Maryland-based vaccine maker Novavax (NASDAQ:NVAX) has been one of 2020’s high-flying stocks. Closing out 2019 at under $4, NVAX stock hit $178.51 on Aug. 10. That’s a whopping gain of nearly 4,400% in just eight months.
The reason for that remarkable performance was the novel coronavirus pandemic. More specifically, Novavax’s Covid-19 vaccine efforts. However, since closing at that high NVAX has slumped, dropping 37%. Once again, the effort to release a coronavirus vaccine is behind the big movement in Novavax shares.
This time, instead of optimism that Novavax could be first to market with a Covid-19 vaccine driving the big price movement in NVAX shares, it’s concern that the company may be left behind.
The Race For a Coronavirus Vaccine
The huge gains made by NVAX started in May. Novavax was awarded $388 million in funding from the Coalition for Epidemic Preparedness Innovations (CEPI). In June, the U.S. Department of Defense kicked in $60 million to help pay for production of 10 million vaccine doses. During May and June, NVAX steadily climbed, for nearly 350% growth.
Shares in Novavax really took off in July (jumping 32% in a single day), on the announcement that the company had been awarded $1.6 billion by the U.S. government as part of “Operation Warp Speed.” The money was aimed at funding a Phase 3 clinical trial and production of 100 million doses of a Covid-19 vaccine. Delivery of the vaccine under the program targets those doses starting to arrive in the fourth quarter, with full delivery by next February.
All told, Novavax had been on the receiving end of roughly $2 billion in funding for the testing, approval, and production of its NVX-CoV2373 Covid-19 vaccine.
However, on Aug. 10, the rug was pulled out.
Novavax reported its second quarter earnings on that day. The company narrowed its losses to 30 cents per share (compared to a loss of $1.69 a share last year). Revenue of $35.54 million was a big year-over-year improvement, but it missed Wall Street estimates. That triggered a steep drop in NVAX stock. After closing at $178.51 on Aug. 10, it dropped to $124.42 on Aug. 12. That’s a 30% drop in just two days.
After a brief recovery NVAX has continued to slide. The big concern now? News broke last week that the Trump administration may fast-track a rival vaccine in order to get it in production in time for the election. AstraZeneca (NYSE:AZN) has denied the report, but Novavax stock has still felt the impact.
NanoFlu
Even if Novavax’s Covid-19 vaccine effort were to sputter, the company has another promising product in development: NanoFlu.
According to the CDC, over the past decade the annual flu season in the U.S. has resulted in 140,000 to 810,000 hospitalizations and between 12,000 and 61,000 deaths every year. And those are U.S. numbers only. Influenza is a global issue.
NanoFlu is intended to boost the effectiveness of annual flu vaccine in adults who are 65 and older. Current vaccines provide efficacy of just 12% in older adults. Delivering better results will cut the annual influenza carnage and reduce the pressure on hospitals during flu season. And Novavax has it pegged as a $4 billion market, globally.
In March, the company reported successful Phase 3 trials of NanoFlu, opening the door to apply for FDA approval of the vaccine. It’s no coincidence that NVAX stock also began its climb in March.
Bottom Line on NVAX Stock
The Novavax stock story in 2020 has been inextricable from the race for a coronavirus vaccine. It’s far from alone in that race, and the prospect of being beaten to market has taken a toll on NVAX stock. However, what investors sometimes forget is that there doesn’t need to be a single winner.
Being first to market doesn’t mean all the other vaccine candidates are abandoned. Different vaccines invariably have different success rates. And given that the coronavirus is a global pandemic, the market is huge. Multiple vaccines are likely to be used in order to produce sufficient quantities.
So not being first to market with a coronavirus vaccine is no reason to panic.
In addition, Novavax has what could ultimately prove to be an even more valuable vaccine in NanoFlu. Influenza is a yearly event — not a (hopefully) one-time pandemic. Having a more effective flu vaccine for the most vulnerable populations would be a permanent revenue generator.
All things considered, the August slump represents a buying opportunity for Novavax stock. The investment analysts tracked by CNN Business agree. Its median 12-month price target for NVAX is $257 (over 125% upside), and the stock has a consensus buy rating.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
