As a company directly related presenting solutions for the novel coronavirus pandemic, it’s not too surprising that vaccine specialist Novavax (NASDAQ:NVAX) experienced a significant lift. However, few could have predicted its meteoric ascent. At the start of the year, NVAX rang in the new year at just under $4. This past Monday, shares closed just under $140.
Though relatively late to the game, Novavax initially caught early-bird investors’ eyes because of its proprietary recombinant nanoparticle vaccine technology. Theoretically, this allows Novavax to produce vaccine candidates efficiently and quicker than traditional production methodologies. Given that time is of the essence, this ability to get a viable vaccine distributed at scale put a positive spotlight on NVAX stock.
Earlier this month, Novavax received another burst of investor sentiment when it received a $1.6 billion deal from the Trump administration to develop a coronavirus vaccine. Under the Operation Warp Speed initiative, WhiteHouse.gov describes the program as a “once-in-a-generation effort” to deliver “a safe and effective vaccine as soon as possible.”
Additionally, another standout point for NVAX stock is that the deal is the largest under the program to date. Overall, the federal government has invested $4 billion in companies actively seeking a vaccine. As well, Operation Warp Speed partners with household names, such as AstraZeneca (NYSE:AZN) and smaller but promising biotechnology firms like Moderna (NASDAQ:MRNA).
On the surface, this is a tremendous catalyst for NVAX stock. Because of the huge impact that the pandemic has already imposed and the future risks it poses, mere momentum alone could drive shares higher.
At the same time, for those who are just looking at Novavax, you may want to think carefully before jumping aboard.
NVAX Stock Has Gone Through the Low-Hanging Fruit
While direct coronavirus plays have been this year’s hottest stocks, we should at least acknowledge how they came to be that way. With so many mysteries surrounding this virus – and there’s much we still don’t know – these companies were bound to enjoy speculative fervor.
As I just mentioned, it’s very possible for NVAX stock to jump higher on momentum. But as vaccine competitors move toward advanced stage trials, this is a time where, if you’ll excuse the gendered expression, we separate the men from the boys.
And this is where Novavax runs into a credibility issue. Absolutely, no one is denying that the company is working on cutting-edge science. In addition, Novavax has big-time supporters in the Bill & Melinda Gates Foundation, according to the New York Times. Because NVAX secured the biggest contract thus far under Operation Warp Speed, it clearly has connections.
But prospective buyers of NVAX stock are right in asking why, in the company’s 33-year history, has it never brought a vaccine to market?
We should be fair. Moderna is also in a similar camp. It has never brought a product to market. Also, while Moderna promises a speedy solution through advanced genetic technology, this innovation has never led to a successful human vaccine.
But if we go with that logic, it appears that Warp Speed is more a political ploy than an answer. After all, it’s not as if individual federal authorities have skin in the game. The initiative uses government money – your taxpayer dollars, actually – to front a shotgun approach to the coronavirus vaccination. And we the taxpayers have little transparency in how our money is appropriated.
Moreover, if Novavax’s science is so great, why wasn’t it effective earlier?
Novavax Is a Play on the Narrative
As you’ve likely heard, the classic sign that a market bubble has formed is when your shoeshine boy gives you stock tips. Of course, I’ve never had this experience because, excuse me, they are called “footwear sanitation engineers.”
But we’ve all seen or even experienced the phenomenon where suddenly every conspiracy nut is an expert on Constitutional law. For me, I’ve been fielding phone calls from people who know jack about biotech suddenly pitch me their biotech picks.
Perhaps this is part of the new normal. Or more likely, this sector is getting overheated.
Ultimately, I don’t know which, if any of these Warp Speed candidates has the magic bullet. Sure, NVAX stock has some forward-looking credibility in terms of scale. For instance, Novavax signed an agreement with Fujifilm’s (OTCMKTS:FUJIY) subsidiary Fujifilm Diosynth Biotechnologies to mass produce NVAX’s Covid-19 vaccine candidate.
But this could still go awry if some other company beats Novavax to the finish line. If you bought NVAX stock early, congratulations! For everyone else, you’re buying into a momentum name that may or may not pan out.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
