The stocks of both Moderna (MRNA -1.39%) and Novavax (NVAX) have lost about 40% since the start of the year. This is even as both companies predict billions of dollars in coronavirus vaccine revenue over the coming months.
Why the pessimism? Investors are worried about the level of vaccine revenue once the pandemic shifts to an endemic situation. This means the virus will still be around -- but without the extreme spikes in infection rates and deaths. Experts say the shift may happen as soon as this year.
Companies have offered us clues that vaccine revenue won't sink like a stone, so there's no need to drop vaccine makers and run in the opposite direction. In fact, both Moderna and Novavax make good buys after their recent earnings reports. Now, the main question is which is a better buy. Let's take a closer look.
Image source: Getty Images.
The case for Moderna
Moderna reported $18.5 billion in coronavirus vaccine sales last year. And the good news is that advance purchase agreements point to an even higher level of revenue this year: at least $19 billion. We don't yet know how strong revenue will remain beyond that point. But we do have a few clues that it could remain significant.
First, we know the coronavirus that causes COVID-19 will stick around. People -- especially the most vulnerable individuals -- will still need protection. Second, Moderna is ensuring its position in tomorrow's vaccine market in two ways. It's working on boosters to better address future variants of the coronavirus, and on a pan-respiratory vaccine candidate. And it's already in talks with countries about 10-year subscription plans covering these potential vaccines or boosters.
But Moderna isn't only about the coronavirus. The company has a total of 44 programs in development in a variety of areas, from infectious diseases to cancer. And the best news of all is that Moderna recently started two pivotal trials -- for a cytomegalovirus (CMV) vaccine candidate and for a respiratory syncytial virus (RSV) vaccine candidate. If all goes well, the company could have two potential blockbusters enter the market within the next few years.
How much does an investor have to pay for this? Not much. Moderna is trading for only about 5.2 times forward earnings estimates. That's down from more than 16 about six months ago.
The case for Novavax
Novavax just stepped into the vaccine market. About 38 countries have authorized its coronavirus vaccine over the past few months. And the company expects to generate revenue of between $4 billion and $5 billion this year, thanks to its first commercialized product.
Of course, Novavax is unlikely to snatch market leadership away from earlier-to-market players Moderna and Pfizer. But it still can carve out and maintain satisfactory market share. The company already has advance purchase agreements, licensing agreements, and other arrangements that bring its vaccine orders to about 2 billion this year. And it's ramped up manufacturing to support that level of demand on an annual basis.
Like Moderna, Novavax also is thinking about the coronavirus market of tomorrow. Novavax actually is a step ahead when it comes to development: The company's combined influenza/coronavirus vaccine candidate is in a phase 1/2 trial right now. Novavax expects to report data from the phase 1 portion next month; if all goes well, it can launch phase 2. Moderna's combined vaccine candidate -- the basis for the future pan-respiratory vaccine -- is still in preclinical tests, but Moderna aims to launch clinical trials soon.
Novavax has about eight programs in the pipeline. All are vaccine candidates for infectious diseases. Closest to market is NanoFlu -- an influenza vaccine candidate that met all primary endpoints in a pivotal trial back in 2020 -- and then the combined flu/coronavirus candidate. Most other programs are phase 1 or earlier.
Today, you can pick up Novavax stock, like Moderna stock, at a bargain price. The stock is trading for only 3.1 times the average earnings estimate for 2022.
And the better buy is...
Both stocks are trading at a discount considering this year's revenue prospects -- and potential products and revenue of the future. Of course, there's risk that one or more candidates may fail during clinical trials. That's the risk that goes along with investing in biotech companies. And that's why it's important to choose companies with strong pipelines.
It's also why I have a slight preference for Moderna overall: The number of programs in its pipeline offers a cushion if some of them fail. Novavax's smaller pipeline makes it a riskier bet.
That said, after the most recent earnings report, Moderna shares may experience more of a lull than those of Novavax. Investors have gotten used to Moderna's billion-dollar revenue and profit. Now, they're looking for concrete information about how much vaccine revenue we should expect down the road.
All of this means Novavax might be a better buy right now. It's at the very start of its coronavirus vaccine story. There may be more room for upside in the coming months as the company announces revenue from its newly commercialized vaccine -- and real-world data. Any positive trial reports from Novavax's combined flu/coronavirus candidate could be another catalyst. And Novavax still is waiting for vaccine authorization from the U.S., so positive news there could lift the shares too. So Novavax is a stock to buy now -- or at least one to watch very closely.
