Investors have been trading biotech stocks on the news all year. It’s been like watching a slow motion horse race play out. Novavax (NASDAQ:NVAX) stock is up over 2,500% since the beginning of the year. And if the race was simply about stock performance, NVAX would be running away from the field.
As of this writing, Moderna (NASDAQ:MRNA) is up approximately 260%. This is impressive and the stock has received a lot of attention from investors. But simply in terms of stock performance, it’s far behind Novavax.
Johnson & Johnson (NYSE:JNJ), which is considered to be the current favorite to get a vaccine to market, is basically flat for the year. Pfizer (NYSE:PFE) stock is actually down for the year.
However, despite the gamification that takes place in the market, this race has serious consequences. Just having a vaccine available is not enough. Doctors have to feel confident in administering it. Consumers have to be confident in taking it. And that means that any vaccine is likely not to be the October surprise that the Trump administration is hoping for.
Where Does Novavax Stack Up?
Of the vaccines that receive funds from Operation Warp Speed (OWS), Novavax falls in the middle of the spectrum. Let’s put it this way. Johnson & Johnson is firmly in the traditional vaccine development camp. Moderna with its nucleic acid-based messenger RNA (mRNA) candidate is perhaps the most experimental. And Novavax is smack in the middle.
The company is developing a subunit vaccine. In this approach protein fragments (subunits) of the virus get injected into the patient. Josh Enomoto wrote more about how this process works. Theoretically, it should be extremely safe. And Novavax claims its vaccine can be stored at refrigerator temperatures. This is an advantage over other candidates that have to be stored in sub-zero temperatures.
Plus, Novavax is lining up partners to help deliver the vaccine at the scale required. That’s where the funding from OWS is critical.
A key downside, as Enomoto wrote, is that it appears it will take two doses of the Novavax vaccine for proper effectiveness.
All this is to say, Novavax isn’t in the lead, but it’s not terribly far behind. In fact, the company recently began a Phase 3 clinical trial in the United Kingdom. And they expect to be starting one in the United States shortly. There’s no shortcutting this process, but the market likes to see progress.
NVAX Stock Was Rising Before Covid-19
With biotech stocks, it’s important for investors to look at the company’s pipeline. That’s true for Novavax. At this point it’s downright critical. That’s because proper risk management means considering what happens to the stock if the company is not successful in getting their Covid-19 vaccine candidate through clinical trials.
At the beginning of 2020, Novavax was trading at around $4.50 per share. By the end of February, the stock had climbed to $16. That gain of over 255% couldn’t have been due to a vaccine candidate that didn’t exist. So why all the excitement?
For Novavax stock investors, it was the company’s NanoFlu vaccine candidate for seasonal influenza. The vaccine was in a late-stage clinical trial with the results were published in March. But the good news for the company got swept under the gigantic rug of the novel coronavirus.
This is significant news. First, 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.
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.
The Bottom Line on Novavax
Are we heading down the stretch? If Johnson & Johnson has anything to say about it, we are. However the Food & Drug Administration is under loads of pressure to get this right. I don’t expect fast approval for any candidate. And that may give Novavax the time it needs to make one final push.
I believe that with NanoFlu in its pocket, the story for NVAX stock is far more compelling than simply as a play on the novel coronavirus. Analysts agree and have given the stock a price target that is approximately 50% higher than the stock price as of this writing.
However, the uncertainty of the vaccine does put a risk premium on the stock.
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 six years. He has been writing for Investor Place since 2019.
