Novavax (NASDAQ: NVAX) skyrocketed more than 2,000% in 2020, with investors betting on the future of their candidate vaccine against coronavirus. It then expanded earnings at a reasonable pace at the beginning of the new year. But even if you are very optimistic about this biotechnology action, you may not have expected what happened next. After reporting data from its phase 3 vaccine test, Novavax’s stock doubled in just two trading sessions.
Now the question is: Does Novavax have enough fuel in the engine to keep going up? Or did this two-day rally use the final crashes? Before answering, let’s take a look at what Novavax has reported and what’s to come.
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The original coronavirus
Novavax said its experimental coronavirus vaccine showed 89.3% overall effectiveness in its phase 3 study in the United Kingdom. But investors looked beyond that number to examine exactly how the vaccine worked against the original coronavirus and emerging variants. The Novavax candidate demonstrated 95.6% effectiveness against the original coronavirus. This is slightly higher than the 95% effectiveness of the Pfizer (NYSE: PFE) vaccine and the effectiveness of 94.1% of Modern (NASDAQ: MRNA) 1.
New strains, such as the one from the United Kingdom and the one that developed in South Africa, are a concern because they spread more easily. And the South African strain is known to escape the antibodies produced after vaccination. The Novavax candidate showed 85.6% effectiveness against the UK strain in the UK test.
At the same time, Novavax reported data from a phase 2b clinical trial in South Africa. There, the vaccine candidate showed 60% effectiveness against the South African strain. Although the effectiveness against the new variants is not as high as the effectiveness against the original virus, it is still excellent news. After all, the U.S. Food and Drug Administration has set the standard for emergency clearance with a minimum effectiveness of 50%.
Investors applauded Novavax’s report. The stock rose from $ 134 to more than $ 268 in two trading sessions. Since then, Novavax has continued to win, reaching more than $ 280 per share. It exceeded Wall Street’s 12-month average price estimate of about $ 205 – but remains below the highest estimate of $ 334.
Novavax against rivals
You may wonder if the recent rise in Novavax has been overstated. Most likely. The latest news does not completely differentiate Novavax from other players. Pfizer and Moderna said their vaccines can handle the new strains. Still, as we heard from the White House Medical Adviser, Dr. Anthony Fauci, new strains are reducing the effectiveness of these vaccines. And when we look at Novavax data, we can see that his experimental vaccine is in the same situation.
Moderna and Novavax could take the lead in the coming months. Moderna is studying a specific strain driver that can eventually adapt to any new strain that may arise. And Novavax plans to test a booster or combined vaccine to deal with new strains.
Looking ahead, success in the reinforcement study can clearly push stocks even higher than today’s level. And other catalysts can do the same. Novavax is preparing to apply for regulatory approval for NanoFlu, its experimental flu vaccine. NanoFlu met all endpoints in a fundamental test last year, so I’m optimistic. Novavax is also exploring the possibility of a combined influenza / COVID-19 vaccine.
As for its position in the coronavirus vaccine market, Novavax may emerge as a leader. The company’s capacity will be 2 billion doses per year by the middle of this year. This is among the highest compared to rivals. And you don’t need ultra-low storage temperatures like the Pfizer vaccine.
What does this mean for investors?
From a long-term investment perspective, I am still optimistic about this biotechnology company. Over time, I hope that the stock will increase even more if the FDA authorizes the candidate vaccine against coronavirus and eventually approves the NanoFlu – and perhaps even the combined vaccine planned in the future. All of this represents billions in revenue annually.
Still, Novavax’s recent rise was too early. As mentioned above, Novavax reported favorable data. But, like rivals, it has not yet reached extremely high levels of vaccine efficacy against new strains. Dealing with new variants is a work in progress.
Will the stock price drop slightly in the next few days? If you are an aggressive investor, you cannot risk missing the train. So, you may want to buy now. But if you’re a cautious investor, it’s best to wait and see if that price level is long-lasting – or if you can buy in a downturn.