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SEC Pursuing Broad Review of Stock-Market Structure, Chairman Says


The Securities and Exchange Commission is considering changing rules that govern how U.S. stocks are traded, including pricing incentives that exchanges and high-speed traders use to attract orders, Chairman

Gary Gensler

said Wednesday.

Speaking to an industry conference, Mr. Gensler outlined a broader examination of market structure than he had previously described. Mr. Gensler, who took over the SEC in April, has questioned the system that results in many individual investors’ orders being routed to high-speed traders known as wholesalers, such as Citadel Securities and Virtu Financial Inc., instead of going to public exchanges.

Mr. Gensler suggested individual investors might get better prices if more trading were done on public exchanges. Only about 53% of all trading in January was done on exchanges, while the rest involved wholesalers and broker-run trading venues known as dark pools, Mr. Gensler said.

“The question is whether our equity markets are as efficient as they could be, in light of the technological changes and recent developments,” Mr. Gensler told the Piper Sandler Global Exchange and FinTech conference.

SEC Chairman Gary Gensler said he was seeking to revise rules for controversial 10b5-1 plans at WSJ’s CFO Network Event. Corporate insiders use the plans to avoid insider-trading claims when buying or selling their own company’s stock.

While public exchanges disclose their bids and offers and then compile the orders to publish a national best bid and offer for every stock, wholesalers and the so-called dark pools don’t reveal their pre-trade prices. Those off-exchange venues have to execute trades at prices at least as good as the national best price coming from the exchanges.

But the national best bid and offer, known as the NBBO, may be a substandard benchmark, Mr. Gensler said, because so many trades happen away from the exchanges. Even some exchange orders aren’t included in the national best price, such as those in odd-lot sizes, in which fewer than 100 shares change hands.

“I believe there are signs…that the NBBO is not a complete enough representation of the market,” Mr. Gensler said.

The SEC will consider revising how the benchmark is calculated, and will examine other potential rule changes related to how exchanges and brokers price shares, he said.

Mr. Gensler has previously criticized a system of trading incentives known as payment for order flow, in which retail brokers send clients’ orders to firms like Virtu and Citadel Securities for a fee. The wholesaler executes the order, typically at a price slightly better than the national best bid or offer.

Trading apps could see some regulation in the future, SEC Chairman Gary Gensler told WSJ’s Jean Eaglesham at the CFO Network Event.

That price improvement can be a fraction of a cent per share. Exchanges aren’t allowed to price shares at prices of less than a penny. That may give wholesalers an advantage when competing for orders, Mr. Gensler said.

Shares of Virtu dropped about 8% in the minutes after Mr. Gensler’s remarks, though they later pared their losses. Virtu handles between 25% and 30% of individual investors’ order flow in U.S. stocks, and its stock has rallied this year amid heavy trading of meme stocks like

AMC Entertainment Holdings Inc.

and

GameStop Corp.

by small investors. Citadel Securities, the only wholesaler with a larger market share, isn’t publicly traded.

The SEC will consider changes to rules governing the minimum price increments, Mr. Gensler said. Any rule changes would first be issued as proposals, giving the ability to investors and other market participants to comment on them. Mr. Gensler didn’t say when the agency would issue a proposal, but said “it should not be confused with something that is far off.”

Exchanges also use incentives, known as rebates, to attract orders from brokers. The SEC tried to force the exchanges to experiment with limiting rebates, but a federal appeals court ruled last year that regulators didn’t have the authority to mandate the planned pilot program. The regulator will consider changes to that pricing system as well, Mr. Gensler said.

“Both types of payment for order flow raise questions about whether investors are getting best execution,” Mr. Gensler said. He noted that brokers are banned from paying for order flow in the U.K., Canada and Australia.

Write to Dave Michaels at [email protected] and Alexander Osipovich at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Stock Futures Tick Up Ahead of Economic Data


U.S. stock futures edged up Friday ahead of fresh data on manufacturing and services sectors that will provide more insights into the pace of the economic recovery.

