Novavax’s Production Problems Are Overblown, Says Analyst

Reports of raw materials shortages causing production delays for Novavax’s (NVAX) COVID-19 vaccine forced the company to postpone signing a supply contract with the European Union Thursday.

As Reuters reported, the EU was hoping to order 100 million, or even 200 million doses of Novavax’s two-dose vaccine, but now “they are slowing down the process of finishing the contract.” That news certainly spooked investors, sending Novavax shares tumbling.

And yet, B. Riley analyst Mayank Mamtani is unafraid.

Mamtani has spoken with Novavax executives and confirmed that the company’s “EU supply negotiations continue in parallel progression… in order to submit regulatory filing in the U.K. first, shortly followed by EMA to access several countries within the E.U.”

In other words, while there may be a delay in signing, the negotiations have not been called off by any means. To the contrary, says the analyst, Novavax is “likely be negotiating from position of strength particularly given the relatively increased prominence of variants of concern, and increased skepticism for local vaccine manufacturers.”

Here, Mamtani obviously refers to the well-publicized problem of Europe’s off-again, on-again, off-again endorsements of AstraZeneca’s AZD1222 coronavirus vaccine over concerns that it may cause blood clots. But the analyst is also referring to a vaccine from CureVac, which he notes has suffered a delay in its “interim readout” into mid-Q2 2021, “in order to account for protocol amendments to include analysis on specific variants.”

As Mamtani explains, the EU had wanted to buy CureVac’s mRNA-based vaccine because trials of its effectiveness would have focused intensively on “subjects in South America,” where more infectious and more severe COVID-19 variants are running rampant. EU health officials wanted an mRNA vaccine proven effective against those variants, which are also gaining ground on the Continent, and had hoped that CureVac’s CVnCoV would be “the first mRNA-based vaccine exposed in a meaningful way to the U.K., S.A., and/or P1 strains in a clinical trial setting.”

But now deployment of it, like AstraZeneca’s troubled vaccine, has been delayed — creating Novavax’s “position of strength” mentioned above.

Meanwhile, on the subject of raw materials shortages delaying production of Novavax’s NVX-CoV2373 vaccine, Mamtani considers any such delays only temporary in nature. As the analyst explains: “enforcement of Defense Production Act would be able to soon flood the global supply chain markets with these relatively commoditized items.”

As a result, Mamtani continues to anticipate that NVX-CoV2373 will “play a meaningful role in the Biden administration’s ongoing vaccine diplomacy efforts recognizing the need for herd immunity to be attained at globally.” The analyst predicts a 90% chance that NVX-CoV2373 will ultimately be approved for Emergency Use Authorization.

So what’s the upshot for investors? Mamtani is sticking to his Buy rating and $365 price target on the stock. In this analyst’s view, there’s still plenty of reason to hope that Novavax stock will more than double. (To watch Mamtani’s track record, click here)

The rest of the Street appears to echo Mamtani’s bullish sentiment. As it has racked up 5 Buys and no Holds or Sells, the consensus is unanimous: NVAX is a Strong Buy. Adding to the good news, the upside potential lands at 86% based on the $323 average price target. (See NVAX stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.