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Can Novavax Make a Comeback?

By Keith Speights and Brian Orelli, PhD – Oct 29, 2021 at 7:01AM

Key Points

  • Novavax stock has fallen due to concerns about its manufacturing issues.
  • Management seems to be confident that Novavax can produce its COVID-19 vaccine at a high quality.
  • The stock should rebound strongly if Novavax meets its regulatory filings timeline.

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The short answer: Yes.

Novavax (NVAX -3.16%) stock has plunged over the past several weeks. Investors have been antsy about the company's manufacturing issues. In this Motley Fool Live video recorded on Oct. 20, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not Novavax can make a comeback from its recent decline.

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Keith Speights: A Politico report, which was actually published online last night, I believe, stated that Novavax's manufacturing quality issues are "more concerning than previously understood." Politico said that its sources, and these are anonymous sources, by the way, believe that Novavax could resolve its issues and achieve full regulatory licensing by the end of 2022. That's a lot later than expected.

Novavax, though, this morning responded to that Politico report and the company confirmed its confidence in both its ability to resolve those manufacturing issues and submit key regulatory filings by the end of this year.

Brian, why should investors make of all of this? Do you think Novavax will rebound quickly from this sell-off?

Brian Orelli: These manufacturing issues have plagued Novavax for months now. It's the reason the company hasn't submitted for regulatory approval. It's pushed back its timeline maybe a couple of times now, the marketing application to regulators basically has two sections.

There's clinical trial results that include safety and efficacy and I don't think there's any concerns there. The vaccine passed its phase 3 clinical trials and there doesn't seem to be any safety issues, so I think they're all set there. The other major section is the CMC, which chemistry, manufacturing, and controls. Basically, can you make it and then also what assays are you using to determine whether it's pure or not. You need both to be able to make it and also be able to prove that it's the same as what you were making previously.

The problem with this Politico report is that no one with the apparent knowledge of the situation is talking on the record. We don't know who they are, we don't know how close are actually to the situation. The fact that in the report it was citing that the manufacturing was only 70% pure is definitely concerning. There's no way you're getting approved with a 70% pure vaccine, but was that the most recent batch? We don't really know because we don't know how close these people are actually to the situation.

The company is claiming that it's going to file in the EU and other regions within the next couple of weeks. I don't think they are probably doing that with 70% pure vaccine so I'm assuming that means that they either have data now that it's pure they expect it in the next couple of weeks. I mean, usually, it takes a while to get all the paperwork together which can take weeks.

I would say that they're probably, they seem fairly confident. Then in the U.S. they are expecting to file before the end of 2021. Now we're only talking about two months from now. I mean, I think that the company seems pretty confident, so I don't know whether this is just not recent news.

The other thing is this article was while there was a lot of information about Novavax, it was actually really more focused on the general problem with getting vaccine out to the rest of the world than the developing world. I think the ability of Novavax to make vaccine is big in that thing so that they are helping to solve that problem. So if they can't do that, that's a big issue.

But the Politico report was more focused on that than it was specifically on Novavax. It wasn't a tell-all about Novavax necessarily. The quote you had was "more concerning than previously understood." Was it previously understood to the general public? Because I could see that it's more concerning than previously understood to the general public, but whether it's more concerning to than previously understood to you and I who have been following the story for months now, maybe that's not necessarily true.

Who knows? I mean, it's hard to tell without having any details on who these people actually are.

Speights: Brian, there's one thing that I really liked. I liked that Novavax's management came out nearly immediately with the response. A lot of times companies will take days before they respond to reports like this. Novavax came right out of the gate and said, no, we are confident in what we've said, we're going to meet our regulatory filing deadlines. We think we can produce this vaccine at a high-quality level.

If management really isn't confident about that, they were making a huge mistake by coming out with that statement. But if they truly are confident then I think investors should take that into consideration and investors are, the stock started off, It went down, I think over 24% at one point this morning. But it's made a comeback to some degree.

My hunch, Brian, is that in the next few weeks anyway, we'll find out whether or not Novavax's management's confidence was warranted and if it was, the stock is going to come back and probably then some.

Orelli: I mean it'll go one way or the other because they'll either file or they won't. I mean, I guess there's a slight worry from an investor standpoint that they file with data that won't actually get authorized. That would be detrimental certainly for the stock price. But hopefully the company won't actually do that.

I mean, they have multiple manufacturing plants. It could be that one manufacturing plant is having issues and they're going to file with the different manufacturing plant. That could solve maybe potentially some of their issues.

Speights: Right. You make a good point, Novavax could meet its deadlines of filing and still not have those manufacturing issues necessarily resolved, but it will be very shortsighted for the company to move ahead with filings if it didn't truly think it had gotten those issues resolved.

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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