Futures tied to the S&P 500 ticked up 0.3%, suggesting that the broad market gauge may end the week on a tepid note after dropping 0.4% by the close on Thursday. Nasdaq-100 futures edged 0.2% higher Friday, pointing to big technology stocks sealing their best week since mid April.

Stocks have ground lower this week on mounting concern that inflation will rise and remain elevated as the economy rebounds. Sentiment reversed on Thursday after initial jobless claims, seen as a proxy for layoffs, fell to a new pandemic low. Investors have poured back into risky assets including growth stocks and cryptocurrencies, prompting prices to rebound from the week’s lows.

“There was some relief that the labor market recovery is under way in the U.S. and we’re seeing some nervousness about inflation ebbing away,” said

Kiran Ganesh,

a multiasset strategist at UBS Global Wealth Management.

Some money managers are betting that some sectors—such as banking and energy—could benefit in particular as the economy rebounds to pre-pandemic levels.

“If we can get a combination of confidence that inflation is under control, and signs of economic momentum coming through, I think there is still good opportunities to be had, in the reopening type of sectors in particular,” Mr. Ganesh said. Stocks that performed poorly during the pandemic could become the new drivers that lead major indexes higher, he added.

Ahead of the market opening, oat-milk maker Oatly rose over 10%. The shares jumped 19% in their trading debut on Thursday.

Preliminary surveys of purchasing managers, due to be released at 9:45 a.m. ET, are expected to show that the U.S. manufacturing and services industries expanded in May.

In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 1.639%, from 1.631% on Thursday.

Bitcoin edged up 2% from its 5 p.m. ET price, trading at about $40,900. The digital asset has rebounded sharply from its Wednesday intraday low of $30,444.93, but is still down over 18% since 5 p.m. last Friday.

“The context of this week is that markets are tired,” said

Paul O’Connor,

head of a multiasset team at Janus Henderson. “Stocks keep losing momentum, speculative areas of the market are losing momentum. There is fatigue here.”

Surveys of purchasing managers across Europe showed that manufacturing and services activity increased in the eurozone this month. The pan-continental Stoxx Europe 600 edged up 0.5%.

In Asia, major benchmarks were mixed by the close of trading. The Shanghai Composite Index declined 0.6% while Japan’s Nikkei 225 advanced 0.8%.

Traders worked on the floor of the New York Stock Exchange on Thursday.



Photo:

Courtney Crow/Associated Press

Write to Anna Hirtenstein at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Fortnite’s Mastermind Goes to Battle With Apple


The billionaire behind one of the most successful videogames of all time came to view

Apple Inc.


AAPL 1.80%

as an existential threat to his dream of the future. So

Tim Sweeney

decided to fight. He gave his dispute with the world’s biggest company a code name: Project Liberty.

The clash was a bold gambit from a man who built an empire around “Fortnite,” the online multiplayer shooter game filled with cartoonish characters that became a phenomenon beloved by teenagers around the world. The ambition of Epic Games Inc.’s chief executive was that Fortnite’s legions of devoted young fans could turn it into a thriving social network, and help realize his vision of the “metaverse,” a shared virtual world where people might one day live, work and hang out.

Mr. Sweeney saw Apple as a central roadblock to that vision, according to people familiar with his thinking and documents unveiled in a recent court proceeding, because of the iPhone maker’s tight control over how people access “Fortnite” and any other mobile apps from Epic. Apple’s App Store takes a 30% cut of Epic’s revenue from those users.

Epic circumvented Apple’s fees and rules last August by introducing its own system for processing user purchases into mobile versions of “Fortnite.” It also prepared for a larger legal and public-relations campaign, complete with a video mocking a legendary Apple ad and the social-media hashtag #FreeFortnite.

