Source: Barron's
Novavax's (NASDAQ:NVAX) stock is up 20-fold Y/Y on prospects for a vaccine to prevent COVID-19. NVAX hit a 52-week high in early August. Vaccines from Pfizer (PFE) and Moderna (MRNA) reached the finish line first, and these companies already are distributing vaccines for emergency use. Meanwhile, Novavax remains in late-stage clinical trials. Both Moderna and Novavax are practically start-up operations. Vaccine sales could potentially be multiples of their current revenue. Over the past two weeks, NVAX has closely tracked the movement of MRNA.
I previously intimated MRNA could nosedive on insider sales after certain sales restrictions were lifted. Chatter suggests NVAX insiders sold $46 million worth of company stock in 2020:
Top executives at the COVID-19 vaccine developer Novavax (NVAX) have sold approximately $46M worth of company stock since the start of 2020, Reuters reported following a review of the company’s regulatory filings...
See AlsoStock Message Boards | Stock Market News | Investing Research - Investor VillageInvestor Village: Stock Message Boards | Stock Quotes | Market NewsInvestor Village: Stock Message Boards | Stock Quotes | Market NewsNVAX: Links for Novavax Inc. - InvestorVillageIssuing a statement, the company said: “Our leaders remain confident in the value and potential of our vaccines and are passionately committed to contributing to ending the COVID-19 pandemic and improving public health around the world.” And, “They continue to hold substantial personal and professional interest in Novavax’ success as well as a financial one.”
There could be more upside for the stock if or when a vaccine is approved. However, I decided to parse through insider sales just in case.
Over the past three months, there were zero insider purchases, about 82,000 shares sold, and 82,000 net shares traded. I understand why there were no new purchases. The shares have run up to the point where insiders are likely sitting on massive gains. The best time to buy would have been prior to the pandemic, of course. Insiders have sold shares, yet not enough to infer that insiders are bearish on the stock.
The Outlook On Novavax Could Be Binary
Novavax's COVID-19 vaccine has demonstrated to be highly effective in monkeys. Clinical trials have been encouraging, yet there is no way to predict how its vaccine will work on humans or the range of potential side effects. Pfizer and Moderna have set the bar extremely high, reporting efficacy rates in the 94%-95% range during clinical trials. Novavax has been on the radar of analysts for several months. SVB Leering believes Novavax will be next to offer late-stage data from clinical trials:
Despite a setback to GlaxoSmithKline (NYSE:GSK)/Sanofi (NASDAQ:SNY) in their COVID-19 vaccine development, Novavax (NVAX), using a similar vaccine platform, will be the first to offer key late-stage data giving an alternative to recently approved vaccines against COVID-19, SVB Leerink predicts. The shares have resumed last year's dream run, rising 4.5% today.
In December, the mRNA-based vaccines from Pfizer (PFE)/BioNTech (NASDAQ:BNTX) and Moderna (MRNA) received the FDA’s emergency use authorization. And Sanofi/ GSK partnership, citing an insufficient immune response in older adults, announced a delay in their protein-based COVID-19 vaccine program. Despite subunit vaccines are considered the "lowest risk among the alternatives," the setback to GSK/Sanofi ‘has eroded the analysts’ confidence.
However, “further inquiries into the other leading programs in this category (Novavax’s NVX-CoV2373 and Clover’s SCB-2019) have reassured us that they are still viable alternatives to the mRNA programs, with clear operational advantages once they come to market” continues the note.
Johnson & Johnson (JNJ) is also considered a leading candidate to enter the market with an effective vaccine. If Novavax can announce key late-stage data soon then it could potentially beat Johnson & Johnson to market. However, the efficacy of its vaccine has to be stellar. Its efficacy may have to be north of 90% in order to convince NVAX bulls that it can compete head-to-head with Pfizer or Moderna.
AstraZeneca's (AZN) vaccine also has been approved for emergency use. Its vaccine is expected to be cheaper than those developed by competitors. AstraZeneca may not profit much from its vaccine. If Novavax's vaccine disappoints on efficacy then management may have to price it much less than those offered by competitors. This could hurt sentiment for the stock.
The 2021 COVID-19 Revenue Window Could Slowly Close
According to analysts from Bernstein, Novavax could garner $4 billion of the $39 billion COVID-19 pie in 2021. This would be a windfall for its start-up operations. NVAX currently trades at 2.0x its projected 2021 COVID-19 revenue versus 4.7x for MRNA. The question remains, "Can Novavax make that estimate stick." On my previous article I explained how the rollout out of vaccinations has been much slower than expected. About 4.2 million Americans have received the first shot, which is much less than (1) the 13 million doses shipped or (2) the 20 million originally expected by the end of 2020. The slower rollout could cause the economy to reopen later than anticipated. It also could cause analysts to lower their 2021 estimate for total COVID-19 sales and/or for Novavax.
Israel, India, Switzerland and the EU have all cut supply deals with either Moderna, AstraZeneca or Pfizer. As time goes on the number of potential supply deals up for bid could continue to shrink, which could put Novavax's expected COVID-19 at risk. Novavax's vaccine can be stored at refrigerated temperatures making it potentially easier to transport vis-a-vis vaccines from Moderna or Pfizer. This potential operational advantage could be a moot point if (1) its vaccine disappoints on efficacy or (2) competitors grab major market share while Novavax awaits FDA approval.
Conclusion
Risks to NVAX's 2021 expected COVID-19 sales makes the stock a hold.
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