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Is Novavax's Growth Story Over?

By Prosper Junior Bakiny - Jan 15, 2021 at 6:25AM

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The next few weeks could be critical for the biotech's coronavirus vaccine prospects.

Most investors would be thrilled with a stock that doubles or triples in value over a 12-month period. A 500% return in a year would be a dream come true. But what if you owned a stock that soars by 2700% in a year? That's what happened to clinical-stage biotech Novavax (NVAX -8.57%) last year. That's because, in early 2020, the company joined the ranks of those hunting for vaccines or treatments for COVID-19. 

Investors responded by bidding up its shares at an almost alarming rate. However, it is worth noting that Novavax has yet to launch its candidate, NVX-CoV2373, on the market, while companies such as Moderna and Pfizer have already done so. Considering its recent run on the market was largely thanks to its efforts to develop a coronavirus vaccine, can Novavax maintain the momentum it gained last year? 

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Positioning itself for the long run

Beyond its coronavirus-related efforts, Novavax made some noteworthy moves last year. For instance, the company made several additions to its leadership team. In June, the company announced that David Mott -- a veteran of the industry with more than three decades of experience -- had joined its board of directors. In July, Novavax named Frank Czworka to the position of senior vice president in global sales. Czworka boasts decades' worth of experience in the biopharmaceutical field. And in November, the biotech appointed Gregg Alton to its board of directors. Alton brings with him two decades of experience working in high-level leadership roles at Gilead Sciences, one of the largest biotechs in the world.

Why should investors care about these appointments? A competent executive and leadership team is an important factor in the success of any company. With the addition of veterans in key roles, Novavax is positioning itself for success in a competitive and highly regulated industry. That is something to keep in mind for anyone thinking of buying shares of Novavax. 

Woman looking up at question marks hovering above her head.

Image source: Getty Images.

Novavax's pipeline 

Novavax's programs aren't limited to NVX-CoV2373. The company boasts other products worth mentioning. Most notable is the company's flu vaccine candidate, NanoFlu. This candidate is aimed at adults 65 or older, a demographic that makes up the bulk of hospitalizations and deaths related to the flu.

In a phase 3 clinical trial, Nanoflu demonstrated a favorable safety profile comparable to that of Fluzone, one of the leading flu vaccines marketed by Sanofi. NanoFlu also showed non-inferior immunogenicity (the ability to trigger an immune response in the body) compared to Fluzone. 

In October, Novavax appointed a leadership team to advance NanoFlu through regulatory licensure. It isn't clear when the company will send a Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) for the approval of NanoFlu. But when it does, investors could respond by sending Novavax's shares even higher. 

The COVID-19 vaccine race isn't over

Despite having yet to launch its COVID-19 vaccine, Novavax could still benefit from its coronavirus-related efforts. After all, the first wave of vaccines won't be the last one needed, and in the long run, the most effective candidates will be the ones to dominate the market. In late December, Novavax started a phase 3 clinical trial in the U.S. and Mexico for NVX-CoV2373. The study will enroll up to 30,000 participants and will test the safety, efficacy, and immunogenicity of the drug in the prevention of COVID-19.

Back in September, Novavax initiated another phase 3 study in the U.K. and it said would enroll up to 15,000 participants. The trial is testing whether NVX-CoV2373 is effective at preventing COVID-19. The company said it expects interim data from this trial as early as the first quarter of this year. Novavax has signed various agreements to deliver millions of doses of its vaccine, provided it is safe and effective. Some of its would-be clients include the governments of Australia, the U.K., and New Zealand.

To buy or not to buy?

Novavax has received about $2 billion in spending from various third parties to help advance the development of NVX-CoV2373, and as of Sept. 30, 2020, it had more than $570 million in cash and cash equivalents. In other words, investors need not worry about the biotech resorting to dilutive forms of financing anytime soon. However, the company's stock could still fall off a cliff if its COVID-19 vaccine fails to prove safe and effective.

Even if it is effective, investors still won't be impressed unless its efficacy compares to that of other vaccines already on the market. With that in mind, and even taking into account the potential of its NanoFlu vaccine, Novavax seems like a bit of a risky bet. But for those with above-average risk tolerance, this biotech stock is worth serious consideration. 

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Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$53.42 (-8.57%) $-5.01
Sanofi Stock Quote
$54.40 (2.52%) $1.34
Pfizer Inc. Stock Quote
Pfizer Inc.
$52.47 (3.59%) $1.82
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$63.84 (0.90%) $0.57
Moderna, Inc. Stock Quote
Moderna, Inc.
$136.25 (-4.97%) $-7.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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