This article was updated on May 11 to reflect the fact that Larry Ramer held a short position in Ocugen on the date of publication.
I believe that Novavax (NASDAQ:NVAX) is worth buying following the recent downturn in NVAX stock, as the concerns about patent waivers on coronavirus vaccines appear to be quite overblown. Further, it appears that the U.S. government is prepared to send many doses of Novavax’s vaccine to nations such as India that are having trouble containing the pandemic.
Importantly, Washington’s statements and actions strongly suggest that it remains committed to purchasing a significant amount of Novavax’s vaccine. Further, the company is well-positioned to sell its jab to many other countries.
The Concerns About Patent Issues Are Overdone
Largely due to the Biden administration’s decision to support waiving patent protections for coronavirus vaccines, NVAX stock has tumbled recently. During the week that ended May 6, it sank 16.7%.
But for four main reasons, I do not expect the patent waivers to negatively impact Novavax’s vaccine business in the next few years.
First of all, Reuters reported on May 7 that “experts say waivers could take years to negotiate, and would not address the immediate need to manufacture more doses fast.” As a result, any waiver (which I don’t expect to materialize) would likely not hurt Novavax’s top and bottom lines for at least a year or two. Further, many developing and developed nations are likely going to realize that a waiver would not help deal with the current emergencies, so they will probably see other solutions instead.
Secondly, France, Germany, and “some EU officials” are opposed to a waiver. In the face of tough opposition from the EU’s largest nations, I think it would be very difficult for a patent waiver to be approved. The EU, after all, has a very powerful voice in world affairs.
The third reason is related to my previous assertion. Specifically, I doubt very much whether the Biden administration, which strongly prefers to coordinate with U.S. allies, would look to strongly oppose France and Germany on this issue.
And finally, since the Biden campaign received a great deal of support from large pharmaceutical companies, I don’t think that the Biden administration will have the stomach to continue opposing the sector on this issue.
Upbeat Signs on Novavax’s Vaccine
As part of Operation Warp Speed, the U.S. government’s initiative to launch coronavirus vaccines, Novavax received a $1.6 billion order for 100 million doses of its jab. And while the Biden administration recently pulled funding from Inovio (NASDAQ:INO), another small American company that has developed a coronavirus vaccine, it has not done the same to Novavax.
Meanwhile, on Apr. 27, President Joe Biden was quoted as saying:
“The problem is right now we have to make sure we have other vaccines like Novavax and others coming on, probably. And I think we’ll be in a position to be able to share vaccines, as well as know-how, with other countries who are in real need.”
Reading between the lines, I think the president was saying that the U.S. would both send doses of Novavax’s vaccine to other countries and stockpile it so that America will have extra doses of vaccines available in case they are needed later this year.
Also importantly, unlike Ocugen (NASDAQ:OCGN), which I am shorting, Novavax has said that it hopes its jab will be approved in a specific timeframe. Specifically, Novavax CEO Stanley Erck has stated that the company believes that the FDA could grant Novavax an Emergency Use Authorization in May. Additionally, Erck said that the company would submit the data on its vaccine to the agency during the current quarter. (According to Barron’s, The Washington Post recently reported that Novavax would not file papers for an EUA until next month).
Novavax Will Obtain a Great Deal of Revenue From Overseas
Also unlike Ocugen, which can only generate revenue from U.S. sales of the Covaxin vaccine, Novavax is well-positioned to obtain revenue from outside the U.S. The U.K. has agreed to buy 60 million doses of Novavax’s vaccine, while Australia, Canada, the EU and New Zealand are also reviewing the company’s jab. Ultimately, I believe that many developed and developing nations, lured by the shot’s generally strong data and the FDA’s likely approval, will look to buy the vaccine.
The Bottom Line on NVAX Stock
The evidence strongly indicates that the patent waiver matter is a “nonissue,” while Novavax has many strong, upcoming positive catalysts. As a result, I think that the shares are very attractive at their current levels.
On the date of publication, Larry Ramer held a short position in OCGN.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.