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Novavax (NVAX) Is a Long-Term Coronavirus Play

TipRanks

Vaccine-maker Novavax (NVAX) is a $6.5 billion company with only $18 million in trailing sales and no profits whatsoever -- but "thanks" to the novel coronavirus, that could soon change. Indeed, in one analyst's view, as little as a year from now, vaccinating patients against COVID-19 could turn out to be a billion-dollar business for Novavax -- or more.

But first, the bad news.

In a note published Thursday, H.C. Wainwright analyst Vernon Bernardino cites "mathematical models we reviewed online" to argue that contrary to what optimists have been saying, "herd immunity" to infection with coronavirus may not be a viable option for ending the pandemic -- at least not in the short term.

As Bernardino points out, coronavirus continues raging around the globe. The latest data show 13.2 million infections have been reported globally, and those infections are growing at the rate of 1.4% per day. Part of the reason that coronavirus continues to spread at such a pace, unfortunately, may be that herd immunity against the disease just doesn't work as well as advertised.

Why not? Recent studies suggest that the immunity conferred by having been infected with the coronavirus, and recovered from it, "may only last a few months." And if this is the case, then "the potential persistence of COVID-19 beyond 2021 as a real possibility," necessitating not just a one-off round of vaccinations to confer immunity once and for all, but annual vaccinations such as are known to be required to provide protection against such diseases as hepatitis A, human papillomavirus, influenza, meningococcal B disease, and streptococcus pneumoniae. In theory at least, Bernardino thinks it's possible that the U.S. Centers for Disease Control and Preparedness (CDC) will end up having to recommend annual vaccinations against COVID-19 as well.

Now, what would that mean for Novavax? Two words come to mind: "Recurring revenue."

Even if herd immunity does prove to "work" against coronavirus, the complications described above suggest (to Bernardino) that true herd immunity containing the virus's spread might not be achieved before 2024. In that case, Novavax could have more than three years in which to complete development and testing of its NVX-CoV2373 vaccine against coronavirus, and to sell it by the millions of doses -- annually -- around the globe.

What might this mean for Novavax, in dollars and cents? Positing a peak global market for coronavirus vaccines of $10 billion by 2023, and a 10% market share for Novavax's vaccine in particular, this could mean as much as $1 billion a year in revenue for the company from this one single product. Or put another way, 50x more annual revenue than the company currently takes in.

As the analyst explains, "Novavax could be in position to deliver approximately 10M doses of NVX-CoV2373 for emergency use and realize $400M in related revenues in fiscal 2020." By 2021, Novavax could be manufacturing 25 million doses annually. (And 2.5x $400 million is in fact $1 billion).

More than that, though, Bernardino notes that Novavax is already capable of producing "50M doses of its candidate flu and RSV vaccines." If the same holds true for NVX-CoV2373, then it's at least possible the company could do two billion dollars in annual coronavirus vaccine business.

Little wonder the analyst, after considering all the above, decided Thursday to up his price target on this already buy-rated stock to $132 a share, which now implies a 6% downside from current levels. (To watch Bernardino's track record, click here)

Overall, TipRanks analysis of 5 analyst ratings shows a consensus Moderate Buy rating, with 3 analysts rating NVAX a Buy, while 2 saying Hold. However, the average price target among these analysts stands at $117.20, which is about 17% lower than the current value. (See NVAX stock-price forecast on TipRanks)

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