It's the moment Novavax (NVAX 3.54%) and its investors have been waiting for. A U.S. Food and Drug Administration (FDA) advisory panel voted for the authorization of Novavax's coronavirus vaccine candidate. The FDA doesn't have to follow the committee's advice. But it usually does. An FDA decision may come in a matter of days.
Meanwhile, more than 40 other countries have authorized the vaccine. And Novavax began generating significant revenue from it in the first quarter. Still, the shares suffered as investors worried about the vaccine's fate in the U.S. Novavax applied for authorization earlier in the year. And investors hoped for a decision in a matter of weeks. The stock dropped more than 66% from the start of the year to the FDA advisory committee meeting yesterday. Trading of the stock was halted during the meeting. Today, the shares had climbed 4.42% at 9:30 a.m. Now that we've reached this much-anticipated moment, we might ask, "What happens next?" Does this really represent a major win? Let's find out.
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Delivering doses to the U.S.
Novavax's plans to deliver vaccine doses from its manufacturing partner Serum Institute of India to the U.S. Serum Institute have already passed an FDA inspection. It's still not clear exactly how many doses the U.S. will request in the near term. That's because more than 76% of adult Americans are already fully vaccinated. And right now, there's plenty of supply in the U.S. to meet demand.
Still, the U.S. government already committed $1.8 billion in funding to Novavax for the development of its vaccine and the delivery of doses. The company said it started this year with about $800 million in funding outstanding from this agreement. And Novavax expects to record at least half of that amount this year.
Though the vaccination rate is high in the U.S., it's also important to remember that some people have shied away from mRNA vaccines. These are the types of vaccines leaders Pfizer and Moderna make. These vaccines use messenger RNA to instruct the body to produce a copy of a certain coronavirus protein. And this sparks immune response. It's a new technology. The COVID vaccines are the first commercialized mRNA products.
The population that's refused mRNA vaccines may feel more comfortable with a traditional vaccine. And that's where Novavax comes in. Novavax's product is a protein subunit vaccine -- like the well-known hepatitis B vaccine, for example. These vaccines include purified bits of protein that stimulate immune response. So Novavax offers the mRNA-hesitant population an alternative.
What today's news means for the future
It's clear Novavax will carve out some market share in the U.S. But I think the most important part of this potential authorization is what it means for the future. In the near term, it's unlikely Novavax will become a leader in the U.S. coronavirus vaccine market. And that's why the shares probably won't skyrocket right now. Pfizer has already fully vaccinated more than 127 million people, and Moderna has fully vaccinated about 77 million. And when booster time rolls around, those people may opt for Pfizer and Moderna if they had a good experience with the companies' products.
What's most important about today's news is that the potential authorization allows Novavax to begin making itself known in the market. That's because the company is working on a future product that could be big. Novavax is developing a combined coronavirus/flu vaccine candidate. Moderna is too. But Novavax is farther ahead. Novavax already reported positive data from a phase 1 trial and aims to begin phase 2 later this year. Moderna's program still is in the preclinical stage.
A combined candidate could take major market share. People who go for an annual flu shot might not go for a separate coronavirus booster if they aren't in a high-risk group. But they may readily opt for the convenience of a combined shot.
So Novavax probably won't bring in major orders or revenue in the U.S. beyond what's covered in the original U.S. grant. And even orders through that contract could come in slowly. But an FDA nod still is great news. It sets Novavax on the path to some revenue growth now -- and potentially a share in future U.S. market leadership. And all of this could lift shares over the long term.
