My last article about Novavax (NASDAQ:NVAX) was in mid-September, shortly before the company announced its partnership with the Serum Institute of India, the world’s largest manufacturer of vaccines. The company’s stock has gone sideways despite the excellent news.
I argued that while it was unlikely Novavax’s share price would hit $200 in 2020, it was worth more than $106 where it was trading on Sept. 14, the day my article was published.
In the month since, two good news pieces have come to light: First, the manufacturing partnership was announced on Sept. 15. Second, on Sept. 24, the company announced its Phase 3 trial in the UK that will evaluate up to 10,000 patients, at least 25% of the cohort from people over the age of 65.
While its shares got an initial 10% bump, they’ve fallen back slightly, providing investors with an opportunity to buy on the dip.
One of 11 groups or companies in Phase 3, September’s news tells me Novavax is in a good position to benefit from the global rollout of Covid-19 vaccines. For those investors betting on the winners, Novavax ought to be on your list.
If it’s not, you’re making a big mistake. Here’s why.
NVAX Stock Is More Than Covid-19
As I mentioned in my September article, in addition to Novavax’s Covid-19 vaccine NVX-CoV2373, it also has NanoFlu ready to go on the commercialization front, providing shareholders with a potential one-two punch.
Whether or not it ultimately provides mass quantities of its vaccine to patients in the U.S. or elsewhere, chief executive officer Stanley Erck’s 33 years of experience developing vaccines has put the company in an excellent position to benefit over the long haul.
I finished my article by stating:
“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. … 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.”
Nothing I’ve read since then has made me less confident about its chances. If anything, the odds have risen over the past four weeks.
It’s easy to focus on front runners like Moderna (NASDAQ:MRNA), who Dr. Anthony Fauci seems to mention every day, but like many horse races, the winner often comes from the back of the pack.
The NanoFlu Effect
As I’ve said, Novavax is not a one-trick pony. InvestorPlace contributor Chris Markoch recently discussed NanoFlu’s contribution to Novavax’s rising share price.
“NanoFlu will be the first vaccine that Novavax successfully brings to market. And second, NanoFlu was more effective than Fluzone in a direct comparison. Sanofi (NASDAQ:SNY) manufactures Fluzone. That means that when NanoFlu launches, it should be able to capture a fair amount of market share right away,” Markoch stated on Oct. 2.
“And as Thomas Niel wrote for InvestorPlace, this gives Novavax a higher floor than investors may imagine. Yes, the company’s stock price will drop without a Covid-19 vaccine, but having reliable recurring revenue will provide support.”
I encourage you to read Chris’s article. It does a good job explaining why Novavax is in good shape, regardless of whether NVX-CoV2373 makes the cuts.
Analysts currently have a 12-month price target of $227.60. Of course, that’s off the consensus of just five people. For it to mean something, Novavax will have to get more analysts on board.
In the meantime, all the company can do is plod along and get through the Phase 3 trial.
The Bottom Line on Novavax
NanoFlu still has several hurdles it has to jump before the company can commercially distribute its seasonal influenza vaccine for adults 65 and older.
But it will get there. When it does, as my colleague has suggested, it will have ongoing recurring revenue, proof positive that it can develop commercially viable products.
Like the credit card commercial says, that’s priceless.
I don’t often recommend biotech stocks to InvestorPlace readers. When I do, I usually attach a caveat that it’s for aggressive or speculative investors only. In this case, Novavax is worthy of your consideration regardless of your risk tolerance.
However, I’d keep the bet to 2-3% of your portfolio, to be safe. In my opinion, it’s a long-term buy.
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.