“You’ll enjoy the upcoming fireworks show,” Mr. Sweeney said in an email to an ally at

Microsoft Corp.

on the eve of the plan’s launch. Apple made that email public in a court filing, along with other emails and witness testimony cited in this story.

Epic hoped to draw the company into a larger conflict, the court documents show. Once Apple and

Alphabet Inc.’s

Google booted “Fortnite” from their app stores, Epic responded by suing both companies.

The fate of Epic’s fight has widespread implications for the entire technology world. It could help determine everything from how much revenue app developers are able to keep to how exposed Apple could be to potential antitrust violations. Apple has rejected claims it has monopoly power, saying that Epic broke the terms of a contract and engaged in a smear campaign.

A resolution could be drawing near. Starting May 3, the dispute goes to trial before federal Judge

Yvonne Gonzalez Rogers

in Oakland, Calif. The judge must decide whether Apple is misusing its power to quash competition or if Epic is merely trying to break its contract with the iPhone maker to boost its bottom line.

Save the world

The man at the center of this clash is a 50-year-old programmer who prefers an office uniform of cargo pants and T-shirts. He eschewed the clubby confines of Silicon Valley to locate Epic’s headquarters just outside of Raleigh, N.C. Mr. Sweeney’s previous dealings with other technology companies showcase his instincts for big and prolonged fights, as well as an eye for strategy. The Maryland native is worth more than $9 billion, according to Bloomberg’s Billionaires Index.

The man who is taking on Apple prefers an office uniform of cargo pants and t-shirts. Here he is pictured in Epic’s offices in 2019.



Photo:

Jeremy M. Lange for The Wall Sweet Journal

He launched Epic from his parents’ basement at age 20 in 1991 and evolved his company from solely building games for PCs to include those for videogame consoles and smartphones. In 2012, he sold a 40% stake of his company to

Tencent Holdings Ltd.

, in part to tap the Chinese tech giant’s expertise in mobile gaming and wringing money from users through small purchases known as microtransactions. (Mr. Sweeney remains Epic’s largest shareholder.) Epic also owns the video-chat app Houseparty and makes the Unreal Engine, a suite of software tools for developing games and producing special effects for television shows, movies and other types of digital content.

Epic’s biggest hit started with the 2017 launch of “Fortnite: Save the World,” then a $40 game for up to four players to fight zombies and build forts. A few months later, after disappointing results, Epic offered up a new, free-to-play mode called “Battle Royale,” in which 100 players duke it out until only one combatant or squad remains. It later sold virtual currency that players could use to acquire in-game perks such as an outfit to make their avatars appear as a Marvel Comics superhero.

To build the community, since only a small percentage of players make such purchases, Epic pushed console makers to allow users of one machine to play “Fortnite” with users of another machine, in what would be an industry first for all three major videogame systems. That meant a PlayStation player could join a match with a friend on Microsoft’s Xbox or

Nintendo Co.

’s Switch.

Microsoft and Nintendo had shown a willingness for such cross-platform play.

Sony Group Corp.

balked.

In the fall of 2017, Epic updated its software that briefly allowed a Sony PlayStation “Fortnite” player to compete against someone on Microsoft’s Xbox. It pulled that function back, saying it was a mistake, after online chat boards lighted up with excitement. Seeing what was possible, gamers demanded more. Players cast Sony as the villain on social media with hashtags such as #blamesony and #notfortheplayers, a harbinger for the Apple dispute.

As Sony internally debated its position, executives were worried about exposure of its consumer-behavior data and competitors taking an unfair share of their business, according to people familiar with the talks. They felt Epic had backed them into a corner and worried that finicky gamers would turn on them, the people said.

Following months of negotiations, Sony relented. Asked about it afterward, Mr. Sweeney described it simply as “an effort in international diplomacy.” Since then, the Tokyo-based company has twice invested in Epic, having most recently contributed around $200 million in a funding round that valued Epic at $28.7 billion. A spokesman for Sony declined to comment.

