The COVID-19 vaccine was worth tens of billions of dollars, but most of it went into the hands of Modern And Pfizer. Smaller biotech companies that tried to dominate this market were much less successful. That group includes Novavax (NASDAQ: NVAX) And Inovio pharmaceutical products (NASDAQ: INO). The former did launch a coronavirus vaccine in the US, but the latter never got that far.
Both have lagged the market significantly over the past three years, but now appear to be experiencing a significant recovery; Shares of Novavax and Inovio have soared since the start of 2024. Which of these two biotech companies could outperform the other in the future? Let’s see.
The case for Novavax
Novavax received approval in several countries for its COVID-19 vaccine, Nuvaxovid. In the US it is still under Emergency Use Authorization. However, the biotech is now aiming for full approval. Novavax generated nearly $1 billion in total revenue last year. First-quarter revenues totaled $93.9 million, up from the $81 million reported in the prior-year period.
Novavax initially forecast it would post sales of up to $1 billion this year. That was before any major agreement was reached Sanofi, a biotech giant headquartered in France. Sanofi will pay Novavax $500 million upfront for the rights to distribute Nuvaxovid in most countries around the world, an exclusive license to use Novavax’s adjuvant technology (designed to increase efficacy) in flu vaccines, and a non-exclusive license to use the technology in non-flu vaccines. Sanofi also acquired a 4.9% stake in Novavax for $70 million.
Novavax could receive up to $700 million in development milestone payments from this deal. The biotech will also earn royalties from sales of Sanofi-developed vaccines that use the adjuvant technology. This partnership will improve Novavax’s financial situation and prospects.
Elsewhere, the biotech is rushing toward the start of a Phase 3 trial for its combination COVID-19/flu vaccine, which it aims to launch in the second half of the year.
Finally, Novavax has implemented a more disciplined approach, reducing unnecessary spend and costs over the past 18 months. Although the company was in danger of going bankrupt in early 2023, that is no longer the case. If Novavax can continue on the same path it has so far this year, it could deliver outsized returns to investors.
The case for Inovio Pharmaceuticals
Inovio Pharmaceuticals is developing several promising products. The most advanced is INO-3107, an investigational therapy for human papillomavirus (HPV)-associated recurrent respiratory papillomatosis (RRP), a rare disease that causes non-cancerous tumors to grow in the airways. RRP can cause problems performing otherwise routine tasks, such as breathing, swallowing, or speaking.
Inovio estimates an annual prevalence of 14,000 cases in the US. Following a successful Phase 1/2 clinical trial for INO-3107, regulators told the company that data from this study would be sufficient to support accelerated approval. It is true that Inovio still needs to conduct a late-stage study to confirm the results of the previous studies and gain full approval. However, the accelerated trajectory would allow INO-3107 to hit the market at least a year earlier than it otherwise would have.
The developments surrounding INO-3107 are the basis of Inovio’s rising share price this year. The biotech has several other candidates in Phase 1 and Phase 2 testing, but its mid-term performance will likely depend largely on INO-3107. Considering that Inovio’s market cap is just $310 million, consistent clinical and regulatory progress could push the stock price even further.
The verdict
Novavax currently generates much higher revenues than Inovio. The former also has more cash on hand, and the partnership with Sanofi improves its prospects.
While INO-3107 appears to be making solid progress, the target group is small and there are still plenty of potential clinical and regulatory pitfalls ahead for Inovio Pharmaceuticals. That’s why Novavax is a better choice between these two companies, even though its market cap is much higher at $1.87 billion. That said, Novavax and Inovio Pharmaceuticals both look like risky options. There are much more attractive stocks in the biotech industry.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
Better Buy: Inovio Pharmaceuticals vs. Novavax was originally published by The Motley Fool
