Novavax (NASDAQ:NVAX), a clinical-stage vaccine company, is down about $89, or 47% since its peak last month. But NVAX stock is not likely to stay down much longer. Its Covid-19 vaccine will support the next leg up.
Last month I wrote that Novavax is worth significantly more than today’s price of $101. This estimate is based on estimates of the dosage of its Covid-19 vaccine. I assumed a price of $10 and a royalty of just 5% for 2.5 billion doses delivered every two years.
Using these assumptions, Novavax will make an estimated $625 million in revenue annually. I believe the market will put a high value on this revenue, which has almost no cost. Since the patents will last between 15 and 20 years, I used a multiple of 17.5 applied to the revenue.
For example, this works out to a market capitalization of $10.94 billion (17.5 times $625 million), compared to its present market value of $6.2 billion. It also is equal to $178.72 per share since Novavax has 61.2 million shares outstanding.
Moreover, even if we discount figure this by 80% due to the time value of money, the net estimate is still $142.98 per share. That still represents a potential gain of over 40% above today’s stock price.
Recent Developments at Novavax
Recently Novavax published its early results in the New England Journal of Medicine of its Phase 1 data from the Phase 1/2 clinical Covid-19 vaccine trials. The bottom line was that the results had “reassuring safety” and also it induced antibody responses.
These responses were “numerically superior” as compared to to the human convalescent serum. This serum is from people who had recovered from Covid-19 and developed antibodies available in their blood plasma.
This is a significant development since the Journal is a prestigious, peer-reviewed medical journal.
More importantly, the company said it was now in “multiple” Phase 2 clinical trials. This essentially involves a much large sample size of people taking the vaccine than the original results.
Where NVAX Stock Is Headed
When the next set of results come out, you can expect to see another jump in the stock price, assuming everything goes to plan. The expected increase will likely take place over the next several months as its clinical trial results come out. Barring a major negative result, the vaccine is likely to propel the stock much higher.
Cantor Fitzgerald called the Novavax vaccine a “promising candidate,” according to a Barron’s article on NVAX stock. The financial magazine also says that four out of five analysts who follow the stock rate it the equivalent of a buy.
This is not a theoretical project. For example, the Financial Times reports that Novavax is one of two companies that the U.K. has signed contracts with to deliver millions of doses to it. This is why I am highly confident that my estimate for the value of this company will likely be conservative. In other words, once the results are in for the vaccine in its Phase 2 trials, it will likely sign up more potential clients.
This will raise my revenue estimates significantly above $625 million annually. That will also raise the potential valuation of the stock.
For example, if we use a $1 billion estimate, using a 5% royalty (which is likely too low), and 17.5 multiple, the valuation is $17.5 billion. Using an 80% factor ($14 billion), and assuming 61.2 million shares outstanding, that works out to $228.76 per share.
This represents a potential gain of 140% over today’s price. That is a great ROI for most investors.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Mark Hake runs the Total Yield Value Guide which you can review here.
