Is Novavax Stock A Buy?

Novavax, Inc. (NASDAQ:NVAX) is an American biotech company that’s late in the vaccine race, but it may have a winning horse.

The company announced an agreement to presell 1.1 million doses of its coronavirus vaccine to COVAX, an organization that includes several prominent health organizations.

With the details somewhat hazy right now, is Novavax stock a Buy?

The company’s vaccine, called NVX-CoV2373 is in late-stage clinical trials in the United Kingdom and United States. So far, data indicates it produces high levels of antibodies up to 89.5 percent. This makes it an effective single-dose treatment that could be the next level of coronavirus vaccines.

But it’s not out of the woods yet, and it’s unclear how much of a tailwind the company will get if it’s approved. So-called “recovery stocks” are starting to take over pandemic stocks on Wall Street, leaving some levels of doubt in analysts’ minds.

What You Need To Know About Novavax 

Novavax is a Gaithersburg, Maryland-based company founded in 1987 to focus on vaccine development. The company’s research is centered on nanoparticles, which generate the necessary antibody proteins to fight viral infections.

These nanoparticles are harvested and attached to coronavirus spike proteins to stop them from replicating. The deactivated proteins are then injected into the arm to trigger the body’s natural immune cells and antigens to attack the disease.

Before the coronavirus, the method was attempted on other diseases, including the flu. This worked well, but it had little success with a high-profile clinical trial that drove stock prices down.

It received an $89 million grant from the Bill & Melinda Gates Foundation in 2015 to develop a vaccine that protects infants from human respiratory syncytial virus.

By March 2016, the company’s ResVax clinical trials reached stage three clinical trials and failed for the first time. Investor confidence plummeted, and it fell even further after failing a second time in 2019. But the company gained a lifeline in the COVID-19 pandemic.

It also gained $384 million in grants from the Coalition for Epidemic Preparedness Innovations in May 2020, along with another $4 million if it proved successful. This has investors wondering if now is the time to buy.

Is Novavax Stock A Buy?

Novavax price volatility reflects the dangers of investing in healthcare companies, especially those involved in the coronavirus vaccine.

This particular vaccine is proving more effective than previous, but it’s possible that COVID shots become a common annual occurrence like the flu shot.

It could put Novavax in a position where it’s constantly developing new vaccines every year, and that’s a good thing for investors. Otherwise, it risks losing revenue and investor interest as the economy recovers.

The company reported a net loss of $177.6 million in the fourth quarter of 2020 off revenue of $279.7 million. Much of this is due to the costs associated in developing the COVID-19 vaccine.

Still, it has $806.4 million in cash at the start of 2021, which gives it a long runway through the vaccine production. And if it does have a solid purchase order in hand, it could lead to a prosperous decade ahead.

But that doesn’t mean the company doesn’t have obstacles to jump over.

Clinical Trials A Major Hazard For Novavax Stock

The biggest risk to buying Novavax stock is its COVID vaccine either failing to pass through clinical trials or having an adverse reaction in the long term. Rushing out so many vaccines is helping to quell the pandemic in the short term, but the long-term impacts have not yet been realized.

And it’s difficult for institutional investors to properly value the company without understanding how many vaccines can be sold.

The stock price is so volatile that it’s also difficult for traders to justify jumping in if their purchase can be cut in half quickly.

Investors looking for low-risk investments may be better served elsewhere. 

Novavax Market Opportunity Diminishing Fast

Novavax is late to the game with a vaccine, and a primary reason it’s creating so much buzz is because it’s a single-dose solution. This could fix a lot of supply chain issues revolving around the distribution of a double-dose vaccine that requires perfect timing to succeed.

In addition, the high efficacy rates being shown in late-state clinical trials give the company hope of pushing through the red tape to hit the market.

Meanwhile, Moderna (MRNA), Pfizer (PFE), and others are all manufacturing vaccines as fast as they can to serve the massive market demand. Even with a high efficacy rate, there’s a good chance the market of unvaccinated people will shrink by the time Novavax solution hits the market.

Still, the promise of a more effective vaccine candidate is enough for investors and the general public to be cheerful.

Is Novavax Stock A Buy? The Bottom Line

Novavax is a vaccine company with several vaccines in its pipeline, including a flu shot. But it gained buzz in the 2020s for its development of a single-dose coronavirus vaccine that uses nanoparticles to deactivate spike proteins and trigger the body’s immune response.

It’s gaining value as major global health organizations back it, but it’s still pushing through government bureaucracy while the competition races to sell their wares.

Should the vaccine be approved in both the U.K. and U.S. (along with several other countries undergoing trials), the floodgates will open and generate a lot of cash flow for the company. The question remains how well it will sustain in a post-pandemic society.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.