What Will It Take for Novavax Stock to Rebound?

Novavax (NVAX) stock has plunged in recent weeks despite the company reporting several positive developments for its COVID-19 vaccine. In this Motley Fool Live video recorded on Jan. 5, Fool contributors Keith Speights and Brian Orelli discuss what it might take for Novavax to rebound.

Keith Speights: Let's shift into our next topic. Novavax has won European authorization for its COVID-19 vaccine. It's scored EUAs in other countries as well, notably including India. It's received emergency use listing from the World Health Organization. The company completed its regulatory package submission to the U.S. Food and Drug Administration last week, although it still has to wait a month to submit EUA in the U.S.

But the stock continues to sink, despite all this good news. Novavax has had a string of really good news. Brian, what do you think it's going to take for Novavax to rebound?

Brian Orelli: Yeah. I think a lot of the problem is that it's relying on the Serum Institute of India for manufacturing. I mean, there's nothing wrong with companies using contract manufacturers or partners to make their product. But we know that the long delay from when Novavax had phase 3 data to when they've actually been filing with regulators was due to manufacturing. It's a little concerning that Novavax still doesn't have its manufacturing together enough to include it in the regulatory package for the FDA.

I think investors will be more confident and the valuation will reflect that when Novavax is manufacturing its vaccine on its own.

Speights: Yeah. Brian, I don't remember the exact day, but I think it was December 14th I predicted that Novavax would shoot up at least 20%. I was looking at all the catalysts that the company had. It had all these catalysts, and I thought it's going to benefit from these.

My prediction was right in a sense, by the way. By the end of that week, within three or four days, the stock had shot up 29%. But then it started to fall and kept on falling, and now it's down, I haven't looked this morning, but as of yesterday, I guess it was down around 20% from the time that I made that prediction.

So I was both right and wrong with that prediction. But what's happened is the changing dynamics in COVID-19. I think it's part of what we've already talked about that Novavax is late to the party here.

I think it's on track -- obviously, it's already won authorization in Europe and India, and I think it's on track probably to win EU and the U.S. as well and other countries. But the dynamics are changing in the market, and I think investors are thinking maybe Novavax is getting in at a bad time here where the demand is just not going to be as high as what it might have been otherwise.

Orelli: Yeah. I think that the demand is going to be probably mostly in the developing world and those which is going to come with lower margins.

Speights: Yeah. Let me ask you this, though. Let's say that investors are right. They're looking to the future and they think, hey, we're going to shift from pandemic to endemic, and COVID-19 isn't going to be as big of a concern, although it will probably still be around. What does Novavax's future look like in that environment?

Orelli: Yeah. It's an interesting. I mean, in one respect, they're going to a do-over, right, because now they're pretty much on even playing field with all the other vaccine makers, because we'll get to the point where you won't even know which vaccine you are getting. You'll just go to your pharmacist and it'll be whatever your pharmacist ordered.

But that means that now they've got to compete on the commercial side. Right now they just have one customer, it's the government and so they just had to establish contracts with the government and they were set. But now when they get to endemic, now they've got to build out a commercial enterprise.

I mean, I don't know, I think it would almost be better to sell the company at that point and let some larger company with more experience with the vaccines do that part or license it out or something like that because I think that building out that kind of infrastructure is probably not ideal.