Novavax (NASDAQ:NVAX) is once again making headlines, and this time positive ones. NVAX stock has rallied 11% in the past two days following news that the company finally submitted its Covid-19 vaccine for authorization with U.K. regulators.
Novavax’s vaccine holds a tremendous amount of potential. For all of its promise, though, the company has experienced some big stumbles in bringing it to market. A recent Politico report highlights manufacturing issues. According to unnamed sources, Novavax is struggling to meet regulators’ quality standards and delivering vaccine batches with purity levels of only around 70%.
The company has also delayed filing for emergency use authorization (EUA) in the United States multiple times, most recently in early August.
These stumbles have cost shareholders. Even after this week’s pop, NVAX stock is down 55% from the high made in early February and 35% in the past month alone. At current prices, though, NVAX stock offers an attractive opportunity for long-term investors.
Huge Opportunity Remains for Novavax
Novavax’s Covid-19 vaccine is a protein subunit vaccine rather than a messenger RNA-based vaccine like the ones developed by Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA). It is made with lab-grown replicas of the spike protein that covers coronavirus meant to stimulate the immune system. This more traditional way of developing vaccines has been used for years, with other examples including the vaccines for HPV and whooping cough.
Compared to the authorized mRNA vaccines, Novavax’s vaccine has been shown to be more effective and have fewer side effects.
In the application submitted to U.K. regulators, the company noted that late-stage trials for the vaccine “demonstrated efficacy of 96.4% against the original virus strain, 86.3% against the Alpha (B.1.1.7) variant and 89.7% efficacy overall.”
Phase 3 trials in the U.S. and Mexico also yielded strong results, with the company saying its shot “demonstrated 100% protection against moderate and severe disease [and] 90.4% efficacy overall.”
Novavax’s vaccine can also be stored at refrigerated temperatures. This gives it another advantage over authorized vaccines, which must be stored at sub-zero temperatures. This will make for easier transport of the vaccine to low- and middle-income countries, which have much lower vaccination rates. In fact, only about half of the world’s population is vaccinated, meaning a huge potential market remains.
In addition to the U.K., Novavax has submitted EUA filings with regulators in India, Indonesia and the Philippines. However, all eyes remain on whether the company can get the nod in the United States.
After multiple delays, management now says it plans to submit its vaccine to the Food and Drug Administration before year end.
Novavax Improves Its Liquidity Position
Novavax appears to be in a better spot after struggling with liquidity issues. It ended the second quarter with $2.1 billion in cash, up from $806 million at the end of 2020. As the company noted in its earnings release, its increased cash position was due in large part to $1.1 billion in payments under advance purchase agreements for its vaccine.
The company also raised $565 million through at-the-market stock offerings during the first half of the year. Of course, raising cash through equity issues leads to dilution for existing shareholders. Total shares outstanding grew by 163.7% during the past year.
But a strong cash position provides Novavax with ample capital needed to undergo vaccine development and production. And I have a feeling investors won’t mind too much if NVAX stock delivers triple-digit returns on a U.S. approval.
The Bottom Line on NVAX Stock
Some argue Novavax is late to the vaccine party. I think Covid-19 is an endurance contest that Novavax may just win.
The world is waiting for an alternative to the mRNA vaccines to be approved and Novavax has the most likely candidate. With filings submitted to multiple regulators, NVAX stock has a number of potential positive catalysts.
The company has inked several advance purchase agreements for its vaccine and has said its annual production capacity will reach 2 billion doses in 2022.
The manufacturing hiccups have surely not been fun for existing shareholders. But anyone considering selling may want to take a wait-and-see approach. NVAX stock looks like an outstanding prospect at current prices given its potential upside.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.