There's no question that investors have soured on Novavax (NVAX -4.82%). Shares of the vaccine maker have plunged more than 80% since last September. But is Novavax a bargain ready to rebound, or a falling knife to avoid? Here are the bull and bear arguments for the stock.
The bull case
Keith Speights: If you're looking for a compelling potential near-term catalyst for Novavax, you don't have to search hard. The company could be close to winning a long-awaited U.S. Emergency Use Authorization (EUA) for its COVID-19 vaccine. A U.S. Food and Drug Administration (FDA) advisory committee voted 21-0 (with one abstention) to recommend authorization last week. While the FDA is first reviewing Novavax's manufacturing process, the company's prospects of securing EUA seem to be good.
Novavax could have solid long-term prospects as well. The company is ahead of rivals in developing a combination COVID-19/flu vaccine. Novavax already had a promising experimental flu vaccine, NanoFlu, waiting in the wings. It plans to advance a combination of this vaccine with COVID-19 vaccine NVX-CoV2373 into phase 2 testing later this year.
Perhaps the strongest argument for Novavax, though, is its valuation. The vaccine stock trades at only 1.5 times expected earnings. That's super low, especially for a company with a cash stockpile of $1.6 billion. The bar to rebound nicely appears to be low for Novavax with its shares available at such a discount.
The bear case
Adria Cimino: The one big challenge for Novavax right now has to do with its position in today's COVID-19 vaccine market. Leaders Pfizer and Moderna have already vaccinated most Americans. So, the first problem for Novavax is that most people who wanted a primary series probably already got one. That doesn't leave a lot of room for Novavax to carve out market share.
The second problem has to do with booster shots. The U.S. Food and Drug Administration (FDA) hasn't yet reviewed Novavax's vaccine candidate as a booster. The FDA is considering it only as a primary series right now. Meanwhile, Pfizer and Moderna are working on updated boosters. These updates would better address the latest variants, such as omicron.
In fact, Moderna recently reported positive results from a clinical trial of its candidate -- and aims to have that candidate ready in the fall. Novavax's vaccine targets the original coronavirus only. So Novavax may have a tough time getting in on the U.S. booster market right away. And this issue could extend into other countries too. If Moderna and Pfizer have updated boosters available first, they may leave Novavax in the dust.
The third problem has to do with yet another delay. (Novavax earlier fell behind in its regulatory submissions as it struggled with its manufacturing ramp-up.) Earlier this week, the FDA advisory committee recommended the agency authorize Novavax's vaccine -- and most of us were expecting a quick decision from the FDA itself.
Usually, the FDA follows the panel's advice. And it does so quickly. But the FDA said it needs more time to review the Novavax candidate, according to a CNBC report. That's because Novavax submitted new manufacturing data earlier this month. As a result, the shares dropped 17% in one trading session.
So, two things may weigh on Novavax in the near term: First, its limited potential in today's vaccine market, and second, the fact that -- considering the problems mentioned above -- some investors have lost confidence in the company.
Short-term bear, long-term bull?
It's actually possible to be a short-term bear but a long-term bull when it comes to Novavax. The company could struggle in the U.S. COVID-19 vaccine market for a while, even if it quickly wins EUA. However, Novavax still has a shot (no pun intended) at long-term success if its combo vaccine proves to be safe and effective.
