Early in the coronavirus vaccine race, Novavax (NVAX 7.85%) shares soared. The stock finished 2020 with a 2,700% gain. Investors cheered on this company's program -- and bet that it would be among the first to launch a vaccine. When Novavax's program fell behind, though, so did the stock. Today, Novavax shares are trading for less than even the very lowest Wall Street 12-month price estimate.
Meanwhile, Novavax won authorization for its vaccine in more than 35 countries in recent months. And the company is leading in the development of an important potential product: a combined flu/coronavirus vaccine. Does this mean Novavax is a good buy now? Or are this company's best days in the past? Let's take a close look at Novavax's latest news and what may be on the horizon before deciding.
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Two catalysts ahead
Novavax has two potential catalysts ahead. One has to do with its current coronavirus vaccine. And the other has to do with its combined vaccine candidate. We'll start with the first.
Novavax has begun delivering its vaccine around the world. But there's one major country that still hasn't authorized the product. And that's the U.S. Novavax completed its Emergency Use Authorization request in late January. Now, it's waiting to hear from the U.S. Food and Drug Administration (FDA). Generally, the FDA schedules an advisory committee meeting to consider the request and issues a decision shortly afterward.
A positive decision from U.S. regulators clearly would be positive for Novavax shares. At this point, I wouldn't expect Novavax to carve out major market share in the U.S. Pfizer and Moderna already have vaccinated most Americans. But an authorization would allow Novavax to enter the market and make itself known. The U.S. already ordered 110 million doses from Novavax so Americans who haven't yet been vaccinated -- or those needing a booster -- would have the opportunity to give this new player a try. This is important because it could help Novavax build market share down the road in the coronavirus/flu vaccine market.
Important data in April
And this brings us to our next catalyst. Novavax expects to report initial data from the phase 1/2 trial of its combined coronavirus/flu vaccine candidate in April. Moderna also is working on this type of shot. But Moderna's program hasn't yet started clinical testing.
Novavax has a big advantage in this program. Its flu component is a candidate that's already made it through a pivotal trial. In fact, it met all primary endpoints in that trial. And the coronavirus component produced positive results in its clinical studies. So, individually, each candidate is strong. If, together, they produce solid results, Novavax shares may climb.
The two catalysts I've talked about are in the near term. They could push Novavax shares out of the doldrums right now. And that would make them a buy at today's level. But let's look farther ahead for evidence that these shares are a good long-term buy. For that, we need elements that show revenue and profit potential ahead.
To start with, it's important to note Novavax already has come a long way. The company predicts the coronavirus vaccine will generate $4 billion to $5 billion in revenue this year. And the company has agreements to deliver more than two billion vaccine doses worldwide. This is Novavax's first commercialized product. So, it's a very big step.
What about future revenue?
Of course, many investors worry that just as Novavax is reaching the market, demand may be on the decline. The concern is vaccine sales will fall post pandemic. This may be true. But even if sales slip, revenue still may remain at blockbuster levels. The coronavirus will continue to circulate after the pandemic. And that means countries still will need vaccines.
I spoke of the combined flu/coronavirus vaccine above. And this is a key element for Novavax moving forward. If Novavax is successful here, such a product could ensure significant recurrent revenue. Novavax also has the option of requesting regulatory approval of its flu vaccine candidate alone -- since this candidate has completed the clinical trial pathway.
All of this means that, at today's level, Novavax has plenty of room for upside. The stock is trading at only 3.23 times forward earnings estimates.
Of course, near-term risk remains. Any possible problems during clinical trials or delays with the FDA review could hurt the shares. But over time, Novavax has the product and potential products that may drive enormous revenue. And that means the shares -- and investors -- can win over time too.
