Novavax (NVAX +2.14%) has been one of the leaders in the hunt for a COVID-19 vaccine. As a result, the company's stock has been on fire recently. Novavax's shares are up by a whopping 855% year to date. With that said, long-term investors should focus on whether -- or how long -- Novavax can keep up this pace.
If the company manages to maintain its momentum for a few more months to a year (or longer), it might be worth seriously considering purchasing shares of Novavax today. With that in mind, let's look at what's really going on with the biotech company, and where it will likely be in 12 months from now.
The best-case scenario
For Novavax, few outcomes would be better than if it were to successfully launch a vaccine for COVID-19 on the market. As a reminder, the company was able to quickly develop several vaccine candidates because of its previous experience with other type of coronavirus. Novavax then identified a lead vaccine candidate, NVX-CoV2373, which the company claimed was able to produce neutralizing antibodies for the SARS-CoV-2 virus that causes COVID-19 in animal studies. Novavax plans to initiate a phase 1 clinical trial this month.
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It is worth noting that Novavax just received a little more help in its quest to defeat COVID-19. On May 11, the company announced it received a grant of up to $384 million from the Coalition for Epidemic Preparedness Innovations (CEPI) to advance the development of NVX-CoV2373. This wasn't the first time Novavax received funding from this organization. On March 10, the CEPI awarded a grant of $4 million to the biotech company. Thanks to these developments, Novavax is hoping to beat its competitors to the punch and launch its vaccine for COVID-19 before all of them.
Novavax does have other exciting products in its pipeline. Most notably, there's NanoFlu, a potential vaccine for the flu the company is developing specifically for adults over the age of 65. According to Novavax, its NanoFlu vaccine could be more effective than the current market leaders. In a clinical trial, NanoFlu "demonstrated significantly stronger and broader immune responses" than Fluzone HD against various strains of the flu. Fluzone HD is one of the leading flu vaccines for adults over the age of 65 that's marketed by Sanofi (SNY +0.80%).
On March 24, Novavax announced positive results from a phase 3 clinical trial for NanoFlu, and the company plans on submitting a Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) soon. If Novavax's potential vaccine for the flu is approved along with its COVID-19 vaccine, the company's stock will likely continue on its upward trajectory.
Tempering our expectations
While Novavax's NanoFlu vaccine looks promising -- and will likely earn approval from regulatory authorities -- the future of its NVX-CoV2373 is far less certain. There are many companies currently looking to develop vaccines for the novel coronavirus, and whether Novavax will win that race is anyone's guess. One of the companies leading this race is none other than Moderna (MRNA 1.76%).
In mid-March, the National Institutes of Health (NIH) kicked off a phase 1 clinical trial for Moderna's investigational COVID-19 vaccine, mRNA-1273. This trial, which initially enrolled 45 healthy adult volunteers, was amended to include six additional volunteers. The trial was to test mRNA-1273's safety, its ability to trigger an immune response in the body, and the amount that causes expected side effects.
On May 7, Moderna announced that the FDA approved its Investigational New Drug (IND) for mRNA-1273. As a result, the company plans to start phase 2 clinical trials shortly. The FDA also granted mRNA-1273 a fast track designation, which means the approval process for this vaccine will be expedited.
Novavax could still leapfrog Moderna in this race, but the truth is that no one knows with any kind of certainty how things will evolve. Both of these companies' investigational vaccines could flop in clinical trials, or some other company could end up developing a successful COVID-19 vaccine first.
Should you buy?
Where will Novavax be in one year? In my view, the company's performance year to date is unsustainable, and in 12 months, Novavax's stock will be significantly down from its current levels. Of course, if Novavax does manage to be the winner in the COVID-19 vaccine race -- which remains unlikely -- the company's stock could keep flying high.
I think Novavax's potential vaccine for the flu could be a big winner, and I'd recommend that investors consider initiating a small position in this biotech stock if its recent performance had not sent its valuation metrics soaring through the roof. Novavax's forward price-to-sales ratio is currently well over 300. I think only investors who can handle significant amounts of risk should consider adding Novavax to their portfolios.
For risk-averse investors, it is probably best to watch from the sidelines for now -- and consider investing in other biotech stocks. If Novavax's stock price drops significantly, it will be worth reconsidering.