Mr. Sweeney’s hardball tactics with Sony helped him usher in cross-play across videogame consoles, personal computers and Apple and Android devices.

All hands on deck

The relationship with Apple was cordial for its first decade. In March 2018, “Fortnite” was launched on Apple’s App Store. A year later, Mr. Sweeney was at the annual Game Developers Conference celebrating how cross-play had helped the game grow to almost 250 million players world-wide – a smashing success. Apple’s managers were happy to help promote the new hit, offering technical and marketing assistance to Epic.

Mike Schmid, head of Apple’s games business development for the App Store, helped oversee the “Fortnite” rollout and several updates. In a court statement, he described an “all-hands-on-deck treatment to address Epic’s non-stop asks, which frequently involved middle-of-the-night calls and texts demanding short-turnaround.”

To manage the work, he assigned someone in Australia so Apple could provide 24-hour coverage.

Mr. Sweeney located Epic’s headquarters far from Silicon Valley, to a spot outside Raleigh, N.C. The offices are pictured here in 2019.



Photo:

Jeremy M. Lange for The Wall Sweet Journal

The relationship described by Apple in court papers differs greatly from the experiences detailed by other developers on Apple’s iOS mobile operating system. Smaller software makers have complained about what they perceive as Apple’s seemingly arbitrary rules and mercurial ways.

With Epic, Apple appeared to go out of its way to help the gamemaker establish itself on the platform. Mr. Schmid said Epic employees had told him Apple represented just 7% of its revenue. He couldn’t be reached for comment through Apple.

“On a variety of occasions, Epic personnel have told me that if Apple did not comply with its demands, Epic would simply terminate its relationship with Apple and remove its games off the iOS platform,” Mr. Schmid said in court records. A core part of Apple’s antitrust defense is that Epic’s games are available on a variety of tech companies’ platforms, not just Apple’s.

By early 2020, “Fortnite” was showing signs of aging, although popularity for online games can sometimes ebb and flow due to new seasons or features. The privately held company doesn’t disclose financial records but app-analytics firm Sensor Tower Inc. estimates global consumer spending within “Fortnite” on Apple devices had fallen in the first quarter of last year to $70 million from a peak of almost $180 million in the third quarter of 2018. Epic Chief Financial Officer Joe Babcock, who departed the company in early 2020, said it expected the trend to continue, according to a deposition he gave cited by Apple. Mr. Babock couldn’t be reached for comment.

Epic disputes the notion that “Fortnite” was waning in popularity, as the company in May 2020 said it had reached 350 million registered accounts.

Epic said in May 2020 it had reached 350 million registered ‘Fortnite’ accounts, up from 250 million a year earlier.



Photo:

cristobal herrera-ulashkevich/EPA/Shutterstock

Epic hatched a plan, according to court records citing a board presentation, to revive interest in “Fortnite” beyond its seasonal updates and occasional music performances and movie screenings that people experience together in a virtual setting. Epic would turn to third-party developers to create new content for “Fortnite,” essentially turning it into an open platform unto itself.

But for this new plan to work, the company needed to find a way it could afford to compensate its would-be partners. Apple’s 30% share, the presentation concluded, was an “existential issue” for its plan and needed to be cut so Epic could share a majority of the profit with creators.

The battle begins

Last spring Epic began sharpening its plan to wrest itself from Apple’s fees and control. Its team investigated ways to surreptitiously add an alternative payment system to the versions of “Fortnite” on Apple and Google’s app stores, according to court records. By May Epic decided it would deploy the new system through a so-called hotfix, an important software update usually reserved for security bugs, records show, and do so just before the debut of the game’s new season.

Epic executives initially considered targeting Google alone, according to court records citing internal emails. But later they decided to include Apple, which in time would become the focus of the effort.

From an early stage, the plan depended on Epic’s payment system being rejected, read an email between Epic executives disclosed in court records. At that point: “The battle begins. It’s going to be fun!”

