Will Novavax Get Hit By Moderna Backdraft?

$Novavax(NVAX)$

Summary

• NVAX has received EUA for its COVID-19 vaccine in several countries.
• COVID-19 vaccine sales have likely peaked for MRNA and PFE, just as NVAX is ramping up.
• Chatter suggests MRNA's CEO recently sold shares and deleted his Twitter account. It could create headwinds for MRNA Monday and beyond.
• NVAX could potentially get hit by MRNA's backdraft. Hold NVAX on the potential to deliver sizeable supply going forward.

This idea was discussed in more depth with members of my private investing community, Shocking The Street.Novavax's (NVAX) went though fits and starts pursuant to receiving regulatory approval for its COVID-19 vaccine. This left it behind Pfizer (PFE) and Moderna (MRNA), who have been major suppliers to the vaccine market. According to Novavax's management presentationat J.P. Morgan's Healthcare Conference last month, the company received emergency use authorization ("EUA") from the World Health Organization ("WHO"), Indonesia, India and The Philippines. The company also has regulatory submissions in the U.S., Japan and U.K., among other countries.

Its approval finally created a pathway for the company to deliver doses into the marketplace. Per Seeking Alpha author Upside Reach, Novavax could garner demand of $2.4 billion doses per year:

Last week, a new development occurred when Novavax CEO Stanley ErcktoldYahoo Finance that with capacity from SII coming online, Novavax would reach an annual run rate of as much as 2.4 billion doses per year in January. He said: "that partnership has really paid off. They've built capacity such that we can have as much as 200 million doses a month produced starting in January, and we're ramping up to that level right now." That said, there was some potential that "as much as" might only mean 180 million.

The question remains, "How much in revenue does that equate to?" Thus far, Novavax's demand has come from lesser-developed countries that may not be able to pay as much as developed nations. Secondly, Moderna and Pfizer have fulfilled supply for the U.S. and Europe, while Novavax sat on the sidelines; demand in more-developed countries will likely wane going forward.

The vaccine runway is slowing as vaccinations rise. That likely caused vaccine revenue for Pfizer to peak. In Q4 2021, revenue from Comirnaty, Pfizer's COVID-19 vaccine,fell sequentially in the low-single-digit percentage range to $12.5 billion. It will likely fall further in 2022 as more people become vaccinated. That could create headwinds for certain vaccine suppliers going forward.

Can Novavax Deliver?

Vaccine hesitancy still remains among certain members of the populace. This could be a catalyst for Novavax in the near term. The safety profile of Novavax's protein-based vaccine could spur demand for those hesitant to take current vaccines already on the market. I have always believed Novavax's safety profile would give it an edge against vaccines from Moderna and Pfizer. However, it has taken Novavax much longer to get its vaccine approved and onto the market.

That said, what Novavax has done thus far is remarkable. The company started from practically a greenfield operation to develop and test a vaccine, and build manufacturing capabilities in real-time. However, the company has still not proven the ability to manufacture and deliver billions of vaccine supply. Earlier this month Novavax divulged it hadfallen shortof expected deliveries:

COVID-19 vaccine maker, Novavax has shipped only a small portion of the 2B vaccine doses the company has pledged for its worldwide customers in 2022. Maryland-based biotech has also delayed its first-quarter supplies in Europe and countries such as thePhilippines, Reutersreported on Tuesday, citing government officials tasked with the vaccine rollouts.

Novavax said it completed shipments of only 10M vaccine doses so far, and it is ramping up the deliveries as fast as possible to meet the contracted supplies for the quarter. Some shipments are stuck at a distribution warehouse waiting for regulatory clearances to reach healthcare clients, Novavax spokesperson Amy Speak said.

Again, the company was practically a greenfield operation prior to the pandemic. Novavax needs to make a believer out of people pursuant to its ability to deliver billions in vaccine supply needed to justify its $6.8 billion market capitalization. The longer the company faces delays, the more the vaccine runway will decline, hurting future opportunity for vaccine supply.

Will Novavax Get Hit By Moderna's Backdraft?

I received a call over the weekend that Moderna's CEO, Stephane Bancel, dumped a bunch of MRNA shares and deleted his Twitter account. Market chatter appeared to have confirmed the rumor:

MRNA is well off its 52-week high of nearly $500. Again, Pfizer's Q4 COVID-19 revenue fell sequentially. Moderna's earnings report is scheduled for February 24th and I expect sequential growth for Moderna's COVID-19 revenue to be flat-to-declining as well. The key will be management's guidance for 2022. If Moderna suggests its COVID-19 revenue will fall hard this year, then it could send the stock much lower. That could be what investors are speculating about, and it could cause MRNA to gap lower Monday morning.

That said, Camille Squires of Quartz implied Bancel's recent share sales were likely part of his scheduled plannedsales:

On Feb. 11, Moderna CEO Stephane Bancel sold 10,000 shares of company stock, valued at $1.8 million in total. By the following day, Bancel’s Twitter account had disappeared without warning.

Observers on Twitter found the relationship between these moves suspicious. In reality, the sale was part of Bancel’s previously-made plans to sell stock over time. Bancel last modified these stock-sale plans in May 2021. The sale is a tiny part of his holdings. At this rate it would take Bancel 16 years to sell all of his shares.

That could be the case, yet it may have created angst over what I have suspected for a while - Moderna's vaccine sales likely have peaked. If investors sense bad news for Moderna on its Q4 earnings call, they may head for the exits this week. The question remains, "Will Novavax get hit by Moderna's backdraft?" There could be extreme volatility for NVAX, depending on how investors interpret the actions of Moderna's CEO. However, I believe the potential upside from Novavax entering the market in a big way is enough for investors to stand pat.

Conclusion

Hold NVAX as management has a chance to finally deliver sizeable vaccine supply.

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