At last report, the population of the world totaled some 7.8 billion souls. With COVID-19 continuing to run rampant -- indeed, a "second wave" of infections is already starting to swamp health care facilities in France, Spain, and perhaps also the UK -- and most potential vaccines against the coronavirus requiring two shots for complete effectiveness, this means there's an immediate need for more than 15 billion doses of vaccine.
Now... who's going to make all those doses?
B. Riley FBR analyst Mayank Mamtani makes the case that Novavax (NVAX) has an important role to play in this fight against coronavirus, even if its NVX-CoV2373 vaccine isn't necessarily first to market.
Mamtani believes that Novavax's vaccine, which he affectionately refers to as "'2373," ranks among the top six "first wave" candidates for proof against coronavirus, demonstrating superior immunogenicity and reactogenicity, while also being "refrigerator stable" at temperatures between 2 and 8 degrees Celsius. Competing "mRNA constructs," notes the analyst, often require dry ice to keep them fresh, and temparatures as low as negative 80 degrees Celsius.
But effectiveness and superior storage characteristics are just one part of this story.
In a world clamoring for production of 15 billion doses -- at least, because if immunity conferred by vaccine is not permanent, then annual immunizations and additional doses may be required subsequently -- manufacturing capacity is easily as important as vaccine effectiveness. In this regard, Mamtani notes with approval Novavax's formal agreement last week to partner with India's Serum Institute of India Private Limited (SIIPL) to expand on its own manufacturing capacity.
Mamtani points out that SIIPL , located in the world's second most populous country, is already the largest vaccine manufacturer in the world, producing 1.6 billion doses of various vaccines annually. Its agreement to devote some of its production capacity to Novavax, enough for 1 billion doses annually, promises to double the latter's production capacity to more than 2 billion doses annually within the next nine to 12 months.
Even combined with other vaccines being manufactured by other vaccine manufacturers, this will leave the world woefully undersupplied with vaccines against COVID-19. From an investor's point of view, however, this isn't necessarily a bad thing as it means that "demand will continue to outpace supply, at least until the middle of 2021," giving Novavax a certain amount of pricing power despite all the competition it is likely to encounter.
What's more, this pricing power, and this demand for Novavax's product, could continue longer than you might think. At a minimum, Mamtani sees demand for COVID-19 vaccines continuing for the next 12-24 months. Indeed, it could take that long just to get a first round of two-dose vaccines manufactured and distributed to everyone who needs them. And as already mentioned, there's also the potential for continuing demand in years to come if it turns out that immunity from coronavirus is not a "one and done" thing, but something that needs to be renewed periodically with annual booster shots.
In short, Mamtani thinks investors' decision to sell off Novavax stock by some 30% since early August is a mistake. The analyst continues to view Novavax stock as a "buy," and stands pat on his price target of $257 a share -- more than twice what the shares cost today. (To watch Mamtani's track record, click here)
Most on the Street keep a Buy rating, too – in fact, 4 out of the 5 analysts to post a NVAX review over the last 3 months suggest just that – with the remaining one recommending a Sell. NVAX's Moderate Buy consensus rating is backed by a $227.60 price target – suggesting a 104% upside from current levels. (See NVAX stock analysis on TipRanks)
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