Investors have to do plenty of hard things. I think one of the hardest is to adjust our thinking to account for changing dynamics. For example, consider how the rapid adoption of the internet and the launch of the iPhone caused shifts that left some investors in the cold.
That leads me to Novavax (NVAX -2.14%). I was a vocal cheerleader for the vaccine stock earlier in the COVID-19 pandemic. My view was that the company had a big opportunity with an alternative to the messenger RNA (mRNA) vaccines from Pfizer (PFE 1.39%) and Moderna (MRNA -1.04%). I didn't think Novavax's market cap fully reflected this opportunity.
For a while, my take seemed to be right. Novavax's shares skyrocketed. But the sizzle fizzled over time. Why? The underlying dynamics for the COVID-19 vaccine market changed. I fully expect that other changes are on the way that will shake things up even more. Because of this, an adjustment of thinking is needed. Is Novavax stock a buy in the new circumstances?
The new normal
One of the most significant changes in the COVID-19 vaccine market is that vaccination rates have decreased greatly for boosters. More than 269 million Americans -- 81% of the U.S. population -- received at least one vaccine dose, according to the Centers for Disease Control and Prevention (CDC). Only 52 million, representing 15.7% of the population, have received a bivalent booster.
There's no reason to expect these numbers to increase dramatically. Actually, the number of bivalent booster doses being administered continues to fall. And bivalent boosters are likely the future, with the U.S. Food and Drug Administration (FDA) appearing to be moving toward annual bivalent boosters.
Image source: CDC.
The new normal for the COVID-19 vaccine market will also soon feature a much different sales model. In the past, the U.S. government purchased all vaccine doses. However, the White House plans to transition to a private market by the fall of 2023. Hospitals, physicians' offices, and pharmacies will buy COVID-19 vaccines instead of the federal government.
There's also likely yet another change on the way in the not-too-distant future. Pfizer, Moderna, and Novavax are developing combination COVID-flu vaccines. Assuming their clinical studies are successful, these combo vaccines will probably take over the market within the next few years.
How Novavax fits in
How does Novavax fit in with this new normal? Unlike Pfizer and Moderna, the company doesn't yet have a bivalent booster on the market. Novavax says, though, that it will deliver an updated vaccine that meets FDA guidance in time for the 2023/2024 vaccination season.
Probably the biggest challenge for Novavax, however, will be the transition to a private market in the U.S. The company has never had to sell to private organizations. It's likely that many of these organizations will only buy one type of COVID-19 vaccine. This will put Novavax in direct competition with Pfizer and Moderna like never before.
This won't change Novavax's strategy in international markets, of course. But the U.S. market is too important for the company to ignore. Novavax might be forced to compete largely on lower pricing to carve out a place for itself.
Perhaps the best opportunity for Novavax in the future is in combo COVID-flu vaccines. The company has a head start on this front. Its flu vaccine candidate, NanoFlu, performed well in late-stage testing. Neither Pfizer, its partner BioNTech (BNTX -2.59%), nor Moderna has flu vaccine programs as far along.
Novavax's combo COVID-flu vaccine is already in phase 2 testing. The company expects to announce initial results from the study in mid-2023. Meanwhile, Pfizer/BioNTech and Moderna are evaluating combo vaccine candidates in phase 1 clinical studies.
Buy the stock?
If I had to sum up Novavax's prospects in one word right now, that word would be "murky." Unfortunately, the company hasn't always lived up to its promises on delivery dates. It's understandable if investors question whether Novavax will actually have a bivalent vaccine (or a monovalent version meeting the FDA's criteria) ready later this year.
Maybe the company will be able to hold its own in the forthcoming private U.S. market. I certainly wouldn't bet against Pfizer and Moderna, though.
I'm not the vocal cheerleader for Novavax stock that I once was. The dynamics have changed -- and so has my thinking. My view now is that there are other stocks that offer more attractive risk-reward propositions.
But could Novavax stock again go parabolic as it did three years ago? Yes. The best shot (no pun intended) at doing so will be for the company to beat Pfizer and Moderna in getting a combo COVID-flu vaccine to market. That's a real possibility considering Novavax's current lead in this race. The stock will make some investors a lot of money if Novavax is able to define the next phase for the COVID-19 vaccine market. For now, though, that's still a big if.
