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Is J&J's COVID-19 Vaccine Setback a Boon for Other Players?

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Shares of coronavirus vaccine makers including Moderna MRNA and BioNTech BNTX as well as other companies like Novavax NVAX whose COVID-19 vaccine is in late-stage development rose as the U.S. Centers for Disease Control and Prevention (CDC) and the FDA jointly recommended pausing of the use of Johnson & Johnson's (JNJ - Free Report) COVID-19 vaccine.

The decision to pause J&J’s vaccine comes after the federal health officials noticed cases of ultra-rare blood clots following vaccination. Reportedly, the cases of blood clots seem similar to cases found in individuals vaccinated with AstraZeneca’s COVID-19 vaccine, Vaxzevria. Please note that Vaxzevria is yet to receive emergency approval in the United States but is already approved (temporary/conditional) for use in Europe, the United Kingdom and some other countries.

Health officials in the United States are now trying to figure out reasons for blood clots after vaccination and has recommended pausing administration of J&J’s vaccine until review of these blood clot cases are completed. A meeting is expected to be held today by the CDC’s Advisory Committee on Immunization Practices to discuss J&J’s case. J&J’s vaccine is also under review for blood clots in Europe.

Please note that J&J received emergency/conditional use approval in the United States and Europe in February and March, respectively. However, the vaccine has not yet been rolled out in European countries.

Advantages for Other Vaccines

Stocks of J&J’s competitors gained following its setback due to an anticipated decrease in competitive pressure in the field of coronavirus vaccines that has attracted several players. Stocks of vaccine developers that rose on Wednesday include Moderna, Pfizer, BioNTech, Novavax, Inoviva and Vir Biotechnology that were up 7.4%, 0.5%, 6.7%, 10.8%, 6% and 4.1%, respectively.

We note that the temporary suspension of J&J’s vaccine boosts the prospect of other biotech players involved in development or commercialization of COVID-19 vaccines. Although other biotech companies have supply agreements related to their respective vaccines already in place, any continuation of the suspension for a longer term may see additional supply agreements for these companies. Additional agreements mean more revenues for J&J’s competitors. We note that several countries have partially or completely restricted use of AstraZeneca’s Vaxzevria following similar blood clot events. Moreover, any setback in the United States for J&J’s vaccine may have a global impact as other countries may follow suit.

Currently, there are three available vaccines — Pfizer/BioNTech’s BNT162b, Moderna’s mRNA-1273 and Vaxzevria — in different countries in the world. Novavax is also developing its vaccine candidate in late-stage studies and may win an emergency use approval in a few months. Currently, BNT162b and mRNA-1273 are primarily being supplied in the United States. Supply to other countries have started or will begin later this year.  Demand for these two vaccines is also increasing in other countries and additional supply agreements may follow.

However, it should be noted that cases of blood clots after vaccination with J&J’s vaccine are ultra-rare and U.S. health officials may allow vaccinations to resume, keeping benefits from the vaccine in mind. The risk-benefit ratio for both J&J’s vaccine and Vaxzevria seems favorable. Outcomes of today’s meeting on J&J’s vaccine will provide more clarityon the scenario. While negative news will be good for competitors, a positive development may hurt theirstocks.

While Moderna carries a Zacks Rank #2 (Buy), the other leading coronavirus vaccine makers — AstraZeneca, J&J, Pfizer and BioNTech — carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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