As recently as mid-December, I remained cautiously optimistic about Novavax’s (NASDAQ:NVAX) chances of generating future vaccine revenues. I went as far as saying, “if you’re a speculative investor, I think the risk-to-reward proposition remains high.” However, NVAX stock has lost 53% in the month since.
From now on, if I say Novavax stock is going higher, you should short it, and if I say it’s going lower, you should buy.
I know we’re in a correction to start 2022, but this is ridiculous.
At this point, the only way NVAX has a shot at $200 is if investors are shown a photograph of U.S. citizens lining up to get Nuvaxovid, the company’s vaccine candidate. Other than that, nothing else seems to matter. Here’s why.
NVAX Stock and a Muddled Story
It suddenly dawned on me as I was considering a subject for this article that part of the problem for Novavax could be that it’s fighting a battle on two fronts. We know in hindsight that didn’t work out so well for the Germans in World War II.
Fit, a health and wellness site produced by India’s The Quint, published an article recently that made me consider the issue of Novavax’s dual vaccines.
You see, for a long time, I considered Covavax (NVX-CoV2373) to be the Novavax vaccine. However, in reality, it is the brand name of the company’s vaccine licensed to the Serum Institute of India (SII).
It has the right to produce and market NVX-CoV2373 in India. It got Emergency Use Authorization (EUA) approval from the Drugs Controller General of India (DCGI) on Dec. 28, 2021.
SII also can produce and market Covavax in Indonesia and the Philippines. In addition, on Dec. 17, it got approval from the World Health Organization (WHO) to send the vaccine to low-income countries.
That’s a wide swath of territory and countries and potentially very lucrative for both organizations.
Where Does Nuvaxovid Fit?
This is Novavax’s in-house version of NVX-CoV2373 if you will. On Jan. 20, Australia’s drug regulators approved its use in the country. It is the fifth Covid-19 vaccine to gain approval since the pandemic began.
Those unvaccinated and 18 or over can get two doses of Nuvaxovid, but it cannot be used as a booster. Fifty-one million doses are on order. At a U.S. price estimate of $16 per dose, that’s $816 million in revenue.
Earlier, on Dec. 20, the European Commission (EU) and the WHO gave the thumbs up to Nuvaxovid in Europe.
However, if you read Fortune’s Jan. 11 article about 10 countries being ready to approve its vaccine, it doesn’t make it entirely clear that it’s Nuvaxovid that’s up for approval.
“In December, the World Health Organization (WHO) granted two applications to approve Novavax’s vaccine for emergency use. The first approval pertained to Covavax, the version of Novavax’s vaccine that the Serum Institute of India is producing in partnership with Novavax that will be sent to low-income countries…Days later, on Dec. 20, both the European Commission and the WHO approved Novavax’s vaccine for the European market.”
I know this is semantics, but that last sentence assumes that investors understand it’s talking about Nuvaxovid.
But you know what they say when you assume: “you make an ass out of u and me.”
The Bottom Line
The big difference between Covavax and Nuvaxovid is revenue.
According to the original supply and license agreement between Novavax and SII, SII gets to keep 50% of the revenue generated from any vaccine sales it can make with Covavax.
However, under Nuvaxovid, Novavax keeps 100% of the revenue from worldwide sales, including the U.S.
In the case of Australia, $816 million under Nuvaxovid becomes half that if sold under the Covavax brand name. It’s not an insignificant number for a company with only $1.2 billion in trailing 12-month revenue.
From where I sit, Novavax doesn’t have a vaccine problem; it cannot tell its story in a way that’s easily understandable to investors.
Owners of NVAX stock are the ones paying for this public relations snafu.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.