The Time Is Right To Buy Novavax

Summary

• Shares of Novavax have been oversold.
• NanoFlu, when approved, may take a large share of the $5 billion global flu vaccine market.
• Pipeline likely to yield RSV NDA candidate for early 2019.
• Buy straw hats in the winter time.

Source: WikipediaCommons

You've heard all the axioms that encapsulate the strategy of buying stocks when they're out of favor: "buy low, sell high", "buy when there's blood in the streets" and "buy straw hats in the winter time" among others. Well, with flu season coming to a close, I thought I should take another look at Novavax (NASDAQ:NVAX) whose stock has had a very tumultuous time of late. I don't like buying biotech secondaries until price action has settled into a more predictable range, and so I haven't kept a close eye since the $50 million offering on April 12th. Shortly before the secondary at $1.65 per share, the stock was trading for several weeks in the $2-2.20 range. Since then, the stock has been pummeled to below the secondary and is now trading at a discount of about 26% pre-offering. I believe now is a time to take a stake in the company and ride it through what may be very fruitful for shareholders.

Shares of Novavax have been oversold

Source: BigCharts

Looking at the technicals, the stock is trading around 15% below both the 30- and 60-day EMA and has been straddling the lower Bollinger Band since the secondary. It is also trading 43% off the 52-week high reached on March 1st, immediately after announcing fantastic results from its NanoFlu Phase 1/2 trial. The stock can easily bounce back 10% from current levels and, with any positive newsflow, could approach the $2 former support level established before the secondary announcement. The Phase 2 kick off in Q3 may also act as a catalyst near term.

NanoFlu, when approved, may take a large share of the $5 billion global flu vaccine market

The flu vaccine most commonly administered this past flu season only protected against about 30% of the virus strain with even lower efficacy due to antigenic drift related to the egg-based processing, a 50-year old manufacturing technology.

Source: Novavax

NanoFlu's manufacturing advantage will not only ensure a significant market share but also command a premium to current flu vaccines. Each year 5% to 20% of the U.S. population contracts some strain of the flu. Thousands die and tens of thousands are hospitalized with flu-related illness. Direct medical expenses exceed $10 billion per year and lost wages exceed $16 billion.

Source: CDCfoundation.org

With greater efficacy, the percent of Americans getting the flu vaccine is likely to rise; of those that do not get the flu shot, 8% listed efficacy as the leading reason they chose not to get vaccinated.

Pipeline likely to yield RSV NDA candidate for early 2019

Source: Novavax

With a peak sales potential in the $1 billion to $1.5 billion area, the company's lead candidate is a vaccine to prevent Respiratory Syncytial Virus (RSV). Currently in Phase 3, there is no RSV vaccine currently available. The vaccine is intended to prevent virus infection of infants through maternal immunization. RSV remains a major unmet need for newborns in the first 6 months of life. It is a major cause of respiratory tract infections and hospital visits during infancy and childhood.

The blinded trial thus far has met all endpoints according to two DSMB analysis conducted thus far. The interim analysis is expected to be completed by Q1 2019 with a BLA filing if successful as early as Q4 2019.

Buy straw hats in the winter time

I love a good bargain, especially with regards to stock investments. With the recent secondary, NVAX now has about $230 million cash in the bank, and with a market cap around $600 million and peak sales potential in the billions, this company is a compelling buy at this price. I believe there has never been a better time to enter into a position in the name from a risk/reward perspective. A multi-bagger in the next year is not out of the question. It is important to keep in mind, there are no guarantees of FDA approval and if the RSV trial fails to confirm positive results thus far, we could be sitting right at current prices a year from now.

Analyst’s Disclosure: I am/we are long NVAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.