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Novavax: No Wind In The Sails – Seeking Alpha

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Novavax: No Wind In The Sails – Seeking Alpha

Aleh Varanishcha/iStock via Getty Images
The arrival of the Omicron variant has completely altered the Covid vaccine landscape. Both BioNTech/Pfizer (March 2022) and Moderna (March 2022) have indicated that they will be launching an Omicron-specific vaccine candidate. Novavax has not given any indication of when an Omicron-specific vaccine candidate will be launched and so far only issued a developmental statement on 22 December 2022: “Development of Omicron-specific vaccine on track for initiation of GMP manufacturing in early January”. The Novavax strategy as advised is to proceed for the time being with the ancestral Wuhan strain vaccine candidate.
The future earnings and share price of Novavax, and the two mRNA Covid vaccine makers, are almost entirely dependent upon the evolutionary progression of the virus in the human populations. It follows that the most pressing analysis required for evaluation of the investment thesis for Novavax is to, first of all, evaluate the current standing of Novavax relative to the evolution of the virus which causes Covid.
The Omicron variant has recently started to displace the Delta variant, in now predictable fashion, first in South Africa where it was initially identified, then in the UK and now also in the USA.
COVID-19 Epidemiological Update – Dr. Michelle Groome – 14 Jan 2022
The South African data shows Omicron in December 2021 at greater than 98%. The speed at which Omicron displaced Delta in South Africa was incredible.
Testing in South Africa is not particularly extensive, but it is clear from the test results that the wave expanded rapidly due the high infectiousness of Omicron then burned out. The Omicron wave in South Africa peaked in the week of 12 December 2021 while declining equally rapidly since then.
COVID-19 Epidemiological Update – Dr. Michelle Groome – 14 Jan 2022
Omicron daily overview: 31 December 2021
The advance of Omicron in the UK followed the same script as the advance in South Africa and 95.6% of the cases by 30 December 2021 were Omicron.
Data cover in the UK is excellent and allows us to compare the waves, the hospitalizations of each wave and the deaths during each wave.
UK Coronavirus Dashboard – Cases
UK Coronavirus Dashboard – Hospitalizations
UK Coronavirus Dashboard – Deaths
Surely, nobody can argue with the UK data that Omicron outcompeted Delta with ease on transmissibility, was very mild with regards to hospitalizations and was even milder with regards to deaths relative to Delta.
The USA CDC data cover is equally impressive allowing for a similar comparison.
USA CDC COVID Data Tracker
Omicron again demonstrated its dominance in no uncertain terms to reach 99.5% of all cases and within five weeks completely obliterated Delta in the USA.
USA CDC COVID Data Tracker
USA CDC Data Tracker
The USA was in the midst of a Delta wave when Omicron arrived so there is an overlap inherent to the data, but the trends are in line with those observed in the UK.
The CDC also published data on Influenza (Flu), estimating the seasonal “wave” expected for the 2021/22 winter, “Season Burden Estimates”. This allows a relative comparison of the Flu season with the Omicron wave to test the theory that Omicron may be “mild as flu”.
USA CDC 2021-2022 U.S. Flu Season: Preliminary In-Season Burden Estimates
It is clear from the Covid data and the flu data that calling Omicron “mild as flu” is certainly not tenable yet, based upon the USA date. The Omicron wave “illnesses” will in this first wave still be almost 10 times the expected maximum flu “illnesses” and the relative death rate will be higher. We have to, however, consider that the Omicron wave is the first wave of Omicron through the population which will always be high, and that the death rate will have a carryover from Delta as well as be higher in the first wave, while the population has a long history with flu infections. The indication is thus certainly there that going forward with Omicron dominant, will tend towards a “mild like flu” progression.
The UK scientists are already making the call that Omicron is in the range of a “bad flu season”.

“Right now just 130 people are dying from the coronavirus every day in England at what is believed to be the peak of the Omicron outbreak, compared to 1,300 last January before vaccines were widely available.
Daily deaths have barely moved since the start of autumn, despite infection rates more than quadrupling over the same time following the emergence of the ultra-transmissible variant.
For comparison, Government estimates show there were more than 400 influenza deaths per day at the peak of the last bad flu season in 2017/18, and almost 300 daily fatalities the previous year. Just like this winter, hospitals were forced to cancel routine operations and patients were told to steer clear of A&E units during both of those outbreaks.
