Many people wish they could forget this year, but not Novavax (NVAX -1.80%). It reported great news for its flu vaccine candidate NanoFlu earlier in 2020. Novavax has also emerged as the biggest coronavirus vaccine winner so far, at least in stock performance.
The future seems bright for Novavax. But where will the biotech be in five years? Here's how it might look in 2025.
Multiple wild cards
Let me first acknowledge that multiple wild cards could impact Novavax's fortunes over the next five years.
Most importantly, the company's COVID-19 vaccine candidate NVX-CoV2373 could run into problems in late-stage clinical testing. Two much larger drugmakers, AstraZeneca and Johnson & Johnson, have already temporarily paused late-stage studies for their experimental coronavirus vaccines due to potential safety concerns. If NVX-CoV2373 causes severe side effects, that could derail the vaccine's chances of winning emergency use authorization from the Food and Drug Administration.
There's also a possibility, albeit a lower one, that NanoFlu could fail to secure regulatory approval. Novavax plans to move forward with a lot consistency trial so it can file for FDA approval of the flu vaccine candidate. While the odds of winning approval seem good, success is not guaranteed.
The news doesn't have to be dire for either NVX-CoV2373 or NanoFlu to dramatically alter Novavax's fortunes. Both vaccines could sail through the regulatory approval process, yet still fail to achieve commercial success if other rivals prove to be even better.
Don't rule out the potential for a positive wild card, either. There's an outside chance that a big drugmaker could decide to acquire Novavax by 2025.
I've come up with my best-guess scenario for how the next five years will go for Novavax. First, most of the large drugmakers with vaccine programs already have their own COVID-19 candidates in clinical testing. My hunch at this point is that Novavax won't be gobbled up by a bigger player.
I'm cautiously optimistic about the prospects for NVX-CoV2373. Sure, the COVID-19 vaccine candidate could flop in late-stage testing. However, I predict that it will prove both safe and effective in protecting against novel coronavirus infection. I think Novavax will win EUA in the first half of 2021 and make a boatload of money over the next couple of years from the vaccine.
As for NanoFlu, my view is that it won't run into any problems with regulatory approval. By 2025, I think the flu vaccine will be a solid commercial success for Novavax, generating sales topping $1 billion.
Now for an interesting twist: I think we'll see a couple of waves of new COVID-19 vaccines hit the market after a first wave that includes NVX-CoV2373. I anticipate that these later vaccines will be better than the original ones. Ordinarily, that would likely mean that Novavax's coronavirus vaccine sales would decline.
However, Novavax recently announced plans to explore a potential combo flu/COVID-19 vaccine that includes NanoFlu and NVX-CoV2373. This combo could prove very attractive to physicians and patients once the pandemic is over. I'm going to go out on a limb here and predict that Novavax will be successful with a combo flu/COVID-19 vaccine within the next five years.
What about Novavax's other pipeline candidates, particularly its ResVax respiratory syncytial virus (RSV) vaccine? Maybe the company could score with these programs, but I'm not betting on it.
What it means for investors now
If my best-guess scenario for Novavax pans out, the biotech stock should be worth a lot more five years from now. Exactly how much more is also hard to predict, but a market cap of more than triple Novavax's current market cap of less than $7 billion isn't out of the question.
What does this mean for investors now? It depends on what kind of investor you are.
If you're aggressive and aren't afraid to take on risk, buying a position in Novavax now could pay off handsomely if my forecast about the company's prospects is accurate. However, if you're averse to taking on significant risk, you'll want to stay away from buying Novavax.
The wild cards I mentioned could entirely wipe out my sunny prediction. Clinical-stage biotech stocks like Novavax can be huge winners -- and they can be huge losers. No one knows how the future will unfold.