Johnson & Johnson (JNJ) Earnings Call Transcript & Summary

Good morning, and welcome to Johnson & Johnson's Investor Webcast. [Operator Instructions] This call is being recorded. If anyone has any objections, you may disconnect at this time. [Operator Instructions] I would now like to turn the conference call over to Johnson & Johnson. You may begin.

Good morning. This is Chris DelOrefice, Vice President of Investor Relations for Johnson & Johnson. Welcome to this webcast as we are pleased to review our Phase III ENSEMBLE study results of our investigational single-dose COVID-19 vaccine candidate. Joining me on today's call is Mathai Mammen, Global Head of Janssen Research and Development. A few logistics before we get into the details. This review is being made available via webcast, accessible through the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. This webcast may contain forward-looking statements, including statements about our investigational single-dose COVID-19 vaccine candidate. The viewer is cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could differ materially from the expectations and projections of Johnson & Johnson. A list of risks, uncertainties and other factors can be found in Johnson & Johnson's filings with the SEC, including the annual report on Form 10-K for the fiscal year ended December 29, 2019, and our most recently filed quarterly report on Form 10-Q. Johnson & Johnson assumes no obligations to update any forward-looking statements as a result of new information or future events or developments. Moving to the agenda. Mathai will provide an overview of the Phase III trial results that we communicated earlier this morning and will share his perspective on next steps to obtain regulatory authorizations. The remaining time will be available for you to ask clarifying questions about our top line Phase III results. We will do our best to address your questions, but there may be some limitations out of respect for the FDA's and other health authorities' protocols and what we can share prior to releasing the full data set in a peer-reviewed journal. We anticipate the webcast will last up to 45 minutes. I will now turn the call over to Mathai.