Professor Paul Hunter, an infectious disease expert from the University of East Anglia, said the figures showed that the burden of Covid is now comparable to flu. He told MailOnline Covid would ‘almost certainly’ get weaker every year as people develop natural immunity and eventually become a common cold that kills only the very vulnerable further down the line.”
Source: Covid is now killing HALF as many people per day as a bad flu year as experts say pandemic will be on the brink of becoming ‘endemic’ after Omicron wave subsides
Countries also do blood test sampling to estimate the extent to which people have antibodies against Covid, called a serology test or antibody test. The objective is to estimate the extent to which the population has reached a temporary herd immunity. Waning antibodies against a coronavirus makes this always a temporary herd immunity but it does inform the relative immunity acquired by the population.
South African sampling reports antibodies in sera at around 60% to 80% and the Western Cape Province recently reported nearly 90%.
“90% of the adult population in the Western Cape have protection against COVID-19 already”
The UK government report is even more encouraging.
“An estimated 97.5% of the adult population in England, 96.8% in Wales, 97.4% in Northern Ireland and 97.7% in Scotland tested positive for COVID-19 antibodies in the week beginning 20 December 2021.”
UK Office for National Statistics – Coronavirus (COVID-19) latest insights: Antibodies
Estimates from the USA up to November 2021 at 31.6%, are not as encouraging but the data is from before the Omicron wave, hence this data set will be worth a review once it is updated to the end of January 2022.
USA CDC Nationwide COVID-19 Infection-Induced Antibody Seroprevalence (Commercial laboratories)
The antibody case studies of South Africa and the UK point to those populations having achieved a temporary herd immunity after the passing of the Omicron wave and that herd immunity can be expected to be repeated in other populations.
I have previously discussed the probable evolutionary path of the Covid virus, evolutionary arms race and the progression to an evolutionary climax where both pathogen (the virus) and the host (humans) survive in an evolutionary equilibrium. The evolution of variants is a random process, but it happens within a framework of natural laws. The most transmissible variant will always win the race of variants. So, any future variant which wants to displace Omicron will have to be even more transmissible, sufficiently more to displace Omicron. Again, in relative and probability terms, the most likely outcome for the virus is an exchange of virulence (making copies of itself in the host which is tied to how ill the host becomes) thus being less harmful, to achieve more transmissibility sufficient to displace a highly infectious Omicron. Odds are that Omicron will be with us for a while.

“Epidemiologist Professor Salim Abdool Karim says based on current studies future coronavirus variants could be much weaker than Omicron.
“What we are likely to see now with future variants is that in order to displace Omicron it’s going to have to be able to spread even faster. But just based on what we can see now, we can expect that future variants in order to beat Omicron would have to in all likelihood be less severe.”
Source: Future coronavirus variants could be much weaker than Omicron: Prof Karim
It is possible that a future variant may be more transmissible and more virulent but that is the unlikely evolutionary path, not the likely direction.
The data and information above strongly indicate that the pandemic will officially be declared over, it’s just a matter of time, and that the globe will enter the endemic phase once the Omicron wave has peaked globally.
Armed with a frame of reference about the Covid causing virus we can apply that knowledge to the evaluation of likely outcomes for Novavax.
Novavax needs a market for its Covid vaccine and the market before the arrival of Omicron was vastly different from the market after the arrival of the Omicron variant. I have seen some commentators call the Omicron variant a “natural vaccine” which is somewhat cheeky but not too far off the mark. The data from the UK and South Africa actually supports that cheeky statement and brings up the investor question, who will want a vaccination when the population has reached herd immunity?
The reported very high asymptomatic spread of Omicron as well as a reported superior protection achieved when a vaccinated person survives an infection combined with herd immunity and a mild like flu progression will significantly shrink demand for Covid vaccines once the Omicron wave has peaked around the globe.
COVID-19 Cases and Hospitalizations by COVID-19 Vaccination Status and Previous COVID-19 Diagnosis — California and New York, May–November 2021
All vaccinated persons with a previous Covid infection were substantially better protected than those vaccinated but not infected.
The Covid vaccine uptake to 21 January 2022 is almost 10bn doses according to Our World In Data, with more than 60% of the global population having received at least one dose of vaccine. Add the Omicron “natural vaccination” effect as well as all the other implications together with its ability to easily get past vaccinations (breakthrough infections even after 3 vaccination doses), and it is highly unlikely that demand for vaccines will remain at the level of 10bn doses.
