J&J shareholders’ vaccine obsession is pointless

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.

It is understandable that people are concerned about the development of a vaccine for Covid. But investors shouldn’t be so obsessed. See Johnson & Johnson, which raised revenue estimates for 2020 on Tuesday, a day after stopping a trial after an unexplained illness. That caused it to fall 3% in the stock market, a relatively large move for a generally stable stock. Although vaccines offer the best hope for life to return to normal, it is a relatively minor issue for J&J.

Pauses are part of the course in drug development, as the unexpected tends to show up, especially in large trials. The Covid study is double-blind, so it’s not even clear whether the disease occurred in a recipient of the vaccine or the placebo. But clinical trials are never safe, and vaccines must have a high level of safety. In addition, there are more than 40 different antiviruses in testing, and another 150 in development. And some firms, including J&J, have pledged to price their vaccines affordably and on a non-profit basis during the pandemic.

But the multitude of existing J&J products are making money. Third-quarter revenue was up 1.7% from 2019. Prescription drug sales were up nearly 5%, driven by an increase in oncology and autoimmune diseases. The rest are doing fine too, partly thanks to the pandemic, as patients take Tylenol for headaches and Pepcid for heartburn, and use Band-Aid plasters for scratches. And medical devices, hit hard earlier this year by the postponement of elective surgeries, are on the mend.

All of this explains why J&J increased its estimated 2020 revenue by about a billion, and now thinks that sales will roughly match 2019’s. It is much better than expected at the beginning of the year, and more important than a potential vaccine that may never give any benefit.