Thanks so much, Chris, and good morning, everyone. I am pleased to be with you here today. It's an exciting day for all of us at Johnson & Johnson. We made the decision only 1 year ago to rise to the occasion and commit the full strength of our resources to combat this global pandemic. So I'll start by sharing our aspiration to create and deliver a simple, safe and effective solution for the largest number of people in the world as responsibly as possible and maximizing our impact and bringing an end to this pandemic. That was our objective. Our goal was and remains to build immunity through vaccination to protect the population from COVID-19, in particular, illness that matter, severe illness, and most notably, hospitalization and certainly death, especially protecting those at highest risk. If one steps back and thinks about why people really care about COVID-19, it's all about the fear of getting really sick and getting sick enough potentially to seek medical attention and to the point where one might need to go to the hospital or even die. That's why people actually care about COVID-19. No one would, if it was more than a bad cold. So success against severe illness is, by far, the most important feature from a public health standpoint for any COVID-19 vaccine. To accomplish that, if you go back in time and earlier in 2020, we spent real time in the experimental phase of the vaccine, testing many versions and optimizing for a full robust breadth of the immune response. So there's a lot of talk of neutralizing antibodies. And yes, we optimize for neutralizing antibodies. But we also optimize for antibodies that had other functions, binding antibodies. And in particular and worth emphasizing, we optimized for T cells. And those T cells are what allow a separate mechanism for killing or clearing virus. And those T cells, memory T cells are particularly important for a durable immune response. So we chose a spike protein antigen that induced a significant and broad immune response. In testing this vaccine preclinically, we found that even a single shot of this optimized antigen protected animals from being infected. So we imagined a single-dose regimen with a fast onset of protection and ease of delivery, ease of transportation designed to reach and benefit a geographically and demographically really diverse population. So I'm proud to say that today, we're announcing that our Phase III data enables us to take the next step with regulators to successfully deliver on that aspiration. Our vaccine demonstrated a really strong outcome with an 85% protection against severe disease and complete protection against COVID-related hospitalization and death after day 28 post-vaccination. So complete protection, meaning 100% of people that were hospitalized or unfortunately died, were on placebo, 0 people that received vaccine ended up in the hospital or dying in our study. So this effect was excitingly consistent across race, ethnicity, gender and age, including adults over 60 years of old to that of [ 8 ] years of age. That's a -- it's important to emphasize that, that vulnerable population was equally well protected. We also saw consistency in that 85% across all variants and region studied. So particular note today and yesterday, after we saw the variant from South Africa enter the United States, it's important to focus on those data. We saw 85-plus percent protection of severe disease in South Africa as well, where 90% of the cases were due to this variant B.11.35 (sic) [ B.1.351 ], also known as 501Y.V2, which is famous down in the news because of concerns that it might circumvent vaccines. So this single result is amazing, and I'm really thrilled about it. It's important to provide context that this study was also conducted in nearly 45,000 people in 8 countries, 3 continents during the height of the pandemic. And this pandemic has fundamentally evolved. This pandemic is very different from 2 months ago when other vaccine developers were running their trials and accruing cases. It's a much more complex milieu at the moment. Everywhere you look, there are variants and running a study at this time put significant pressure on the vaccine. So our data are not comparable apples-to-apples versus data generated earlier. The data generated in this environment gives us -- gives me great confidence in the protective effect of our vaccine in the extremely difficult circumstances currently in the world. The vaccine's also 66% protective when looking at milder endpoints, namely our endpoint of moderate and severe disease at both 14 and 28 days post-vaccination. And we note here, importantly, because of our immune response and the way it is enhanced with time, that our efficacy, too, is growing with time. As we defined a moderate disease, the disease was rather mild. The endpoint was basically the same as all symptomatic disease, anyone that basically reported a symptom. The level of protection against symptomatic infection combined was 72% in the United States, 66% in Latin America and 57% in South Africa, where the new variant was most prevalent and dissolved 28 days post-vaccination. So we do see more heterogeneity in the protection against milder forms of COVID. But again, to emphasize, we see very consistent 85% protection irrespective of geography, irrespective of the variant when it comes to protecting against more significant and concerning disease. So let me actually just step back and take a moment to explain the difference between severe and moderate disease, as I think it's important in detail as we all, you all review our study results. These are protocol definitions agreed with FDA that at times diverges a little bit about how these words are used in English language. So moderate disease in our study was 2 -- or 2 or more signs or symptoms. And these could be quite mild. For example, one could have a cough and a mild fever and be a moderate case. There were a few -- there were very few mild cases formerly in our study as the moderate categories basically encompass those. Severe disease included patients that had signs of systemic disease and included patients that [ self ] quite sick, but included patients, these -- many of these patients, most of them were not sick enough to seek medical interventions. So our vaccine provides confidence and protected against not only severe COVID-19, but against moderate disease as well, and its benefits emerge quickly and importantly, they continue to increase. So importantly, our safety profile was consistent with other vaccine candidates that use our AdVac vaccine technology among -- more than 200,000 people to date. Overall fever rates were above 9% and no anaphylaxis was observed. Our formulation of this vaccine is pretty plain vanilla. It's the human [ at 26 ] virus, inside of which is the spike protein. There's nothing else in there of note. A one-dose vaccine is considered by the World Health Organization, WHO, to be the very best option in the pandemic, and it's more than twice as good as a 2-dose regimen given the complexity of logistics. So a one-dose vaccine will improve access. It will improve distribution and compliance. Importantly, our vaccine candidate is also compatible with standard vaccine distribution channels, which would undoubtedly make it easier to get to the -- into the arms of people who need it, following, of course, regulatory authorization or approvals. So we look forward to sharing the data with regulators as a very next step. We intend to file for U.S. Emergency Use Authorization in early February. The team here is working really hard to get it in, in approximately a week. And we would expect to have product available to ship immediately following authorization. Our anticipated manufacturing time line will enable us to meet our 2021 supply commitments, including those signed with governments and global organizations, which includes, importantly, being on track to deliver 100 million doses to the United States by the end of June. So before I close, I want to amplify some of the most important details is obviously a complex data set. And I want to emphasize, I think what matters the most. First of all, we have 85% protection in preventing severe disease. We have 85% protection against severe disease across all the variants that we saw, which included the variant that was observed in South Africa. This is the [ B.11.35 ] strain. And now that it's in the United States, it's very important to focus on that particular variant. So the 85% is very meaningful there. And we can't compare to other vaccines that were studied at a time where many of these variants were not around to any significant level. We have 100% protection against COVID-related hospitalization and death, and this importantly is irrespective of geography irrespective of variant. We have rising immunity and rising efficacy, and some of that we'll report on as time goes on. And this is consistent, of course, with the Phase I data that we published in the New England Journal of Medicine, where we saw rising T cell and antibody responses with time. The onset of protection was also really impressive. COVID-19, we had onset as early as 14 days for modern and severe disease and onset as early as 7 days for severe disease. And this, again, increased with time. There was equal efficacy across all ages studied, including older adults older than 60 and 65 as well as all the other subgroups of race, ethnicity, comorbidities, et cetera, really well tolerated by all participants, no anaphylaxis or any AEs of concern. And we overall believe that this vaccine is good for everyone. It's good in -- it prevents people from getting COVID. It prevents people from getting severe COVID. It prevents all people from getting hospitalized or dying because of COVID. And even those that have breakthrough infections on our vaccine, we actually note that they have a milder, a much milder course of the disease. So we believe it's good for everyone as a single shot, convenient to store and transport, we believe this will be a workhorse vaccine for the pandemic. So we're super excited at the impact, we believe, this vaccine can have. I thank you for listening, and I look forward to answering your questions.

