This is Novavax’s (NASDAQ:NVAX) year. Every time the stock doubled, it would double again. Last week, NVAX stock returned 2,270.85% in the year-to-date. But as the stock pulls back from the 52-week high of $111.77, what will investors look for next in this COVID-19 vaccine developer?
Novavax announced that it was selected to participate in Operation Warp Speed (OWS). The purpose of the government program is “to begin delivering millions of doses of a safe, effective vaccine for COVID-19 in 2021.”
The rapidly accelerating spread of COVID-19 in the U.S., now at 60,000 a day, highlights the need for a vaccine. Plus, the coronavirus may have more chance of mutations introduced to the general population. If it gets a favorable characteristic that improves its chances of infecting more people, then hospitals will get even more overwhelmed.
Fortunately, the basic characteristics of the coronavirus should not change enough to undermine vaccine development. Novavax’ COVID-19 vaccine candidate, NVX-CoV2373, began its Phase 1/2 clinical trial in May.
The company will post the immunogenicity and safety results of the 130 participants at the end of this month. These are two important traits of a vaccine. If it is unsafe to administer, then people are better off without an NVX-CoV2373 vaccination. And if a subject does not produce an immune response, then the vaccine will give no protection.
In Phase 2, Novavax will assess immunity safety. The pivotal Phase 3 clinical trial will involve as many as 30,000 subjects and will start in the fall of this year.
The $1.6 billion from OWS will enable the company to fund its clinical development. Later on, it will have the resources to establish large-scale manufacturing. In the best-case scenario, Novavax will have 100 million doses at the end of this year.
A Closer Look at NVAX Stock
The strong performance of NVAX stock may attract momentum traders who missed the rally. The increased buying volume may send the stock higher. At a short float of 14.91%, the high cost of betting against the stock will cause short-sellers to cover. This would add to the buying pressure.
Media will increase their coverage on Novavax’s vaccine candidate, increasing company awareness, and once again increasing stock buying interest. Fundamentally, favorable clinical results coming out later this month and in the quarters ahead may help.
Bigger drug firms with more resources are vying to develop an MRNA-based vaccine candidate against SARS-COV-2. For example, Pfizer (NYSE:PFE) posted early positive data from its Phase 1/2 study.
According to Kathrin U. Jansen, Ph.D., Senior Vice President and Head of Vaccine Research & Development the company is “encouraged by the clinical data of BNT162b1, one of four mRNA constructs we are evaluating clinically, and for which we have positive, preliminary topline findings.”
Regeneron (NASDAQ:REGN) won a U.S. government contract worth $450 million. Under OWS, the funding will support Regeneron’s REGN-COV2 cocktail. This is an antibody the company made as well as derived by isolating from recovered COVID-19 patients. AbbVie (NYSE:ABBV) and Eli Lilly (NYSE:LLY) are also developing antibody therapies.
Without any revenue, investors do not have the usual financial models available for estimating the company’s fair value.
Alternatively, five analysts offer a one-year price target. The average price target is $101.20, according to Tipranks. This is above the fair value estimate from Stockrover. Based on enterprise value to sales, the stock is worth almost $87.00.
Novavax needs to post positive earnings starting in 2021 to justify its future value.
As the earnings forecast implies, everything depends on the company reporting positive clinical results and bringing a vaccine to market. In the weeks ahead leading to the study results, expect increasing trading volatility at the very least.
Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities.