Don’t be too quick to jump on the Wall Street bandwagon.
It’s been a great year for Novavax (NVAX 0.25%). The biotech is up by 150% since January. However, analysts see even more upside for the vaccine maker. The consensus estimate of $20 a share implies a 65% increase over its current stock price, not too shabby for a company that, not too long ago, seemed to be not too far from bankruptcy. Can Novavax maintain its momentum? Let’s find out if the biotech can hit the street’s price target within the next 12 months.
Multiple catalysts on the horizon
Novavax recently signed a partnership with Sanofi that granted the latter the right to market Nuvaxovid, Novavax’s coronavirus vaccine, in most countries worldwide starting in 2025. Until then, it is business as usual for the mid-cap biotech. Novavax recently filed applications with regulatory authorities in the U.S. and Europe for an updated COVID-19 vaccine for the upcoming 2024-2025 season.
Though this market isn’t nearly as large as it was two years ago — and it is still dominated by Moderna and Pfizer — Novavax will still generate some sales from it, provided its updated candidate earns approval. Elsewhere, Novavax is advancing new vaccines through the pipeline. It plans to start phase 3 studies for a combination coronavirus/flu vaccine and a stand-alone flu vaccine in the fourth quarter. Novavax expects data from these studies in mid-2025, less than a year from now.
How could these potential catalysts affect Novavax’s shares? The company earning approval for its updated COVID-19 flu candidate shouldn’t jolt the stock price much. Novavax is getting ready to cede that business to Sanofi. Though Novavax will still generate royalties from the sale of Nuvaxovid, the market has already factored in much of the effect of the agreement the two entities signed. That’s why Novavax’s shares have more than doubled this year.
However, if they are successful, Novavax’s upcoming phase 3 studies could send its stock price soaring. The biotech currently has no other product in the market. These two could be massively successful and allow it to generate growing revenue if they earn approval, likely in 2026 at the earliest. So, within a year, Novavax could be recording royalties from the sale of Nuvaxovid from Sanofi while preparing to send applications to regulatory authorities for two potentially lucrative new vaccines.
If things go as well as the company hopes, its shares will almost certainly climb past $20 apiece.
The long-term view
Of course, there are significant risks associated with Novavax. It isn’t the first biotech to try to develop a better influenza vaccine, or even a combination flu/COVID-19 vaccine. Competition raises the bar for success in the biotech industry, as in many others. Novavax must do more than produce positive results in its upcoming phase 3 trials. It also has to demonstrate efficacy for its candidates that is at least somewhat close to that of other products that are further along.
That’s not a problem for a company with plenty of products on the market that generate steady revenue and earnings. But that doesn’t describe Novavax. Moderna’s combination vaccine recently kicked it out of the park in a late-stage study. Pfizer and BioNTech were also on this tail, but their candidate failed to hit one of its two primary endpoints in a late-stage study.
These companies’ shares didn’t drop off a cliff following these mixed phase 3 results, but they have much larger lineups and pipelines than Novavax. If Novavax’s vaccine suffers the same fate, it would be bad news for its stock. By August next year, more influenza vaccines, including one by Pfizer and another by Moderna, could produce phase 3 results. In other words, Novavax looks like a risky company to invest in.
It could produce a performance that allows it to match the street’s estimates within the next 12 months.
But it could also lose much of its value by this time next year. There are much more attractive biotech stocks to invest in.
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends BioNTech Se and Moderna. The Motley Fool has a disclosure policy.
