Novavax (NASDAQ: NVAX) was in the perfect position to develop a COVID-19 vaccine, having previously been successful against two similar coronaviruses (SARS and MERS) in the laboratory. The company chose a vaccine candidate in April and, nine months later, the phase 3 trial finally started in the United States. In anticipation, the stock increased 660% over that period. It is not obvious what shareholders should do now, but there is something that they should not do.
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Are all the good news already listed?
Novavax became part of the US government’s Operation Warp Speed in July and subsequently signed several agreements with global vaccine manufacturers for a capacity of 2 billion doses per year, according to the administration. Despite several delays related to manufacturing, phase 3 data will be available by the end of April if the company follows the same schedule as Pfizer (NYSE: PFE) and Modern (NASDAQ: MRNA). In the meantime, Novavax has a phase 3 study in the UK that can report back earlier this quarter and should provide insight into the company’s future.
Although the company’s vaccine has the advantage of using the traditional supply chain, there is a major obstacle to be resolved in terms of relevance. Vaccines from Pfizer and Moderna have shown about 95% effectiveness in preventing COVID-19. Add competition from companies that sell their vaccine at cost or others that require only one injection, and the market for a coronavirus vaccine can quickly fill up.
Novavax also has a flu vaccine with superior performance Sanofiin (NASDAQ: SNY) market leader in a phase 3 trial that ended in March, and management is exploring a combined injection of COVID-19 and influenza vaccine that differentiates the product. This is in the future.
In the short term, the worst thing an investor could do is watch 2020 earnings evaporate if the UK data is not as positive as with other vaccines. Anyone with significant profits from Novavax shares may want to lock in gains on a portion of their investment and wait to see if the vaccine is effective and the company can successfully manufacture enough to meet its high projections.