Is Novavax about to hit warp speed in the coronavirus vaccine race?
With 11 coronavirus vaccine candidates in phase 3 trials and 49 in the early stages, it can be difficult for laypersons to estimate which has the best long-term potential. So much attention has been paid to finding the company with the first approved candidate that many investors have lost sight of the ingredients that typically produce multi-tag stock market earnings.
While large cap companies with dozens of drugs in their portfolios, like Pfizer (NYSE: PFE) and AstraZeneca (NASDAQ: AZN) – will benefit if they produce an effective vaccine, small businesses are best placed to see their actions double, triple or do even better. By aligning with large global organizations, receiving funding that dramatically increases the size of their businesses, and revolutionizing treatment approaches, small vaccine manufacturers can dramatically accelerate their growth. For investors looking to seize this opportunity, Novavax (NASDAQ: NVAX) matches the invoice.
How did we get here?
At the start of 2019, Novavax was a $ 108 million company best known for the failure in 2016 of its cold vaccine candidate, which caused the stock to drop 85%. Thanks to hopes for a coronavirus vaccine – and several large cash injections – the stock currently has a valuation of $ 5.2 billion.
In July, the company secured $ 1.6 billion from the U.S. government Operation Warp Speed. It was a huge amount considering the size of the company, and the stock quickly climbed 140% over the next month. Despite the rise, the stock is currently at the same price as at the time of this funding announcement.
Prior to that, Novavax was part of the COVAX initiative, a pool of financial and scientific resources from economically developed countries designed to ensure that a COVID-19 vaccine reaches those who need it most. 172 countries are participating in the initiative – sponsored by the World Health Organization (WHO) and its vaccine-related arms – which aims to end the acute phase of the pandemic by 2021.
One such arm, the Coalition for Epidemic Preparedness (CEPI), initially provided Novavax with $ 4 million, followed by an additional $ 388 million in May when the drug was showing promise. It was CEPI’s biggest investment in a candidate at the time.
And the days go by
Investors took a whiplash last week when Novavax delivered both good and bad news. First, last Wednesday the company delayed the start of Phase 3 trials in the United States and Mexico by about a month, saying they would now start by the end of November. This was followed at the end of the week by news of favorable results for patients who received two injections of the company’s vaccine candidate 21 days apart. The announcement was part of a presentation by the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices. Novavax plans to enroll a diverse population of 30,000 adults in the next North American Phase 3 study, while another ongoing Phase 3 study in the UK hopes to have 15,000 participants by the end of November.
While test results aren’t expected until the first quarter of 2021, the company is wasting no time getting ready. Management announced a 15-year lease for 122,000 square feet near its Maryland headquarters (along with the purchase of 9.7 acres) to manage future growth.
Despite an almost catastrophic failure in 2016, Novavax used its experience in developing an influenza vaccine when the pandemic struck. COVAX’s initial capital to explore a COVID-19 vaccine candidate, and a follow-up funding round after demonstrating progress, has excited investors and pushed the stock higher.
The US government’s huge investment in Operation Warp Speed has made the company one of the largest vaccine makers tasked with ending the pandemic. And the announcement of an expanded manufacturing space and additional property indicates management is confident that the vaccine’s growth will not be short-lived.
Investors willing to look beyond the race for approval and the long-term implications of a vaccine might find a multibagger in Novavax shares.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.