The COVID-19 vaccine market in developed economies is dominated by the likes of Pfizer (PFE) and Moderna (MRNA). These companies have benefitted from an early-mover advantage.
However, the vaccination drive is far from over. According to the global vaccine alliance (GAVI), 80% of the population in high- and upper-middle income countries have received at least one dose of the vaccine. That number is abysmal for low- and lower-middle-income countries. Only 20% of those populations has received at least one dose of the vaccine.
As the focus shifts to equitable distribution of the vaccine, Novavax (NVAX) seems to be a prime beneficiary.
NVAX stock has already trended higher by 80.3% for year-to-date 2021. (See NVAX stock charts on TipRanks)
With vaccine deliveries around the corner, further stock upside seems likely. I am bullish on Novavax, with the company at a growth inflection point.
Focus on Low-Income Countries
Novavax is a leading contributor to the World Health Organization-backed COVAX initiative. The company has already committed 1.1 billion doses of its vaccine.
Last week, Novavax and the Serum Institute of India announced submission to the World Health Organization for emergency use listing of the vaccine. The company has also separately applied with authorities in India, Indonesia and the Philippines for emergency use approval.
It’s also worth noting that Novavax has advance purchase agreements for approximately 400 million doses of the vaccine. This agreement is with the European Union, Canada, Switzerland, Australia and the U.K. Recently, the company also signed an agreement with the government of Japan for 150 million doses of the vaccine.
The key point is that Novavax has an order pipeline from developed markets. Additionally, there is significant visibility for pipeline boost from low-income countries. This provides strong revenue and cash flow visibility for 2022.
Paving Way for Long-Term Growth
Novavax also seems to be positioning itself for long-term cash flows. There are two factors that are likely to play an important role.
First and foremost, a single booster dose has demonstrated four-fold increases in neutralizing antibody levels. With encouraging results, the booster dose is likely to provide scope for incremental revenue.
Furthermore, Novavax has already initiated Phase 1 and 2 clinical trials for a combination of the COVID-19 vaccine and seasonal influenza. Positive results on this front can be a possible source of long-term revenue from the vaccine.
It’s also worth noting that as of Q2 2021, Novavax reported cash and equivalents of $2.1 billion. It’s likely that the company’s cash position will swell further in 2022.
This is important as Novavax already has a deep pipeline of candidates in various stages of clinical trials. With strong financial flexibility, the company is positioned to pursue multiple vaccine candidates.
Currently, the company’s pipeline is for therapeutic areas that include seasonal influenza, respiratory syncytial virus, Ebola virus, Middle East Respiratory Syndrome and Severe Acute Respiratory Syndrome.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, NVAX stock comes in as a Strong Buy, with three Buys assigned in the past three months.
The average NVAX price target is $290.33 per share, implying 43% upside potential from current levels.
Concluding Views
From a manufacturing and supply perspective, Novavax is well positioned. By Q4 2021, the company expects to ramp up manufacturing to 150 million doses per month.
Additionally, Novavax has a licensing agreement with the Serum Institute of India, SK bioscience, and Takeda. Therefore, the company is positioned to service the order backlog in 2022 and beyond.
Overall, NVAX stock is likely to trend higher once the company receives approval from the World Health Organization. A pending emergency use authorization approval with the United States is also a stock upside catalyst.
Disclosure: At the time of publication, Faisal Humayun did not have a position in any of the securities mentioned in this article.
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