Wall Street has been looking at Novavax (NVAX) of late, and investors clearly like what they see. Over the past 5 months, Novavax stock skyrocketed over 1000% (that's not a typo) and remains relatively close to its 52-week high. The company’s speedy development of a possible COVID-19 vaccine has been behind the stock’s dazzling performance.
Acting as a catalyst for Novavax’s latest round of share price appreciation was last week’s announcement that the coalition for Epidemic Preparedness Innovations (CEPI) will provide Novavax with up to $388 million to further the development of its experimental COVID-19 vaccine, NVX-CoV2373.
According to B.Riley FBR analyst Mayank Mamtani, there are a number of reasons for the CEPI’s vote of confidence.
First of all, the analyst believes Novavax’s response to previous viral outbreaks played a major part in the CEPI’s decision to provide funding. The company developed vaccines against coronaviruses such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS), for which preclinical testing demonstrated strong immunogenicity and 100% protection. This was also the case for Ebola, with the NVAX vaccine candidate proving effective in primate studies.
The last point is important, as management thinks NVX-CoV2373’s positive results in preclinical trials involving baboons, which displayed an “immune response comparable to convalescent plasma in humans”, also played a significant part in the CEPI’s funding decision.
Therefore, Mamtani argues that Novavax’s background could separate it from the pack and increase its candidate’s chance of success.
The 5-star analyst said, “We believe NVAX not only offers a clinically validated adjuvanted recombinant nanoparticle platform but, also, demonstrates the ability to elicit a potent immune response at extremely low doses, boding favorably for both safety and scalability, with management guiding to 100 million doses by YE20 and >1 billion during 2021. And, with a regulatory path becoming relatively clearer, likely on the basis of Ph. IIb results by leveraging Emergency Use Authorization (EUA), we increase the '2373 probability of success, from 25% to 40%.”
As a result, Mamtani reiterated a Buy rating on Novavax and boosted his price target from $43 to $53. However, Novavax’s latest surge has already left the figure in the rear-view mirror, with the new target suggesting a modest upside of 0.5%. (To watch Mamtani’s track record, click here)
The rest of the Street agrees with Mamtani’s call. Solely Buy ratings – 5, in fact - add up to a Strong Buy consensus rating. Novavax’s recent gains mean that the average price target of $47.60 implies possible downside of 12%. Expect the analysts to readjust their Novavax models shortly. (See Novavax stock analysis on TipRanks)
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