In a previous blog post, we discussed how a potential coronavirus vaccine would affect the market. In July, both Pfizer and a lesser-known company, Novavax, were both awarded almost 2 billion dollars in funding from the government, with the the government placing orders for 100 million doses if the vaccine proves effective. The vaccine would be made available to Americans at no cost, but it’s unclear how they will determine who would receive the first doses of the vaccine and how the decision would be made.
While everyone knows Pfizer (maker of Advil and Robitussin, along with Chapstick), Novavax is a much smaller, relatively unknown company. While Pfizer certainly does not need government funding to produce a vaccine, Novavax is a much smaller company with less resources. This funding means that Operation Warp Speed (OWS) will cover the cost of Phase III trials, as well as the production of 100 million doses of the vaccine. So, your next question might be, what makes the Novavax vaccine so special?
Novavax is approaching the development of a vaccine a little differently than most companies. They have reportedly genetically engineered a coronavirus spike protein that’s expected to trigger an antibody response. Their technology uses moth cells to pump out molecules at a faster rate than typical vaccines, which is an advantage in a pandemic with a disease that spreads as rapidly as COVID-19. This is a different approach from other companies that received federal funding, and that, coupled with the potential to produce millions of doses very quickly was the attraction for the government. The vaccine did boost antibody titers in baboons that were seven times higher in baboons than in recovered COVID-19 patients, along with 8 times higher receptor binding and blocking antibodies.
The company launched trials for their vaccine in May and the Coalition for Epidemic Preparedness Innovations invested $384 million in their vaccine. Once they received that funding, Novavax made an aggressive push to the US government, and they were awarded 1.6 billion from OWS earlier this month. While their vaccine trials are promising, Novavax has not successfully brought a vaccine to market in three decades of operation and their executives stand to make tens of millions of dollars even if their vaccine does not work. It stands to note that the company also has connections with the Gates Foundation and US health officials, as two former Novavax executives head the Biomedical Advanced Research and Development Authority (BARDA), the organization helping to carry out OWS.
As for Novavax and the stock market, The Washington Post reports, “The Company’s share price has ballooned since it announced the development of a COVID vaccine candidate and has risen dramatically as nonprofit and government funding have poured in. As of Tuesday’s closing, Novavax stock is worth more than 31 times its value at the beginning of the year, with the company’s market capitalization currently at $8.3 billion”. At the beginning of the year Novavax’s stock (NVAX) was selling for $3.99 a share and is now worth $140.69, an increase of 3,430%. It has surged over 30 percent in the past two weeks since the administration announced funding for the company.
New York Times: How a Struggling Company Won $1.6 Billion to Make a Coronavirus Vaccine
Novavax: Novavax Initiates Phase 1/2 Clinical Trial of COVID-19 Vaccine
Reuters: U.S. government awards Novavax $1.6 billion for coronavirus vaccine
Washington Post: Novavax executives stand to collect millions even if covid-19 vaccine doesn’t work
Reuters: Pfizer-BioNTech potential coronavirus vaccine shows promise in second early trial
CNBC: U.S. agrees to pay Pfizer and BioNTech $2 billion for 100 million doses of coronavirus vaccine
Medical Life Sciences: Novavax SARS-CoV-2 vaccine candidate shows promise in animal models
Yahoo Finance: Novavax: Promising Pre-Clinical Data Keeps up the Momentum
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The assertions and statements in this blog post are based on the opinions of the author and Liquid Strategies. The examples cited in this paper are based on hypothetical situations and should only be considered as examples of potential trading strategies. They do not take into consideration the impact that certain economic or market factors have on the decision making process. Past performance is no indication of future results. Inherent in any investment is the potential for loss.