Summary
- Novavax's share price has risen from $4, to $181 in 2020, and is now in decline, trading at $99.7 at the time of writing.
- The company's promising SARS-Cov-2 vaccine has produced some of the most positive data to date, and Novavax has secured ~$2bn in development funding.
- I put the share price decline down to the recent progress of treatments developed by pharmas GSK, AZN, and PFE, plus less favourable treatment from Operation Warp Speed.
- I believe Novavax can secure approval for its COVID-19 vaccine, given its learnings from developing 2 late-stage vaccines for RSV and Flu, and expect to see its shares trade above $160 before the end of the year.
- The longer-term downside case is severe, despite the RSV and flu opportunities, but I would not expect to see NVAX drop below $80 in 2020.
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Investment Thesis
A cluster of early-stage biotechs have seen their stock prices make spectacular gains after entering the "race" to develop a vaccine for the SARS-Cov-2 virus that causes COVID-19, but even amongst these companies, Novavax's (NASDAQ:NVAX) rags to riches performance stands out, as we can see in the chart below.
Share price performance of selected SARS-Cov-2 vaccine developers Novavax, Inovio, Vaxart, Moderna, AstraZeneca - past year. Source: TradingView.
Novavax share price traded at a price of $4 at the beginning of 2020, yet by August 20th, it had reached $181 - a 4,400% gain in a little over 8 months.
Since August, however, Novavax's share price has declined to $99.7 at the time of writing, whilst the prices of other smaller biotech developers have also suffered. In the past month, Vaxart (VXRT) stock is down ~33%, Inovio (INO) stock is down ~42%, and even Moderna (MRNA) stock is down by ~13%, despite the fact its vaccine candidate is about to enter a phase 3 trial.
It might be tempting for investors to, therefore, conclude that having reached the peak of their hype-cycle, this is the end of the road for the microcap biotechs, who have been out-muscled and outspent by big pharma, and that investors in these companies should brace themselves for substantial losses.
I would disagree with this thesis, however, and believe there is plenty more to come from this group, and that amongst them, Novavax presents the strongest credentials of all and stands a good chance of being one of the first companies to bring a safe and effective COVID-19 vaccine to market.
