J&J's COVID-19 Vaccine Shows Rare Events, Now Paused

The U.S. Centers for Disease Control and Prevention and the Food and Drug Administration have recommended a pause in using Johnson & Johnson's JNJ COVID-19 vaccine due to a handful of cases of severe blood clots among Americans receiving the vaccine. We don’t expect any changes to our $158 fair value estimate or wide moat rating for J&J, as the vaccine is being delivered on a not-for-profit basis.

Further, we expect the pause to be temporary because of the rarity of the adverse events—six cases among the more than 6.8 million doses administered in the U.S. However, this development could slightly disrupt the timing of herd immunity in the U.S. and have bigger effects on a return to normal in international markets relying more heavily on adenoviral vector vaccines from Johnson & Johnson and AstraZeneca.

The potential side effects related to the J&J vaccine appear very rare and are likely surmountable. But the severity is concerning. The U.S. government agencies plan to review the data and provide updated guidance, which we expect over the next couple of weeks. Also, the European rollout will probably be delayed until more clarity is established. The potential side effects with the J&J vaccine seem to match similar rare side effects of AstraZeneca’s COVID-19 vaccine, which is based on similar vector technology and could therefore lead to age restrictions on its administration.

Under the worst-case scenario where the J&J vaccine is removed from the market, we believe enough alternative vaccines are available to only slightly delay herd immunity in the U.S. from early June to late June. However, globally, the potential loss of the vaccine would be more pronounced, given the ease of one-dose delivery and easier storage conditions. We see the J&J vaccine holding the most importance in developing markets that lack strong healthcare distribution infrastructure.

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