Terrific. Thank you, Mathai. And just briefly, as a reminder, the full year 2021 financial guidance that we shared on our Q4 2020 earnings call earlier this week, it excludes the financial impact from the potential distribution of our COVID-19 vaccine candidate. Once we have more clarity to the status of obtaining regulatory authorization orders and other details, we will provide a financial update during our first quarter earnings call in April. We'll now move to the Q&A portion of the webcast. Operator, can you please provide instructions for those on the line wishing to ask Mathai a question.

[Operator Instructions] Our first question comes from the line of Terence Flynn with Goldman Sachs.

Congratulations. Just a two-part one. I was just wondering if you can provide the number of people that were hospitalized or died in the placebo arm of the trial? And then given the higher levels of neutralizing antibodies that you saw in Phase I/II with a second booster shot, do you expect that your efficacy here would improve in the second trial? I know, Mathai, you had said that you're already seeing signs of increasing efficacy in this study over the course of the trial. But as you add that -- think about that second booster, what do you think your efficacy would go up?

Yes, two great questions. Thank you for both. On the specific numbers, we report that we had over 450 cases here. We're going to wait on the exact breakdown of all those cases, including the deaths and hospitalizations until we get our Emergency Use Authorization in. We don't want to get ahead of FDA or other regulators before very specific numbers. But we did have quite a large number of hospitalizations and deaths. And all of those occurred on placebo, none occurred on vaccine. So the 2 doses -- so we do have -- we kicked off at the same time or slightly stagger started a 1-dose and a 2-dose regimen. I felt very strongly that to be a good scientific company, we needed to study both regimens. We're about halfway through a 30,000-person, 2-dose study right now. And we will see what the results are. I'm particularly happy that we have the 85% protection against severe disease and complete protection against hospitalizations and death. So -- and including on this particularly problematic variant, will the 2-dose offer some advantage on a few points higher on efficacy? Will it offer more durability? The jury is still out, and I think we need to look at that. And I'm glad we're doing the study that would need to be traded off with the nontrivial logistical burden of a second shot. So my personal feeling is right this moment that exactly what we have is best suited for a pandemic.

Great. Thank you. Thanks, Terence, for the question.

Our next question comes from the line of Louise Chen with Cantor Fitzgerald.

Congratulations on the data. So I'm just curious, how do you plan to address mutations to the COVID virus in your vaccine strategy?

Yes. It's a really good question. So when we optimized this vaccine, we optimized for different components of the immune system and different variants will depend to different extents on those components of the immune system. So some may be more susceptible to neutralizing antibodies, some may be more susceptible to T cells, as an example. And so when we co-optimize we, in fact, anticipate that the virus does change, but the virus doesn't circumvent all those components of the immune system all at once. We do know that the Ad26 platform is what allows us to have a great T cell response. So my hypothesis at the moment is this is why we see such great activity against the South Africa variant [ B.11.35 ]. It's because that T cells are likely handling that virus, which seems to circumstant to some extent, to neutralizing antibodies. So in the future, we're rigorously monitoring right now all the variants that are emerging. And if there is one that pops and becomes one that we believe will circumvent all components of our immune system, what we would do is jump immediately to manufacture at scale and add it into the mix of the current vaccine to make a multivalent vaccine. We did anticipate -- before we're looking at our data right now, we did jump on the South Africa, [ B.11.35 ] variant, and we're manufacturing it. Whether that's the one or not to focus on is not clear to me. But we at J&J are ready to -- we're poised to proceed in whatever direction the world needs.

Great. Thanks, Louise. Appreciate the question.

Our next question comes from the line of David Lewis with Morgan Stanley.

I guess just maybe two quick ones for me. There's 85% protection against severe disease. Some of the vaccines showed no severe events that [ high ]. So do you know severe disease was largely in the variant population or more evenly dispersed? And then just a quick one on South Africa. I wonder if you could share with us any information on whether you have efficacy in HIV positive or negative patients? And what percent of the South African patients were infected prior to dosing?

Yes. These are really terrific insightful questions, David. Thank you for them. So the severe disease, the ratio of severe-to-moderate disease right now in our trial did not seem to vary from geography to geography. So I know that there's a lot out there on whether the new variants are more lethal or cause more severe disease. We don't see evidence of that, but that said, we're still gathering and putting together data, those sorts of analyses. So that's not something to take to the bank just yet. Sorry, your second question was...

