Novavax Stock Down 32% From Recent Highs: Is The COVID-19 Play A Buy Ahead of Key Readouts?

Novavax, Inc. NVAX stock has pulled back sharply since hitting an all-time high of $331.68 on Feb 9.

Will the weakness bring traders back into the stock?

Novavax Stock Cools Off: Novavax was among the best performing stocks in 2020, adding 2,700%,thanks to the biopharma jumping on the COVID-19 vaccine bandwagon and the success it found with the late-stage study of its NanoFlu vaccine candidate.

The shares managed to sustain the upward momentum in the new year despite rival coronavirus vaccine programs coming to fruition. The stock jumped over 98% in January amid a slew of vaccine supply deals the company stitched up and the release of preliminary Phase 3 data from the U.K. leg of a Phase 3 trial.

The late-stage results, though fairly robust, fell short of the numbers from Moderna, Inc. MRNA and the joint program from Pfizer Inc. PFE and its German partner BioNTech SE BNTX.

February brought further buying in the stock that pushed it to historical highs early in the month, with the continuing vaccine news flow lending support.

By this time, Novavax had began submissions for rolling reviews with a few regulatory agencies.

Novavax broke the uptrend and began retreating with the broader market Feb. 8. The quarterly results reported March 1 accelerated the sell-off in stock, leading the stock to a low of $147.39.

The stock has been in recovery, with the final efficacy data from the Phase 3 U.K. trial and data from the South African Phase 2b trial released in mid-March leading to further strength.

Novavax has a clear path to approval and commercial sale of its first product, and given the favorable product characteristics, should see widespread purchase and adoption, SVB Leerink analyst Geoffrey Porges said in a note.

The analyst cautioned that the company has some catching up to do with second-generation vaccines in light of the viral drift that is occurring.

"Ultimately, Novavax is well positioned to develop a combined multi-valent influenza/COVID vaccine, and this may be their most compelling commercial opportunity longer term," Porges said.

Upcoming Novavax Catalysts: With rolling reviews of regulatory submissions underway in Europe, Canada, Australia and New Zealand, Novavax investors can expect further news flow in the coming months.

The company is expecting to file for authorization in the U.K. by early in the second quarter. It intends to use the final Phase 3 data from the U.K. as the basis for submission for authorizations to various regulatory agencies.

With the company remaining in contact with the FDA through submissions to its open investigational new drug application, an emergency use authorization filing in the U.S. is due in the second quarter.

Novavax's vaccine, with its ready-to-use liquid formulation and stability in refrigerated conditions, differentiates itself from the rest of the pack. The vaccine could use existing vaccine supply chain channels.

"As the company also has already established a comprehensive global vaccine distribution plan, including scale vaccine manufacturing and supply agreements in eight geographies around the world, and annual capacity of over two billion doses (more than 150 million doses per month) that the company expects to have in place by mid-2021, we believe the scope and robustness of Novavax's strategy to be the leader in COVID-19 vaccines remain underappreciated," H.C. Wainwright analyst Vernon Bernardino said in a note.

The rest of Novavax's pipeline is also robust. Apart from the COVID-19 vaccine, the company has two more vaccine candidates in late-stage development: NanoFlu for seasonal flu and ResVax for infants via maternal immunization.

In the run up to COVID-19 regulatory decisions, the stock could pick up some momentum.

Even with the run-up, the forward P/E for Novavax is 6.77 compared to Moderna's 9.74 and price to sales ratio at 35.26 compared to 72.23 for Moderna.

NVAX Price Action: At last check, Novavax shares were adding 0.91% and trading at $227.52.

Photo courtesy of Novavax.