Despite delays in obtaining approval for its Covid-19 vaccine, Novavax (NASDAQ:NVAX) has a competitive edge compared to its peers. The company has its production partners ready to ship its vaccine. It also initiated a clinical trial for evaluating a combination of Covid and seasonal influenza vaccines. Still, NVAX stock is poised to trade higher in the coming 12 months for more reasons than that.
Developed countries are about to push vaccine boosters. When Novavax starts selling its product, it will have a large addressable market.
NVAX Stock Waits for Japan Start
In preparation for Novavax’s eventual production, Japan’s Ministry of Health, Labour, and Welfare said that it will purchase 150 million doses of the NVAX vaccine. Takeda is establishing manufacturing capabilities to manufacture TAK-019 (also known as NVX-CoV2373). It will begin distribution in early 2022. Novavax will give Takeda the license and transfer manufacturing technologies.
Takeda will manufacture the vaccine antigen, while Novavax supplies the Matrix-M adjuvant. That’s the compound administered “alongside vaccines to enhance biological functions: creating robust and long-lasting immune responses that may allow for dose-sparing of vaccines,” according to DrugBank Online.
Novavax is relying on Takeda to complete the Japanese clinical trial. Takeda is also responsible for the regulatory submission to the country’s Pharmaceuticals and Medical Devices Agency (PMDA). While Takeda works with partners in healthcare in around 80 countries and regions, it is highly familiar with Japan’s regulations. As investors wait another four months for approvals and sales, stocks like Moderna (NASDAQ:MRNA) and BioNTech (NASDAQ:BNTX) trade at a bigger market capitalization.
NVAX stock is relatively smaller and offers better upside for investors willing to wait for the eventual vaccine approvals.
Commercialization Skills Still Needed
Cautious investors should wonder why Novavax is studying combination vaccines when it received no approvals for either one on its own. NanoFlu is still a vaccine candidate. It demonstrated significantly stronger immune responses in studies. The company may have hesitancy in focusing first on approval because of its academic mindset. Management is comfortable in studying the vaccine. It lacks a focus and the experience in commercializing the product.
Novavax may overcome those weaknesses by hiring veteran leaders with experience in commercializing drugs. The longer it waits on building a strong team, the more market share competitors gain. Still, Novavax pre-sold 150 million doses in Japan for Q1/2022.
Investors may assume that Novavax prices the vaccine at or below Pfizer’s (NYSE:PFE) and Moderna’s prices. Pfizer’s shot costs $23.15 a dose. Moderna charged $25.50 a dose. Novavax could charge $30 to $35 for the combination Covid and influenza dose and $18 to $20 for the Covid vaccine. In the latter case, Novavax will post $3 billion in sales in Japan. At a 50/50 revenue split, Novavax would get $1.5 billion. At a 70/30 split, it will book $2.1 billion in revenue in Japan alone.
Those figures suggest that waiting for regulatory approvals is just a formality. The pandemic is nowhere close to coming to an end. Even at vaccination rates of over 90% for a country’s population, semi-annual booster shots will sustain Novavax’s future revenue.
Flu-Covid Combo Considered
Earlier this month, Novavax initiated a Phase 1-2 clinical trial to study the combination vaccine for Covid-19 and seasonal influenza. It will evaluate the safety and immunogenicity, combining NVX-CoV2373 and NanoFlu vaccine candidates.
Gregory M. Glenn, M.D., president of Research and Development, said on Sept 8, “the combination of these two vaccines, which have individually delivered outstanding results with favorable safety and tolerability profiles, may lead to greater efficiencies for the healthcare system and achieve high levels of protection against COVID-19 and influenza with a single regimen.” The study will have 640 healthy adults in the range of 50 to 70 years of age. They will either all have been vaccinated at least eight weeks before enrolment or have been previously infected.
Investors are counting on a large global market for Novavax’s growth ahead. Markets are highly forgiving for delayed regulatory approvals for its vaccine. The revenue potential is far greater than the near-term downside risks.
Investors seeking exposure to Covid vaccine makers may consider Pfizer for the dividend income and growth. Moderna and BioNTech are up by too much to consider. Novavax is the next emerging biotechnology firm to grow significantly post-vaccine launch.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.