Warning from CEO of world’s largest vaccine maker could be bad news for Novavax

Almost everything seems to go as hoped Novavax (NASDAQ: NVAX) these days. The company reported excellent interim results from an advanced UK study of its COVID-19 vaccine NVX-CoV2373 at the end of January. He also completed enrollment in the pivotal study in the United States and Mexico. Novavax appears to be on track to secure emergency use authorizations in the UK, US and other countries in the coming months.

But there is a potential problem on the horizon. Adar Poonawalla, CEO of the Serum Institute of India (SII), the world’s largest vaccine maker, issued a warning last week that could be bad news for Novavax.

Image source: Getty Images.

A stern warning

Poonawalla told members of a World Bank panel on March 4, 2021 that organizations face a shortage of the raw materials they need to make COVID-19 vaccines. He specifically highlighted the shortages of items such as bags and filters.

He wasn’t the only one sounding the alarm bells. Soumya Swaminathan, chief scientist at the World Health Organization (WHO), also said there was a global shortage of glass, plastic, caps and vials used with COVID-19 vaccines.

What is causing these problems? Poonawalla highlighted the US government’s enactment of a law that blocks the export of items essential to the manufacture of COVID-19 vaccines.

Last month, the Biden administration invoked the Defense Production Act in the fight against the COVID-19 pandemic. The law, which was passed in 1950 during the Korean War, gives the president emergency powers to harness the production of American companies to meet critical national security needs.

In particular, the Biden administration wanted to ensure that Pfizer has everything it needs to speed up production of BNT162b2, the COVID-19 vaccine it was developed with BioNTech. Pfizer ran into problems getting all of the raw materials it needed to make the vaccine by the end of 2020, leading the big drugmaker to lower its production targets.

How Novavax could be affected

So what impact does this have on Novavax? The company signed an agreement last year for SII to manufacture approximately 1 billion doses of NVX-CoV2373 by 2021. In February, Novavax announced a memorandum of understanding with SII and Gavi (an international organization that works to improve the access to vaccines in poor countries) to provide 1.1 billion doses of its COVID-19 vaccine. This objective could be threatened.

Poonawalla said, “The Novavax vaccine, for which we are a major manufacturer, needs these items from the US If we talk about capacity building all over the world, the sharing of these critical raw materials is going to become a limit. critical. factor – no one has been able to solve this problem so far. “

Novavax CEO Stanley Erck alluded to the potential commodity shortage in his comments on the company’s fourth-quarter conference call. Asked about the production capacity of Novavax, he replied that “there are difficulties in obtaining enough raw materials for all the factories to operate at full capacity”. Erck added: “But I think we’re getting there.”

So far, Novavax has concluded supply agreements for approximately 300 million doses of NVX-CoV2373 with governments around the world. This includes 100 million doses for the US government. The raw materials for these targeted doses for the United States should be easily secured through the invocation of the Defense Production Act.

Should Investors Be Worried?

Supply shortages could certainly be a problem for Novavax. Poonawalla stressed that if enough raw materials are not available in the United States, it “is going to be a serious limiting factor”.

We I don’t know how much Novavax charges for the 1.1 billion doses it hopes to provide for worldwide use. The company’s profit margin on these doses is likely to be much lower than it will achieve in the US, UK and other developed countries.

There’s also a good chance the Biden administration will ease export restrictions once the majority of Americans have been fully immunized. It could happen as early as this summer.

Either way, the problems Novavax faces due to global supply shortages are likely to be only temporary. With the likelihood that NVX-CoV2373 will soon obtain key clearances, the biotechnology stock should still have tremendous growth prospects in the coming months.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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