Novavax (NVAX -2.51%) soared a jaw-dropping 7,900% from the start of 2020 through its peak last February. That's as investors bet on the ability of its coronavirus vaccine candidate to deliver billions of dollars in revenue. But when Novavax postponed its submission for regulatory authorization more than once, some investors reined in their excitement. By the end of last year, the stock had retreated 55% from its high.
Today, Novavax's situation has changed dramatically. The company has won authorization for its vaccine in more than 30 countries over the past few months. And Novavax recently submitted complete data to support Emergency Use Authorization in the U.S. It just officially applied for an EUA. Yet the stock still is suffering. It lost about 40% in January. Now, the question is whether, after that decline, this vaccine latecomer is a buy right now...
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Why investors were worrying
First, let's talk about why investors have been worrying about Novavax. Coronavirus infection rates remain high, and the omicron variant has gained ground worldwide. But experts have been speaking about the situation shifting from pandemic to endemic -- and some have even predicted that could happen as soon as this year. At the same time, a big percentage of the population in high-income areas such as the U.S. or the European Union have had their primary vaccination series. So, investors are concerned Novavax might be arriving at a point when demand for vaccination may significantly drop.
Now, let's talk about why these worries may be overdone. Even once the situation shifts to endemic, people still will need protection against the coronavirus. Vaccine leaders Pfizer and Moderna both have suggested that an annual vaccine or booster will be needed. This means vaccines should continue to generate revenue in a post-pandemic world.
And two factors should weigh in Novavax's favor when it comes to carving out market share. First, health authorities have authorized the practice of mixing and matching vaccine brands. So, if you've had a Pfizer primary series, you could get a Moderna or Novavax booster. This opens the door for a newcomer like Novavax.
The Novavax difference
But why would someone who's already taken the Pfizer or Moderna jab try a different shot, you might ask. The Novavax product is a different type of vaccine. It's a protein subunit vaccine. It doesn't offer the body instructions through mRNA to make protective proteins like the Pfizer and Moderna vaccines. Instead, it works by injecting purified protein antigen along with an adjuvant to boost immunity. Protein subunit vaccines have been on the market for years. People who are hesitant to try a newer technology like mRNA may prefer a Novavax vaccine. Novavax also could interest those who have experienced side effects after an mRNA vaccine or are allergic to one of the ingredients.
It's clear that Novavax's opportunity would have been even greater if it had entered the vaccine market at the same time as Pfizer and Moderna. But that doesn't mean opportunity has evaporated. For the reasons I've mentioned above, Novavax still may generate major revenue from its vaccine -- and soon. For example, the European Union has authorized the Novavax product -- and the company has already started shipping doses to the region.
A long-term winner
I also see Novavax as a potential winner over a period of several years. Here's why: The company is working on a combined coronavirus/flu vaccine. For this, Novavax is using its flu vaccine candidate that already met all primary endpoints in a pivotal trial. That's a big plus. Moderna also is working on a combined vaccine -- but Novavax is farther ahead in the development process.
So, let's get back to our original question: Is Novavax a buy after dropping about 40% in just a few weeks? It's important to keep in mind that Novavax has been very sensitive to coronavirus news -- and the stock hasn't been an investor favorite in recent times. This means there may be more rough patches ahead. This stock is best for investors who can tolerate volatility and risk.
But if you are in that category, now is a good time to consider the Novavax story. Revenue and profit should be right around the corner. Novavax could steadily build a long-term presence in the coronavirus vaccine and booster market. And all of this may equal lasting share gains.
