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From a broader perspective, Novavax (NASDAQ:NVAX) is unquestionably one of this year’s biggest success stories. Just prior to 2020, NVAX stock was trading in the low single digits. Even during the depths of the Great Recession, Novavax shares managed to keep its price tag relatively respectable. Indeed, before the novel coronavirus pandemic disrupted the world, the company was on the verge of collapse.
While I’d never classify a virus outbreak as a good thing, for NVAX stock, it kept the lights on. Still, the second half of this year has been a volatile one. Yes, shares were on the cusp of closing at the $200 level in August. But as the harsh realities of the vaccine race spooked investors, many decided to pocket their enormous profits. Who could blame them?
Of course, the ensuing selling pressure took down NVAX stock and quite dramatically. Earlier this month, shares were trading decisively below $100. However, with renewed enthusiasm for vaccines, should investors take another shot?
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Scientifically, the case for NVAX stock is an intriguing one. Currently, there are four major types of vaccines that are in various stages of clinical trials: traditional, subunit, viral vector and nucleic acid. For Novavax, it’s running with a subunit vaccine, which involves injecting nanoparticle fragments (subunits) of the SARS-CoV-2 protein into the patient. From there, the body’s cells undergo a complex process to develop antibodies that attach to and prevent the novel coronavirus from infecting healthy cells.
While an effective platform (the hepatitis B vaccine utilizes the subunit approach), for the coronavirus, Novavax is still in phase 2 trials. However, many of the company’s competitors are in phase 3 for their vaccine candidates.
A Complicated Road for NVAX Stock Awaits
On paper, falling behind in the clinical trial race may seem like a death sentence. Presumably, once one of the vaccine developers succeeds in a viable candidate, the federal government will support the victor. But the concept is hardly as streamlined as you might think.
If you want to get a better idea of the present dynamic, you should consider old-school beat-em-up games. Many of these games allow you to pick characters of varying strengths and weaknesses. For instance, some characters are very powerful but slow. Others are lightning quick but lack reach.
So it is with vaccine players and it will likely have a strong impact on NVAX stock. As I mentioned in an earlier article about Novavax, the pivotal advantage of subunit vaccines is that they are safe to use for immunosuppressed patients. With Covid-19 imposing the worst health outcomes for those with underlying conditions, this is not an attribute to ignore.
That said, an unfortunate disadvantage is that subunits and Novavax’s candidate in particular may be more expensive. The manufacturing process to develop the underlying nanoparticles is more involved than producing the traditional oligonucleotides that may be used in nucleic-acid vaccines.
Further, while governmental support may make the cost argument a moot point, what cannot be swept under the rug is the manufacturing requirements. The subunit vaccine production process is unique and Novavax may need to build out more manufacturing capacity. That takes time, which is a luxury we don’t have.
However, nucleic-acid vaccine developers, such as Moderna (NASDAQ:MRNA), have issues of their own. For example, the New England Journal of Medicine implied through its analysis of Moderna’s messenger RNA vaccine that two doses may be required for its candidate to be truly effective.
That would be inconvenient, to say the least.
Novavax Has a Chance But It’s a Tight Race
In my opinion, Moderna has the lead specifically within the vaccination space. Not only is it in advanced stage trials without a hiccup – unlike AstraZeneca (NYSE:AZN) and its viral-vector approach – Moderna’s mRNA-based vaccine lends itself to ease of manufacturing.
Still, the knock against the company is that nucleic-acid based vaccines are unproven. It’s the same situation with Inovio Pharmaceuticals (NASDAQ:INO). Further, in Inovio’s case, there may be a risk that its DNA-based vaccine could affect the host’s genome. In that case, it could cause cancer.
For viral vectors, a concern exists that patients could develop a negative immune response to the vector (carrier) virus, which is how this approach inserts the genetic sequence of the novel coronavirus.
As I mentioned with the video game analogy, there are really no standout winners in this rush to produce a Covid-19 vaccine. If you want proven efficacy, you’d go with traditional vaccines. But they take far too long to develop. If you want speed, your best bet is the nucleic-acid approach. However, concerns abound regarding its unproven nature.
Therefore, in the midst of this craziness, Novavax could find itself relevant. By logical deduction, NVAX stock still has a chance, despite it falling behind in clinical trials. But if you choose to play, you better be ready for a wild ride.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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