Novavax Stock: What Are The Risks?

Vaccine specialist Novavax (NASDAQ: NVAX) has seen its stock price soar by roughly 25x year to date. While part of the gains were driven by encouraging results for phase 3 trials of the company’s NanoFlu flu vaccine back in March, a bulk of the price appreciation is due to the company’s development of a Covid-19 vaccine candidate. While we discussed some of the merits of the Novavax vaccine in our previous update (see below), in this note, we take a look at some of the key risks that it could face.

While Novavax entered the Covid vaccine race in the Spring, along with Moderna and Pfizer/BioNtech who have now started rolling out their vaccines, the company has faced delays in its timeline. The first readouts from its phase 3 trials are expected around Q1 2021 – likely one quarter behind the front runners. Only after these results are available will the company be able to file for emergency approval and rollout its vaccine. While this may not be a big deal considering that there’s enough room for multiple Covid vaccines, Novavax might miss out on relatively more lucrative orders from developed markets. For instance, the U.S. is now expected to increase its order for Pfizer’s vaccine to another 100 million doses.

Margins for the vaccine could also be a concern. Novavax’s vaccine is based on subunits – essentially using a fragment of the virus – and the manufacturing process is apparently more complex compared to the method used in messenger RNA vaccines including Moderna’s.  This could potentially make the Novavax vaccine more expensive to manufacture. Based on a supply agreement with the U.S. government, the Novavax vaccine will be priced at about $16 per dose, below the $19.50 for Pfizer’s vaccine and as much as $37 per dose for Moderna’s. The potentially more complex manufacturing process and lower prices could mean that margins might be lower.

[Updated 12/2/2020] Does Novavax Covid Vaccine Still Matter?

Novavax (NASDAQ: NVAX) stock saw some volatility after the company said that it had rescheduled its Phase-3 clinical trial in the US, indicating that it could begin in the coming weeks, instead of starting in November. This marks the second time that the company has delayed its U.S. trials, amid some challenges with scaling up production. While the company currently has late-stage trials underway in the U.K, with a readout expected in Q1 2021, Novavax significantly trails frontrunners Pfizer and Moderna who have shown extremely high efficacy rates of roughly 95% and have already applied for emergency approval with the U.S. FDA. Considering that the Novavax vaccine could be at least one quarter behind the frontrunners, will there be a place in the market for the Novavax vaccine even if it proves safe and effective and wins regulatory approval? We believe the answer is yes, for multiple reasons.

See our indicative theme on Covid-19 Vaccine stocks for more details on the performance of key U.S. based companies working on  Covid-19 vaccines.

While the Novavax vaccine might arrive later than expected, it still holds promise. Firstly, based on data from early trials there are indicators that it might be highly effective. For example, the antibody responses for the Novavax vaccine were meaningfully stronger than other vaccines that have been reported at that time, per data from its Australian trials that were available in August. ^[1] The vaccine should also be easier to distribute, as it only needs to be stored at refrigerated temperatures, unlike Pfizer’s vaccine which needs to be stored at ultra-cold temperatures.  Novavax’s vaccine might also be more reasonably priced. Based on a supply deal with the U.S. government, the vaccine’s price is estimated to be about $16 per dose, compared to as much as $37 per dose for Moderna’s vaccine and $19.50 for Pfizer’s. If all goes well, Novavax could also scale up production fairly quickly. In September Novavax reached an agreement with the Serum Institute of India, one of the largest vaccine manufacturers in the world, boosting the company’s capacity to as much as 2 billion doses a year starting from mid-2021. ^[2]

Novavax’s vaccine could also emerge popular in low and middle-income markets. While the Oxford-AstraZeneca’s vaccine – which is likely to be priced at a few dollars per dose – is seen as key to fighting the pandemic in emerging markets, it now faces questions regarding the way phase 3 trials were handled, potentially resulting in delays and apprehension among governments. This could make the Novavax vaccine – which can be produced at scale and easily distributed – popular if the pricing is suitably adjusted.

[Updated 11/4/2020] Covid-19 Vaccine stocks

Our indicative theme of Covid-19 Vaccine stocks – which includes a diverse set of U.S.-based pharma and biotech companies developing Covid vaccines – is up by about 560% year-to-date, on an equally weighted basis, compared to the S&P 500 which has gained just about 4% over the same period. While most vaccine stocks declined last week, amid a broader sell-off in the markets, they are likely to come back into the spotlight as efficacy data from late-stage trials is expected from frontrunners Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) in the coming weeks. Below is a bit more on the companies in our theme of Coronavirus Vaccine stocks and their relative performance.

Novavax (NVAX), a vaccine development company, began late-stage trials of its Covid vaccine in the U.K in September, and large-scale phase 3 trials are due to begin in the U.S. and Mexico this month. While the company doesn’t have any other products on the market yet, its flu vaccine NanoFlu could be ready for potential FDA approval. The company has received about $1.6 billion in funding from the Federal government. The stock has soared 2,000% year-to-date.

NVAX

Moderna (MRNA) , a clinical-stage biotech company, is carrying out phase 3 trials of its Covid-19 vaccine, completing enrollment of 30,000 participants. The company is likely to have data on whether its vaccine works or not by this month, and has noted that it would seek emergency approval from the FDA if the vaccine is at least 70% effective. The stock is up 253% this year.

Johnson & Johnson (JNJ): Unlike most other vaccine candidates, which are likely to require two shots, J&J is targeting a single-dose vaccine. While the company had to pause trials in mid-October after an illness was reported in a volunteer, the company is now preparing to resume trials.  The stock is down by -5.1% this year.

Pfizer (PFE) is working with German partner BioNTech on a Covid-19 vaccine. The company is likely to have efficacy data from late-stage trials available shortly. The company could supply about 40 million doses in the United States in 2020 if the data is positive and regulators approve the vaccine. The stock is down by about -7.6% this year.

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1. Will a small, long-shot U.S. company end up producing the best coronavirus vaccine?, Science [↩]
2. Novavax Press Release [↩]