On July 30, I suggested that Novavax (NASDAQ:NVAX), the best-performing U.S.-listed stock in 2020, had a real shot to hit $200 by the end of the year. In the six weeks since, NVAX stock is down 42%.
A swing and a miss. And a big miss at that.
To make matters worse, AstraZeneca (NYSE:AZN) announced Sep. 8 that it was pausing its clinical trial for its potential vaccine for the novel coronavirus due to one of the volunteers getting an unexplained illness. While the pause is standard procedure when this kind of thing happens in large trials, it does reiterate that all the companies in the Covid-19 sweepstakes aren’t guaranteed a victory lap.
It’s a crapshoot, indeed. So, where to from here?
With the markets backsliding at the moment, it seems very unlikely that it will get anywhere near $200 in 2020. It might not even get back to triple digits.
Recent news from north of the border suggests the company is still on the right track. Aggressive investors ought to be buying. Here’s why.
NVAX Stock Fell on News
On Aug. 31, Novavax announced that it had reached an agreement in principle with the Canadian government to supply up to 76 million doses of NVX-CoV2373, the company’s Covid-19 vaccine. Assuming two doses per person that covers the entire Canadian population.
“We are pleased to work with the Canadian government on supply of our COVID-19 vaccine, an essential step to ensure broad access of our vaccine candidate,” said Stanley C. Erck, President and Chief Executive Officer of Novavax. “We are moving forward with the clinical development of NVX-CoV2373 with a strong sense of urgency in our quest to deliver a vaccine to protect the world.”
I was confident about Novavax’s success before this announcement. As a Canadian, I have to say I’m even more so today, almost 10 days later. As Novavax stated, the vaccine is currently in multiple Phase 2 clinical trials.
Benzinga staff writer Shanthi Rexaline recently highlighted all of the supply deals the company has arranged for NVX-CoV2373. Including the most recent agreement with the Canadian government, Novavax has negotiated supply agreements for almost 1.5 billion doses of its vaccine. If successful, these agreements would be worth many billions.
Of course, Rexaline also points out that Novavax is in Phase 2b while five others, including AstraZeneca and Moderna (NASDAQ:MRNA), are in Phase 3. The company still needs almost flawless execution if it’s going to thread the regulatory needle and get emergency use authorization (EUA) or full Food and Drug Administration approval.
That’s no sure thing, hence why its share price has been losing altitude.
It’s Got the Funding
The aggressive investor ought to remember that Novavax isn’t some Johnny-come-lately pharmaceutical company. In my July article, I pointed out that it’s taken the company’s CEO nine years to get to where it is today. Stanley Erck has 33 years of experience in developing vaccines.
Success is where preparation and opportunity meet. Despite being slightly behind, the opportunity remains real. More importantly, Novavax has the funding to push through the finish line, something some of the others don’t.
“In the second quarter, Novavax said that it secured $2 billion in funding through Coalition for Epidemic Preparedness Innovations ($388 million), U.S. Department of Defense (up to $60 million), and Operation Warp Speed ($1.6 billion),” InvestorPlace’s Chris Lau stated on Sep. 8.
“In return, the company will provide the U.S. with 100 million doses of the experimental vaccine. As Novavax stock sold-off, markets forgot those funding amounts. This will give the company the capital it needs to develop and commercialize the vaccine.”
As my colleague points out, NVAX stock is not for the faint of heart.
That said, I continue to believe that Novavax remains an underdog worth betting on. Wisely, it’s laid the foundation for future business despite not having an actual vaccine to supply its partners.
But when you think about it, how much different is the current development cycle from a normal one, other than speed to market? My guess would be not much.
I probably jumped the gun on a $200 share price prediction by the end of 2020. Barring good news in the next month or two on its Covid-19 vaccine, $200 will have to wait until sometime in 2021.
However, it’s also important to keep in mind that Novavax isn’t a one-trick pony. It also has NanoFlu ready to go from a commercialization standpoint. Erck calls it a “game-changer for the prevention of influenza.”
With the fall expected to be a one-two punch of Covid-19 and the flu, any treatment that can help alleviate one or both is going to be very useful in keeping people healthy and alive.
As I said in my last article, until I hear bad news about NVX-CoV2373, I believe Novavax has a real shot at the big time. And even if it doesn’t make the cut, its future looks very promising.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
