The Red Ink on Novavax Only Hides Its True Potential

Among the leading candidates for a novel coronavirus vaccine, Novavax (NASDAQ:NVAX) is arguably the most compelling. In my opinion, the biotech firm is poised to receive a vaccine approval, thereby bolstering the bullish narrative for NVAX stock. Still, if you looked at its trajectory on Monday, you probably wouldn’t get many positive vibes.

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

If you’ve been following the headlines, you’ll know that Novavax has been under pressure due to competing Covid-19 vaccine candidates. Interestingly, the two vaccines that pose the biggest headwinds for NVAX stock are based on messenger RNA (mRNA). The main idea here is to insert bioengineered mRNA – which carries the “recipe” for antibody production – into a patient’s cells.

Furthermore, both leading mRNA vaccines are purported to be incredibly effective, to the tune of over 90%. According to the New York Times, “If the results hold up, that level of protection would put it on par with highly effective childhood vaccines for diseases such as measles.”

Based on that assessment, you might be tempted to abandon NVAX stock. However, prospective investors ought to take a closer look at the fine print.

First, the novel coronavirus represents a dynamic crisis. There’s nothing in the rule book that states only one vaccine will receive approval. Second, the claims about the mRNA-based vaccines come from the developing companies, not from peer review. As the participant base widens and additional tests are conducted, the effectiveness could decline.

Third and most importantly, mRNA vaccines have always been “laboratory queens.” While the Washington Post notes that these nucleic-acid-based vaccines offer quick design and manufacturing advantages, they come with crucial trade-offs. Safety is a paramount concern because large-scale human distribution has never been done. Also, there are questions about long-term efficacy.

In other words, don’t count out NVAX stock yet. Instead, the recent hit that it took could translate into a buying opportunity.

NVAX Stock Wins on the Holistic Front

In many cases, Wall Street tends to overreact in the healthcare space. I think that’s exactly what’s happening with the volatility in NVAX stock. Sure, competing vaccines have made progress against Novavax’s NVX-CoV2373 subunit coronavirus vaccine. But that progress is mostly confined on paper.

One of the biggest benefits for Novavax is that its candidate has been peer-reviewed by the New England Journal of Medicine, “in which NVX‑CoV2373 demonstrated a reassuring safety and reactogenicity profile and induced robust antibody responses numerically superior to that seen in human convalescent sera.”

Further, Novavax utilizes a proven methodology incorporating protein subunits of SARS-CoV-2. It’s a similar process to traditional vaccines. However, rather than injecting weakened or inactivated forms of the target virus, Novavax injects protein fragments or subunits; hence the name.

Theoretically, it’s a safer approach than traditional vaccines and is especially appropriate for those with compromised immune systems. Given that Covid-19 poses a steeper threat for those with underlying conditions, Novavax gets the edge for a contextually superior safety profile.

Most importantly, NVAX stock is levered to a holistic solution. Not only has peer review demonstrated the effectiveness of NVX-CoV2373, it’s also logistically easier to distribute. Keep in mind that mRNA-based vaccines typically require storage at freezing temperatures to maintain structural integrity. Unfortunately, that’s going to hinder efforts at global distribution because not every healthcare system is up to our standards.

In fact, some hospitals in the U.S. “don’t have enough ultracold storage capacity to make a large vaccination campaign feasible, or even possible” in certain areas, according to Fiercepharma.com. Essentially, a vaccine approval for specific mRNA vaccines could end up becoming a Pyrrhic victory – a win for the laboratory but not necessarily one for society.

In contrast, Novavax doesn’t have the same challenges because subunits are much easier to store. According to the company’s website, NVX-CoV2373 “has a favorable product profile that will allow handling in an unfrozen, liquid formulation that can be stored at 2°C to 8°C, allowing for distribution using standard vaccine channels.”

Don’t Throw in the Towel

To be sure, subunits are not perfect solutions. For one thing, they can take time to produce and may be more expensive to manufacture. Additionally, NVX-CoV2373 will likely require two doses, putting it at a disadvantage to competing vaccines that offer one-dose regimens.

Still, for the combination of efficacy, safety and convenience, Novavax checks off more attributes than other vaccine candidates. Eventually, Wall Street will come around to the same realization. But before that happens, you can bank on NVAX stock now, especially since it’s on a discount.

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

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.


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