On paper, there's really no contest between Novavax, Inc. (NVAX 4.64%) and Pfizer Inc. (PFE -0.61%). Novavax has no approved products. It doesn't have a steady source of revenue. Pfizer, of course, has dozens of approved products and generates billions of dollars in revenue -- not just every year, but every quarter.
Despite all of this, Novavax has been the better-performing stock so far in 2018. And Wall Street analysts have higher expectations for the clinical-stage biotech than they do for Pfizer. Is Novavax really the better stock for investors now -- or do the analysts have it wrong?
The case for Novavax
With clinical-stage biotechs, the investing thesis is always about the pipeline. And it's Novavax's pipeline that makes this biotech stock so appealing.
Novavax's lead pipeline candidate is ResVax, a respiratory syncytial virus fusion (RSV F) protein nanoparticle vaccine. The company is currently evaluating ResVax in a phase 3 clinical study for maternal immunization of infants. Novavax plans to conduct a final efficacy analysis in the first quarter of 2019. If all goes well, the biotech should file for U.S. and European regulatory approvals for the vaccine in early 2020.
While many clinical-stage biotechs only have one promising candidate, that's not the case for Novavax. The company recently began a phase 2 study of its nanoparticle influenza vaccine NanoFlu in immunizing older adults. Results from this study are expected in Q1 of next year.
Novavax's pipeline also includes an Ebola vaccine that completed phase 1 testing in 2015. The company hasn't moved forward with this vaccine, though, as it focused on its RSV and flu vaccine programs. Novavax is conducting preclinical testing on a combination flu/RSV vaccine.
Market research firm EvaluatePharma projects that ResVax ranks as the No. 5 most valuable vaccine currently in development. If approved, the firm thinks that ResVax could generate annual sales of $668 million by 2024. Novavax believes that the peak market opportunity for its RSV F vaccine tops $1.5 billion.
But EvaluatPharma ranks Novavax's combination flu/RSV vaccine as the top vaccine in development based on potential sales. If approved, this vaccine could rake in more than $1.8 billion by 2024. Of course, assuming all goes well in clinical studies, NanoFlu would be on the market well before a combo vaccine. Novavax thinks that its flu vaccine could also become a blockbuster.
The case for Pfizer
Any conversation about Pfizer stock should start with the big pharma company's lineup of blockbuster drugs. Pfizer's top-selling product is pneumococcal vaccine Prevnar 13, which is on track to make over $5.2 billion this year. Several of the company's other blockbuster drugs, though, are even more exciting.
Anticoagulant Eliquis, which Pfizer co-markets with Bristol-Myers Squibb, is expected to become the No. 5 best-selling drug in the world by 2024, with sales topping $10.5 billion. Breast cancer drug Ibrance should make over $4 billion this year but is expected to continue strong sales growth for years to come. Pfizer's immunology drug Xeljanz should also enjoy sustained sales momentum.
Pfizer thinks that its pipeline is the best it's had in decades. The company awaits approval for 11 programs. Some of these are new indications for already-approved drugs such as Xeljanz and Xtandi. However, several new drugs await approval as well, including promising cancer drugs dacomitinib, lorlatinib, and talazoparib plus tafamidis meglumine, which targets treatment of rare disease transthyretin (TTR) familial amyloid polyneuropathy.
Pfizer's late-stage pipeline is loaded with 30 programs. Many of these programs are pursuing additional indications for current drugs such as Bavencio. There are also several new drugs, notably including pain drug tanezumab, which Pfizer is developing in partnership with Eli Lilly.
The company has faced some headwinds over the past few years with product shortage problems in its sterile injectables business and declining sales for older drugs that have lost exclusivity or will soon do so. However, Pfizer is resolving the product shortage issues, with improvement expected in Q3. Falling sales of drugs losing exclusivity will continue to hurt some, but the company should move past these issues beyond 2020.
One thing that probably any investor will like about Pfizer is its dividend. Pfizer's dividend yield currently stands at 3.11%. The company has boosted its dividend payout by nearly 42% over the last five years and should be in good shape to keep the dividend hikes coming in the future.
Is Novavax the better buy right now or is Pfizer? It depends on what kind of investor you are.
If you're an aggressive investor who is willing to take on considerable risk, Novavax could be very attractive. Its market cap is still only a little over $700 million. If the biotech is successful with ResVax or NanoFlu, Novavax stock will likely skyrocket.
For most investors, though, I think Pfizer is the better stock to buy. The consensus among Wall Street analysts is that Pfizer will grow its earnings by around 7.5% on average over the next five years. That kind of solid, if not spectacular, growth combined with a strong dividend should enable Pfizer to deliver a total return that many investors will like.