Down 50%, Is Novavax Stock a Great Buy Now? This coronavirus vaccine drugmaker developed a solid vaccine but has encountered huge logistical problems

Motley Fool ^ | 06/08/2021 | Zhiyuan Sun

[SeekAndFind]

Over the past year, Novavax (NASDAQ:NVAX) stock has swung between extremely overvalued and extremely undervalued, with a share price ranging from a low of $40.50 to a high of $331.68. It's currently down more than 50% from those all-time highs, which it reached in February.

Investors were thrilled that the company had developed a solid coronavirus vaccine candidate, but were then shocked by its logistical problems. Is now the time to buy the dip?

What happened?

Novavax created its coronavirus vaccine candidate, NVX-CoV2373, using genetic materials that mimic the coronavirus's spike protein, along with an immunoadjuvant (a substance that enhances immune response). In clinical studies, NVX-CoV2373 demonstrated 96% efficacy against the original virus, as well as 86% and 55% efficacy against the U.K. and South African strains.

It's clear that the science behind the vaccine is solid. As an emerging biotech, however, Novavax began encountering problems with production and regulatory filings. To date, NVX-CoV2373 has not received emergency authorization in any country. Meanwhile, the company has had to delay its goal of producing 150 million doses per month all the way from the second quarter of 2021 to the fourth quarter.

The delay means that Novavax will probably miss the vaccine rollout in G7 countries. As a result, investors began abandoning the stock en masse.

Is there any hope left?

On May 6, Novavax executed an agreement with global vaccine alliance Gavi to manufacture and distribute 350 million doses of its recombinant protein-based vaccine to developing countries. Under a separate agreement, the company plans to produce 1.1 billion doses of its vaccine candidate manufactured by the Serum Institute of India (SII). With the facilitation of UNICEF, Novavax transferred its vaccine technology to SII at no cost.

That brings up the main reasons why the stock is undervalued -- its international expansion efforts. While it's true that vaccine demand is plummeting in the U.S., things are not looking so good elsewhere. As of now, only 10% of the world's population has received at least one dose of coronavirus vaccine (it's mostly developed nations boosting that number).

If Novavax manages to get its act together and start producing vaccines by the end of the year, it could very well witness billions in revenue in 2022. The company would have to make some pricing concessions -- say, offering its vaccines at $3 to $4 per dose. However, keep in mind that its market cap has fallen to $10.94 billion and the company still has $2 billion in cash in the bank, giving it an enterprise value of less than $9 billion. That's very cheap for a manufacturer with 2 billion doses in production capacity.

What's the verdict?

Given the strength of its coronavirus vaccine candidate, its current valuation, and the growing demand for vaccines beyond the U.S., Novavax stock is an ideal biotech to buy now. Like all other coronavirus vaccine drugmakers, Novavax has the potential to sell more vaccines after the initial rollout completes via booster shots. If you can stomach a lot of volatility ahead, give the stock a chance.

[Wally_Kalbacken]

Should have brought it to market in a rectal lozenge form.

/s

[viewfromthefrontier]

Probably not part of the “in crowd” that had already planned to profit from vaccines. Nobody wants to share a cut if they don’t have to.

[ProtectOurFreedom]

It appears the vaccine window slammed shut. Everybody who wanted the shot has gotten it. At least in the USA — other countries (like Canada), not so much.

[SeekAndFind]

RE: It appears the vaccine window slammed shut. Everybody who wanted the shot has gotten it.

I don’t know about Novavax’s safety profile, but if it is proven to be just as effective or more and even safer than the 3 vaccines approved in the USA, a significant number of the remaining 30% of the population who have been surveyed/polled to not want to take any vaccine could possibly even consider NovaVax.

[2aProtectsTheRest]

That’s a relatively small market for them, but it’s possible it could still be worth it to them to enter the US market. They were supposed to have filed for an EUA by April, but obviously that hasn’t happened and it doesn’t appear likely they’ll file soon. At this point, if they want into the US market, they’ll need a full BLA.

The world market is still wide open. Billions have no access to a COVID-19 vaccine right now. If they can get their manufacturing and distribution problems solved, they’ll make good money entering the overall world market. But given their failures to date, I wouldn’t invest in that stock. It’s basically gambling at that point.

[catnipman]

“along with an immunoadjuvant (a substance that enhances immune response)” ... because the immune response to the actual vaccine itself is so poor that they have to artificially hyperstimulate the entire immune system for it to work, an approach that’s known to have caused an epidemic of autoimmune thyroid disease in cats that received annual vaccinations of crappy, adjuvanated vaccines, and which has unknown consequences for human autoimmune diseases ... adjuvanated vaccines are the bullet for autoimmune russian roulette ...