There's an old investing adage: "Don't try to catch a falling knife." Novavax (NASDAQ:NVAX) fits the description of a falling knife right now. The biotech has lost nearly half of its market cap in just one month. That might discourage some investors from even considering buying shares.
However, I'd argue that Novavax should be more attractive to investors now than it has in quite a while. Here are three compelling reasons to buy the biotech stock.
1. Strong coronavirus vaccine prospects
It's important to understand that the recent decline in the value of Novavax stock isn't related at all to concerns about its coronavirus vaccine candidate NVX-CoV2373. Actually, the prospects for the vaccine are stronger than ever.
Novavax kicked off phase 2 studies of NVX-CoV2373 in late August. Last week, additional data from the biotech's phase 1 study of the investigational vaccine was published in The New England Journal of Medicine. This data appeared to confirm earlier optimism from Novavax's initial announcement of interim results from the early stage study.
Since the slide for the biotech stock began, Novavax has also lined up additional supply deals. On Aug. 14, the United Kingdom signed an agreement to buy 60 million doses of NVX-CoV2373. On Aug. 31, Novavax announced that it had reached an agreement in principle with Canada to supply up to 76 million doses of the COVID-19 vaccine. The company previously inked a deal with the U.S. government to supply 100 million doses.
2. A relatively easy hurdle remaining for NanoFlu
While NVX-CoV2373 gets most of the attention these days, investors shouldn't forget about the opportunities that lie ahead for another of Novavax's pipeline candidates -- NanoFlu. There's only one remaining hurdle to jump for the flu vaccine candidate before Novavax can seek FDA approval. And that hurdle should be relatively easy.
NanoFlu has already passed the hard part. Novavax reported positive efficacy and safety results from a phase 3 study of the investigational flu vaccine in March. NanoFlu performed admirably in a head-to-head matchup with Sanofi's market leader FluZone Quadrivalent.
Now, all Novavax needs to do is conduct a lot consistency clinical trial. The purpose of this trial will be to demonstrate manufacturing consistency in lots of NanoFlu. In the company's Q2 conference call, Novavax CEO Stanley Erck said that the company was exploring alternatives for manufacturing the product required for this clinical trial.
3. A more attractive price
It's understandable why Novavax's market cap of nearly $11 billion a month ago might have caused investors to be concerned. However, with the biotech's market cap now at close to $5.3 billion, Novavax's price tag shouldn't be nearly as scary.
Assuming that NVX-CoV2373 proves to be safe and effective in immunizing against the novel coronavirus, Novavax could be looking at annual sales measured in billions of dollars for the COVID-19 vaccine. On top of that, H. C. Wainwright thinks that NanoFlu, if approved, could generate sales of $1.7 billion by 2028.
There's a pretty good chance that Novavax will rake in total annual sales of at least $4 billion within a few years. This prospect makes the biotech's current valuation seem attractive, although risks exist that Novavax's pipeline candidates could stumble. Still, for aggressive investors, Novavax appears to be one of the more appealing clinical-stage biotechs on the market.