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Is Novavax Stock a Good Bet on Coronavirus Vaccines?

By Adria Cimino - Feb 18, 2021 at 6:30AM

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This investigational vaccine showed it could handle one of today's biggest risks.

If you look only at Novavax's (NVAX -7.50%) share performance last year, you would probably hesitate to buy the stock today. The biotech company soared more than 2,000% in 2020. Investors were busy scooping up shares as the company advanced its coronavirus vaccine candidate and won more than $1.6 billion from the U.S. government to fund its development.

Now you might be thinking that its growth story is over. Moderna (MRNA -1.20%) and Pfizer (PFE 1.50%) have both brought vaccines to market, and the U.S. government bought enough of them to immunize the whole country. What could possibly be left for Novavax? Let's take a look at where the company stands right now -- and whether it's still a good bet on vaccines.

An investor holds $100 bills in one hand and vials of vaccine in the other.

Image source: Getty Images.

New strains are emerging

Novavax's late-stage clinical trials took place in areas where new coronavirus strains have been escalating -- in the U.K. and South Africa. That may have hurt overall vaccine efficacy. Novavax's overall efficacy was 89.3%, compared to more than 94% for the Pfizer and Moderna vaccines. But in context, 89% efficacy is actually a fantastic achievement.

Why? Because Novavax generated trial data about the vaccine's performance against these strains in real-world studies. New variants represent a big risk, and governments are closely watching whether today's vaccines can handle them. Pfizer and Moderna established their vaccines' efficacy earlier -- when the original coronavirus was of highest concern.

In a phase 2b trial in South Africa, Novavax said its investigational vaccine demonstrated 60% efficacy. The South African strain represented more than 90% of coronavirus cases in the trial. And in a phase 3 trial in the U.K., the company's vaccine was 85.6% effective against the U.K. strain. These South African and U.K. strains have been among the most worrisome since the start of the year.

Efficacy of 60% or more against these strains is good -- great, in fact, when we consider that the U.S. Food and Drug Administration (FDA) was hoping that a vaccine against the coronavirus would achieve at least 50% efficacy. But what's even better is that Novavax also is working on a booster or combination vaccine to specifically target new strains. The company plans on launching clinical trials for that project in the second quarter of this year.

A focus on emergency authorization

For now, though, the focus is on emergency authorization for the vaccine candidate. The FDA and regulatory agencies in Europe, the U.K., and Canada have started the rolling review process for Novavax's investigational vaccine. That means they consider trial results as they're generated, rather than as one big submission.

If these agencies give Novavax the nod, the company could collect billions of dollars in revenue this year. Novavax already has orders for more than 280 million doses of vaccine. At the price paid by the U.S., that totals at least $4.5 billion in sales for the business.

Novavax's advantages include the investigational vaccine's characteristics and the company's production capacity. The potential product only needs to be stored in refrigerator temperatures and it arrives in a ready-to-use liquid formulation. That makes transport, storage, and administration relatively easy. Pfizer's vaccine, by comparison, requires ultra-low freezer temperatures and must be diluted before administration.

Novavax is also prepared to ship as many as two billion doses annually as of the middle of this year. That puts it in line with Pfizer and ahead of Moderna. A Pfizer executive told the Associated Press recently that the big pharma company "can potentially deliver" two billion doses this year. Moderna aims to provide between 600 million and one billion doses this year.

NVAX Chart

NVAX data by YCharts

One weak spot

So, things are looking good for Novavax. Still, one weak spot for Novavax -- and many others -- will be the U.S. market, at least in the near term. President Joe Biden recently ordered enough Moderna and Pfizer vaccines to immunize the whole population. This year, it's hard to imagine rivals winning many new orders from the U.S.

And Moderna may solidify its position in the U.S. market if it's successful in its plans to develop a strain-specific booster. Still, if Novavax's potential booster or combined vaccine shows equally strong or better results, the company may carve out a share of the U.S. market next year and in the years to come.

Meanwhile, Novavax could benefit elsewhere. For instance, many European countries are struggling with vaccine shortages. Novavax could win in those areas if it can rapidly deliver doses.

Novavax's shares have continued their winning streak. So far, they've climbed 142% this year. I don't expect another quadruple-digit percentage gain in 2021. But I do think the shares of this biotech company have farther to go. Novavax has demonstrated efficacy against new strains in a real-world setting. It is developing a potential product to further target these variants. And it's a winner from a logistics point of view. All of this means it's a great bet on coronavirus vaccines.

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Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$48.00 (-7.50%) $-3.89
Pfizer Inc. Stock Quote
Pfizer Inc.
$50.67 (1.50%) $0.75
Moderna, Inc. Stock Quote
Moderna, Inc.
$136.26 (-1.20%) $-1.65

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

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