Novavax (NASDAQ:NVAX) has had a wild ride over the past year. Prior to the novel coronavirus, Novavax was in a fight merely to remain in business. Once the company got into the Covid-19 vaccine development arena, however, everything changed. NVAX stock ran up from a low of $4 to as high as $189 in recent months.
Traders that caught the wave early made fortunes.
As is often the case with this sort of fast-moving stock, however, things can change in a hurry. Since its peak on Aug. 10, NVAX stock lost half of its value over the past month. What’s worse, it seems that the company’s vaccine may get left behind as other vaccine candidates approach commercial launches within a matter of months.
Let’s not take anything away from Novavax. Management did a great job keeping the company moving forward despite its near-death experience in 2019. And the $2 billion or so that it brought in for funding the Covid-19 vaccine was a great help. The company’s vaccine still has a shot at becoming the ultimate winner in the marketplace. However, as the odds are starting to turn against the company, traders should be careful.
Approaching the Finish Line
The race for a Covid-19 vaccine is drawing toward the close. As of the World Health Organization’s Sept. 9 vaccine overview, there are nine different Covid-19 vaccines in Phase 3 trials around the world. Among those are the well-known programs from the likes of Moderna (NASDAQ:MRNA) and AstraZeneca (NYSE:AZN).
Unfortunately for Novavax, it is not one of the nine companies that have already made it to Phase 3. Instead, it’s among the 26 companies that also have vaccine candidates but are still back in Phase 2 or earlier stages of clinical work. Novavax got a big leg up on the competition from being one of the few select companies that made it into Operation Warp Speed. But government funding was just one piece of the puzzle; Novavax still has to deliver the goods in clinical trials.
All that to say that there’s still time for Novavax to get its Covid-19 vaccine to market. But with every passing week, the window of opportunity is narrowing.
Novavax Hasn’t Been Successful Historically
Given Novavax’s high share price and market capitalization, you might think Novavax is quite a successful company. Historically, it actually hasn’t been, though.
Just last year, Novavax appeared to be heading toward extinction. The company’s previous vaccine candidate, NanoFlu, failed a pivotal Phase 3 trial. NVAX stock plummeted so low that it was threatened with delisting from the market. In fact, with shares at 35 cents, Novavax ultimately had to do a 1:20 reverse split just to keep the stock at a reasonable level.
Over the past decade, Novavax has not turned an operating profit. Its best year from a revenue perspective was 2015, when it brought in $36 million. Even then, it lost $157 million in the course of generating those $36 million of sales, thus piling up a worse than -400% operating margin. All that to say that while Operation Warp Speed saved the company for the time being, there’s not really much else here if the Covid-19 vaccine doesn’t pan out.
NVAX Stock Verdict
I gave Novavax the benefit of the doubt when misleading reports surfaced last month about the safety of Novavax’s vaccine. Unlike other smaller vaccine players such as Inovio (NASDAQ:INO), Novavax made it into Operation Warp Speed. It has a large and well-funded clinical trial for its vaccine. It is credible from a scientific background and has a reasonable shot of working.
While the science checks out, though, the economics are becoming a question mark. The issue with this Covid-19 race is that society doesn’t really need a bunch of different vaccines for the same ailment. As soon as one gets across the finish line, the value of the other rivals will drop sharply. It’s a winner-take-most market, and right now, Novavax is not giving us much confidence that it will be the fastest to market.
The company is still intriguing as it has a viable vaccine candidate that could easily be effective. Whether or not it will ever become commercially successful, however, is a less certain matter.
On the date of publication, Ian Bezek held a long position in AZN stock.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.