With a coronavirus vaccine on the verge of worldwide commercialization, Novavax (NVAX +0.80%) is probably a few months away from being able to sit pretty and watch the money roll in. Now that the stock has captured the attention of investors everywhere, the next question is whether the company can turn its soon-to-be success into the consistent and long-term kind.
In my view, Novavax is going to be in a stronger place by the middle of the decade. But, I'm of the opinion that the work it did before the pandemic is going to be almost as important as its much-anticipated coronavirus jab moving forward. Let's take a look at its current slate of projects to see why.
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Expect the pipeline to yield some of its long-awaited fruit
Three years from now, the company could have a trio of products on the market, but it'll need to do a lot of work in the clinic between now and then.
Its coronavirus vaccine, which is currently known as NVX-CoV2373, will likely be the first product in its history to get regulatory approval.
Over the last 12 months, Novavax has already brought in $1.2 billion from the jab thanks to advance purchase orders and government funding for its development. Phase 3 clinical trials are done, and now all that's left is for the data to be submitted to U.S. regulators. Management has already petitioned regulators for approval in the E.U., India, South Korea, and with the World Health Organization (WHO). Plus, public health authorities in Indonesia and the Philippines have already given the green light for commercialization, so revenue from those countries is already starting to pour in.
But, there's more to this business than NVX-CoV2373 alone, and a pair of its other projects are likely to be relevant quite soon.
Its shot for respiratory syncytial virus (RSV), ResVax, concluded its first phase 3 trial in early 2019, but it failed to meet its primary endpoint of curbing symptomatic RSV infections in infants. Still, the trial found that children who got the inoculation were hospitalized at a lower rate than those who didn't. As a result of these findings, regulators in the U.S. and the E.U. requested that another phase 3 trial be performed before proceeding with the approval process.
If Novavax manages to confirm that ResVax is effective, it'll open the door to several juicy opportunities to combine it with other critical vaccinations, like its influenza vaccine for older adults, NanoFlu. For its part, NanoFlu is done with its phase 3 trials, and it has performed favorably in comparison to other inoculations against the flu. Given that the project is nearly ready to submit to regulators to consider for approval, it's reasonable to assume that it'll be on the market and making recurring revenue within three years.
More importantly, getting NanoFlu commercialized will pave the way to complete a trifecta of combination products. NanoFlu is already being tested in a phase 1/2 trial in a combination with the company's coronavirus candidate, and the preliminary clinical results look promising.
The utility of these combination jabs is hard to overstate, and Novavax has several different product differentiation opportunities which could enable it to excel in key markets that are contested by other vaccine makers. For instance, its coronavirus-NanoFlu-ResVax combo in preclinical testing would dramatically simplify the vaccination process for children, who are the most at risk from RSV. In contrast, pairing up NanoFlu and its coronavirus offering might make an ideal annual solution for older adults, who are more vulnerable to both diseases. And the company will be able to market the products individually, too.
What will be cooking in late 2024?
In all probability, Novavax will be making recurring revenue from sales of its trio of jab candidates for quite some time if they are each approved. Nonetheless, it'll need to make headway with new pipeline projects and initiate new programs if it wants to stay competitive with other biotechs in the long term.
I expect that the company will continue to develop inoculations for emerging infectious diseases. Beyond that, it's already doing several clinical-stage collaborations investigating whether its Matrix-M technology is useful for improving the potency of a pair of vaccines against malaria. If these projects are successful, it's possible that other businesses may want to license the technology for their own purposes, which would create another stream of income.
Overall, my expectation is that the Novavax of 2024 and beyond will be significantly more formidable than it is today. While I can't guarantee that its stock will continue to beat the market if its coronavirus vaccine revenue starts to ramp down, its looming spate of approvals makes it clear that the company is (finally) on the verge of hitting its stride.
