This year could be a big one for Novavax (NVAX -2.51%). The biotech company fell behind in the coronavirus vaccine race last year. It delayed its regulatory submission several times due to manufacturing issues. But here's the good news: Today, it's reached the final stretch. Novavax just completed its data submission to the U.S. Food and Drug Administration (FDA). That means the company can apply for Emergency Use Authorization (EUA) as early as a month from now.
Meanwhile, Novavax stock price momentum has slowed from its 2,700% gain in 2020. Last year, it climbed 28%. Today, the shares trade for about $140. That's well below Wall Street's average 12-month share price forecast of $268. And Wall Street's highest forecast calls for a price of $305. Now the question is, can Novavax reach such levels this year? Let's find out.
Image source: Getty Images.
The key factor
Vaccine rollout will be a key factor for Novavax in 2022. Investors have been eagerly waiting for Novavax to win an EUA in the U.S. But it's important to remember that Novavax's vaccine has picked up authorizations in other countries in recent weeks.
For example, the European Commission authorized the vaccine in late December. And Novavax said doses will start arriving in Europe this month. Novavax has signed an advance purchase agreement with the European Union for the delivery of as many as 200 million doses through next year.
We don't know the exact cost of the vaccine. But if, like rivals, some contracts price it at about $20, that could represent $4 billion. That's huge for a biotech company's very first commercialized product. And that's only counting sales to one region.
So, it's clear that Novavax doesn't have to depend entirely on the U.S. for significant revenue. It will be important to look at Novavax's first-quarter earnings report to see how the company is doing on production and deliveries to countries that have authorized its vaccine. If Novavax scores a win with vaccine rollout, the shares could climb.
Of course, authorization in the U.S. remains another major catalyst for the biotech company this year. And it could happen soon. Novavax says it plans to submit its EUA application in one month. The FDA has typically reviewed and then decided on coronavirus vaccine candidates in a matter of weeks. That means it's possible a decision could happen in the first quarter of the year.
A chance in the U.S. market
Early in the vaccine race, the U.S. awarded Novavax $1.6 billion in funding for its program. As part of the deal, the company would produce 100 million doses for the U.S. So, if authorized, Novavax's vaccine will get its chance to enter the U.S. market. True, Novavax likely will enter the market more than a year after leaders Moderna and Pfizer. That will make it difficult for the company to gain major market share.
But two factors may help Novavax make a name for itself in the U.S. First, its product isn't an mRNA vaccine like those of Pfizer and Moderna. That offers an alternative for people who can't take or don't want to take an mRNA vaccine. Second, the FDA now allows healthcare providers to mix and match authorized vaccines. So, for instance, if you got the Pfizer primary series, you could get the Novavax jab as a booster -- if it wins an EUA. This could offer Novavax a huge lift when it comes to gaining market share in areas where many people already have been vaccinated.
Billions of dollars in revenue
Now, let's come back to our question: Could Novavax reach the highest Wall Street share price estimate of about $300 this year? Novavax has already gained authorization in about 30 countries. Trial data have been positive, so I'm optimistic about Novavax's chances of winning authorization in the U.S. too.
As I mentioned above, Novavax's performance this year depends on vaccine rollout. If the situation isn't filled with bumps and snags, Novavax could start generating significant revenue very quickly. The company said early last year that in the four to six quarters following authorization, it expects to bring in billions of dollars in revenue.
Now, let's do some math. The current earnings per share estimate for Novavax this year is $25.71. If the stock were to rise to $300, it still would be reasonably priced in relation to that level of earnings. Novavax would have a price-to-earnings ratio of about 11. By comparison, Moderna today is trading at about 14 times trailing-12-month earnings.
As always, biotech stocks that depend heavily on one product remain high-risk. Any disappointment could crush the shares. But if Novavax successfully manages this next chapter in its vaccine story, it's possible this biotech stock could reach analysts' highest forecasts.
