Novavax May Profit From Life in the Slow Lane

Biotech companies involved in finding a vaccine or therapeutic for Covid-19 have been among the most popular, and volatile, stocks of 2020. Novavax (NASDAQ:NVAX) is no exception. NVAX stock is up near-2,000% in 2020. But that’s down nearly half from where it has been.

Novavax (NVAX) logo surrounded by medical supplies

Source: Ascannio/

Novavax is one of the companies receiving funds from Operation Warp Speed (OWS). In fact, it’s receiving approximately $1.6 billion in funding to launch its Covid-19 vaccine candidate. And that’s where the story starts.

There are four types of Covid-19 vaccines in clinical trials: traditional, subunit, viral vector and nucleic acid. The Novavax candidate is of the subunit type. In layman’s terms, the vaccine is one step removed from the traditional approach to vaccine creation.

What’s in a Name?

To put it lightly, there is a healthy dislike for President Donald Trump in much of the nation. Perhaps the mildest complaint is his knack for speaking in superlatives. So whether intentional or not, Operation Warp Speed sounds like the biotech equivalent of “Make America Great Again.” It sounds boastful and, without context, it can sound reckless.

But I’ll give the vaccine skeptics a slight pass. They are concerned that a vaccine will be rushed to market without fully understanding its safety and effectiveness. In fact, a Pew Research survey published in September cites that 77% of Americans hold that opinion.

It shouldn’t be that surprising then that a mere 21% of respondents said they would definitely take a vaccine once it is available. That’s about half the amount that told Pew they would definitely take the vaccine when asked in May.

But fortunately OWS is only cutting financial corners. That is, taking the risk premium behind vaccine developers preparing a vaccine before it is out of clinical trials. If the vaccine fails in late-stage trials, the company will stay whole. If it passes, there are millions of doses of the vaccine ready to go.

No Skimping on the Science

I don’t pretend to be the most enlightened scientific mind. But I never believed Trump’s “any day now” proclamations for when the vaccine would be ready. At the same time, I also am not concerned that it is likely we will have a vaccine in record time. After all, I don’t get off my couch to change the TV channel. I have a computer in the palm of my hand every day.

Things change. The advancements in science and technology are being used in the development of a Covid-19 vaccine. This includes the ability to deliver genetic material into our cells to help replicate the vaccine and our body’s immune response. Plus, even traditional vaccine developers can skip time-consuming steps such as using chicken eggs to grow a whole virus.

Novavax Still Has Time

As I’ve mentioned before, the race for a vaccine is not a zero-sum game. The hope, and the plan, is for there to be multiple vaccine candidates. And each approved vaccine may have taken a slightly different approach to come to market.

Novavax does not have a product on the market yet. As such, it is not profitable. By themselves, neither of these is a specific reason not to invest in NVAX stock. The company has only been around about 10 years and has some promising candidates in its pipeline.

NVAX Stock Is Expensive, But May Be Worth the Risk

Biotech companies have a lot to lose if they get this wrong. In fact, concern about jumping the gun is the reason several of the phase-3 trials are taking longer than expected. That is working to Novavax’s advantage in the short term. But admittedly, if one of the other companies such as AstraZeneca (NASDAQ:AZN) or Pfizer (NYSE:PFE) get a candidate through phase-3 trials, investor dollars may flow away from Novavax more than they already have.

Even without a Covid-19 vaccine, Novavax may find success with NanoFlu, its influenza vaccine candidate. Prior to the Covid-19 pandemic, the company had a very successful phase-3 trial of NanoFlu in March. The company will likely receive approval to market the vaccine, which has the potential to deliver over $1.5 billion in sales.

Novavax is not without risk, but if you believe in the profile of its vaccine, then that reward may be well worth the risk now.

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 InvestorPlace since 2019.  

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