The progression to a “mild like flu” standard will see Covid vaccine demand compared with flu vaccine demand. The global flu vaccine market is estimated to be worth $6.59 billion in 2021. The global shingles vaccine market was estimated to be worth around $3bn in 2020.
The Covid vaccine market at an average of $10 per dose for 10bn doses would have been worth $100bn in 2021. That will not be repeated, and the likely demand in a post-Omicron world is set to be a fraction of that. Not only will a post-Omicron world with herd immunities at the 80% and 90% levels have significantly less appetite for Covid vaccines, but the move from double dose primary vaccinations to single-dose booster vaccination probably only to vulnerable populations and annually will also materially reduce demand. I do not expect demand for Covid vaccines to exceed 3bn doses per annum, likely to be between 2bn and 3bn doses even in 2022 and likely about the same range beyond 2022.
Booster uptake has been weak relative to primary vaccinations. The global uptake in spite of Omicron is only around 11% while the USA, with no limitation on available vaccine doses, is only at around 25%.
Our World In Data – Boosters Doses
It follows that the drawdown on advance purchase agreements (APAs) in 2022 will be a lot less and a lot slower than what is currently expected. Competition for new sales will become fierce. Sales under the APAs can only be accounted for once the buyers have called for deliveries and delivery has taken place. APAs may even get cancelled where demand is insufficient to justify the continued contractual arrangement. See, for example, the cancellation by the UK government of the APA with Valneva.
Moderna is guiding an increase in scale from 807mil doses in 2021 doses, of regulatory approved manufacturing (say 1bn doses) while BioNTech/Pfizer is guiding 4bn doses. Novavax is guiding “targeting” 2bn doses but on deliveries is only “targeting” 80mil doses to be shipped in Q1. The adeno platforms can easily also add another 3bn doses of cheap vaccines to create a buyers’ market in Covid vaccines from the seller’s market of 2021. Those mentioned add to 10bn doses potential supply compared to a 2-3bn doses potential market demand. That is before the entry of additional new Covid vaccine competitors to the market in 2022.
The cheap Corbevax vaccine candidate alternative bears watching. Corbevax is a collaboration between Baylor College of Medicine’s National School of Tropical Medicine, Texas Children’s Hospital Center for Vaccine Development, and Biological E of India, holding a 300mil doses APA with the Indian government. Corbevax is already approved by the Drugs Controller General of India. It is also an adjuvanted recombinant protein sub-unit vaccine and is a potential direct competitor to Novavax, particularly with regards to the developing countries even though its clinical data at this stage may be wanting.
It is also telling that SII now seems to have a Covishield (AstraZeneca adenovirus) Covid vaccine stockpile overhang which it wants to sell. 18 January 2022. “We’re ready to support you again. Please get in touch.” @adarpoonawalla (@SerumInstIndia) declares his support for global vaccine equity.” “… probably supply a billion-plus doses in the first quarter 02”. These doses will not be the 80mil doses Novavax target, so it is most likely a Covishield overhang in stockpile.
The post-Omicron Covid vaccine market will be characterized by weak demand and a massive oversupply of Covid vaccines. Novavax will equally face weak demand even under the existing APAs, irrespective of whatever supply issues it may have. The future where Covid vaccines are transferred to the private sector as customer-paid-for shots is also approaching and Novavax has no commercial network for distribution.
There is no pandemic Covid vaccine demand wind in the sails of Novavax in a post-Omicron variant vaccine market.
I have covered the manufacturing issues of Novavax in my article “Novavax: The Bear In Ambush”. Further information became available from the Novavax presentation at the 40th Annual J.P. Morgan Healthcare Conference on 10 January 2022. Novavax is targeting 80mil doses for shipping in Q1, 2022. No further deliveries beyond the 10mil doses to Indonesia have been made by Novavax under any of the approved emergency use authorizations including the latest authorization from Australia. No deliveries have been announced by SK bioscience in South Korea under its recent approval though it “expects to supply Nuvaxovid quickly once passing the national lot release procedure in South Korea”.
The Politico report of October 2021 mentioned: “The methods it used to test the purity of the vaccine have fallen short of regulators’ standards and the company has not been able to prove that it can produce a shot that is consistently up to snuff…” It is useful to also look at the science of the Novavax platform to evaluate the reported manufacturing and purity risks.
