So here's the bad news: Novavax (NVAX -4.82%) isn't beating the market today. Shares of the biotech company have lost a whopping 56% this year -- while the S&P 500 has slipped about 6%. That's after Novavax soared more than 3,400% over the past two years. Why such a change? Investors lost faith in the company as it fell behind in its regulatory submissions for its coronavirus vaccine candidate. Since, Novavax has gotten back on track. But the shares clearly haven't followed.
Now, here's the good news: Novavax still has market-beating potential over the long term -- even if it missed out on selling vaccine doses during the earlier stages of the pandemic. Why do I say this? Let's take a closer look at this biotech company and find out.
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One of the early coronavirus companies
Novavax was one of the earliest companies to launch a vaccine candidate in clinical trials. And the U.S. initially invested $1.6 billion in the company's program. As a result, investors expected Novavax to be one of the first companies to enter the vaccine market. When that didn't happen, many turned their back on the stock.
Of course, the best-case scenario would have been an early arrival in this billion-dollar market. But even a late arrival is proving valuable for Novavax. First of all, the company has already secured orders for 110 million doses from the U.S. and orders for as many as 430 million doses from various other countries. Novavax also has deals to provide more than a billion doses to lower- and middle-income countries.
More than 35 countries have authorized the vaccine so far, and Novavax has started deliveries. So, revenue is beginning to come in. Speaking of revenue, Novavax says it expects to generate $4 billion to $5 billion this year thanks to vaccine sales. This is a particularly big deal because the vaccine is Novavax's first and only commercialized product.
Today's uncertainty
The one bit of uncertainty remaining right now is that the company is still waiting for the U.S. to decide on its authorization request. Some suggest the U.S. Food and Drug Administration may be slow-walking the authorization of Novavax's candidate. Still, Novavax's data are strong -- so Novavax's chances of success seem good.
Now, all of this refers to what's happening this year. But I'm looking at Novavax as a possible winner over the long term. What could drive this? First, it's important to note that an eventual switch from pandemic to endemic won't eliminate the need for a coronavirus vaccine. At the very least, the most fragile populations will need protection.
And it's very possible the coronavirus will follow the path of the flu -- with people getting annual vaccinations. Just last year, about half of the U.S. population opted for a flu shot. If the same percentage goes for a coronavirus jab too, that could mean major revenue for vaccine makers.
Novavax's current vaccine could carve out a spot in that market. But a potential product that might have an even better chance is this one: Novavax's combined flu/coronavirus vaccine. The company expects to report initial data from its phase 1/2 trial this month. Moderna is also working on such a candidate. But Novavax is further ahead. This sort of product could be the key to capturing the population that usually goes for a flu vaccine. And it could ensure recurring revenue over time.
A flu vaccine candidate
At the same time, Novavax's pipeline includes a flu vaccine candidate -- NanoFlu -- that met all primary endpoints in a phase 3 trial. NanoFlu is a component of the combined flu/coronavirus candidate. But the company could also submit NanoFlu for regulatory approval as a stand-alone flu shot (as was originally planned prior to the pandemic).
This expertise in coronavirus and flu prevention should drive revenue at Novavax over time. And over time, as investors see the resulting revenue and profit levels, they are likely to give this stock a second look. That's why this growth stock has market-beating potential over the long term.
