The race to find a vaccine for the novel coronavirus involves several biotechs looking to turn their fortunes around. Although Novavax (NASDAQ:NVAX) is a part of this group, it’s also not a one-trick pony. The case for NVAX stock is backed by its promising influenza vaccine along with its Covid-19 vaccine candidate.
However, despite this promise, its 2,584% year-to-date gains are outrageous. As such, it’s best to let its price drop before investing in it.
Phase 1 data for NVX-CoV2373 (its Covid-19 vaccine) showed that it induced a potent antibody and T-cell response among participants. Moreover, it began Phase 2b of its trials last week, pushing it ever so close to the finish line. With its positive results so far and its strong financial position, I feel Novavax will emerge a winner in the coronavirus vaccine race.
Is Nanoflu Another Ace Card for Novavax?
Novavax had a forgettable 2019, after failing to deliver on its respiratory syncytial virus (RSV) vaccine candidate again. As a result, NVAX stock shed almost 90% of its value last year.
Thankfully, the company had its influenza vaccine, NanoFlu, which it hoped would turn its fortunes around. In January 2019, Novavax announced positive results from Nanoflu’s phase 2 study and initiated phase 3 last October.
Nanoflu passed its final stages of clinical trials with flying colors and plans to follow a fast-tracked approval path aggressively. Novavax’s CEO Stan Erck stated that the vaccine would be “a game-changer for the prevention of influenza.”
Novaflu targets older adults, those 65 and above, which is a market of greater than $4 billion. If the company can gain a conservative market share of say 25%, it stands to make $1 billion annually.
Better Than Expected Second-Quarter Results
The coronavirus vaccine maker recently announced better than expected vaccine results for its second quarter. Its losses per share were 30 cents, which is significantly lower than analyst estimates of 51 cents per share. Additionally, revenues were 25% higher than analyst estimates at $35.5 million.
Last month, Novavax announced the U.S. government, under its Operation Warp Speed program, had committed $1.6 billion in funding its coronavirus vaccine development.
Analysts expect a bumper second half of the year, with projected earnings per share of $7.24 compared to a loss of $5.88 per share in 2019. Similarly, revenues are expected to be around $900 million, a massive improvement from the $20 million it made in 2019.
Novavax reported positively on the phase 1 portion of NVX-CoV2373 vaccine trials and has begun phase 2b in South Africa. The success of the vaccine trials has attracted investments from some of the most influential groups at this time. The Bill & Melinda Gates Foundation is supporting phase 2b of NVX-CoV2373’s trials with a $15 million grant.
Moreover, The Coalition for Epidemic Preparedness Innovations will also fund the manufacturing doses of the vaccine for the trial. Additionally, it also secured $1.6 billion in funding to cover its phase 3 trials under Operation Warp Speed.
Puzzling Valuation
It’s been a stellar year for biotech stocks. However, NVAX stock’s dumbfounding growth raises questions about its valuation. You’d expect Moderna (NASDAQ:MRNA), a major player in the Covid-19 vaccine race, to have had a similar growth pattern. However, MRNA stock has risen 367.4% compared to NVAX’s growth of more than 1,800%.
We can observe the spike in the price of NVAX stock between mid-January and February when it announced positive results of Nanoflu. However, the bulk of the growth is after April, when Covid-19 completely engulfed the world.
So we are essentially looking at the potential of the two companies with regards to their Covid-19 vaccine candidates. Moderna’s vaccine candidate is in phase 3, much closer to release than NVAX’s vaccine candidate, which just began Phase2b last week. Moderna also announced its supply agreement of a 100 million initial doses with the U.S. government. Hence, Moderna is considerably ahead in the Covid 19 race compared to NVAX, which makes the latter’s growth unjustifiable. NVAX stock has already shed 13.9% of its value this month, which is likely to be the start of its pullback.
Final Word on NVAX Stock
There are a lot of reasons why you should invest in NVAX stock at this time. It has two game-changers in its product pipeline, which could generate billions of dollars for the company. It has enough in the tank to see the development of each of its vaccine candidates to the end.
However, it’s incredibly overpriced at this time, and it’s best for investors to wait until it comes down to an acceptably low level.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. He does not directly own the securities mentioned above.