Novavax uses an Sf9/BV insect cell platform for its Covid vaccine. BV stands for baculovirus and the Sf9 a clonal isolate of the Spodoptera frugiperda cell line. Sf9 was originally established from ovarian tissue of the fall armyworm. In simplified terms, the baculovirus is particularly adept at infecting insect cells and the Sf9 insect cell line was obtained from fall armyworms. The use of Sf9 is questioned as to whether it is the best choice.
“Although there is significant scientific data on the characteristics of this Lepidopteran cell line, it remains to be confirmed whether it is the best line for virus or recombinant protein production. Ongoing research suggests that different insect cell lines may support varying levels of expression and differential glycosylation with the same recombinant protein”
Source: Instruction Manual, Guide to Baculovirus Expression Vector Systems (BEVS) and Insect Cell Culture Techniques. Invitrogen Corporation
The Novavax Covid vaccine platform uses the Sf9 insect cells infected with modified baculovirus to “grow” the required spike protein on the surface of the insect cell membrane. The spike proteins are then harvested from the insect cell membranes and incorporated into the Covid vaccine product. All the materials other than the spike proteins are considered impurities which must be separated from the spike proteins and discarded.
Novavax CORPORATE OVERVIEW AND INVESTOR DECK Presentation
The recent science still describes this process as primitive and difficult to produce. Yields of, for instance, the desired spike protein, may be small and/or inconsistent, increasing the challenges to “purify” the spike protein batch. Batches may also contain many false positives.

“A number of products for human and veterinary use are now on the market, which attests to the utility of the systems. Despite these successes, baculovirus vectors essentially remain in a relatively primitive state of development. Many proteins, particularly membrane-bound or secreted products, continue to be difficult to produce.”
“The secretion of recombinant proteins by baculovirus expression vectors is often poor, relative to the total amount of protein synthesized in the cell. This is an issue that has long been recognized as a problem…”
“For recombinant products to be realized as commercial vaccines or therapeutic proteins, however, regulatory authorities require that the host cell is thoroughly characterized and, as far as is possible, shown to be free from adventitious agents that may contaminate the final product.”
Source: Recent Developments in the Use of Baculovirus Expression Vectors, PubMed.gov, Curr. Issues Mol. Biol. (2020) Vol. 34.
The science supports the suggestion that large-scale production of vaccines using the Sf9/BV platforms is challenging. That does not automatically mean that Novavax will not succeed in meeting and beating the challenges, but it does combine with the delays and slow deliveries to indicate that the challenges are still being attended to. Current deliveries and delivery targets suggest that some small-scale manufacturing is taking place, but information disclosed so far does not support successful large-scale manufacturing as yet.
SII has also recently posted an interview on its website with the CEO, Adar Poonawalla, on 8 January 2022 where the CEO mentions the very same challenges highlighted by the science: “You have got, with a biological, so many different challenges when you do the bulk production. The yields, the consistency, the purity levels that you need to achieve and then, of course, when you fill and finish the product, it has to be particulate free, it has to conform to all the parameters…”
The European Medical Authority (“EMA”), Committee for Medicinal Products for Human Use (“CHMP”) assessment report on the Novavax application for marketing authorisation to the European Medicines Agency (EMA) for Nuvaxovid, manufactured by SII also has specific references and recommendations with regards to the same manufacturing, quality, analysis, and purity issues.
The conclusion and recommendation are very reserved, conditional and time limited to 31 March 2022 for compliance:

“The CHMP therefore recommends the granting of the conditional marketing authorisation subject to the following conditions:
In view of the declared Public Health Emergency of International Concern and in order to ensure early supply this medicinal product is subject to a time-limited exemption allowing reliance on batch control testing conducted in the registered site(s) that are located in a third country. This exemption ceases to be valid on 31 March 2022. Implementation of EU based batch control arrangements, including the necessary variations to the terms of the marketing authorisation, has to be completed by 31 March 2022 at the latest..” [My emphasis.]
The 52 recommendations in the report from page 162 onwards deal with the removal of impurities issues, characterization of baculovirus seed virus, test methods, outstanding spiroplasma test, protocols and a large number of other requests, many of which have time limits as close as 31 January 2022.
There is no manufacturing and delivery wind in the sails of Novavax given the current supplied information.
