Up until now, I’ve been bullish on Covid-19 vaccine play Novavax (NASDAQ:NVAX). I felt its international order backlog made up for its lack of progress in entering the U.S. market. This pointed to further upside for NVAX stock, as investors were not fully pricing in future earnings.
Even with news of Merck’s (NYSE:MRK) antiviral Covid-19 pill, perceived to be something that would hurt global vaccine demand, I didn’t see it as a “game over” moment for Novavax. But now, assuming Politico’s report on manufacturing headwinds is accurate, the bull case may be waning for NVAX stock.
Now, instead of considering Novavax a vaccine play on par with the rivals that have already crossed the finish line, like Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE), this one may have more in common with plays in the “also-ran” camp, such as Ocugen (NASDAQ:OCGN) and Vaxart (NASDAQ:VXRT).
Yet, given that NVAX stock has fallen nearly 50% in the past month, any bit of positive news could cause shares to spike. This makes it a potential trading opportunity, even as it becomes a long shot in terms of crossing the vaccine finish line.
Novavax Struggles With Manufacturing Issues, Purity Flaws
According to the Politico report, which was based on three unnamed sources familiar with the company’s problems, Novavax is struggling to meet regulators’ quality standards. The Food and Drug Administration typically requires a purity level of around 90% for each vaccine batch. Novavax has been delivering batches with purity levels of around 70%, sources say.
The exposé raises further doubt that Novavax’s vaccine will receive approval in the United States. It also makes the case for a delayed international rollout. In particular, Novavax is likely to fall significantly short of the 1.1 billion doses promised to COVAX, an international consortium set up to provide vaccines to the developing world.
NVAX stock plummeted 15% in a single day following the Politico report, which makes sense. Investors are now questioning whether the vaccine maker can meet analyst expectations for $5.49 billion in sales in 2022 and $32.30 per share in earnings.
Don’t Throw in the Towel on NVAX Stock Just Yet
There is plenty to suggest Novavax will continue to stumble and fail to capture a sufficient share of the global vaccine market. Moderna, Pfizer and Johnson & Johnson (NYSE:JNJ) more or less have the U.S. vaccine market on lock. Along with AstraZeneca (NASDAQ:AZN), they also have a substantial edge over Novavax in many international markets.
Manufacturing issues and a potential antiviral Covid-19 pill only add to the hurdles the company must clear in order to generate a material amount of sales from its vaccine.
Yet, there’s still a chance Novavax will get its vaccine out in time for the pandemic to be a catalyst rather than a missed opportunity. And given the bearish sentiment in NVAX stock, any positive news could be enough to spur a double-digit percentage pop in shares.
For instance, we could see NVAX stock rally on any progess in the company’s efforts to obtain an emergency use listing (EUL) from the World Health Organization. Considering the wild moves names like Ocugen have made on just the expectation of a WHO EUL listing, you can imagine the impact obtaining one would have on NVAX stock.
We could also see shares move up sharply if the company provides any positive updates on its next quarterly earnings call, which is scheduled for Nov. 4.
The Bottom Line on NVAX Stock
Novavax appears to be a riskier play now than it did just a few weeks back. Its chances of making it to $500 per share now seem like a pipe dream. But NVAX stock may still present an opportunity for a high-risk, possibly high-reward trade.
After getting beaten down by negative headlines, sharholders could see a quick move higher in NVAX stock on any positive news.
On the date of publication, Thomas Niel 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.