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Could Novavax, Inc. Be a Millionaire-Maker Stock?

By Keith Speights - Feb 16, 2018 at 5:04AM

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Novavax is hot right now -- but just how much hotter could this biotech stock get?

All it takes for a stock to turn an initial investment of $10,000 into a cool $1 million is to double -- roughly seven times in a row. And that would give you several hundred thousand dollars left over.

That might seem like a tall order... and it is. However, it's been done before. In fact, an initial $10,000 investment in Warren Buffett's Berkshire Hathaway back in 1964 would be worth close to $240 million today.

Novavax (NVAX 11.12%) is no Berkshire Hathaway at this point. However, the clinical-stage biotech stock is up more than 60% so far in 2018. That's a good start. Could Novavax possibly be a millionaire-maker stock at some point down the road?   

Man holding magnet attracting cash

Image source: Getty Images.

Behind the tremendous momentum

Did Novavax stock zoom higher in recent weeks because of an announcement of great clinical results? Nope. Did the small biotech announce that it was getting bought out? No again, but we're getting warmer.

The impressive gain for Novavax so far in 2018 stemmed primarily from speculation that the company might be acquired by a larger player. The two names being floated as potential suitors are GlaxoSmithKline (GSK 0.51%) and Sanofi (SNY 1.96%). Interestingly, though, the rumors of a possible acquisition don't seem to have been driven primarily by Novavax's lead pipeline candidate.

Instead, a really nasty flu season has led some to suspect that GlaxoSmithKline and Sanofi could be interested in Novavax's experimental nanoparticle-based flu vaccine, NanoFlu. GSK's Flulaval and Fluarix and Sanofi's Flublok and Fluzone vaccines currently are the leaders in the flu market. However, Novavax announced encouraging pre-clinical results for its NanoFlu vaccine in August. Those results prompted the biotech to kick into high gear to advance the vaccine into clinical testing.

Both GlaxoSmithKline and Sanofi would be natural candidates to potentially buy Novavax. GSK's growth has been hampered by stagnant and declining sales for some of its older products, and it's a similar story for Sanofi. The French drugmaker has already announced one major acquisition this year with its purchase of Bioverativ. More deals wouldn't be surprising. 

Novavax's prospects

It's important to remember, though, that NanoFlu is currently only in early-stage testing. Novavax should announce results from its phase 1/2 study any day. If the study is successful, the company wants to quickly move to a late-stage study of the vaccine.

All we have to go on right now are the pre-clinical studies of NanoFlu conducted in ferrets. In those studies, NanoFlu generated better antibody responses than did Sanofi's Fluzone and Fluzone HD vaccines. There's still a few years to go, though, before NanoFlu could potentially be approved -- and that's if everything goes well in testing.

Still, if NanoFlu succeeds in clinical testing, it definitely has tremendous opportunities. The flu-vaccine market in the U.S. and six other developed nations tops $3 billion annually. The current flu season has definitely demonstrated the need for more effective treatments.

However, Novavax has another pipeline candidate that also has significant potential. And it could be even closer to approval. 

The biotech is currently evaluating its RSV F vaccine for maternal immunization of infants in a late-stage study. Novavax expects to announce results from this study by early 2019 and perhaps by the end of this year. If those results are positive and the vaccine wins regulatory approval, the company estimates worldwide peak sales for the RSV F vaccine could exceed $1.5 billion.   

Don't count on that million

Could Novavax be a millionaire-maker stock? Don't count on it.

I'm cautiously optimistic about Novavax's chances with NanoFlu and the RSV F vaccine. There are certainly risks that things won't go well, but my view is that the biotech could score with both pipeline candidates. However, the only way Novavax could make you $1 million, in my view, is if you started with an initial investment in the six figures.

My reasoning is simple: If NanoFlu is successful in the phase 1/2 study, I expect Novavax to be acquired -- probably by GlaxoSmithKline or Sanofi, just as some have speculated. If that doesn't happen, but the RSV F vaccine is successful in the current phase 3 study, I still expect the biotech to be acquired. Either way, my projection is that the price tag for Novavax will be well below what's needed to make most investors $1 million.

Will my predictions be accurate? We'll soon find out.

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Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$57.15 (11.12%) $5.72
Sanofi Stock Quote
$51.01 (1.96%) $0.98
GSK Stock Quote
$43.75 (0.51%) $0.22

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