Between pandemic-driven price movements, a vaccine reaching widespread approval, and the standard slate of biotech risks and pitfalls, investors are bound to have dramatically varying outcomes with their Novavax (NVAX -3.85%) shares depending on when they bought in. Moving forward, keen investors are likely to take a different approach to the stock than people who are merely interested to jump on the bandwagon as it realizes billions in revenue from vaccine sales.
So, let's dive in and examine three things that the experts know so that you'll be as capable of profiting from this stock.
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1. Scaling vaccine manufacturing is hard, but it might get easier over time
Novavax is no stranger to manufacturing issues, and they've been a consistent challenge for the stock. In August, it decided to delay the U.S. regulatory submission for its jab until October to address concerns with manufacturing.
Then, on Oct. 19, the company conceded that it was struggling to produce vaccine doses that met the minimum standards for purity as laid out by regulators. Now, it's aiming for a submission to the U.S. Food and Drug Administration (FDA) before the end of the year.
It might be tempting to brush away these issues as part and parcel for a fast-moving biotech that's firing on all cylinders to serve global demand for its product. And there's more than just a grain of truth to that perspective. But smart investors know that there's one common thread to all of the manufacturing problems that's harder to dismiss: The biotechnology that Novavax uses to generate its vaccine doses.
Unlike with the jabs made by Pfizer or Johnson & Johnson, Novavax enlists an insect cell expression system as a key part of the production process. The manufacturing protocols that come with insect cell-based production can be quite difficult to scale up. It's possible that manufacturing difficulties will continue to be a source of headaches for investors, not to mention customers awaiting their orders containing millions of shots. On the other hand, Novavax is becoming more experienced with scaling its manufacturing operations, so in my view these growing pains are likely to subside over time.
2. The fight for market share is soon to come
With the Dec. 17 announcement that the World Health Organization (WHO) had granted an emergency use listing for Novavax's vaccine as manufactured and marketed by its collaborator, the Serum Institute of India, it's now nearly inevitable that the jab will soon reach the global market through a forthcoming set of additional approvals. This most recent approval comes right after others in the Philippines and Indonesia, and it signals that the WHO is likely to grant the company's pending request for a full worldwide approval to market its shot.
Savvy investors recognize that a global rollout means an imminent confrontation with the competition -- specifically, with pharma heavyweights like Pfizer and AstraZeneca, whose products are already available in the vast majority of the countries in the world. But because countries negotiate with companies to order doses for future delivery, difficulty in fulfilling orders this year and in 2022 could have spillover effects into the next two years. After all, why would a country buy shots from Novavax for next year if Pfizer could deliver them sooner?
On the bright side, the company may have an edge over AstraZeneca as well as Johnson & Johnson because its jab could be more protective.
Whereas AstraZeneca's vaccine was found to be 76% effective at preventing symptomatic disease, Novavax's protectiveness may be as high as 90.4%. That also compares quite favorably to the Johnson & Johnson shot's efficacy of 66%.
If future investigations find that Novavax's product is better against viral variants, that'll be another point in its favor when battling for market share.
3. The coronavirus vaccine isn't the only thing in the pipeline
While it's understandable for people to focus primarily on Novavax's coronavirus candidate, investors with a longer-term perspective know to appreciate its other projects. Once the pandemic reduces in intensity, it'll be those programs that carry the company forward.
Coronavirus shot aside, the most important thing in the pipeline is NanoFlu, which is an influenza inoculation for adults over age 65. Its phase 3 trials are completed, but it hasn't been submitted to regulators to consider for approval as of yet.
If it is eventually approved, it'll become an important source of recurring revenue, and it'll also create a handful of opportunities to make combo shots that protect against multiple infectious diseases at once. In particular, NanoFlu is being tested in a combination with the coronavirus jab, which would be a massive time-saver for healthcare systems looking to reduce their caseload.
The combination program is still in early phase clinical trials, but upon completion it could be a huge seller, which smart investors shouldn't discount.