SII CMC package filed by Novavax on 31 December 2021 to “fulfill the prerequisites for emergency use authorization (EUA) application request to the U.S. Food and Drug Administration (FDA) for NVX-CoV2373” has been available since October 2021. It was first used by Novavax for completion of its rolling regulatory submission to the UK Medicines and Healthcare products Regulatory Agency (MHRA) for authorization on 27 October 2021. Note the language, it is not an application for EUA it is only a filing of data on the way to making an application for EUA, “Novavax expects to submit a request for EUA for the vaccine in the U.S. in one month….”, from 31 December 2021. Novavax has never explained why it waited since October 2021, when the SII CMC package was first used, until 31 December 2021 to file the same package with the USA FDA.
Issues with “analytic methods” which stopped Novavax manufacturing under OWS in the USA are still in place.
“The U.S. government has recently instructed the Company to prioritize alignment with the U.S. Food and Drug Administration on the Company’s analytic methods before conducting additional U.S. manufacturing and further indicated that the U.S. government will not fund additional U.S. manufacturing until such agreement has been made.”
I do not believe that the SII package will receive approval if it is ever submitted as the basis of an EUA application to the FDA, while “analytic methods” are still an outstanding issue between Novavax and the USA FDA?
I do not see any chance of an USA, FDA, EUA wind in the sails of Novavax until such time as Novavax has aligned its analytic methods with those required by the FDA.
The independent evaluation of the Novavax vaccine in a heterologous booster study in the UK placed the Novavax vaccine above the AstraZeneca adenovirus vaccine but below the two mRNA vaccines as a booster shot.

“Findings
Between April 19 and May 14, 2021, 1072 participants were enrolled at a median of 9·4 weeks after receipt of a single dose of ChAd (n=540, 47% female) or BNT (n=532, 40% female). In ChAd-primed participants, geometric mean concentration (GMC) 28 days after a boost of SARS-CoV-2 anti-spike IgG in recipients of ChAd/m1273 (20 114 ELISA laboratory units [ELU]/mL [95% CI 18 160 to 22 279]) and ChAd/NVX (5597 ELU/mL [4756 to 6586]) was non-inferior to that of ChAd/ChAd recipients (1971 ELU/mL [1718 to 2262]) with a GMR of 10·2 (one-sided 98·75% CI 8·4 to ∞) for ChAd/m1273 and 2·8 (2·2 to ∞) for ChAd/NVX, compared with ChAd/ChAd. In BNT-primed participants, non-inferiority was shown for BNT/m1273 (GMC 22 978 ELU/mL [95% CI 20 597 to 25 636]) but not for BNT/NVX (8874 ELU/mL [7391 to 10 654]), compared with BNT/BNT (16 929 ELU/mL [15 025 to 19 075]) with a GMR of 1·3 (one-sided 98·75% CI 1·1 to ∞) for BNT/m1273 and 0·5 (0·4 to ∞) for BNT/NVX, compared with BNT/BNT; however, NVX still induced an 18-fold rise in GMC 28 days after vaccination.
Heterologous second dosing with m1273, but not NVX, increased transient systemic reactogenicity compared with homologous schedules.”
Source: Immunogenicity, safety, and reactogenicity of heterologous COVID-19 primary vaccination incorporating mRNA, viral-vector, and protein-adjuvant vaccines in the UK (Com-COV2): a single-blind, randomised, phase 2, non-inferiority trial, The Lancet, December 06, 2021
The performance of the Novavax vaccine in this independent study was substandard and not indicative that the Novavax vaccine will be a competitive booster vaccine. This was the ancestral Wuhan variant vaccine candidate and both mRNA’s have indicated that they will be launching an Omicron-specific vaccine candidate as early as March 2022 (see references above). The uncompetitive Novavax Wuhan strain vaccine will then have to compete with the Omicron-specific vaccines in a post-Omicron market environment. The Novavax vaccine was already found less effective, measured against the mRNA Wuhan strain vaccines, and is not expected to offer a competitive challenge against the mRNA Omicron-specific vaccine offerings unless Novavax also launches an Omicron specific vaccine candidate.
The manufacturing delays and delivery delays are also a drain on the cash available to Novavax to initiate and launch a new Omicron variant vaccine. The dispute with the USA government on analytic methods adds to this problem. How many Wuhan doses will Novavax be able to deliver under APAs before buyers demand an Omicron variant version? Novavax will have fallen behind once again if demand shifts to an Omicron variant vaccine. That demand shift is inevitable, based on the evidence of Omicron’s dominance and virtual total displacement of Delta. The cash requirements for Novavax to defer Wuhan variant vaccine deliveries and switch to an Omicron version may become unaffordable in my opinion in the absence of Novavax receiving USA government support. Any attempt to tap shareholders for cash will have serious negative consequences for the share price.
