With the share price of vaccine developer Novavax (NASDAQ:NVAX) stock running higher, is now the time for investors to take a position?
NVAX stock jumped 12% on Sept. 16 to $123.46 a share after the company announced an agreement with the Serum Institute of India that effectively doubles its potential production capacity of a Covid-19 vaccine. The Gaithersburg, Maryland-based company says the deal gives it the ability to produce 2 billion vaccine doses a year.
That news, coupled with growing optimism that a vaccine will be available for mass distribution within the next six months, sent Novavax’s stock sharply higher. Between Sept. 10 and Sept. 16, the company’s share price rose 32%.
While investors might be tempted to jump on the NVAX bandwagon in hopes of riding the company’s stock to big gains, it is important to remember that we’ve seen this type of upsurge before, and seen the stock deflate after a big gain.
A 4,155% Run-Up
At the start of trading in January this year, NVAX stock was changing hands at $4.45 a share. It was a penny stock. In August, the share price hit an all-time high of $189.40, marking a 4,155% run-up. Returns don’t get much better than that. However, Novavax stock deflated and fell to $85 a share over the last month before its recent resurgence.
Like many vaccine manufacturers, the stock’s fortunes tend to rise and fall with the latest developments regarding a Covid-19 vaccine. The stock got a bump after AstraZeneca (NYSE:AZN) halted its vaccine trial. Regardless of the daily gyrations, it’s safe to say that the stock’s biggest run has already occurred.
That said, Novavax is a serious contender in the race to bring a Covid-19 vaccine to market. The company’s vaccine candidate is called “NVX-CoV2373, and the company entered a phase two clinical trial with it on Aug. 24. This trial involves about 1,500 participants and will test the safety of the vaccine. Results should be known in the fourth quarter of this year.
Perhaps equally important is the fact that Novavax has been exceptionally good at locking up lucrative contracts with governments around the world for its Covid-19 vaccine. The U.S. government awarded Novavax $1.6 billion to produce as many as 100 million vaccine doses by year’s end. The government of neighboring Canada has an in-principle agreement with Novavax for it to supply up to 76 million vaccine doses. And, the company has reached an agreement with the British government, which will purchase 60 million doses of the Novavax vaccine.
These agreements have left Novavax flush with cash. In total, the company has received about $2 billion in funding from various sources since the spring.
Of course, the question facing the dozens of companies that are seriously pursuing a Covid-19 vaccine is what will they do if they are not successful in commercializing a vaccine and bringing it to market? In the case of Novavax, the company also has in development NanoFlu, a flu vaccine for adults 65 and older.
NanoFlu performed well enough in a recent phase three clinical trial that the U.S. Food and Drug Administration (FDA) granted it fast-track designation, which expedites the review process. Given the results of its phase three clinical trial and the vote of confidence from the FDA, Nanoflu looks very likely to earn approval and make it to market.
And NanoFlu could be a game changer for Novavax and NVAX stock. The company estimates that the market opportunity for NanoFlu is $2 billion in the U.S. alone. Globally, NanoFlu’s market is forecast to be north of $5 billion.
Having this flu vaccine in the pipeline lessens the company’s reliance on scoring a home run with its Covid-19 vaccine. Should both vaccines be commercialized, it would change the fortunes of Novavax and its shareholders.
The Bottom Line on NVAX Stock
There’s a lot to like about Novavax and the direction that the company is headed. The company is certainly one of the leaders in terms of developing a Covid-19 vaccine and governments around the world are lining up to secure a vaccine supply from the company. Additionally, Novavax’s other vaccine contender, NanoFlu, looks very promising and could prove to be lucrative for the company.
Analysts remain extremely bullish on NVAX stock. The five analysts who cover the company and have 12-month price forecasts for Novavax have a median price target of $257 a share, with a high estimate of $290 and a low estimate of $105. The price targets make Novavax stock look like a bargain at current levels.
Given its undeniable potential and long-term growth prospects, NVAX stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.