Novavax Is a Short-Term Trade in a Long-Term Paradigm

The tech underlining NVAX stock isn't fast enough to provide a first-response solution.

I’ve said this before and I’ll say it again: without any hesitation, Novavax stock is one of the biggest beneficiaries of the new normal.

As the New York Times reported last year, NVAX stock was essentially “on the verge of collapse.” The underlying company had researched and developed several vaccines, only to fail clinically.

This time, though, things are different. What’s usually a phrase reserved for scorn turned out to be true in a very positive framework.

Thanks to a pivotal investment in Novavax by the former Trump administration, the biotechnology firm got the lifeline it desperately needed. From a share price that was flirting with the dollar menu, NVAX stock eventually soared to its current triple-digit offering.

Of course, with such a dramatic turnaround, it raises the question: can those eyeballing Novavax today count on a profitable decision?

Although it’s late in the game regarding the vaccination race against the novel coronavirus, NVAX stock has the right stuff to swing northbound — at least on a near-term basis.

As our own Joseph Nograles stated, Novavax “scored a major victorywhen the European Union (EU) inked a supply contract with the pharmaceutical firm for up to 200 million doses.”

Initially, as Nograles noted, the purchase seems a strange one.

“After all, the vast majority of EU countries already have at least 60% to 70% of their populations fully vaccinated,” he wrote.

However, the Europeans are thinking long term.

“[T]he answer lies in the EU’s strategy to defend itself against future variants — as well as to prepare for possible booster shots,” Nograles wrote.

So yes, Novavax has upside potential but for how long?

Long-Term Dynamics Don’t Support NVAX Stock

Per my colleague’s analysis, the EU is implementing a cohesive, broad-based strategy.

“Novavax’s vaccine is unique in that it uses alternative technology to what’s currently in the market. Rather than being mRNA-based, it’s a subunit protein vaccine. As such, it’s similar to an mRNA-based shot, but a key difference is that its coronavirus spike protein is already part of the dose. Plus, Novavax’s vaccine has an adjuvant made from tree bark that helps improve a patient’s immune response.”

While the subunit approach (which is a proven one used todevelop the hepatis B vaccine) is an attractive case for NVAX stock, it has certain weaknesses.

Yes, the established track record will help ease concerns for those who are on the fence regarding inoculation against Covid-19. But at the same time, subunits are more expensive and possibly more time-intensive to develop.

According to information from Gavi.org, subunit vaccines use living bacteria, yeast and other living organisms that need more time and specific conditions do grow. This makes themmore expensive.

Further, the complexity behind subunit vaccines may have contributed to Novavax’s solution falling behind its rivals, mainlyPfizer (NYSE:PFE)andModerna(NASDAQ:MRNA), which used the mRNA approach.

Again, in the near term, NVAX stock offers a strong narrative, but on a longer-term basis, the subunit may prove less effective.

As an article on Statnews.com declared, weneed to start preparing now for the next pandemic. Even then, there’s not a whole lot that can be done about virus outbreaks given our globalized transportation networks. Therefore, a quick, efficient response — as in mRNA vaccines — is key.

Being Realistic About the Circumstances

I sincerely hope that no one interprets the above as me being negative toward NVAX stock. Last year, I was very hopeful that Novavax would be the first one across the clinical finish line. Again, as a proven platform, a subunit-based Covid-19 vaccine offers massive potential.

However, it wasn’t to be. The superior manufacturing profile of mRNA vaccines won out.

While subunits may prove to be more effective over the long haul, the Covid pandemic proved that response speed is the priority. Like it or not, that favors nucleic-acid-based approaches.

That’s not to say that NVAX stock is due for the dumpsters. In the short run, there could be some upside here. However, I wouldn’t bet the house on Novavax unless the underlying science and economics of scaled-up production somehow changes.