In the race to bring a coronavirus vaccine to market, Novavax (NVAX) looked like a loser — lagging rivals like Pfizer and Moderna by months. Now, all of a sudden, Novavax looks like a winner — and its stock doubled over the past two trading sessions.
What rabbit did Novavax pull out of which hat to accomplish this?
After close of trading Thursday, the company announced that in clinical Phase 3 trials, its NVX-CoV2373 vaccine has shown “strong efficacy” in preventing infection with COVID-19, even when “over 50%” of the cases combated were of the “now-predominant UK variant” of the disease. Furthermore, the company says that Phase 2b trials in South Africa have demonstrated “clinical efficacy” in preventing infection with the “South Africa escape variant” of the disease. Overall, NVX-CoV2373 is looking to be 89.3% effective at protecting patients against coronavirus.
In short, said Novavax CEO Stanley C. Erck: “NVX-CoV2373 is the first vaccine to demonstrate not only high clinical efficacy against COVID-19 but also significant clinical efficacy against both the rapidly emerging UK and South Africa variants.” In so doing, Novavax has addressed the concerns of multiple medical professionals (and patients) worrying that, no sooner had we invented vaccines to beat coronavirus, than the virus already mutated into forms against which the vaccine could not defend.
B. Riley analyst Mayank Mamtani explained the significance of the news, calling the data both “overwhelmingly positive” and “above Street expectations.” Indeed, the 5-star analyst points out that at 96% efficacy against the original strain of coronavirus, Novavax’s vaccine appears to be the “best-in-class” vaccine. Better than Pfizer’s. Better than Moderna’s, too. (And probably way better than Sputnik V).
In Mamtani’s view, the United Kingdom (where the Phase 3 trial was conducted and the “UK variant” is obviously a primary concern), rollout to market of Novavax’s vaccine is likely to begin within the “next few weeks.” In the US as well, the analyst is predicting rapid Emergency Use Authorization.
This seems patently good news — good enough that Mamtani was willing to jump to the conclusion that “NVAX shares are undervalued and [even after the 3845% jump in share price, over the past 12 months, the stock] doesn’t fully reflect the potential of the underlying adjuvant platform that enables rapid creation and large-scale production of vaccine candidates.”
Regardless of how big the orders end up coming in, explains Mamtani, Novavax’s vaccine has significant advantages over the competition, including in particular the ability to be shipped at room temperature. Furthermore, Novavax has demonstrated a facility at employing small doses and combinations with other drugs and vaccines “to remain one of the pioneers in addressing the evolving C-19 pandemic globally,” such that even as the virus mutates, Novavax’s vaccines can still target it. In fact, that’s probably the best news of all.
Accordingly, Mamtani reiterates a Buy rating on Novavax shares and bumped the price target up from $223 to a Street high of $334. Investors could be pocketing gains of 23%, should Mamtani’s thesis play out over the coming months. (To watch Mamtani’s track record, click here)
Novavax has decent support amongst Mamtani’s colleagues, but its current valuation presents a conundrum. NVAX’s Moderate Buy consensus rating is based on 5 Buys and 1 Sell. However, the share gains keep coming in thick and fast, and the $226.50 average price target now suggests shares will decline by 16% over the next 12 months. (See NVAX stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
