The Pfizer (NYSE:PFE) vaccine has started making its way across the U.S., and that’s important news for anyone on the front lines dealing with the novel coronavirus. While Pfizer was first to the gate, Novavax’s (NASDAQ:NVAX) chances of participating in the vaccine process looks very promising, and that’s good news if you own NVAX stock.
NVAX Stock Up 73% in November
Anytime a stock gains 73% in a single month, it’s only natural that investors start to panic that it’s gone too far, too fast, leading to a big letdown in the following month. Halfway through December, it has lost about 13% of its value.
But considering it’s up 2,937% year-to-date, I don’t think there’s a lot of complaining from long-time Novavax shareholders. Heck, CEO Stanley Erck exercised 52,317 stock options in mid-November at an average price of $37.14 per share and turned around and sold them at prices between $87.20 and $93.61, netting the CEO more than $2.8 million in pre-tax profits.
Even better, he still held 62,993 shares worth $7.9 million at current prices. At the beginning of 2020, the same Novavax stock was worth $279,000.
Bill Gates appeared in an interview with CNN’s Fareed Zakaria in late November that touted Novavax’s vaccine’s effectiveness along with those from AstraZeneca (NASDAQ:AZN) and Johnson & Johnson (NYSE:JNJ).
That’s pretty heady company. JNJ and AZN have a combined market capitalization of $535 billion, 64 times that of Novavax.
While it’s gained an ungodly amount of ground in the first 11.5 months of 2020, 2021 could be almost as impressive.
It’s Got a Second Drug for Sale
InvestorPlace’s Lou Carlozo recently pointed out that Novavax got an additional order for 11 million doses from the Australian government to make up for it having to cancel an order for 51 million doses from CSL Ltd. (OTCMKTS:CSLLY) due to trial difficulties.
That’s on top of the 40 million doses ordered on Nov. 4. Each treatment involves a first dose and then a second dose 21 days later. Together, the two orders will enable Australia to treat almost 26 million people through Novavax. That’s the entire population.
As Carlozo states, analysts expect Novavax to report a $3.89 a share profit in the first quarter of 2021. And I’m not sure that even takes into account Nanoflu, its flu vaccine that’s awaiting commercial approval by the Food and Drug Administration.
In November, I pointed out that Novavax could be worth $4.5 billion on the back of Nanoflu alone.
“Sanofi (NASDAQ:SNY) is its biggest competitor in the flu game. It trades at three times sales. Based on $1.5 billion in NanoFlu sales, NVAX could be worth $4.5 billion. It currently trades at a valuation of $6.1 billion,” I wrote on Nov. 10.
“That means investors are valuing NVX-CoV2373 and the rest of its pipeline at $1.6 billion. That’s ludicrously cheap when you consider that Pfizer gained $15.7 billion in just the first hour-and-a-half of Nov. 9. Trading [press release about its vaccine’s effectiveness].”
That doesn’t consider 51 million doses of NVX-CoV2373 from Australia and another minimum of 225 million doses from the U.S., U.K., and Canada.
Based on a current market cap of $8.4 billion, if my $4.5-billion estimate from Nanoflu is accurate, the Covid-19 business would only be valued at $3.8 billion. I don’t see how that’s possible. In August, Barron’s estimated a single Novavax dose would cost $16. That’s $4.4 billion in sales from those 276 million doses.
The Bottom Line
In my November article, I commented that if you were one of the unfortunate people who bought NVAX stock when it was trading above $180, the news that the company’s Phase 3 clinical trial in the UK was making real progress and the U.S. and Mexican Phase 3 trials would start shortly, ought to make you feel better about its chances of being one of the lucky ones.
A month later, the Australian government’s additional order, along with the positive comments from Bill Gates, suggests that Novavax remains in a solid position to benefit from the global vaccine deployment.
As long as the news remains good, I’m not sure it makes sense to bet against Novavax at this point. I see it as a long-term buy despite the huge gains in 2020.
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.