Epic co-founder

Mark Rein

predicted there was a greater than 50% chance Apple would immediately remove “Fortnite” from its platforms, according to an Epic employee deposition cited in court records. “They may also sue us to make an example.” Mr. Rein declined to comment.

While it worked on the technical attack, Epic also planned to cut prices on certain items in the console and PC versions of “Fortnite” by 20%— essentially creating a reason for players to eschew the mobile alternative offered by Apple.

But first, Epic would go to the front door and ask a favor of Apple and Google: The company wanted permission to run its own competing store and payment system.

In a late June email to Apple CEO

Tim Cook,

according to court records, Mr. Sweeney sought an exemption from App Store rules. Most important, he wanted to stop paying Apple’s 30% fee.

Apple rejected the request in a July 10 letter, laying out many of the same arguments it would make in defending itself against the eventual Epic lawsuit. Epic had other ways to sell its game, Apple’s lawyer added, as well as noting Epic collects royalties from games built on its software.

“Yet somehow, you believe Apple has no right to do the same, and want all the benefits Apple and the App Store provide without having to pay a penny,” the letter concluded. “Apple cannot bow to that unreasonable demand.”

‘Fortnite’ became a phenomenon beloved by teenagers around the world. Here fans cheer during the 2019 ‘Fortnite’ World Cup inside Arthur Ashe Stadium in New York City.



Photo:

johannes eisele/Agence France-Presse/Getty Images

Mr. Sweeney on July 17 responded with another email to Mr. Cook and others calling the response a “self-righteous and self-serving screed.” He promised to “continue to pursue this, as we have done in the past to address other injustices in our industry.”

Behind the scenes, Epic’s Project Liberty team met regularly and devised a way to present their plan to a judge and the public. The team included as many as 200 Epic staffers, outside lawyers and public-relations advisers. It developed an argument that Apple violated antitrust laws with its requirements that all apps offered on its iPhones and iPads go through its App Store and that all purchases of digital content go through the tech giant’s in-app purchase system.

It wasn’t a unique gripe. Other app makers, including

Netflix Inc.

and Spotify Technology SA, have also butted heads with Apple on its slice of fees and control. Apple says the walled mobile-software garden it built in 2008 is now responsible for more than a half-trillion dollars in commerce.

Epic’s team worried it wouldn’t be a sympathetic character in a public fight and that gamers would blame the company if Apple and Google ultimately decided to yank “Fortnite.” So it strategized on how to bring in additional companies, including smaller, sympathetic developers, to advocate for its cause, records say. It also studied past Apple responses to major public fights, focusing on its battle with the Federal Bureau of Investigation over demands to create a backdoor into the iPhone of a shooter in a 2015 terrorist attack in San Bernardino, Calif. The controversy subsided when the government found an alternative way into the device.

The Epic team concluded that Apple could be thin skinned when it came to its public image. “Nothing moves Apple to change other than notable consumer pressure,” an Epic memo noted.

Share your Thoughts

Do you think Apple is misusing its power to quash competition? Why or why not? Join the conversation below.

As August approached, Epic’s board of directors was briefed on the project’s final pieces in a presentation dubbed “battle plan.” By this point, the board was told, Epic had spent time helping form the Coalition for App Fairness, an advocacy group, to support its crusade and it tested the payment system that would eventually be uploaded to Apple’s and Google’s app stores.

Mr. Sweeney sent emails to Sony, Microsoft and Nintendo alerting them to the upcoming price changes in “Fortnite,” a prelude to the “fireworks show.”

On Aug. 13, he lighted the fuse. “Epic will no longer adhere to Apple’s payment processing restrictions,” Mr. Sweeney wrote at about 2 a.m. in an email to Apple. Hours later, Epic flipped the switch on the new payment system and a public-relations campaign to rally gamers to its fight.

Project Liberty was in play.

Apple and Google both booted the game by day’s end, springing the second part of Epic’s plan: a legal battle.

