This Is No Time to Lack Conviction on Novavax

Novavax (NASDAQ:NVAX) is the flavor of the week in the game of the biotech roulette that’s playing out in real time. NVAX stock is up nearly 2,000% in 2020. But just a few weeks ago, the stock was up over 3,300%. Can you say profit taking anyone?

Novavax (NVAX) logo surrounded by medical supplies
Source: Ascannio/

Of course, Novavax is one of many biotech firms competing in the race for a Covid-19 vaccine. And I suspect the next month will see tremendous volatility as companies report results of their clinical trials. So, is Novavax worth taking a gamble on? I’m sitting out this round, but I’ll try to give you as much insight as I can.

There seem to be three prevailing reasons for optimism about Novavax.

First, the company was one of the larger recipients of the government’s largesse. Novavax received $1.6 billion to develop a Covid-19 vaccine. The government also was giving the company that money as an advance payment for the 100 million doses they expect to receive.

Second, the company just secured a deal with Canada to provide 76 million doses of its vaccine.

And last but not least (pay attention), Novavax has a next-generation flu vaccine, NanoFlu, that is through Phase 3 trials. Novavax could possibly be submitting an application to the FDA before the end of the year. This gives Novavax an additional bite at the apple.

Do any of these support a gain of over 2,000% for NVAX stock? Probably not. And it’s important to remember that Novavax has not produced a successful vaccine candidate in its 33-year history. Is this time different?

A Different Approach

Like Inovio Pharmaceuticals (NASDAQ:INO), Novavax does not take a conventional approach to its vaccine candidate. In the case of Novavax they are going with a subunit vaccine design. Read this article by Josh Enomoto to get a detailed description.

But essentially, Novavax is not injecting recipients with a piece of the actual virus. This is an approach that comes with both benefits and risks. However, as I mentioned when discussing Inovio recently, a novel approach may be exactly the right solution for a novel virus. Time will tell, and time is what this is about.

A Vaccine Takes Time

Ever since the words “novel coronavirus” and “Covid-19” became part of our everyday conversation, there has been talk of a vaccine. I didn’t put a lot of stock in a vaccine by Christmas then. And I don’t now. Some will say that’s being pessimistic, but I see it as being realistic. I’m one of the more optimistic people I know.

However, as the saying goes, if it was easy it would have been done already.

I understand the no-win position that President Trump is in. If you’re going to be criticized no matter what position you take, you might as well bet it all on hope.

But a vaccine is not created by executive fiat. It’s too important.

And as Enomoto writes, the market may already be factoring in the idea that a vaccine is not going to happen.

A Dangerous Time to Invest in NVAX Stock

At the onset of the pandemic, one biotech was as good as any other. The hunt for a vaccine was literally a tide that rose the stocks of any company obliquely involved. But as we get to a manufactured end of the year deadline, the shine is starting to come off the apple.

In recent weeks, we’ve seen biotech stocks move up and down sharply based on the news. And of course, it’s hard to determine how accurate the news is, and if there are agendas involved.

It’s a reason I prefer to stay off the biotech carousel. But if you’re still willing to ride, I can understand why Novavax is an intriguing play. However, I urge you to stop thinking about the vaccine as a race with one winner. It’s more important to get a vaccine right then to get a vaccine fast.

Vince Martin makes the case that being “one of many” may work against Novavax. And if you’re carrying an expectation of an additional 2,000% gain, he’s exactly right. But if you’ve been on the ride this long, you’re just looking to keep your gains. Novavax getting a seat at the table makes that more likely. But if you’re going to bet on NVAX stock, you should be prepared for a bumpy ride.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. 

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