Novavax (NVAX -3.78%) soared more than 2,000% in 2020 as investors bet on the future of its coronavirus vaccine candidate. Then it extended gains at a reasonable pace as the new year began. But even if you're very bullish on this biotech stock, you might not have expected what happened next. After reporting data from its phase 3 vaccine trial, Novavax shares doubled in just two trading sessions.
Now the question is: Does Novavax have enough fuel in its engine to keep on climbing? Or did this two-day rally use the final drops? Before answering, let's take a look at what Novavax reported and what's on the horizon.
The original coronavirus
Novavax said its investigational coronavirus vaccine showed 89.3% overall efficacy in its U.K. phase 3 trial. But investors looked beyond that number to examine exactly how well the vaccine worked against the original coronavirus and emerging variants. Novavax's candidate demonstrated 95.6% efficacy against the original coronavirus. That's slightly higher than the 95% efficacy of the Pfizer (PFE 0.78%) vaccine and the 94.1% efficacy of the Moderna (MRNA 1.01%) one.
New strains such as the one originating in the U.K. and one that developed in South Africa are a concern because they spread more easily. And the South African strain is known to escape antibodies produced post-vaccination. Novavax's candidate demonstrated 85.6% efficacy against the U.K. strain in the U.K. trial.
At the same time, Novavax reported data from a phase 2b trial in South Africa. There, the vaccine candidate showed 60% efficacy against the South African strain. While the efficacy against the new variants isn't nearly as high as efficacy against the original virus, it's still excellent news. After all, the U.S. Food and Drug Administration set the bar for emergency authorization at minimum efficacy of 50%.
Investors cheered Novavax's report. The stock climbed from $134 to more than $268 in two trading sessions. Since, Novavax has continued to gain, reaching more than $280 a share. It's surpassed Wall Street's average 12-month price estimate of about $205 -- but it remains lower than the highest forecast of $334.
Novavax versus rivals
You might wonder if Novavax's recent surge was overdone. Probably. The latest news doesn't completely set Novavax apart from other players. Pfizer and Moderna both have said their vaccines can handle the new strains. Still, as we've heard from White House Medical Advisor Dr. Anthony Fauci, new strains are lowering the efficacity of these vaccines. And as we look at Novavax's data, we can see its investigational vaccine is in the same situation.
Moderna and Novavax both may take the lead in the coming months though. Moderna is studying a strain-specific booster that it could eventually adapt to any new strain that may arise. And Novavax plans to test a booster or combined vaccine to address new strains.
Looking ahead, success in the booster study clearly could push the shares even higher than today's level. And other catalysts may do the same. Novavax is preparing to request regulatory approval for NanoFlu, its investigational flu vaccine. NanoFlu met all endpoints in a pivotal trial last year so I'm optimistic. Novavax also is exploring the possibility of a combined flu/COVID-19 vaccine.
As for its position in the coronavirus vaccine market, Novavax could emerge as a leader. The company's capacity will stand at 2 billion doses annually by the middle of this year. That's among the highest compared to rivals. And it doesn't need ultra-low storage temperatures like the Pfizer vaccine.
What does this mean for investors?
From a long-term investment perspective, I'm still positive about this biotech company. Over time, I expect the shares to climb further if the FDA authorizes the coronavirus vaccine candidate and eventually approves NanoFlu -- and maybe even the planned combined vaccine down the road. All of that represents billions in revenue annually.
Still, Novavax's recent increase was too much too soon. As mentioned above, Novavax reported favorable data. But, like rivals, it still hasn't reached extremely high levels of vaccine efficacy against new strains. Handling new variants is a work in progress.
Will the share price come down a bit in the coming days? If you're an aggressive investor you may not want to risk missing the train. So, you might want to buy now. But if you're a cautious investor, you're better off waiting to see if this price level is lasting -- or whether you can buy on a dip.