So far in 2021, shareholders of Novavax (NVAX 0.18%) and Axsome Therapeutics (AXSM +0.17%) have had radically different returns. Novavax owners have watched their stock crush the market as the share price has run up 112% this year. Axsome shareholders, on the other hand, have been disappointed as the stock has dropped 25% over the last few months.
This is a replay of what we saw in 2020. Novavax, which is still working on a COVID-19 vaccine, rose 2,700% in 2020. Axsome, on the other hand, has no pharmaceuticals to prevent or treat COVID-19 -- it's focused on medicine for depression and migraines. And like a lot of biotechs, its clinical progress has stalled somewhat because of lockdown delays. Axsome's stock dropped over 20% last year.
Over the past week of trading, however, both stocks have started shooting higher. What's going on? It's definitely got something to do with the market getting bullish about regulatory news and possible approvals on the horizon. Here's why people are buying shares of Novavax and Axsome Therapeutics right now, and why you should too.
Image source: Getty Images.
Novavax will soon file for Emergency Use Authorization for its COVID-19 vaccine
On April 27, Novavax stock shot up 16%. There was no news from the company to back up the boost, but press reports said that the biotech is preparing to submit its COVID-19 vaccine to the Food and Drug Administration (FDA) for Emergency Use Authorization. If Novavax does receive an authorization, its drug will become the fourth COVID-19 vaccine to hit the American market.
Based on data from a phase 3 trial conducted in the United Kingdom, Novavax's vaccine candidate, NVX-CoV2373, had 96% efficacy against mild, moderate, and severe disease caused by the original COVID-19 strain. And the vaccine offers 100% protection against severe disease. Novavax's vaccine was tested in over 15,000 people, 27% of whom were over the age of 65.
The market opportunity is, of course, huge. Novavax has already entered into multiple distribution agreements with governments around the world. Novavax has deals in place to supply 1.4 billion doses of its vaccine candidate in various countries. That puts the biotech behind only AstraZeneca in its worldwide distribution orders, and ahead of the first-to-market companies Pfizer and Moderna. (This could soon change if the EU and Pfizer formally ink a 1.8 billion-dose deal.)
| Countries With Novavax Agreements | Number of NVX-CoV2373 Doses Ordered |
|---|---|
| India | 1 billion |
| U.S. | 110 million |
| U.K. | 60 million |
| Canada | 52 million |
| Australia | 51 million |
| Indonesia | 50 million |
| South Korea | 40 million |
| Philippines | 30 million |
| Other | 11 million |
Data source: Bloomberg.
In a big-time deal last year, Operation Warp Speed agreed to pay Novavax $1.6 billion in order to preorder 100 million doses. While none of the other jurisdictions have disclosed financial details, at $16 a dose, the Novavax contracts would be worth over $6 billion. This estimate does not include the India supply deal, which is set aside for the COVAX facility, a global initiative dedicated to spreading the vaccine worldwide, and is funded in part by the Coalition for Epidemic Preparedness (CEPI). COVAX vaccines are expected to be priced at around $9 a dose.
Novavax's vaccine candidate promises to be a huge, multi-billion-dollar product. Of course this all depends on whether regulatory authorities approve the vaccine. Over the next few weeks, Novavax CEO Stan Erk expects good news on that front, first from U.K. authorities, and then from the FDA in May.
The FDA has granted Priority Review to the application for Axsome's new drug
On April 26 Axsome received notice that the FDA is now reviewing the company's new drug application (NDA) for its lead molecule, AXS-05. This pharmaceutical is expected to be the first new mechanism of action for major depressive disorder (MDD) to hit the market in 60 years.
It's not hard to see why the FDA has granted priority review to the application. There were 22 million adults in the U.S. with depression prior to the onset of COVID-19. Now, in part because of the COVID lockdowns and isolation, depression rates have skyrocketed; Axsome believes there are approximately 71 million adults in the U.S. with depression.
Axsome's drug seems to be highly effective. In a phase 3 trial, 40% of patients had substantial improvement after two weeks on the medication, and that number climbed to 76% at the six-week mark. And the response was sustained over a year of treatment.
The biotech has another drug that is near the finish line: AXS-07, for migraines. As CEO Herriot Tabuteau said on the earnings call, "In the fourth quarter we announced positive results from a long-term open-label MOVEMENT trial of AXS-07, demonstrating rapid, substantial, and durable relief of migraine pain and associated symptoms over the 12-month period." The company plans on submitting an NDA for this drug in the second quarter.
Both Novavax and Axsome are making the transition from unprofitable biotech research labs to pharmaceutical companies with drugs on the market. The opportunity for COVID-19 vaccines is astronomical, which is why Novavax has already been rewarded with a $17 billion market cap. Axsome is a much smaller company, with a $2 billion valuation. But its market opportunity is substantial. The global market for drugs to treat depression is about $19 billion, and the migraine market is about $4 billion. While some will want to wait until the FDA actually approves the drugs, risk-tolerant investors might want to buy shares now.
