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Novavax: The Company With The Most To Gain From a Successful COVID-19 Vaccine

With Novavax stock (NVAX) surging over 2,500 per cent in the year of 2020, I question whether there is more room for NVAX to run going into 2021.


Who is Novavax?

Novavax develops innovative vaccines to prevent infectious diseases and address urgent global health needs. Novavax currently has two drugs in late-stage development. Its NVX-CoV2373 is designed to treat Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). It is also developing a vaccine to protect infants via maternal immunization against Respiratory Syncytial Virus (RSV).

Results from phase one and two trials for their Covid-19 vaccine published in September showed that two doses of the vaccine can safely produce an immune response in healthy volunteers – with all the participants who received the vaccine producing antibodies against the virus at levels four-to-six times higher the levels seen in people who have recovered from natural infection.




Vaccine Race

The race to produce a Covid-19 vaccine for the masses is heating up. Last month, Pfizer released its phase three clinical trial results for its Covid-19 vaccine which showed 95 per cent efficacy. Moderna also released their late-stage vaccine results last month, which practically matched Pfizer’s efficacy. Britain was the first to approve the use of the Pfizer vaccine at the beginning of December followed by Canada, the U.S. and the E.U. Moderna’s vaccine candidate has only been approved in the U.S. to date. However, the Europeans Medicines Agency is due to complete its approval decision today. With major blockbuster revenues on the line, the question remains of where this leaves Novavax in the race to get its vaccine out to the public.


Currently, Novavax is currently undergoing a pivotal phase three trial in the U.K., the largest Covid-19 vaccine trial to take place in the U.K. to date. Preliminary results for this trial are expected to be released in the first quarter of 2021. However, with Covid-19 infections rising in the U.K., we could see results released earlier, perhaps at some point in January 2021. Depending on the outcome of these results, it may lead to emergency approval by the U.K. and possibly the E.U., with the U.K. already having ordered 60 million doses for 2021 with the option to order 60 million more. The E.U. recently concluded preliminary talks with Novavax to secure up to 200 million doses of its Covid-19 vaccine, with each dose being priced at around $16. There have also been several other agreements for a specified number of doses with Canada, New Zealand, Australia, and the U.S., amounting to 286.7 million doses being ordered so far (excluding the 200 million potential doses being ordered by the E.U.).


Novavax’s late-stage clinical trials in the U.S. are expected to begin at the beginning of January 2021 after some delays due to manufacturing issues. It is unclear whether the FDA in the U.S. would be willing to grant emergency use authorization for Novavax’s Covid-19 vaccine based on the preliminary data provided by the U.K. studies, or whether they would be inclined to wait until data from the studies in the U.S. is made available. Nevertheless, it should be expected that at some point in the first half of 2021, Novavax’s Covid-19 vaccine will be given emergency use authorization in the U.S.

The $38 Billion Pie

Bernstein analysts estimate that the top five vaccine candidates are set to divvy up about $39.5 billion in sales, with the first-to-market companies Pfizer and Moderna reaping more than half of that. Novavax are predicted to garner $4 billion of this Covid-19 vaccine pie in 2021, and with orders from the E.U. being negotiated, we could see this number increase to around $6-$7 billion.

After a huge haul in 2021, the analysts predict the Covid-19 vaccine market will dwindle to around $6 billion in 2025, assuming vaccine recipients need a booster every three years. Along the way, the team of analysts’ project $23.1 billion in total Covid-19 vaccine sales in 2022, $12.6 billion in 2023, and $8.5 billion in 2024.


Although vaccines from Pfizer and Moderna are first to market, there could be distribution issues. Pfizer’s vaccine must be stored and transported at temperatures as low as -94 degrees, and Moderna’s vaccine must be stored and transported at normal freezer temperature. According to Novavax, its vaccine can be stored at refrigerated temperatures, making it more conducive for large scale distribution, particularly for rural or remote areas. Furthermore, due to the comparative ease of storing Novavax’s vaccine, it could mean that hospitals and storage facilities will choose to store Novavax’s vaccine, instead of its competitors, for future vaccinations to minimise costs.


What this means for NVAX stock

With the stock up over 2500 per cent for the year, investors may be questioning whether it is too late to take a position in this dark horse Covid-19 vaccine play.

Novavax has a market capitalization of $8 billion which equates to 2x projected Covid-19 revenue. To provide some comparison, AstraZeneca recently paid $39 billion for Alexion, which is about 6.5x their run-rate revenue. Moderna currently trades at just shy of 4x its projected 2021 Covid-19 revenue. NVAX trades at well under these metrics, which means there could be some upside ahead. This also excludes the fact that their projected revenues for 2021 could amount to significantly more as orders from countries pile up.


An investment into a company that is very dependent on one single product comes with some potentially heavy risks. The Covid-19 vaccine revenue for Novavax is likely what they are depending on to spur future R&D to develop a robust pipeline of drugs to introduce on the market. Therefore, an investment into Novavax would come with the expectations of strong upcoming U.K. Phase three trial data- which Bill Gates, an investor in Novavax, stated on CNBC that he expects stronger results than that of Pfizer’s and Moderna’s. In addition to this, the extremely reactive and volatile nature of these Covid-19 vaccine stocks to any news reported, requires strong execution by Novavax in manufacturing and distributing their vaccine when it gets approved.


As AstraZeneca has gained approval for its vaccine candidate, and Johnson & Johnson also come close to gaining authorisation, in the first quarter of 2021, there are bound to be some dips in the price of NVAX, which could present some possible buying opportunities. The low public float of NVAX can cause huge price swings and this is something that is very important to look at when deciding whether to invest into the stock. As a follower of the stock, I have noticed that the stock can suffer from short-term sell offs that recover immediately in the following days. NVAX has a 52-week high of $189 and is currently trading between a big range of $107 to $140 in the past month.


My opinion is that, with upcoming catalysts ready to drive the stock higher, potential investors should consider NVAX if there is some weakness in the stock, with price moving towards $107. If the weakness in NVAX is attributed to any news however, I would hesitate in taking a position. However, this should not be taken as investment advice, and you should ensure that you conduct your own thorough research into NVAX, or any stock for that matter, before making an investment decision. For more information, please see our disclaimer below!


Disclaimer:

The Student Investor is not a registered investment, legal or tax advisor or broker/dealer. All opinions expressed by The Student Investor are from the personal research of the author, and are written for educational purposes only. Although best efforts are made to ensure that all information is accurate and up-to-date, occasionally unintended errors and misprints may occur. Please note that the value of your investment can go up or down, and The Student Investor takes no responsibility for any decisions made by readers.

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