It's that South Africa or any more detail on the status of the HIV positive.

Yes, HIV positive. So we did have -- we did allow HIV-positive individuals into our trial. And we see no difference at the moment between being HIV-positive and HIV negative. That data, too, needs to be analyzed in robustly. And we'll do that when we put together our Emergency Use Authorization. But the top line is no difference to that subgroup or actually, interestingly, any subgroup that we've been able to measure.

Great. Thank you, David. Appreciate the questions.

Our next question comes from the line of Larry Biegelsen with Wells Fargo.

Congratulations. Mathai, could you remind us of your production goals for 2021 and maybe 2022? And do you think you'll be able to sell all the doses you can make this year and next year?

Thanks for the question, Larry. So we said before that we have 100 million -- the United States has signed an advanced purchase agreement for 100 million doses for June, and we're very much on track to deliver exactly that. The exact production schedule, I don't think we've talked about just yet. And then for 2021, we've committed to and are very much on track for 1 billion doses. And 2022, we haven't talked about, I think, much, but we plan on making more vaccine as the world needs it.

Terrific. Thanks, Larry. Appreciate the question.

Our next question comes from the line of Josh Jennings with Cowen & Company.

I echo the congratulations. Just wanted to just ask about just the headline results. You think about the 100% efficacy in eliminating hospitalization as death. It's a tremendous outcome, the high level, 72% efficacy against the bar that's out there versus some of the other vaccine approaches and their data [indiscernible] go apples-to-apples. But in terms of convincing patients that J&J's vaccine is as efficacious as Moderna's or Pfizer's, is there anything that J&J is going to do on the education front? I think it's going to be clear to the clinical community, but just the patient population, and just seeing those 2 headline results? And then just a follow-up is there was a quote in an article this morning about the contract with the U.S. of 100 million doses for $1 billion. I don't know if that came from J&J, but just wanted to ask about if that is an accurate quote.

I'll take that first question and then maybe for Chris to talk about the second because I'm not familiar with it. But you hit the nail on the head that from a communication standpoint, it's a tricky situation because, as I said before, the pandemics evolved a lot. And that apples-to-apples simply isn't possible. if one took exactly the same vaccine and studied it prior or now, you'd very likely see different data. And because there are a large number of these variants running around, the majority, we're sequencing all the virus, but the majority have changed from a couple of months ago. And many of those variants are more virulent, meaning it takes a smaller amount of virus to cause an infection. They're more easily spread. So that makes it harder for vaccine. They circumvent to different degrees, different components of the immune system like neutralizing titers. So you really cannot compare our 72% in the United States to a 94% done at a different time. People will try, but you really shouldn't compare those. And what we do know is we have actual clinical data in a very complex milieu, a very many variants that we have 85% protection against severe COVID and complete protection against hospitalizations and deaths. So clinicians, people in the world should feel very comfortable that taking a J&J 1-shot vaccine will protect them against disease that matters.

And Josh, again, as it relates to production and dose availability, one, we will have doses immediately available if we were to get authorization. And like Mathai had said earlier, 100 million doses by the end of June to satisfy the U.S. commitment, which we see as having a meaningful impact in the near term. And we are also on track for our longer-term commitments of the $1 billion -- 1 billion doses by the end of the year. Thanks, Josh.

Our next question comes from the line of Matt Miksic of Credit Suisse.

I'll keep it to one, Dr. Mammen, if you -- you could maybe talk a little bit about this concept of sort of increasing levels of efficacy or antibody activity, why you think you're seeing that? How that's potentially different from some of the other platforms that are out there? Or anything else that you can share on that trend you mentioned?

It's a really good question. It's -- the basis of that was published in the New England Journal of Medicine recently where we measured in a Phase I/II setting, different components of the immune system as a function of time. And what you see there is a surrogate for all of that are our antibodies. And you see that over the first month, over the first 29 days, you see antibodies go up and then more gradually continue to go up through day 57 and then flatten out and stay solidly flat. There's no waning whatsoever out through day 85. And so -- and it keeps going. If you look at our other vaccines that use the same platform, that flatness of slope lasts a very long time, like over a year. So -- and why is that? It's because we induce -- I believe, it's because we induced good memory T cells. And those are what maintain high B-cell production of antibodies. If you don't produce good T cell responses, those antibodies titers do wane, and we are concerned about that. When you look at the mRNA vaccines, that the neutralizing titers of antibodies do wane with time and have a negative slope to them. So it's rational that we would see efficacy that holds tight or goes up and with the mRNA vaccines might not hold tight, and that's all to be determined.