A trial date hasn’t been set in Epic’s lawsuit against Google, though the situation is distinct. Devices that run Google’s Android operating system can download software from other app marketplaces in addition to the Google Play store. Google has said that Epic violated its app store’s policies as well, which are designed to keep it safe for users.

In the months after its lawsuit, Epic pursued complaints with regulators around the world and supported lobbying efforts among statehouses and Congress for changes that would crimp Apple’s power. It also released an online video that echoed Apple’s famous 1984 ad, a nod to George Orwell’s dystopian novel, that framed the computer maker as the underdog against the then-mighty

IBM.

This time around, the image of a televised Big Brother was replaced by one of a talking Apple wearing glasses similar to those of Mr. Cook. The call to action at the end read: “Join the fight to stop 2020 from becoming ‘1984.’ ”

Write to Tim Higgins at [email protected] and Sarah E. Needleman at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Critical for Daimler’s Future, Mercedes Should Be at Its Most Profitable in Years


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Ant Group Explores Future Without Chinese Billionaire Jack Ma


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Alden Clashes With Billionaire Over Future of Tribune—and of Local News


A few weeks ago, New York hedge fund Alden Global Capital LLC was on the verge of acquiring Tribune Publishing Co. —home to the Chicago Tribune, Baltimore Sun and other U.S. metro newspapers—with seemingly no one in its way.

Then it offended one of its partners in the deal, setting off a battle that could help shape the future of local news in America.

Maryland hotel magnate Stewart Bainum Jr. had worked out a side arrangement with Alden Chief Executive Heath Freeman to buy the Sun, a paper Mr. Bainum grew up reading. Then, in Mr. Bainum’s view, Alden tried to raise the cost of a fee agreement that would substantially jack up the price, people close to the situation said.

Mr. Bainum told his advisers late on the afternoon of Friday, March 12, that he was worried he could no longer trust Alden, according to a person familiar with the matter.

That evening, the 74-year-old got on the phone with his bankers and decided to attempt a stunning 11th-hour move: his own bid for the whole company, which he announced by the end of the weekend.



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Microsoft Is in Exclusive Talks to Acquire Discord


Microsoft Corp. is in advanced talks to acquire messaging platform Discord Inc. for $10 billion or more, according to people familiar with the matter, as the software giant seeks to deepen its consumer offerings.

Microsoft and Discord are in exclusive talks and could complete a deal next month, assuming the negotiations don’t fall apart, the people said.

Originally favored by gamers, San Francisco-based Discord offers voice, text and video chatting. The platform’s popularity has surged since the pandemic took hold as people stay home and connect online—as has that of other chat services, like Facebook Inc.’s WhatsApp and Signal Messenger LLC. Discord has been considering an IPO.

Microsoft, which has a market value of more than $1.7 trillion, has been on the hunt for an acquisition that would help it reach more consumers. Last summer, it held talks to buy the popular video-sharing app TikTok amid a high-profile geopolitical standoff prompted by the Trump administration, before abandoning the effort.

VentureBeat reported this week that Discord was exploring a sale and had entered exclusive discussions with an unnamed suitor.



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J&J Single-Dose Covid-19 Vaccine Gains Backing From FDA Advisory Panel


Johnson & Johnson’s


JNJ -2.64%

single-dose Covid-19 vaccine worked safely and should be authorized for use in the U.S., a panel of experts advised federal health regulators Friday.

The advisory committee’s vote in support of the vaccine’s authorization is the last step before the U.S. Food and Drug Administration issues a decision, which is expected Saturday.

The panel, a group of 22 medical specialists in fields like internal medicine, pediatrics, vaccines and epidemiology, regularly advises the FDA about experimental vaccines. It voted to recommend shots from

Pfizer Inc.


PFE -0.98%

and partner

BioNTech


BNTX -2.94%

SE and

Moderna Inc.


MRNA 4.33%

before the agency authorized them in December.

