Can COVID vaccine be a panacea for Novavax’s (NVAX) growth needs?

The market has been closely following the activities of leading biopharma companies for some time, looking for updates on their COVID vaccine programs. With most drug candidates entering the final stages of trial, vaccine frontrunners like Novavax (NASDAQ: NVAX) are striving to outpace each other. With a promising pipeline under its belt, Novavax is a strong contender in the COVID vaccine race.

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The Gaithersburg, Maryland-based biopharma company’s shares have been making steady gains after rebounding from the post-earnings dip earlier this month. They are riding on the bullish sentiment surrounding the company’s COVID vaccine, especially after the FDA granted fast track designation. The uptrend is expected to continue in the near future, at least until a clear picture emerges on the vaccine front. Meanwhile, investors can expect decent returns, as indicated by the target price that points to a 5% upside in the next twelve months.

Crucial Phase

The COVID vaccine race between Novavax and rival drug makers like Moderna Inc. (MRNA) intensified after their candidates entered the final phase of the clinical trial. The unprecedented nature of the coronavirus crisis shows it is going to influence the pharma companies engaged in vaccine development. So, the future of Novavax will primarily be determined by the effectiveness and availability of its COVID vaccine. The company enjoys an advantage over some of the rivals due to its relatively high capacity.

From Novavax’s Q3 2020 Earnings Conference Call:

“At the end of September, we initiated a pivotal Phase 3 efficacy trial in the U.K. two weeks ago we announced the expansion of this U.K. trial and that we are planning to begin enrolling into our U.S. pivotal Phase 3 clinical trial by the end of this month. So as all of you can see, there’s been a great deal of progress on the COVID-19 vaccine front, since we embarked on this journey earlier this year.”

Area of Concern

On the flip side, the heavy investment that goes into the vaccine development program – with most of it coming from external funding — makes the whole process risky. Moreover, the company is taking forward the program without any partnership and the approach is quite traditional when compared to others.

Recently, the FDA granted fast track designation to Novavax’s COVID vaccine. A pivotal phase-III clinical trial of NVX-CoV2373 is expected to commence by month-end in the U.S. and Mexico. On emerging successful in the endeavor, the company would be able to shrug off its troubled past and make a new start.

Costs Drag Profit

For its most recent quarter, Novavax reported a wider loss of $3.21 per share, impacted mainly by research and development expenses related to the COVID vaccine. Revenues, meanwhile, increased multifold year-over-year to $157 million. The numbers also missed the market’s estimates. Hereafter, the finance department will be headed by Gregory Covino, a former executive of GlaxoSmithKline who joined Novavax as chief financial officer recently.

Overall we have strategically enhanced our manufacturing capacity over the course of 2020. We now have antigen production capacity in the following geographies. In India through the Serum Institute; in Korea through SK Bioscience; in Spain through Biofabri; in the Czech Republic through Novavax CZ; in Japan through Takeda; in the U.K. through FUJIFILM; and in the U.S. through two facilities operated by FUJIFILM.

Stanley Erck, chief executive officer of Novavax

Earlier this week, Moderna’s stock got a big boost after the company reported positive results from the clinical study on the efficacy of its COVID-19 vaccine candidate. A statement from the biotechnology firm said the Phase-III study on mRNA-127 revealed an efficacy rate of 94.5%.

Stock Surges

Novavax’s stock witnessed phenomenal growth since the beginning of the year, with the momentum accelerating after it started the coronavirus vaccine program. In the past six months alone, the stock gained about 55% and outperformed the broad market.