In the race to create COVID-19 vaccines, it seems there are no losers.
I thought Novavax (NASDAQ:NVAX) was the “ultimate vaccine play” last year despite having no track record of success. In November I suggested people sell NVAX stock. The stock, which had been selling at $5 in January, was selling at the time for $86.
That was the wrong call. NVAX stock topped out at nearly $286/share in February. By June it seemed they had a vaccine that worked. With shares at about $180 I suggested a buy.
Trouble is, it’s one thing to have a vaccine, another to have scaled production. That’s why BionTech (NASDAQ:BNTX) took Pfizer (NYSE:PFE) as a manufacturing partner. Novavax tried to go it alone. That’s not going so well.
Novavax’s early vaccine batches don’t all have the same potency, according to the Food and Drug Administration (FDA). A $1.75 billion government contract is being held up by the problem. FDA also wants Novavax’ Emergency Use Authorization (EUA) delayed until problems are fixed.
The news, which came out Aug. 6, send shares down nearly 20%. Shares that started the day at $236 ended it below $190. They were recovering in pre-market trade August 9, due to open around $193.
Compare that to Moderna (NASDAQ:MRNA), which I actually bought after I recommended it here. Since my purchase in February, it’s up 177%. Novavax is down 17% in that time.
The difference is management, and approach.
Moderna, which I recommended at its IPO in 2018, is a specialist in Messenger RNA (MRNA), drawing its leaders from top Boston universities. Novavax uses recombinant particle technology. It has been pushing this for a decade, but it has had repeated failures in Phase Three trials.
CEO Stanley Erck isn’t a biochemist. He has an MBA from the University of Chicago. Novavax has a manufacturing partner in Korea’s SK Bioscience. But the deal only covers South Korea.
A Speculation on NVAX Stock
It’s hard to recommend a stock whose management is iffy. But there are reasons to buy.
First, vaccine designers that have demonstrated efficacy have proven to be winners. BionTech is up 400% over the last year. Second, there’s a whole world that needs vaccines, and COVID will be a challenge for quite a while yet.
Most important, the current problems can be fixed. If Novavax signed a contract with a scaled production partner, or announced its sale to another entity, the stock could skyrocket. At its present price Novavax is worth $14 billion. That makes it a minnow next to AstraZeneca (NYSE:AZN) or Johnson & Johnson (NYSE:JNJ). Both have proven manufacturing technology even if their COVID concoctions have proven sub-optimal.
Novavax might also fix its own problems, which seem to be mainly in the testing phase of production. If its vaccine is effective against the current Delta variant, or other new strains, that could also boost its prospects, and the stock price. That would make future deals easier to do.
The Bottom Line
There is still upside potential forNVAX stock, as our Louis Navillier writes. The vaccine works. It doesn’t require the super-cold storage of the Pfizer-BionTech or Moderna vaccines. It could still be a big winner, especially in markets like India where storage is an issue.
We are earlier in this pandemic than I imagined we would be when it started. The virus has been able to mutate and come back stronger. This battle will go on for years, doing continuing damage to the global economy.
Given that, you can still make money speculating on Novavax stock. The company still has time to get its act together.
On the date of publication, Dana Blankenhorn held long positions in MRNA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at firstname.lastname@example.org or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.