Thanks, Matt. Appreciate the question.

Our next question comes from the line of Bob Hopkins with Bank of America.

Congratulations on all the progress with your program. The question I have is just I'm wondering if there are any common features in patients infected in terms of comorbidities? And any sense for the impact on transmission?

Yes. So there's two good questions. On comorbidities right now, we -- again, we'll avoid giving specific numbers, but we don't see differences in subgroups. 40% of our people in our trial had some form of comorbidity and maybe more than 1. And we don't see any difference in efficacy across any of the subgroups, including those with comorbidities. And so -- sorry, you had a second question.

Transmission, any sense on transmission.

Transmission. So in our protocol, we're not able to speak to it definitively today. But in our protocol, it's differentiated because what we did was we collected blood at baseline and then at 1 month, 2 month, 3 months. So we can see people that zero convert without any symptoms, so-called asymptomatic disease. And the numbers are too small to really speak definitively to. But qualitatively, I'm excited by what I see for a symptomatic disease, which, of course, speaks directly to transmission. And so we'll be able to report more definitively on an impact of zero conversion and therefore, transmissibility probably in the weeks or maybe months to come. But that's -- we know that, that's an important question.

Thanks, Bob.

Our next question comes from the line of Joanne Wuensch with Citi.

Congratulations on the program. Can you remind us of the age range of the participants in the program and where J&J is in terms of fastening this vaccine for children?

Yes. No, it's a great question. We studied people over the age of 18 in this particular study. That's a -- that was our FDA-agreed requirement, all the way up to, I think our oldest participant was 100 years old. And we saw no difference in those ages at all. So by regulatory guidelines, what happens now is we will kick off a pediatric program. If FDA reviews the package of data that we've submitted on 18 and older and permits that, and what our plan would be there is to collect a good amount of safety data, immunogenicity data and some efficacy data but attempt to bridge off the adult data to be able to vaccinate children. There are a lot of children that need this vaccine, and we're moving as quickly as humanly possible to get there.

Thanks, Joanne. Appreciate the question.

Your next question comes from the line of Jayson Bedford with Raymond James.

Just one quick one for me. You outlined the EUA time line in the U.S. Can you just talk about the regulatory pathway in other geographies?

Yes. So we've begun rolling submissions in a lot of regions right now, a lot of jurisdictions. And so we will file -- if we can get it all together, we will file next week, maybe end of next week, an EUA in the United States. And that will be followed in very quick succession with Europe and then other countries across the globe. We haven't talked about exact dates yet, but we're moving really heaven and earth to get all this data together in a very comprehensive way, and it's a big package of data with 45,000 participants and get it all filed globally as quickly as possible. But it will be fast.

Thanks, Jason. Appreciate the question.

Your next question comes from the line of Danielle Antalffy with SVB Leerink.

Congratulations on the data. Just a question on previously infected individuals. Was there any difference in safety and tolerability in these folks? And then also, any sense of the difference in infection rate in placebo patients between previously infected and naive individuals?

Yes. These are excellent questions. We don't actually have answers to them yet. We did interestingly have, given the state of affairs in the world, a reasonable percentage that came into the study, zero positive, so were previously infected. So we will know that soon. And those individuals, should be -- they should be more protected in the sense that they effectively got a booster from us instead of a primary protection. But I don't know the answers to those questions just yet.

Thanks, Danielle. Appreciate the question.

Your next question comes from the line of Rick Wise with Stifel.

Just based on your comments, could we postulate that given the different mechanisms of action for J&J's vaccine versus the Pfizer, Moderna vaccine, are you inclined to think -- would you have us think that perhaps patients who have already had one of those vaccines already approved that they could ultimately benefit from the J&J shot as a booster shot and keep them even safer? I mean is that a possible route forward here?

It's a -- I'm a person that operates entirely on data and want to collect good evidence sets of whatever action like large numbers people take. So I'm unable to recommend that. All I can say right now is that those that have not had vaccines would benefit terrifically from our vaccine. Those kinds of mix and match, sometimes they're called heterologous prime boost, I think will be tried. And I would encourage both -- other developers and we, of course, to study those kinds of questions very quickly so that we can get answers to society. But I can't sit today and say that, that's really a good idea or a bad idea.

Thanks, Rick, and thanks to everyone for your questions and continued interest in our company. We look forward to sharing an update on the status of our COVID-19 vaccine candidate at an appropriate date in the future. Stay well, and have a great day.

Thank you. This does conclude today's Johnson & Johnson investor conference call. You may now disconnect.