Last month, I went out on a limb with a prediction about Novavax (NVAX -4.38%). I was right -- and wrong.
On Dec. 14, I wrote that Novavax stock could "soar 20% or more within the next 20 days." Within three days, shares jumped 29%. My prediction came true in a spectacular fashion.
But I can't claim the mantle of Nostradamus. Since then, Novavax gave up all of those gains and then some. The stock is now down nearly 20% instead of up 20%.
I really thought that Novavax would enjoy a solid (and a lot more sustainable) run. However, a key part of my underlying premise was flawed. So is it time to throw in the towel on Novavax?
Image source: Getty Images.
Mission (nearly) accomplished
One of the top potential catalysts that I mentioned three weeks ago was the imminent European authorization of Novavax's COVID-19 vaccine. Sure enough, the European Commission authorized NVX-CoV2373 on Dec. 20, 2021.
This was a huge milestone for Novavax. It set the stage for the company to supply up to 200 million doses of its vaccine to European Union countries.
I also noted that other key regulatory decisions were pending, specifically pointing out the possibility that Novavax could win Emergency Use Listing (EUL) for its COVID-19 vaccine from the World Health Organization (WHO). On Dec. 17, the WHO granted EUL to NVX-CoV2373 to Novavax and its partner, Serum Institute of India. Three days later, Novavax secured a second EUL for its own marketing of the vaccine.
In addition to these milestones, I predicted that Novavax could pick up other authorizations or approvals. On Dec. 28, India granted EUA to the company's COVID-19 vaccine.
Novavax also fulfilled its pledge to submit a complete regulatory package to the U.S. by the end of 2021. However, I mistakenly referred to that as meaning the company would file for U.S. EUA. Actually, the company has to wait a month after the full package has been submitted before filing for EUA of NVX-CoV2373. It plans to do just that.
Why isn't Novavax stock soaring?
Novavax has checked off multiple important regulatory boxes. Why isn't its stock soaring?
My first reason for why I thought Novavax's shares would take off was that there was "simply too much pessimism" about the stock. Investors were down on Novavax after the company missed its dates for regulatory filings several times last year. I looked for that pessimism to diminish as the company completed filings and secured key regulatory approvals and authorizations.
But while Novavax had positive development after positive development in recent weeks, the overall climate for vaccine stocks was deteriorating. BioNTech and Moderna, both of which already have COVID-19 vaccines on the market, saw their shares fall nearly as much as Novavax's shares have tumbled since I made my prediction.
You can blame this scenario in large part on the coronavirus omicron variant. Sure, COVID-19 cases are rising due to the new strain. However, although omicron is more contagious, it seems to be milder than previous variants. Investors are now worried that COVID-19 vaccine sales won't be nearly as robust in the future as they hoped. That's not a good picture for Novavax as it finally begins to market NVX-CoV2373.
Hang onto those towels
Let's return to the original question: Is it time to throw in the towel on Novavax? I don't think so.
The average Wall Street estimate is that Novavax will generate sales of around $5.5 billion in 2022. With European EUA and the WHO's EUL in hand plus U.S. EUA likely just around the corner, I suspect the analysts are right. If so, Novavax's shares are trading below two times expected sales.
I also think that Novavax could emerge as a leader in the vaccine market if COVID-19 transitions from pandemic to endemic. The company already has a promising flu vaccine candidate, NanoFlu, that sailed through late-stage testing. Novavax appears to have a solid head start in developing a combination COVID-19/flu vaccine.
No, I'm not going to predict how Novavax stock will perform in 2022. I've learned my lesson. However, there are still several positive underlying reasons to own this beaten-down stock. I believe that investors should hang onto those towels with Novavax.
