Novavax (NASDAQ: NVAX) has been dominating recent headlines. On July 7, the company announced that it had secured $1.6 billion from the White House's Operation Warp Speed program to fund late-stage clinical development of its coronavirus vaccine candidate, NVX-CoV2373. Shares rose nearly 32% that day.
Novavax is the latest company to receive funding from the Department of Health and Human Services through the Warp Speed program, including Johnson & Johnson (NYSE: JNJ) and Moderna (NASDAQ: MRNA). Novavax will utilize this funding for its upcoming phase 3 clinical study of NVX-CoV2373 and for augmenting its vaccine manufacturing capabilities. The company hopes to have 100 million doses on the market before the year is out.
With all the buzz surrounding Novavax at the moment, you might be wondering if now is the time to buy this stock and whether its the most promising coronavirus vaccine developer of the bunch. Let's take a closer look.
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The tale of a once-floundering stock
The hype surrounding Novavax in past months has given the stock's price a jaw-dropping boost. In September 2016, shares tumbled by well over 80% on news that the company's potential respiratory syncytial virus (RSV) vaccine had fallen way short of expectations in a late-stage clinical study. This news was a defeat for what the company had hoped would be a blockbuster product.
Between the stock's infamous plunge in 2016 up until early 2019, its price rarely went much higher than $45 per share -- and that was on a very, very good day. The stock often hovered in the ballpark of $20 to $35 per share. Novavax stock scraped the bottom in 2019. Last July, Novavax's stock was just $4.60 per share.
The stock closed at $4.49 on the first trading day of 2020. In May, shareholders started to see a significant and consistent uptick in the stock's price. This trend started around the release of Novavax's first-quarter 2020 results on May 11, in which the company shared that the Coalition for Epidemic Preparedness (CEPI) had agreed to invest up to $388 million in Novavax's COVID-19 vaccine candidate. The stock shot up, closing at $24.50 per share. At market close on Friday, July 17, a few weeks out from the news of funding through Operation Warp Speed, shares of Novavax were trading at a cool $140.49.
Potential blockbuster flu vaccine
As shares hit an all-time low in 2019, Novavax's financial performance was a mixed bag. In Q4, the company's revenue totaled $8.8 million, a 44% increase from the $6.1 million it earned in Q4 2018. For the full year 2019, Novavax reported $18.7 million in revenue. That was a decided drop from its reported revenues in 2018 ($34.3 million) and 2017 ($31.2 million.) Novavax reported net losses totaling $132.7 million in 2019, an improvement from its 2018 net losses, which were $184.7 million. In Q1 2020, the company's $3.4 million in revenue represented a 15% decrease on a year-over-year basis.
Apart from its potential COVID-19 vaccine, Novavax's one bright spot is its flu vaccine candidate, NanoFlu. The vaccine candidate met all its primary endpoints in a phase 3 clinical trial completed in March, and the company intends to pursue approval of its U.S. biological license application from the Food and Drug Administration under an accelerated approval pathway. If approved, this product would easily represent hundreds of millions in revenue per year and could eventually even achieve blockbuster status.
The race to develop a coronavirus vaccine
Novavax's sprint to develop an effective and safe coronavirus vaccine has drawn considerable attention and scrutiny. Critics are concerned because the company has never released a vaccine to the public in its 33 years of business, which shows it doesn't have a successful track record.
Novavax first announced that it was evaluating numerous potential coronavirus vaccines on Feb. 26, just when the pandemic was starting to spread across the globe. Out of these candidates, the company selected one called NVX-CoV2373 to advance to a clinical trial setting. Novavax announced in a May 25 press release that it had commenced a phase 1/2 clinical trial of NVX-CoV2373:
The Phase 1/2 clinical trial is being conducted in two parts. The Phase 1 portion is a randomized, observer-blinded, placebo-controlled trial designed to evaluate the immunogenicity and safety of NVX‑CoV237 ... The trial is enrolling approximately 130 healthy participants 18 to 59 years of age at two sites in Australia. The protocol's two-dose trial regimen assesses two dose sizes (5 and 25 micrograms) ... The Phase 2 portion is expected to be conducted in multiple countries, including the United States, and would assess immunity, safety, and COVID‑19 disease reduction in a broader age range.
Novavax has serious financial backing for its COVID-19 vaccine candidate. In addition to funding from the Operation Warp Speed program and CEPI, it was also awarded a $60 million contract from the Department of Defense (DOD) in June, with the agreement that it would supply the DOD $10 million worth of doses for emergency use or further clinical testing before the end of the year. Results from the ongoing phase 1/2 trial of NVX-CoV2373 are expected out this month.
Catalysts on the horizon
If successful, Novavax's COVID-19 vaccine candidate could ring in a whole new era for the company. NanoFlu's blockbuster potential should also not be overlooked. If either of these vaccines hits the market, shares could go even higher, and the company's balance sheet could look very different in the future.
That said, an investment in Novavax is hardly a risk-free venture. If you're willing to take the leap, investing in this stock may be the buy of the decade. On the other hand, if the volatility of Novavax stock is giving you second thoughts, you might want to wait until we know more.
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