Novavax (NASDAQ:NVAX) stock has surged in 2020, but is it ready to take off again? It’s hard to tell.
On one hand, the company’s Covid-19 vaccine candidate, NVX-CoV2373, remains a contender. And, with a secondary catalyst in NanoFlu, there’s plenty in motion that could send shares rallying yet again.
Sure, there are many factors unique to Novavax’s vaccine that may help it become as widely used as the aforementioned front-runners. But we won’t know whether this vaccine will move the needle until it gains regulatory approval.
Not only that, who’s to say a vaccine remains the sole “silver bullet” for tackling the outbreak? A pivot towards treatments could reduce the eventual demand for vaccines. This could mean big downside risk for NVAX stock.
Given the secondary NanoFlu catalyst, shares have a low chance of tumbling back to pre-pandemic prices. But the monetization of NanoFlu could be years away, so it may not be enough to shore up shares near-term if the Covid-19 catalyst falls short.
Put it all together, and it’s clear Novavax is somewhat of an “all bets are off” situation. There’s plenty to make the argument that shares will bounce back to prior all-time highs. But also, plenty of reason why shares continue to trend lower in the coming months.
So what’s the play, as shares teeter just above $100 per share? There may be still opportunity here. But be careful, as things could go either way for this stock.
NVAX Stock and Vaccine Politics
Novavax’s pandemic vaccine candidate started Phase 3 trials in the U.K. late last month. A U.S. study may be around the corner. That’s promising, but more broadly, vaccine development has seen some hiccups as of late.
Two other contenders from Johnson & Johnson (NYSE:JNJ) and Eli Lilly (NYSE:LLY) suspended studies due to safety concerns. While unrelated to Novavax, this news may help drive concerns the race for a vaccine may take longer than expected.
And while the company’s pandemic catalyst remains in play, it may not deliver the financial results investors still expect. What do I mean? On October 9, InvestorPlace’s Ian Bezek made the case that the shelf life of vaccine stocks is shrinking.
Namely, with President Trump crediting Regeneron’s (NASDAQ:REGN) treatment for his relatively quick Covid-19 recovery, focus (and funding) may shift from vaccines to therapies. While vaccines will still be on the table, this may mean less potential revenue for vaccine developers like Novavax.
Is this what’s going on? It’s debatable. Sure, we may see the government’s “back to normal” game plan lean less on a vaccine. But, with next month’s U.S. Presidential elections, a win from President Trump’s opponent, Democratic Party nominee Joe Biden, may mean big changes in the government’s tackling of the pandemic. Then again, while Biden has discussed his plans for a vaccine rollout, his actions may differ from his campaign promises.
In short, the jury’s still out whether Novavax’s vaccine catalyst is still in motion, or losing momentum. Sure, there’s another catalyst at play. But while it may help buffer a possible share price crash if NVX-CoV2373 fails to deliver, it may not be enough to save the stock.
What About NanoFlu?
Almost all of Novavax’s gains this year are due from the novel coronavirus catalyst. But while that means shares could tumble big time if its candidate fall short, at least the company has another potential needle-mover on the back burner.
I’m talking about NanoFlu. After putting it to the side when Covid-19 hit, the company is ramping things up again with its prospective influenza treatment. Positive developments with NanoFlu could help the stock out in case its Covid-19 catalyst falls flat on its face.
So what’s the bad news? It may take several years for NanoFlu to bring home the bacon for Novavax. As this commentator noted, NanoFlu and the company’s other late-stage candidates won’t be generating revenue for several years.
NanoFlu may not get approved until 2022, with sales only starting in 2023. With this in mind, it may not help bolster NVAX stock as much as it appears at first glance.
Catalysts Still in Motion, But Be Careful
Novavax’s pandemic catalysts remain in play. But with interest in vaccine stocks fading, and the risk government policy could lean less on vaccines to tackle the outbreak, shares may continue to head lower.
Even with the NanoFlu catalyst serving as a backup, it may not be enough to shore up NVAX stock if its Covid-19 vaccine falls short of expectations. With all this uncertainty at play, tread carefully with NVAX stock.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Thomas Niel, contributor to InvestorPlace, has written single stock analysis since 2016.
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