Novavax (NASDAQ: NVAX) was in the perfect position to develop a COVID-19 vaccine, which had previously been successful against two similar coronaviruses (SARS and MERS) in the laboratory. The company selected a vaccine candidate in April, and nine months later, the Phase 3 trial finally began in the US. In anticipation, the share is 660% higher during this time. It is not obvious what shareholders should do now, but there is something they should not do.
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Is all the good news already priced in?
Novavax became part of the US government’s Operation Warp Speed in July and, according to management, signed several deals with global vaccine manufacturers for a capacity of 2 billion doses per year. Despite several manufacturing delays, Phase 3 data will be available by the end of April if the company follows the same timeline as Pfizer (NYSE: PFE) and Modern (NASDAQ: MRNA). Meanwhile, Novavax has a Phase 3 study in the UK that will be able to report early this term that should provide insight into the future of the business.
Although the vaccine of the company has the advantage of using the traditional supply chain, there is a high standard to be clear. Both Pfizer and Moderna’s vaccine have shown approximately 95% efficacy in preventing COVID-19. Add competition to companies that sell their vaccine at cost price, or others that only need one shot, and the market for a coronavirus vaccine can quickly hit pressure.
Novavax also has a flu vaccine that has performed better Sanofisay (NASDAQ: SNY) market leader in a Phase 3 trial that ended in March, and management is investigating a combination of COVID-19 and flu vaccine that would differentiate the product. This is in the future.
In the short term, the worst thing an investor can do is to see how the profits of 2020 evaporate if the UK data is not as positive as with other vaccines. Anyone with a significant profit in Novavax shares may want to recoup a portion of their investment and wait to see if the vaccine is effective and that the company can manufacture successfully enough to meet its high projections.