Is Novavax Stock A Buy Or Sell? (NASDAQ:NVAX)

Two months ago I wrote about Novavax’s (NASDAQ:NVAX) prospects given the demand for its COVID vaccine seeming to be soft. Here I update the Novavax story in the light of probable imminent FDA approval for emergency use (EUA : Emergency Use Authorization). The EUA for Novavax’s Nuvaxovid COVID vaccine will be a big deal (assuming it happens soon) to become only the fourth COVID vaccine to receive EUA from the FDA. However, given the expectation of $billion revenues from billions of sales, I’m unconvinced that EUA will be enough to turn the tide for Novavax.

Novavax and FDA approval

Novavax continues to wait for the outcome of FDA deliberations about approval of its Nuvaxovid vaccine, although the latest news suggest that FDA EUA is imminent.

A recent statement Novavax (July 1) indicated that clinical data on its vaccine indicates that it provides broad immune responses, including against current variants such as Omicron BA.4/5. The recent release goes on to indicate that Novavax has a program focusing on Omicron BA.4/5 (as recommended by the FDA on June 30). The company expects to have additional preclinical data on Omicron BA.4/5 by late summer/fall and management claims that they will have an “Omicron-containing vaccine in Q4 of this year”. Could this indicate that there may be delays about FDA approval until the Omicron-specific vaccine becomes available?

Will FDA approval be a trigger for Novavax share price recovery?

FDA EUA approval is certainly a big deal given only three COVID vaccines have achieved EUA status.

Pfizer (PFE)/BioNTech’s (BNTX) Comirnaty and Moderna’s (MRNA) Spikevax are both available with EUA under various conditions.

The Janssen (JNJ) COVID vaccine is available under EUA, but since May 2022 only in a restricted way.

So FDA EUA approval of Novavax’s Nuvaxovid will be a big deal and recent share price recovery has probably resulted from the expectation of approval. The question is where to from here?

Where will Novavax achieve sales at scale?

To convince the market about the future of Novavax’s Nuvaxovid COVID business, I think there needs to be evidence that Novavax is going to be able to achieve success alongside Pfizer and Moderna. This seems questionable at this stage because it is clear that Comirnaty and Spikevax are next generation technology that has been widely accepted.

Novavax today reported that the US Department of Health and Human Services and the Department of Defence have secured an initial 3.2 million doses of the Novavax COVID vaccine subject to FDA Emergency Use Authorization. There is also a recommendation from the CDC for the Novavax vaccine to be made available free of charge to states, jurisdictions, federal pharmacy partners and federally qualified health centers. So it seems likely that the Novavax COVID vaccine (Nuvaxovid) will become available soon in the US.

The problem is that I don’t see evidence that Nuvaxovid will replace demand for Pfizer/BioNTech or Moderna mRNA vaccines. Critical decisions are being taken that will decide whether Novavax is being seen as a replacement rather than a “nice to have” alternative. Currently with both the Pfizer/BioNTech and Moderna vaccines being approved for use in children as young as 6 months, the whole vaccination spectrum is now largely covered and Pfizer/BioNTech and Moderna continue to dominate US vaccination and indeed markets where Western vaccines can penetrate.

Australia has a new Government which is reviewing the current vaccine purchase agreements. It seems that there are 3 vaccines that have substantial orders going forward. Two are mRNA vaccines that have dominated vaccine adoption in the West (Comirnaty, and Spikevax) and the third is Novavax’s Nuvaxovid. The way that the Government has already positioned COVID vaccines indicates that Pfizer/BioNTech and Moderna’s vaccines are seen as the “gold standard”. To quote Health Minister Mark Butler. “I have already met with Pfizer and Moderna and sought an update on their progress in vaccine development for different variants of COVID as well as paediatric doses.” Moderna is building a manufacturing facility in Melbourne Australia after reaching an in principle agreement with the Australian Government and the Victorian Government. It is claimed that this will be the first mRNA manufacturing facility in the Southern Hemisphere, with capacity to produce 100 million vaccine doses annually. The plan is to open the facility in 2024 subject to regulatory and planning approval. Part of this deal will give Australia priority access to the Moderna mRNA vaccines.

There is no mention of Novavax, but what might be of concern to Novavax was the response of Health Minister Mark Butler to a question about whether the Australian Government might review or cancel COVID vaccine contracts. Butler gave the following response : “the Government might need to make some change”. This is the issue that Novavax may be encountering in many markets.

The evidence that Pfizer/BioNTech and Moderna continue to “own” the COVID vaccine market comes from recent news about US Government supply orders. On June 29 Pfizer/BioNTech announced a new vaccine supply agreement with the US Government for 105 million doses (possibly including Omicron-adapted vaccines, subject to FDA authorization) with an option to increase the number of doses purchased to 300 million. The contract is for $3.2 billion for the first 105 million doses (~$30.5/dose) which might be delivered as soon as late summer 2022 continuing into Q4 2022.

The scale and scope of the deals that Pfizer/BioNTech and Moderna are doing concerning mRNA vaccines (not only for COVID, but also for influenza and combination vaccines) indicate that both companies have a dominant position in the vaccine space going forward.

A further risk that Novavax faces is that even the dominant mRNA vaccine manufacturers are facing cutbacks in Europe currently where there is a substantial oversupply of COVID vaccines.

Claim that anti-vaxxers will choose Novavax vaccine

A significant claim by Novavax management is that its COVID vaccine will be adopted by people who are vaccine-cautious or anti-vaxxers, who refuse to accept a mRNA vaccine (because it is new technology). The Novavax vaccine is a genetically engineered product. I doubt that this will be more acceptable than a mRNA vaccine when the opportunity to choose is available.

Nuvaxovid and side effects

There is commentary on the internet about Nuvaxovid about having “no side effects”. The Australian Government commentary about this matter indicates that there have been the usual minor side effects with Nuvaxovid and rare side effects have been encountered, including severe allergic reaction (anaphylaxis), myocarditis and pericarditis in a clinical trial. However, the risk level for these side effects is not yet clear, nor are other rare side effects known. The statement on the Australian Government website is as follows: “We don’t yet know if there are other rare side effects after Novavax vaccine. This is because only relatively small numbers of people have received this vaccine worldwide.”

Conclusion

Novavax is a company with a significant number of enthusiastic investors. The trick for rational and less passionate investors is to sort out where the company actually fits in the COVID vaccine space. Despite a 90% recovery in share price in the past month to reach $69.76, I still suspect the ship has left the shore. The share price remains down 63% year on year and Seeking Alpha authors have turned negative, with 4 sell and 1 buy recommendation in the past 30 days. Of 6 Wall Street analyst recommendations in the past 90 days, there remain 4 optimists with 3 strong buy and 1 buy recommendation, while there is one hold and 1 sell recommendation. Notwithstanding that the COVID pandemic clearly isn’t over despite everyone’s hopes, the mRNA vaccines from BioNTech/Pfizer (Comirnaty) and Moderna (Spikevax) still seem to be the “go to” solutions. Unless that changes I’m not sure there is room for Novavax to fulfil the high expectations of Novavax investors.

To be clear, I am not a financial advisor so I don’t provide “buy” or “sell” advice. I do follow closely the biotech industry and I have written a number of articles on the COVID pandemic and the emergence of the mRNA vaccine technology. I own Pfizer stock as a result of my considerations, having been (in my view) too late to the party for BNTX and MRNA. I hope that my comments on Novavax are useful to you and your financial advisor as you make investment decisions concerning Novavax.