Any stock that skyrockets over 4,600% from the beginning of a year through early August is bound to create a lot of buzz in the investment community. Although biotech Novavax (NVAX 2.95%) has been around for decades and doesn't yet have a marketed product, its entry into the race for a COVID-19 vaccine has put the stock in the spotlight and has investors scrambling to snap up the shares.
Novavax stock has cooled off in the last few months, down 44% from the peak, as the market seemed to grow more cautious about formerly red-hot coronavirus stocks. But the company still has people talking about recent developments, and Novavax-watchers may be wondering if this is a buying opportunity. Here are some factors that could support that view.
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Possibly a better coronavirus vaccine
There is clearly room for multiple winners in the space, but the opportunity has attracted a flood of competition. The Coalition for Epidemic Preparedness Innovations says there are now 321 COVID-19 vaccines in development, with 33 of them in clinical trials. Novavax just launched its first pivotal phase 3 trial on Sept. 24, weeks behind some of its biggest competitors, but even if the company's vaccine isn't the first to hit the market, it could be the best.
Novavax's coronavirus vaccine uses a more proven approach than do the front-runners in the race. Vaccines from Moderna (MRNA 3.28%) and from the partnership between Pfizer (PFE 0.23%) and BioNTech (BNTX 0.55%) introduce messenger RNA (mRNA) into the recipient's cells, causing them to produce proteins found on the surface of the SARS-CoV-2 virus and provoking an immune response. Novavax's vaccine simply consists of a recombinant protein derived from the virus and an adjuvant, an ingredient that intensifies the immune response. The mRNA approach has that extra step of cellular protein production that hasn't yet been proven in any medicine, vaccine or otherwise, whereas the Novavax approach of just injecting the protein directly is well established.
The vaccine developed by AstraZeneca (AZN 1.03%) and Oxford University uses a viral vector technique, with a deactivated virus of a completely different type delivering genetic instructions for producing the coronavirus spike protein to patients' cells. That approach is also new, but one vaccine that uses it, Merck's Ebola vaccine, was approved last year.
Novavax's proven approach gives it a reasonable chance of producing the most effective COVID-19 vaccine, and safety results have so far been positive, but it has another important advantage. Its vaccine candidate can be safely stored and transported at refrigerator temperatures, whereas mRNA vaccines need to be kept below freezing. The stringent requirements for the "cold chain" for these products may hamper their availability, especially in the early months of distribution.
Not so far behind
If Novavax's COVID-19 vaccine was months behind the front-runners, it might have some issues breaking into an established market, but that doesn't appear to be the case. Despite getting a late start, CEO Stanley Erck recently said that the company expects to file for approval in December. That puts Novavax right in the thick of things, not significantly behind its competitors. With some recently announced manufacturing deals, Novavax says it's lined up a supply chain that will be able to produce two billion doses annually.
Flu and RSV could be even more important
Even though the coronavirus vaccine is what everyone's talking about, Novavax also believes its flu vaccine candidate is a game-changer. The company plans to go head-to-head against the most widely-used seasonal flu vaccines; earlier this year it announced that its quadrivalent NanoFlu vaccine met primary and secondary endpoints in a registrational phase 3 trial in adults older than 65.
The trial results appear to support Novavax's belief that its flu vaccine, which uses the same recombinant protein approach as its coronavirus vaccine candidate, will be differentiated from the current seasonal flu vaccines, which are based on flu viruses grown in chicken eggs and then deactivated. Current vaccines have had effectiveness well below 50% in recent years, and one reason for that is egg adaptation: The viruses change during the manufacturing process to adapt to the egg environment, and consequently become mismatched to the viruses circulating in humans. Another problem is "antigenic drift," in which circulating flu viruses mutate during the flu season enough to evade the vaccine.
Novavax's NanoFlu provoked a stronger antibody response in older adults to the target viruses than Sanofi's (SNY 1.15%) egg-based Fluzone, while also providing markedly superior protection against drifted virus strains. The company now needs to conduct a trial to prove it can achieve lot-to-lot consistency, and regulatory submission may not be too far off after that.
One reason this year's stock performance is so breathtaking is that Novavax's share price was depressed after its vaccine for respiratory syncytial virus (RSV) failed a clinical trial for the second time. The stock tumbled 89% in 2019 due to that face-plant. The company hasn't given up on it, claiming that the vaccine worked, but that "trial conduct and design factors led to less than optimal results." While that remains to be proven, a comeback for the RSV vaccine could support the share price in the future.
Novavax will remain buzzworthy as long as it's in the running to be a winner with its COVID-19 vaccine. Despite the huge run-up in share price since the beginning of the year, it sells for just above twice its peak of last year. Success for the company is not a certainty by any means, but biotech investors who are comfortable taking the risks may feel that the current share price could be an attractive entry point.
