If you invested $10,000 in Novavax (NVAX 8.23%) last March, that principal would be worth nearly $133,000 just one year later. But over the past month or so, Novavax stock has fallen nearly 45% from all-time highs. This has left many investors wondering: What gives?
As it turns out, coronavirus vaccines are by no means immune from the supply and demand dynamics of the market. While many countries are seeing shortages now, countries like the U.S. have already ordered enough to vaccinate their entire populations -- even if some are lost or wasted during transport. Does Novavax have what it takes to overcome this supply glut?
The good news first
In clinical trials, Novavax's coronavirus vaccine candidate, NVX-CoV2373, demonstrated 96% efficacy against the original strain(s) of COVID-19. Against the U.K. and South African strains, NVX-CoV2373 was 86% and 51% effective at preventing infection, respectively. It can be stored in temperatures ranging from two degrees to eight degrees Celsius and is ready to adminster upon delivery. Meanwhile, competitors vaccines from Pfizer (PFE 1.32%) and Moderna (MRNA 4.42%) need to be frozen and subsequently thawed. On regulatory approval, Novavax's CEO recently stated that: "Regarding our regulatory pathway in the U.S., we are in ongoing discussions with the FDA [Food and Drug Administration] to align on the data required for initiation of the EUA [Emergency Use Authorization] and continue to provide information to our opening IND [Investigational New Drug] application. At this time, we expect to complete our EUA filing in the second quarter."
Novavax has already secured 2 billion doses in annual production capacity with various contract manufacturing organizations around the world. The U.S., U.K., Canadian, Australian, Swiss, and South Korean governments have pre-ordered 370 million doses of NVX-CoV2373. At a price of $16 per dose, this means the company should have close to $6 billion in future revenue.
That is quite a lot of expected revenue for a company with a market cap of $13.22 billion. And Novavax could really use the boost, as the company has been operating at a loss for quite some time. Novavax did receive $2.15 billion in funding from the Coalition for Epidemic Preparedness Innovations (CEPI) and Operation Warp Speed (OWS), but there's not much of that money left. It has about $806.4 million in cash and equivalents as of Dec. 31, 2020, compared to a quarterly loss of $177.6 million.
Before you get too excited about Novavax stock, it's essential to understand that the golden age of investing in coronavirus stocks is probably at its finale. At the moment, the top six vaccine producing countries in the world including the U.S., India, China, U.K., Germany, and South Korea can produce more than 11.52 billion one-dose and two-dose vaccines each year, which is just about enough to vaccinate the entire world. In addition, people in underdeveloped countries wouldn't be able to afford a vaccine that costs $16 per dose. Novavax is already pledging 1.1 billion doses this year for these nations for no profit.
Overall, Novavax's vaccine stands up very well against those made by Pfizer, Moderna, AstraZeneca (AZN 1.78%), and Johnson & Johnson (JNJ 0.42%). The problem is that vaccines could be a one-time thing; once a population becomes vaccinated, that market opportunity might be gone for good. Booster shots may not even be necessary if companies develop new and more effective vaccines against the mutant strains. The bottom line is that we don't yet know how long these vaccines' protection last, so betting on their ability to generate revenue past the pandemic is a gamble.
No longer a millionaire-maker
I wouldn't be surprised if Novavax sees a revenue spike for much of this year and 2022, and subsequently loses its coronavirus sales by 2023. Unfortunately, the seasonal flu vaccine is restricted at a global market size of just $4.7 billion last year, and Novavax's candidate, NanoFlu, would be joining a crowded field of well-established competitors. It is not uncommon for a biotech to bring a flu vaccine to market and only see a few million dollars in peak annual sales.
Unlike the companies mentioned above, Novavax does not have a lengthy pipeline or product portfolio to fall back on when the pandemic subsides. For these reasons, I think the growth moment is mostly over for Novavax stock. If you invest, don't purely for coronavirus-related reasons. In the meantime, check out these other biotech stocks instead.