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Why Novavax Could Be the Biggest Winner From Johnson & Johnson's Vaccine Woes

By Keith Speights - Apr 21, 2021 at 5:01AM

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The biotech could benefit from more supply deals.

Johnson & Johnson (JNJ 0.89%) announced in February 2020 that it planned to develop a COVID-19 vaccine. It was certainly good news that the world's largest healthcare company was putting its massive resources behind the effort. Even better news came later as J&J reported that its vaccine would require only a single dose.

Those efforts culminated in J&J winning Emergency Use Authorization (EUA) for its single-dose COVID-19 vaccine on Feb. 27, 2021. Authorizations in other countries followed over the next few weeks. 

Recently, though, it's been nothing but bad news for J&J's vaccine. But problems for one company often create opportunities for another. Here's why Novavax (NVAX 1.37%) could be the biggest winner from Johnson & Johnson's vaccine woes.

Vaccine vials forming a dollar sign.

Image source: Getty Images.

Johnson & Johnson's jinx?

A superstitious person might even think that Johnson & Johnson is jinxed. The healthcare giant has faced more problems with its vaccine than any other leading U.S. drugmaker (although AstraZeneca has experienced plenty of problems in Europe with its COVID-19 vaccine.)

First, there was an embarrassing glitch at the Baltimore facility where J&J's COVID-19 vaccine is produced. In late March, reports surfaced that staff at the facility operated by Emergent BioSolutions contaminated a batch that resulted in the loss of 15 million doses of J&J's vaccine. This led to the U.S. government giving control to J&J to manage the facility.

Next came an even worse problem. Last week, the Food and Drug Administration (FDA) and Centers for Disease Control & Prevention (CDC) jointly recommending pausing the administration of J&J's COVID-19 vaccine after reports of rare blood clotting in individuals who received the vaccine. 

The bad news kept coming. On Monday, Emergent BioSolutions revealed in a regulatory filing that production at its Bayview facility in Baltimore has halted while the FDA conducts an inspection. This move will significantly impact the number of doses of J&J's vaccine that can be made.

Enter Novavax

What does all of this have to do with Novavax? Plenty.

The biotech hasn't won EUA yet for its COVID-19 vaccine NVX-CoV2373. However, that could change soon. Novavax reported impressive results from a late-stage study of its vaccine conducted in the U.K. It expects to complete another late-stage study conducted in the U.S. and Mexico this quarter. The company thinks that it will also be able to file for U.S. EUA in Q2.

Novavax already has an agreement with the U.S. to supply 100 million doses of NVX-CoV2373. It also has supply deals with other governments totaling close to 200 million doses. J&J's problems increase the likelihood that Novavax will be able to line up even more supply agreements.

Sure, Moderna and Pfizer, along with its partner BioNTech, could benefit from J&J's vaccine issues. However, winning additional supply deals wouldn't provide the same boost for the companies as it would for Novavax, which is much smaller than any of these rivals.

It's also likely that governments will want to diversify their vaccine sources considering the problems that have surfaced for both AstraZeneca and Johnson & Johnson. Assuming Novavax wins EUA as expected, its vaccine would be the logical choice to help achieve that diversification.

Long-term possibilities

No one knows exactly what the COVID-19 vaccine market will look like in a post-pandemic world. However, Novavax could have what it takes to be a top player.

The company seems to have a good strategy for addressing emerging coronavirus variants. It's already testing a booster dose of its vaccine. Novavax also plans to advance candidates that specifically target variant strains into clinical testing within the next few months.

In addition, Novavax is exploring the potential for combining NVX-Cov2373 with flu vaccine candidate NanoFlu. A COVID-19/flu combo vaccine could be a commercial winner if annual COVID-19 vaccinations are needed as many anticipate will be the case.

Of course, there's still a chance that Novavax's vaccine could run into headwinds of its own. After all, the blood clotting issues linked with Johnson & Johnson's vaccine didn't become a big issue until after it was on the market. However, the future looks promising for Novavax right now. With a market cap of around $15 billion, this biotech stock could have plenty of room to run.

Keith Speights owns shares of Pfizer. The Motley Fool owns shares of and recommends Emergent BioSolutions. The Motley Fool recommends Johnson & Johnson and Moderna Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$42.88 (1.37%) $0.58
Johnson & Johnson Stock Quote
Johnson & Johnson
$167.57 (0.89%) $1.48
AstraZeneca PLC Stock Quote
AstraZeneca PLC
$66.74 (-0.10%) $0.07
Pfizer Inc. Stock Quote
Pfizer Inc.
$49.86 (0.22%) $0.11
Emergent BioSolutions Inc. Stock Quote
Emergent BioSolutions Inc.
$29.39 (-3.64%) $-1.11
Moderna, Inc. Stock Quote
Moderna, Inc.
$167.96 (-4.99%) $-8.82
BioNTech SE Stock Quote
BioNTech SE
$160.37 (-1.30%) $-2.11

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

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