Is Novavax’s share price set to gain?

Novavax's [NVAX] share price has climbed a staggering 1,969.7% so far this year as investors bet on who will be the first to develop a coronavirus vaccine. Yet for all the gains, could Novavax and other companies like it be overvalued? After all, since Novavax’s share price hit a 52-week closing high of $178.5 on 10 August, it has slipped over 47.9%.

Other companies lining up against Novavax in the race to develop a COVID-19 vaccine are facing a similar trend. Both Moderna and AstraZeneca's share prices have seen steady declines since the middle of July. One explanation is that traders are underestimating the complexity of developing a vaccine, with those looking for short-term gains are now selling stock.

Still, as clinical trials progress, the recent pullback in Novavax’s share price might have created a buying opportunity for some investors.

What's moving Novavax's share price?

Clearly any news on clinical trials is likely to move Novavak’s share price. Positive early-stage trial data for its COVID-19 vaccine candidate saw Novavax’s share price spike at the end of August. The data showed the vaccine was safe and elicited an enhanced immune response, according to The New England Journal of Medicine last week.

In total 131 healthy adults took part in the study. Eighty-three people received the vaccine with adjuvant, which boosts the immune response, twenty-five got the vaccine alone and twenty-three a placebo.

"Based on the positive Phase 1 results, we have begun multiple Phase 2 clinical trials, from which we expect to collect preliminary efficacy," said Dr Gregory Glenn, president of research and development at Novavax.

What are the coronavirus plays to watch?

Of course, Novavax is one of many companies developing a coronavirus vaccine. Others in the race to produce a vaccine include Moderna, a biotech that is conducting Phase 3 trials of its candidate. Moderna's share price is up around 225%, with analysis from Trefis suggesting the launch of a successful vaccine could net the company $16bn in revenue.

In the UK, Oxford Biomedica's share price gained 5% last week when it revealed a new supply agreement with AstraZeneca. The deal will see AstraZeneca give Oxford Biomedica £15 million to reserve manufacturing capacity. AstraZeneca's share price is also up 9% this year as it works with the team at the Oxford University to develop a vaccine.

Where next?

Development of a coronavirus vaccine is an increasingly heated political issue. Russia is pushing for the distribution of its vaccine candidate, nicknamed ‘Sputnik V’, before phase 3 trials. While in the US, the White House has suggested that a vaccine could be authorised by November, just in time for the Presidential election.

However, the World Health Organisation doesn’t expect a vaccine to be available until next year:

"In terms of realistic timelines, we're really not expecting to see widespread vaccinations until the middle of next year," WHO spokeswoman Margaret Harris told journalists at a Geneva briefing on 4 September. "This Phase 3 must take longer because you need to see how truly protective the vaccine is. You also need to see how safe it is," she said.

Where does Novavax fit in with all of this? Well, backing the firm’s share price could be a long-term play, rather than a speculative bet. It also means that investors need to weigh up each company creating a vaccine, and the political environment in which they operate.

Looking at price targets, Novavax's share price has an average 12-month target of $257 from the analysts tracking it on the Financial Times. Hitting this would see a huge 176.3% upside on the current price.

Among the competition, Moderna’s share price carries an average $94 price target, which would see a 50.6% gain on the current price, while Oxford Biomedica carries a 1,098.5p price target, which would see a 28.9% upside.