices – are big revenue drivers that, although slowed by the pandemic, will likely return once the pandemic has subsided. Johnson & Johnson’s diversification got it through the pandemic, and if its vaccine takes off (as many expect), the company could have a record year.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.