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Why Novavax's Pending COVID Vaccine Deal With the EU Raised Concerns

By Keith Speights and Brian Orelli, PhD - May 15, 2021 at 6:02AM

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It's all about the timing.

Novavax (NVAX -2.58%) is reportedly getting close to finalizing a major supply deal with the European Union. While that seems like very good news, some of the details emerging don't sound so great to some investors. In this Motley Fool Live video recorded on May 5, Motley Fool contributors Keith Speights and Brian Orelli discuss why the biotech's pending EU deal has raised some concerns.

Keith Speights: Reuters reported earlier this week that Novavax, the ticket there's end NVAX. Novavax is close to finalizing a supply deal with the European Union for up to 200 million doses of its COVID-19 vaccine, but the stock fell on those reports from Reuters. It seemed to be, at least on the surface, pretty good news for the company. What was it, Brian about this report that raised concerns for investors?

Brian Orelli: Yeah. After all this back and forth in the news sources and stuff like that, it's good that the governments and Novavax they're pretty close to finalizing an agreement. The stock fell because it doesn't look like the deliveries are going to happen until 2021 with most of the doses shipped until 2022.

We've talked previously about Novavax having manufacturing issues. We can only assume that's the case and an unnamed government source in the Reuters article said that that was the reason why they wouldn't be shipping until late 2021 and then most of it in 2022.

It's obviously disappointing because there's a lost opportunity to supply the vaccine for both 2021 and 2022. But long-term investors, and I'm one, should be focused on the potential for the vaccine that covers the variance and then a combination of the coronavirus vaccine with Novavax's flu vaccine. I think those two are long-term opportunities and this is a short-term issue with maybe losing out some sales in 2021.

Speights: Yeah. I think Novavax already has supply deals of around 300 million doses lined up. If the company gets this EU deal that would up to 500 million doses or at least up to that amount. That's a lot of money on the line.

Orelli: Yeah. I mean, it's a lot of money, but it's a one-time issue versus we want to be worried about whether that revenue is going to come in year after year after year.

The long-term valuation of the company is not going to be determined based on their 2021 revenue, it's going to based on the year that you are in plus five years, that's what evaluation is going to be based on, and so you have to look at that and then that makes the 2021 issue less of long-term issue for long-term investors. For short-term investors, it made sense that the stock moved down on the news.

Brian Orelli, PhD owns shares of Novavax. Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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