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Thinking of Buying Novavax Stock? Here's What You Need to Know

By Adria Cimino - May 10, 2020 at 6:40AM

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Coronavirus vaccine work has put Novavax in the spotlight, but its investigational flu vaccine may be the bigger revenue driver.

Novavax (NVAX -1.17%) may have caught your eye in recent weeks due to its work on a coronavirus vaccine. Shares of the late-stage biotech company have surged 360% since the beginning of the year while the coronavirus outbreak pushed most of the market lower.

Coronavirus work has put Novavax in the spotlight, but if you are interested in buying the stock, what you really should know about is the company's flu vaccine. Earlier this year, Novavax said NanoFlu achieved all of its primary endpoints in a phase 3 clinical trial.

A doctor prepares a patient's arm for a flu shot.

Image source: Getty Images.

That's a turnaround from last year when Novavax's vaccine to prevent respiratory syncytial virus (RSV) in babies via maternal immunization didn't meet a primary endpoint in a phase 3 trial. While a disappointment, the company continues to discuss possibilities to bring the product to market with regulatory authorities. Still, Novavax shares sank 89% for the year.

A chance at commercialization

Now, with NanoFlu, Novavax has a solid chance at commercialization. In a trial involving adults age 65 or older, NanoFlu was compared with Sanofi's (SNY -0.28%) Fluzone Quadrivalent. NanoFlu demonstrated non-inferior immunogenicity, was well-tolerated by trial participants, and showed a safety profile similar to that of Fluzone. And NanoFlu outpaced its rival in measures of antibody response. The only small blemish in this report: NanoFlu showed a slightly higher level of local adverse events.

In January, the Food and Drug Administration granted the vaccine candidate fast track designation, which speeds up the review process for products that address serious illnesses or fulfill unmet needs. Novavax said it would submit the vaccine for approval through this accelerated pathway.

At the same time, Novavax is moving ahead with coronavirus work. The company recently said it identified a coronavirus vaccine candidate and plans on starting human trials by the middle of this month. The investigational vaccine produced high levels of neutralizing antibodies against the virus in animal studies. Novavax also noted a high titer level, meaning a high concentration of antibodies were produced -- an element that suggests the vaccine may work in humans.

Preliminary results in July

Now Novavax will test the vaccine candidate in about 130 healthy adults in a phase 1 trial. In July, the company expects preliminary safety results as well as data on the stimulation of immune response. The Coalition for Epidemic Preparedness Innovations has offered Novavax $4 million in initial funding for the project, and discussions about more funding are ongoing.

Though the coronavirus project is definitely getting the market's attention -- and a win here would be great for Novavax -- NanoFlu represents a stronger long-term opportunity for the company. At the moment, there are too many unknowns linked to the coronavirus. How long will the outbreak last? Will the virus return seasonally, stay around, or disappear completely? There also is the ethical question of pricing too high when selling a vaccine or treatment for a pandemic.

The flu vaccine represents a treatment area with fewer unknowns. The size of the global flu market and lasting nature of the illness -- we all know flu is around every year -- make NanoFlu a significant product for Novavax. The global flu vaccine market, at a compound annual growth rate of 7.7%, is expected to reach $7.34 billion by 2026, according to Fortune Business Insights. Sanofi reported a 100% gain in flu vaccine revenue -- that includes Fluzone and other products -- to $68 million in the first quarter.

Novavax earnings

Novavax reports earnings on May 11, and investors should be on the lookout for any news on NanoFlu's progress. It also will be important to keep an eye on Novavax's research and development expenses and costs linked to the coronavirus program. If costs go up without much outside funding, I would hesitate to invest in the shares at this point. Moderna (MRNA 2.58%), a rival in the race to produce a vaccine, has government funding that will take the company's vaccine through FDA licensure.

In the near term, Novavax shares may have more to gain with any good news from the coronavirus work. But for a long-term investor, I would look to regulatory news on NanoFlu before buying the shares. If the FDA gives NanoFlu the nod, this vaccine could be the true money-maker for Novavax.

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Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$63.54 (-1.17%) $0.75
Sanofi Stock Quote
$50.04 (-0.28%) $0.14
Moderna, Inc. Stock Quote
Moderna, Inc.
$159.56 (2.58%) $4.02

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