Few companies have done as well for investors in 2020 as Novavax (NASDAQ:NVAX).
The stock began the year below $5 per share. Then COVID-19 came to America. A vaccine specialist, Novavax quickly issued a press release saying it had a vaccine candidate for the coronavirus called NVX-CoV2373.
Novavax is one of several companies pursuing a COVID-19 vaccine under the Trump administration’s “Operation Warp Speed” program. Among the other companies that received contracts under the program were Pfizer (NYSE:PFE), AstraZeneca (NYSE:AZN), Johnson & Johnson (NYSE:JNJ), Glaxo SmithKline (NYSE:GSK), and Moderna (NASDAQ:MRNA).
It’s exalted company.
A History of Failure
It is especially exalted company given Novavax’ history of failure.
Before COVID-19 arrived, Novavax had developed two vaccines which failed in two separate Phase 3 trials. These vaccines were called ResVax. The first failure, in 2016, resulted in the company laying off 30% of its employees. The second resulted in a 1:20 reverse stock split, which let NVAX stock keep trading on the Nasdaq Exchange.
Whenever the company gets some good news, CEO Stanley Erck does raises money by issuing more shares of its stock. He announced he was selling more shares of newly issued stock this month for $500 million. He has become a regular guest on TV. And Erck recently sold 29,112 shares of his own personal Novavax shares for about $110 each, netting $3.2 million.
InvestorPlace contributor Will Healy profiled Novavax as a penny stock in June 2018. Despite its relatively recent penny-stock status, it received more than $2 billion of funding to develop a vaccine for the coronavirus.
What Novavax Has
Besides a flair for publicity, Novavax mainly has an adjuvant. It’s called Matrix-M, and it was acquired by Novavax, along with the Swedish company that had developed it, in 2013. An adjuvant increases the potency of a medicine, allowing more people to be treated with it.
In contrast to the Pfizer vaccine, Novavax has said its product can be stored with existing refrigeration technology. The Pfizer vaccine must be stored at –70 C. Moderna’s vaccine must be stored at –4 C.
All of this assumes that Novavax’s vaccine works. The company has previously developed shots that failed Phase 3 trials.
Given how dependent Novavax is on a single vaccine and the government’s largesse, you may think it’s remarkable that the stock has done so well.
The truth is that the shares haven’t done that well. They peaked in mid-August at over $170 and have generally headed lower since. Novavax has gone to some lengths to keep the stock afloat. For instance, it released the details of its federal contract ahead of the government. The contract gave its vaccine candidate “fast track” designation.
The Bottom Line on NVAX Stock
Novavax has a market cap of nearly $6 billion because it has taken advantage of a desperate government.
Unlike other COVID-19 plays, such as Moderna, which has a unique technology involving Messenger RNA, NVAX stock is entirely dependent on the company’s COVID-19 vaccine. Without it, this would be the penny stock of a wily promoter whose hype machine has failed to deliver in the past.
COVID plays are all about momentum, not revenue. Novavax’s management gave itself $100 million in stock options in April after its vaccine candidate had advanced to a Phase Two trial, But at the height of the panic, that achievement was not too difficult.
If I had a profitable position in Novavax, I would sell it.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn.