Novavax (NVAX 2.04%) is nearing the finish line of the coronavirus vaccine race. The clinical-stage biotech company expects to report interim data from a phase 3 trial in the early part of this quarter. All eyes will be on those results, because they'll support the company's request for emergency authorization in countries around the world.
Novavax is at a critical juncture. Overall, I'm positive about Novavax's prospects -- so positive that I can think of three reasons to buy shares. But nothing is perfect, right? And that's why I'm also able to find one reason to sell the stock. Consider these points before making either move.
1. Coronavirus vaccine capacity
The U.S. Food and Drug Administration (FDA), like other regulators worldwide, has already granted emergency use authorizations (EUAs) to vaccines from Pfizer (PFE 0.52%) and Moderna (MRNA 3.78%). So you might wonder why anyone would get excited about players who are late to bring their products up for approval. And you might even be wondering if they could still carve out a share of the coronavirus vaccine market.
Considering the global need for coronavirus vaccines, there's room for several players. Even if five of the biggest players operate at full capacity, there still won't be enough vaccines for everyone. So far, with only two products on the market, many cities and countries have struggled to procure enough vaccine doses to protect their entire population.
Novavax's strength is that it has the second-greatest capacity among the current leaders -- which also include Moderna, Pfizer, AstraZeneca, and Johnson & Johnson. Novavax is ramping up to produce 2 billion doses annually by the middle of this year. AstraZeneca's capacity is about 3 billion doses a year. Moderna plans on producing 500 million to 1 billion doses this year, while Johnson & Johnson aims to deliver 1 billion doses. Pfizer's coronavirus vaccine partner BioNTech recently said they may be able to produce 2 billion doses this year -- that's up from an earlier target of 1.3 billion doses.
2. Another close-to-market product
Novavax announced positive data last spring from the pivotal trial of its flu vaccine candidate, NanoFlu. The company is now in the process of preparing for the next step: the request for regulatory approval. Novavax hasn't provided a timeline. But the FDA gave Novavax the option of an accelerated approval pathway, and the company plans to use it. In the fall, Novavax appointed a team of experts who will shepherd NanoFlu through the regulatory process.
Of course, there's no guarantee the FDA will approve NanoFlu. But we have reason to be optimistic. The product candidate met all primary endpoints in its trial. This means it showed non-inferior performance compared to a leading commercialized flu vaccine, and overall safety. In fact, NanoFlu even showed stronger neutralizing antibody response than the other product -- Sanofi's Fluzone Quadrivalent.
NanoFlu represents Novavax's second close-to-market product. That lowers the company's dependence on the investigational coronavirus vaccine. This in turn lowers Novavax's overall risk. The more products it has on the market, the more chances the company has to generate revenue.
3. A possible coronavirus game-changer down the road
Novavax is also exploring a combined influenza/coronavirus vaccine. The idea is to combine its investigational coronavirus vaccine with NanoFlu. Such a product would be for a post-pandemic world -- when cases no longer pose a severe problem globally.
A combined vaccine could be a game changer -- even if the coronavirus pandemic has passed. Governments will continue to stock up on vaccine to protect against possible future outbreaks. And it's common for people to seek out annual flu vaccines. From a logistics and cost perspective, one vaccine to prevent both COVID-19 and flu is a winning idea. It's still unclear whether people will need coronavirus vaccination once a year or more or less frequently. We'll only know that once companies say how long antibodies last in those who've been immunized.
Novavax is the perfect company to take on this task because of the expertise it's shown in the development of NanoFlu.
Why sell Novavax?
Novavax shares soared more than 2,600% last year. And the company's market value climbed nearly 46-fold.
I think that shares of this biotech company have farther to go, but it's unlikely we'll see another four-digit percentage increases this year. And there's a big risk ahead in the form of data from the phase 3 coronavirus vaccine trial. If efficacy results are strong, the stock will be on the road to more gains. But if efficacy is weaker than that of rivals Pfizer and Moderna, share performance is likely to stumble. And of course, there's always the possibility of complete failure in phase 3, which would be disastrous for the share price.
The choice of buying, selling or holding Novavax stock right now depends on your risk tolerance. If you don't mind some risk, you might want to stick with Novavax and bet on the growth potential ahead. But for investors who benefited from last year's gain and now want to minimize risk, it may be time to sell.