Novavax (NVAX -18.44%) reached a pretty big milestone in the first quarter: The biotech company posted its first profit as a commercial-stage company. That’s after more than 35 countries authorized the vaccine. And Novavax has delivered more than 42 million doses worldwide so far.
Still, two elements in the earnings report this week disappointed investors. Novavax’s profit fell short of analysts’ expectations. And the company said it hasn’t yet received an order from Gavi. This is an organization that provides equitable access to vaccines. The advance purchase agreement with Gavi calls for Novavax to deliver 350 million doses. And, of course, entering the market a year later than vaccine leaders Pfizer and Moderna represents a headwind. But in the long-term, Novavax may have what it takes to become a leader in the market. That’s because of one particular element.
Vaccine market of the future
First, let’s talk about this coronavirus vaccine market of the future. Some investors have worried that vaccine sales would drop off a cliff once the pandemic was over. But experts predict the virus will stick around. And much like the flu, it will require annual protection — at least for the most vulnerable individuals. By vulnerable, I mean those with comorbidities and also those who work in a high-risk setting, such as a hospital.
We’ve already seen evidence that these experts are right. The virus continues to mutate — and new variants have periodically popped up and gained ground. Right now, countries continue to vaccinate with current vaccines. Moderna even says it could have a booster targeting omicron ready for use in the fall. And players including Pfizer, Moderna, and Novavax each are preparing to update vaccines for the latest strain when needed.
So, right now, you might be imagining the following future scenario. When fall rolls around, you’ll go for a flu shot, and you’ll also go for a coronavirus jab. Or, maybe if you’re not high risk, you’ll skip the coronavirus jab to avoid an extra shot. Now, here’s where Novavax comes in. The company is working on a potential product that can protect you — but without the hassle of running out for multiple shots.
Novavax versus Moderna
Novavax is working on a combined coronavirus-flu candidate. Moderna also is developing such a candidate — but Novavax probably has a better chance of getting to market first. Here’s why. Novavax already has a coronavirus vaccine and a flu candidate that have each completed phase 3 trials — and met primary endpoints. Moderna is new to the flu vaccine business. Its most advanced flu candidate may start phase 3 trials by the end of the second quarter.
As a result, Novavax’s program is farther ahead. The company plans to launch a phase 2 trial for its combined candidate by the end of the year. Moderna’s combined candidate so far is in the preclinical stage. Another plus: Novavax already has reported positive results from the combined candidate’s phase 1 clinical trial.
In the earnings call, chief business and commercial officer John Trizzino said the company “would expect high demand for this in most high-income country markets.”
Novavax has already started carving out a share of the coronavirus vaccine market. It’s important that Novavax starts building a presence in this market now. It’s likely to bring in billions of dollars in revenue and profit. And it will put the company on the radar screen of the governments and healthcare facilities that buy vaccine doses — this could help Novavax if its combination vaccine reaches commercialization.
But Novavax is unlikely to beat more advanced rivals Pfizer and Moderna right now. What does this mean for investors? I wouldn’t panic if Novavax remains well behind these vaccine leaders in today’s market. And I wouldn’t worry too much about quarter-to-quarter revenue fluctuations. Instead, it’s best to focus on the future. It’s important to keep an eye on the combination vaccine program. If things continue to progress smoothly, that’s where Novavax could truly stand out.
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