Novavax (NVAX -4.82%) was in the perfect position to develop a COVID-19 vaccine, having previously succeeded against two similar coronaviruses (SARS and MERS) in the lab. The company chose a vaccine candidate in April, and nine months later, the phase 3 trial has finally begun in the U.S. In anticipation, the stock is up 660% over that time. It's not obvious what shareholders should do now, but there is something they shouldn't do.
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Is all the good news already priced in?
Novavax became part of the U.S. government's Operation Warp Speed in July, and subsequently signed several deals with global vaccine manufacturers for a capacity of 2 billion doses per year, according to management. Despite several delays related to manufacturing, phase 3 data will be available by the end of April if the company follows the same timeline as Pfizer (PFE -3.85%) and Moderna (MRNA -2.45%). In the meantime, Novavax has a phase 3 study in the U.K. that could report out by early this quarter that should give insight about the company's future.
Although the company's vaccine has the advantage of using the traditional supply chain, there is a high bar to clear for relevance. Both Pfizer's and Moderna's vaccine demonstrated about 95% effectiveness in preventing COVID-19. Add in competition from companies selling their vaccine at cost, or others requiring only one shot, and the market for a coronavirus vaccine might get crowded quickly.
Novavax also has a flu vaccine that outperformed Sanofi's (SNY 5.90%) market leader in a phase 3 trial that ended in March, and management is exploring a combo shot of COVID-19 and influenza vaccine that would differentiate the product. That's in the future.
In the near term, the worst thing an investor could do is watch 2020's gains evaporate if the U.K. data isn't as positive as with other vaccines. Anyone with significant profits in Novavax shares may want to lock in gains on a portion of their investment and wait to see that the vaccine is effective and the company can successfully manufacture enough to meet its lofty projections.