During the all-day public meeting, representatives from the FDA and J&J discussed the safety and effectiveness of the company’s vaccine in a 44,000-plus subject study, as well as how effective the J&J vaccine is in preventing new cases caused by variants.

The give-and-take of questions and answers can be valuable in bolstering public confidence in the shot, according to FDA officials.

The vaccine was 66% effective at protecting people from moderate to severe Covid-19, an FDA review found, and even more effective at preventing severe disease alone.

“If authorized, Janssen’s vaccine candidate would play a pivotal role in the global effort to fight Covid-19,”

Johan Van Hoof,

global head of vaccines research at J&J’s Janssen pharmaceutical unit, said during the panel’s meeting. “A single-dose regimen offers the ability to vaccinate a population faster.”

As highly transmissible coronavirus variants sweep across the world, scientists are racing to understand why these new versions of the virus are spreading faster, and what this could mean for vaccine efforts. New research says the key may be the spike protein, which gives the coronavirus its unmistakable shape. Illustration: Nick Collingwood/WSJ

A rollout of the J&J vaccine could add enough shots in the U.S. by the end of March to boost the total number of people vaccinated by 20%. Health authorities are pushing to inoculate enough people as quickly as possible so that business, schools and other establishments can fully reopen.

SHARE YOUR THOUGHTS

How would you grade the vaccine rollout? Join the conversation below.

J&J has said it would deliver about 20 million doses for U.S. use by the end of March.

The FDA often convenes public meetings of outside experts to scrutinize experimental drugs, devices and vaccines up for agency approval, in part to boost public acceptance of the products should they be cleared for wide use.

J&J’s vaccine appeared to be safe in its pivotal study, the FDA found, aside from being effective.

“The known and potential benefits of Ad26 outweigh the known and potential risks,” Macaya Douoguih, head of clinical development and medical affairs at J&J’s Janssen unit, said during Friday’s meeting, using a code name for J&J’s vaccine.

FDA medical officer Yosefa Hefter said there are still unknowns about the vaccine, including the duration of immune protection and the safety and effectiveness in children.

An FDA analysis for the committee meeting also said rare cases of deep vein clots and of blockages in lung arteries were slightly more common in vaccine recipients than in placebo patients, and that the FDA considers these as “of clinical interest.”

The vaccine was effective “across demographic subgroups,” the FDA said. The demographic subgroups in the large study of J&J’s vaccines included racial and ethnic groups such as Black, Latino and Asian people, and age groups such as those 60 years and older.

Researchers also assessed efficacy in people who had underlying medical conditions including obesity and high blood pressure before entering the clinical trial. Sometimes vaccines don’t work as well in older people because of weakened immune systems.

One exception was that the vaccine appeared to be less effective in people 60 and older who had certain underlying medical conditions like diabetes and high blood pressure.

The Pfizer-BioNTech and Moderna vaccines also worked effectively across various demographic subgroups.

The vaccine was less effective in South Africa, where a more-transmissible Covid-19 variant has thrived, than in the U.S. J&J is among the companies working on new shots targeting the new strain, against which several current vaccines don’t appear to work as well.

J&J’s Covid-19 shot was, however, very effective against severe and critical cases in South Africa. The vaccine was 73.1% effective in preventing such cases occurring at least 14 days after vaccination, and 81.7% effective in preventing such cases at least 28 days after vaccination.

How Viral Vector Vaccines Work

Johnson & Johnson’s vaccine relies on a different mechanism for conferring immunity than traditional vaccines.

Traditional Vaccines

1. In classic vaccines, such as those against measles and polio, the patient is inoculated with weakened or inactivated versions of the virus. This triggers the immune system to produce specialized antibodies that are adapted to recognize the virus.

2. After vaccination, the antibodies remain in the body. If the patient later becomes infected with the actual virus, the antibodies can identify and help neutralize it.

