J&J Pauses Coronavirus Vaccine Trial: ETFs That May Take a Hit

The world again had to face disappointment in the coronavirus vaccine development as Johnson & Johnson (JNJ) halted dosing in all clinical studies on its coronavirus vaccine candidate, JNJ-78436735. The company has also paused its large pivotal phase III study, ENSEMBLE, which began last month.

According to sources, an unexplained illness observed in a study participant is being considered to be the reason behind the pause. Notably, the ENSEMBLE independent Data Safety Monitoring Board and J&J’s own internal physicians are looking into the cause. Meanwhile, the company has said that the studies have been paused to allow vigilant assessment of the situation and the available data before the studies can resume.

However, this is the second time that coronavirus vaccine trials have been paused for the same reason. Last month, AstraZeneca/Oxford University paused the global studies on their coronavirus vaccine candidate as a patient in the U.K. suffered an unspecified illness.However, while studies have resumed in the U.K., Brazil, South Africa, India and Japan, the study in the United States remains on hold and AstraZeneca is working with the FDA over when the studies can be resumed.

The increasing uncertainty surrounding the introduction of a coronavirus vaccine is making investors more jittery. Going by the sources, Trump’s administration is believed to be building pressure on getting a vaccine approved before the elections in November. Meanwhile, the FDA published new guidelines for the requirements of the much-awaited coronavirus vaccine’s emergency authorization after the advice to the pharmaceutical companies was delayed by the White House review, as sources reported. Analysts believe that the new FDA mandates might delay the urgent introduction of a coronavirus vaccine by the U.S. presidential elections.

J&J’s COVID-19 Vaccine in Details

Notably, J&J was the fourth company to join the vaccine developers already in the Phase 3 clinical trials. The other companies to have already started the Phase 3 clinical trials are Pfizer (PFE) /BioNTech (BNTX), AstraZeneca (AZN)/Oxford University and Moderna (MRNA), all testing two shots of their respective candidates. Meanwhile, in comparison to rivals, J&J’s coronavirus vaccine candidate enjoys certain advantages. J&J’s coronavirus vaccine is developed using a technology with proven safety standards in vaccines for other diseases. Moreover, the vaccine could need just one shot instead of two and is also not required to be kept frozen, according to The New York Times report.

Going on, J&J’s phase III study (ENSEMBLE) is projected to enroll 60,000 adult participants and will compare a single vaccine dose of JNJ-78436735 (previously Ad26.COV2.S) to placebo. It aims to enroll participants in Argentina, Brazil, Chile, Colombia, Mexico, Peru, South Africa and the United States at across more than 200 sites. Results of the phase III study are expected by year end or early next year.

Leading Vaccine Developers’ Progress So Far

Moderna (MRNA), which is developing this vaccine in collaboration with the National Institute of Allergy and Infectious Diseases, has started the Phase 3 clinical trial, encompassing 30,000 healthy participants at around 100 research sites in the United States. The company enrolled 25,296 participants out of 30,000 in the study as of Sep 16, 2020. More than 10,000 participants have been administered the second dose of the coronavirus vaccine candidate. 

Pfizer (PFE) in collaboration with German biotech firm BioNTech has also started its late-stage study on a coronavirus vaccine. The trial comprises around 30,000 participants and will be conducted at nearly 120 sites globally. Meanwhile, Pfizer recently applied to the FDA to expand the late-stage trial to include up to 44,000 participants from 30,000 stated previously.

ETFs That Might Suffer

The news has put the spotlight on a number of ETFs that could be impacted the most due to their high exposure to the J&J. Let’s take a look at these funds:

iShares U.S. Pharmaceuticals ETF IHE

This ETF provides exposure to 47 companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index. Of these, Johnson and Johnson takes the top spot, accounting for a 21.6% share. The product has charges 42 bps in fees (read: Pharma ETFs to Benefit from Lilly's Coronavirus Antibody Progress).

The Health Care Select Sector SPDR Fund XLV

The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. Expense ratio comes in at 0.13%. In total, the fund holds 63 securities in its basket, with JNJ taking the top spot, accounting for 9.8% of the assets (read: 4 Sector ETFs Grab Attention on Solid Job Creation).

iShares U.S. Healthcare ETF IYH

This fund offers exposure to 122 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 8.8% of the total assets. The product charges 43 bps in annual fees (read: 4 Top ETFs, Stocks From Attractive Sectors Pre Q3 Earnings).

iShares Evolved U.S. Innovative Healthcare ETF IEIH

This actively-managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 254 stocks in its basket, JNJ is the top firm with an 8.7% allocation. The product charges 18 bps in annual fees (read: ETFs in Focus on Momenta Buyout Deal With JNJ).

Vanguard Health Care ETF VHT

This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 431 stocks in its basket. Of these, Johnson & Johnson occupies the top position with an 8.3% allocation. It charges 10 bps in annual fees.

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Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
Vanguard Health Care ETF (VHT): ETF Research Reports
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
iShares Evolved U.S. Innovative Healthcare ETF (IEIH): ETF Research Reports
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