Novavax (NVAX -1.08%) was one of the early stars of the coronavirus vaccine race. Its shares soared about 2,700% in 2020. That's after it became one of the first to launch clinical trials and the U.S. government invested $1.6 billion in its program.
But the company fell behind in regulatory submissions and entered the market later than rivals Pfizer and Moderna. Right now, more than 35 countries have authorized its vaccine. But it's still waiting for authorization in the U.S. The shares have lost 46% this year, but they've rebounded 87% over the past month. Should you avoid this vaccine player? Or is it time to buy? Let's look at the bear and bull cases.
The bear case
Novavax missed out on the first wave of coronavirus vaccinations. This probably was the time when the most money could have been made. That's because need was at its highest. No one had yet been vaccinated, so people flocked to vaccination centers as soon as they opened.
Pfizer and Moderna vaccinated most of the U.S. population last year -- and a significant share of the global population. Their vaccines generated more than $36 billion and $18.5 billion in revenue, respectively.
There are some people who refused Pfizer and Moderna's messenger RNA vaccines. They may opt for Novavax's vaccine since it's based on more of a traditional technology.
But it's fair to say most people who wanted a vaccine probably already got one. This means even authorization in the U.S. represents limited near-term revenue for Novavax.
The company has forecast annual revenue of $4 billion to $5 billion this year. This pales compared to the revenue Pfizer and Moderna have been generating. At the same time, Novavax doesn't have other products on the market. And its focus these days is on its coronavirus vaccine.
So Novavax's market share and revenue likely will be limited today. And the company's success may rely heavily on the coronavirus market of tomorrow. That makes Novavax a risky investment right now.
The bull case
Regulatory authorizations are giving Novavax the opportunity to enter the market, prove the value of its vaccine, and generate product revenue for the first time. But the big positive for Novavax has to do with coronavirus prevention down the road.
Novavax is working on a combined coronavirus/flu vaccine candidate. It's not the only one. Moderna also is developing such a candidate. But Novavax has two advantages.
First, it's further ahead. The company aims to start a phase 2 trial by the end of the year. Moderna's program hasn't yet entered clinical studies.
Second, Moderna is a newcomer to the area of a flu vaccine. Novavax has already brought a candidate -- NanoFlu -- through clinical development. NanoFlu met all primary endpoints in a phase 3 trial. So, when designing its combined candidate, Novavax has two of the main components that already have been successful in clinical trials: NanoFlu and its coronavirus vaccine.
A combined candidate could be a leading product in the future. Experts say the coronavirus will stick around. That means at least the most at-risk people will need protection. It's easy to imagine those who usually go for a flu shot instead to opt for a combined flu/coronavirus vaccine.
Today, Novavax trades for about three times forward earnings estimates. That looks cheap considering its long-term prospects in a combined coronavirus/flu vaccine market.
Bull or Bear?
Novavax looks like a good buy today -- for investors who don't mind some risk. The company's long-term program seems promising. But it will take a few years for a combined vaccine to enter the market. And there's always the risk of setbacks or failure during the development process.
It's positive that Novavax is generating revenue right now. And this may boost the stock in the near term. But Novavax's biggest gains probably will come over time.