Novavax (NVAX -1.44%) and Moderna (MRNA -5.90%) both entered the coronavirus vaccine race around the same time, in early pandemic days, and their shares soared -- in fact, Novavax rose the most, gaining 2,700% in 2020 compared to a 400% increase for Moderna. Investors were betting on the companies' coronavirus vaccine candidates and their ability to bring in billions of dollars in revenue.
Moderna fared well, dominating the vaccine market along with big pharma rival Pfizer, and bringing in as much as $18 billion in annual vaccine revenue. The stock since has declined from its peak, but still remains up more than 400% over five years -- and Moderna's solid late-stage pipeline and promise to deliver as many as 15 new products in the coming five years suggest more gains could be on the horizon.
Novavax entered the coronavirus vaccine market late, missing out on the biggest revenue opportunity. This disappointed investors, and the stock plummeted more than 90% from its high. But recent news -- a big partnership with pharmaceutical giant Sanofi -- and Novavax's progress with newer vaccine candidates signal brighter days may be ahead. Could Novavax carve out share in the vaccine market and potentially become the next Moderna? Let's find out.
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Novavax's $1.2 billion deal
Last week, Novavax announced a $1.2 billion partnership with Sanofi. The pharmaceutical giant will pay Novavax $500 million upfront for the rights to co-commercialize Novavax's coronavirus vaccine and to use Novavax's Matrix-M adjuvant technology in its own vaccines. The deal includes potential milestone and royalty payments for Novavax -- and Sanofi also took a stake of nearly 5% in the biotech company.
Considering Sanofi makes the world's top-selling flu vaccines and is a leader in the general vaccine marketplace, this represents a game-changing partnership for Novavax. And the timing is perfect. Novavax's disappointing coronavirus vaccine sales led to general financial troubles in recent years -- and last year Novavax even questioned its ability to continue operations. So, the company launched a cost-cutting plan, shedding staff and reducing expenses by hundreds of millions of dollars.
Meanwhile, Novavax's combined coronavirus/flu vaccine candidate as well as a stand-alone flu candidate performed well in clinical trials, and the company started putting into place a plan to increase sales of its current coronavirus vaccine during the next fall vaccination season.
Today, the strength of Novavax's investigational vaccines, its cost-cutting progress, and the deal with Sanofi together represent a key turning point for the biotech company. The Sanofi agreement even prompted Novavax to say it now no longer is at risk of shutting its doors.
But does this mean Novavax could become a leader in the coronavirus vaccine market like Moderna? First, it's important to remember that Moderna's initial sales gains and the share performance that followed happened during early pandemic times -- a rather unique time. So we can't expect that same level of performance today from Novavax or from Moderna.
How Sanofi could help Novavax
That said, I think Novavax, thanks to Sanofi's expertise in the flu market, could begin to carve out a decent share in the coronavirus vaccine market. Sanofi has the commercial infrastructure and experience to bring the Novavax product to the attention of healthcare providers.
Also, the Novavax product is based on traditional vaccine technology rather than the newer mRNA technology of the Moderna and Pfizer vaccines. So it could appeal to those who've experienced side effects with the mRNA vaccines or who prefer sticking with a more traditional vaccination approach.
In more good news, the Sanofi deal, from a financial perspective, should help Novavax advance its combined vaccine candidate and stand-alone flu candidate.
Stronger vaccine sales and potential positive reports from vaccine development programs could lift Novavax's shares in the months to come, and as a result, lift market value.
But I don't think Novavax will become the next Moderna because the company's pipeline remains limited, focused on the potential combined and flu vaccines. In contrast, Moderna has more than 40 candidates in the pipeline, and as mentioned above, expects to launch several products within the next few years.
This doesn't make Novavax a stock to avoid, though. The biotech, with this new Sanofi deal, seems to be on the path to recovery -- and has a key ally that could boost sales over time. So even if vaccine sales don't soar, they could progressively move higher and brighten Novavax's earnings picture. And this makes Novavax an interesting biotech stock to buy today and hold onto for the long term as this new story unfolds.
