When I started writing about the COVID-19 vaccine race I was skeptical about Novavax (NASDAQ:NVAX) stock.
I called it the “ultimate vaccine play,” because, unlike leaders Moderna (NASDAQ:MRNA), BioNTech SE (NASDAQ:BNTX) or Pfizer (NYSE:PFE), Novavax was betting everything on success against the virus.
As those other companies approached Phase Three trials, while Novavax trailed, I suggested you sell.
That was bad advice. Since last November the price, and value, of Novavax are up 195%. Despite finishing behind the others, it has finished, and it has won.
Novavax nearly topped last year’s $475 million in revenue during the first quarter, when it brought in $447 million. Analysts expect another $586 million for the second quarter.
A Closer Look at NVAX Stock
Now that approval for its vaccine seems assured, with 100% effectiveness against severe cases, revenue for 2022 is projected at $5.23 billion, with $30.21 per share of earnings.
If it hits those projections, Novavax is cheap at today’s price. At its current price, you can get it for just 2.6 times next year’s sales and about six times next year’s earnings.
The problem is that the company is finishing this race like an early 20th-century marathoner. It’s exhausted, with $2 billion of cash on the books it’s still burning at the rate of $418 million in the first quarter.
Worse is that the most profitable market for vaccines, the U.S., is now spoken for. Moderna and Pfizer have developed big reputations while other vaccine producers, like Johnson & Johnson (NYSE:JNJ) and AstraZeneca (NYSE:AZN), lag behind.
The Novavax mission now changes to producing the vaccine in quantities and getting shots in arms.
Novavax is aiming at international markets. In May it signed an advance purchase agreement with Gavi, the vaccine alliance, to produce its vaccine through the COVAX facility.
It has a memorandum of understanding to expand in South Korea. The vaccine itself was tested in Mexico, as well as the U.S. There’s an agreement to produce vaccine for Japan through Takeda Pharmaceutical (OTCMKTS:TKPHF).
Our Louis Navillier believes NVAX stock can still be a winner. Don’t worry about the cash burn, he writes, thanks to support from the U.S. government and the Gates Foundation.
Don’t worry about production, thanks to an agreement with the Serum Institute of India. Don’t worry about the U.S. market, because there are plenty of others. The folks at Tipranks are also positive, with 4 of 6 analysts saying buy and a price target 38% higher than the stock is now.
The question is how profitable this will be. The World Trade Organization wants a TRIPS Waiver, waiving intellectual property rights on COVID-19 vaccines. Novavax opposes the waiver, but the U.S. Trade Representative, on behalf of the Administration, has expressed support for it.
The Bottom Line
Because the Novavax vaccine uses protein technology, it doesn’t have the cold storage requirements of MRNA-based vaccines.
Thanks to vaccine hesitancy in the U.S., and the rise of more contagious and virulent variants of COVID, there remains a big opportunity. It’s increasingly likely that Americans will need boosters against new variants, and most of the world remains unvaccinated.
There remain risks. I suspect current 2022 earnings estimates are overoptimistic. There is going to be pushback on vaccine pricing. But that’s why Novavax stock is so cheap right now. If there weren’t risks, you couldn’t afford it.
Odds are you can still make money here. This pandemic has legs.
On the date of publication, Dana Blankenhorn held LONG positions in AMZN and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.