Johnson & Johnson’s Vaccine

Scientists have isolated the genes in coronavirus responsible for producing these spike proteins. The genes are spliced into weakened, harmless versions of other viruses.

Instead of using the whole virus to generate an immune response, these vaccines use only coronavirus’s outer spike proteins, which are what antibodies use to recognize the virus.

Weakened virus with

spike protein genes

When injected into a patient, the genetically engineered viruses enter healthy cells where they produce coronavirus spike proteins.

The spike proteins produced by the cells prompt the immune system to mount a defense, just as with traditional vaccines.

Vaccine-generated antibody response

1. In classic vaccines, such as those against measles and polio, the patient is inoculated with weakened or inactivated versions of the virus. This triggers the immune system to produce specialized antibodies that are adapted to recognize the virus.

2. After vaccination, the antibodies remain in the body. If the patient later becomes infected with the actual virus, the antibodies can identify and help neutralize it.

Johnson & Johnson’s Vaccine

Scientists have isolated the genes in coronavirus responsible for producing these spike proteins. The genes are spliced into weakened, harmless versions of other viruses.

Instead of using the whole virus to generate an immune response, these vaccines use only coronavirus’s outer spike proteins, which are what antibodies use to recognize the virus.

Weakened virus with

spike protein genes

When injected into a patient, the genetically engineered viruses enter healthy cells where they produce coronavirus spike proteins.

The spike proteins produced by the cells prompt the immune system to mount a defense, just as with traditional vaccines.

Vaccine-generated antibody response

1. In classic vaccines, such as those against measles and polio, the patient is inoculated with weakened or inactivated versions of the virus. This triggers the immune system to produce specialized antibodies that are adapted to recognize the virus.

2. After vaccination, the antibodies remain in the body. If the patient later becomes infected with the actual virus, the antibodies can identify and help neutralize it.

Johnson & Johnson’s Vaccine

Scientists have isolated the genes in coronavirus responsible for producing these spike proteins. The genes are spliced into weakened, harmless versions of other viruses.

Instead of using the whole virus to generate an immune response, these vaccines use only coronavirus’s outer spike proteins, which are what antibodies use to recognize the virus.

Weakened virus with

spike protein genes

When injected into a patient, the genetically engineered viruses enter healthy cells where they produce coronavirus spike proteins.

The spike proteins produced by the cells prompt the immune system to mount a defense, just as with traditional vaccines.

Vaccine-generated antibody response

1. In classic vaccines, such as those against measles and polio, the patient is inoculated with weakened or inactivated versions of the virus. This triggers the immune system to produce specialized antibodies that are adapted to recognize the virus.

2. After vaccination, the antibodies remain in the body. If the patient later becomes infected with the actual virus, the antibodies can identify and help neutralize it.

Johnson & Johnson’s Vaccine

Instead of using the whole virus to generate an immune response, these vaccines use only coronavirus’s outer spike proteins, which are what antibodies use to recognize the virus.

Scientists have isolated the genes in coronavirus responsible for producing these

spike proteins. The genes are spliced into weakened, harmless versions of other viruses.

Weakened virus with

spike protein genes

When injected into a patient, the genetically engineered viruses enter healthy cells where they produce coronavirus spike proteins.

The spike proteins produced by the cells prompt the immune system to mount a defense, just as with traditional vaccines.

Vaccine-generated antibody response

J&J, citing preliminary evidence in an analysis released by the FDA, said the vaccine was 65.5% effective in preventing asymptomatic infections in a subset of study subjects.

Health authorities have been watching whether Covid-19 shots can stop people without symptoms from transmitting the virus. The virus has largely been spread by people who were infected but didn’t realize it because they had no symptoms.

The vaccine was less effective in South Africa, where a more-transmissible Covid-19 variant has thrived, than in the U.S. J&J is among the companies working on new shots targeting the new strain, which several current vaccines don’t appear to work as well against.

Write to Thomas M. Burton at [email protected] and Peter Loftus at [email protected]

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