After flying high in 2020, the feeling for investors in Novavax (NVAX 8.40%) is, once again, euphoria. Last week, the company reported good news in yet another phase 3 trial. And this is the big one -- its COVID-19 vaccine.

The biotech's coronavirus vaccine, NVX-CoV2373, achieved 89% efficacy rates in a U.K. trial. While not quite as high as the efficacy Pfizer or Moderna achieved, the results were arguably as exciting. That's because the U.K. was the center of a new strain of the coronavirus. To achieve 89% efficacy against the original strain and the mutation was an impressive feat. Novavax's vaccine was 95.6% effective against the original virus, and 85.6% effective against the U.K. mutation.

While Pfizer and Moderna both say that their vaccine works against the mutation, their claims haven't been backed up by clinical trials yet. So Novavax might end up with the more impressive label. What really has investors salivating is how many doses of vaccine Novavax will produce -- over 2 billion. And Novavax has signed distribution agreements with governments around the world. Let's do a back-of-the-napkin calculation and see if we can come up with a rough estimate of the revenue investors might expect once this vaccine hits the market.

Chinese people on the street wearing protective masks for COVID-19

image source: Getty Images

$1.6 billion in the U.S. (or will it be higher?)

There are an estimated 332 million people in the U.S. How many will be vaccinated? Let's be optimists and hope that 300 million people will eventually get the shot. That's the number that Operation Warp Speed (OWS) has targeted. 

OWS has proceeded on a theory that everybody ought to be vaccinated. That's why OWS made a variety of deals with pharmaceutical companies to acquire vaccines before they earned authorization from the U.S. Food & Drug Administration (FDA). OWS gave Novavax $1.6 billion in order to pre-order 100 million doses of its vaccine. That deal puts a tentative price of $16 per dose for Novavax's vaccine. It's a two-shot regimen, so $1.6 billion will only vaccinate 50 million people.

Will the government want to order more doses? Let's take a look at the leaders in the COVID-19 vaccine race, and see what kinds of deals OWS struck.  

Company Price Paid by OWS Price per Dose Number of Doses Number of People Who Can Be Vaccinated
Novavax (NVAX 8.40%) $1.6 billion $16 100 million 50 million
Moderna (MRNA -3.00%) $1.53 billion $15 100 million 50 million
Pfizer (PFE 0.76%) $1.95 billion $19.50 100 million 50 million
Johnson & Johnson (JNJ 0.87%) $1 billion $10 100 million 100 million
AstraZeneca (AZN 2.65%) $1.2 billion $4 300 million 150 million
Sanofi (SNY 2.03%) $2.1 billion $21 100 million 50 million

Data source: BioWorld. Table by Author.

That's enough doses to vaccinate 450 million people! So at first glance, it would seem that OWS would have no interest in buying any more of Novavax's vaccines. However, Novavax is actually in a pretty strong position, given the intricacies and challenges that come with actually getting the jabs into peoples' arms. Let's take a look at Novavax's two strongest competitors -- the vaccines that are on the market now.

Issues with the mRNA vaccines

The first wave of vaccines from Moderna and Pfizer have hit the market. And we are already seeing bottleneck issues and supply shortages. That's because of the nature of mRNA vaccines. One huge benefit to mRNA technology is how fast you can discover a molecule and get it into the lab. That's why Pfizer and Moderna beat everybody else to the finish line. But the downside of mRNA technology is the complicated nature of its manufacturing and distribution.

mRNA vaccines have to be stored at very cold temperatures. For instance, the Pfizer vaccine has to be stored at minus 94 degrees Fahrenheit. That's a severe problem, as a lot of hospitals simply don't have freezers that can store the vaccine at that temperature. And while the Moderna vaccine can be stored in ordinary freezers, the vaccine only has a shelf life of 30 days. This creates serious logistical issues for public health authorities. For instance, an unknown quantity of Moderna vaccines might go bad if people are not vaccinated right away. Presumably the government wouldn't give this vaccine to people if the 30-day window is not met. That means some quantity will have to be thrown away.

These issues with the mRNA vaccines give Novavax a distinct distribution advantage with its recombinant nanoparticle vaccine candidate. While Novavax's vaccine also has to be refrigerated, it has a life span of at least six months in refrigerators. "We expect the product to be viable a minimum of six months at 2º to 8º C, and at least 24 hours at room temperature," Novavax spokesperson Edna Kaplan said, as reported in Genetic Engineering & Biotechnology News.

With these distribution issues slowing down the mRNA vaccines, Novavax might actually vault to the top supplier position in the U.S. For that to happen, Novavax would need the FDA to grant it an Emergency Use Authorization (EUA) based on its U.K. phase 3 trial data. It's an open question whether the FDA will do that, but if so, expect the stock to zoom higher yet again.

What about other competitors? So far the reported data suggests those vaccines are less effective. For instance, Johnson & Johnson's single-shot vaccine only had 66% effectiveness in preventing "moderate to severe" COVID-19, while AstraZeneca's vaccine might not work well with senior citizens (the most at-risk group), and Sanofi is facing serious delays.

Novavax already has a deal in place for $1.6 billion. But its ultimate revenue in the U.S. might actually be higher -- maybe a lot higher.  

Don't forget the rest of the world

Before Novavax was given $1.6 billion by OWS, it was given $388 million by the Coalition for Epidemic Preparedness (CEPI), a non-profit that seeks to vaccinate the world during health pandemics. This was validation of Novavax's nanoparticle science, and probably why the small biotech received such a big grant from OWS.

CEPI has an international focus. Because of this, Novavax has been very active around the world, and has signed numerous agreements with foreign governments, including the U.K., Australia, New Zealand, and Canada. While we don't know the financial terms of any of these deals, we do know that Novavax is contracted to supply 286 million doses overall. Using the OWS price of $16 a dose, that's $4.5 billion in revenue.

I think that $4.5 billion is a fair (if not conservative) estimate of the minimum Novavax investors ought to expect. The ultimate number is likely to be a great deal higher. That's because I'm not including any money Novavax receives from its collaboration agreements in Japan, South Korea, or India. Nor am I including a possible EU contract, or further sales with the U.S. government.

Novavax traded for $7 a share a year ago, and became a 30-bagger in 2020. Today, Novavax trades around $266 per share. And yet, I think the market is still underestimating how much money this biotech is about to make.