There is no competitive advantage wind in the sails of Novavax.
This is already a very substantial report on Novavax, but the general macro-economic environment is an added very real risk. A harsh market and macro-economic environment may be the proverbial final straw for Novavax. I will restrict myself to only four macro-economic variables, Inflation, Interest rates, markets liquidity, and possible recession.
USA Federal Reserve System, Credit and Liquidity Programs and the Balance Sheet
The USA Federal Reserve (“FED”) has provided a massive liquidity stimulus to the markets and supported massive fiscal stimulus which increased its balance sheet assets from less than $4trillion to almost $9trillion in less than two years, which is more than the total growth in the FED balance sheet since its creation in 1913. The FED has now indicated that it will remove some of this liquidity, increase interest rates and address runaway inflation pressures.
Consumer Inflation
United States Inflation Rate, TRADING ECONOMICS
Producer Inflation
United States Producer Prices Change, TRADING ECONOMICS
When the inflation rate started increasing in 2004, the Fed initiated a period of higher interest rates. It did not do much for the inflation rate, but it did contribute to the 2007 economic crisis. The inflation rates have since the stimulus in 2020/21 increased to the same levels at before the 2007/8 financial crises which required interest rate increases to manage. The Fed has indicated that it will now also start increasing interest rates. The 2007 economic crisis saw the implementation of an interest rate policy down to near zero which in the EU even went negative to avoid a 1930’s type depression. The zero-interest policy was also applied when Covid exploded across the globe.
United States Fed Funds Rate, TRADING ECONOMICS
The FED’s intention to now increase interest rates and withdraw liquidity from the financial markets (tapering) will be managed with great care but even so will cause significant headwinds for any, and all asset classes. Vulnerable assets will ruthlessly be sold off. Taking excessive risks in this type of macro-economic market is ill-advised and the risk of a recession or even significant general market decline cannot be ruled out.
Novavax will have no wind in its sails from this macro-economic environment.
The information provided above informs my scenario analysis for Novavax. I will present an anticipated best-case scenario and a competitive failure scenario. Both models will be made available at the end of the article for download.
The Novavax revenue from SII is based upon a profit share arrangement. This is a redacted version of the contract filed with the SEC.

“SIIPL Royalty Payment. SIIPL shall pay Novavax with respect to SIIPL’s sale of Product a royalty in an amount equal to percent (50%) of the Revenue on a [***] bases (the “SIIPL Royalty Payment”). All payments under this Restated Agreement shall be made in United States Dollars. Payments pertaining to SIIPL Royalty Payment, as applicable, shall be fully paid [***] on the basis of the applicable sales of Product recognized under US GAAP for the [***].
7.2Adjuvant Payment. The payments pertaining to Adjuvant Price to be paid by SIIPL to Novavax or its designee will be initiated [***] and will thereafter be due and payable upon receipt of the applicable invoice from Novavax (the “Adjuvant Payment”).
A-74 “Revenue” means the Net Sales of Product, less (A) DS Price, (B) Adjuvant Price and (C) DP Cost, (A), (B) and (C) collectively referred to as “Agreed Cost Price”.
A-53 “Net Sales” means the gross receipts representing sales of the Product to third parties (whether an end-user, a distributor or otherwise) by SIIPL or its Affiliates less applicable deductions for the following invoiced or itemized items to the extent actually allowed and taken by such third parties and not otherwise recovered by or reimbursed to SIIPL or its Affiliate in connection with such Product:
[***]
A-32 “DS Price” means [***]
A-29 “DP Cost” means [***].”
Source: SEC Archives, Amended and Restated Supply and License Agreement between Serum Institute of India Private Limited and Novavax, Inc.
While full of [***] gaps, it is still sufficient information to inform the use a Revenue formula as Revenue for SII & Novavax = Sales less Cost of Sales which is then divided 50/50 between SII and Novavax at a Gross Profit level. I have mentioned this before, the modeling is not supposed to be nit-picking, hair-splitting accurate, we paint with a broad brush.
The Covid vaccine market is expected to decline in a post-Omicron, post-Pandemic and post-primary vaccination environment already in 2022, to around 2.3bn doses.
Booster Demand for COVID Vaccines
Modelling by Sarel Oberholster
Novavax Pricing Model – Best Case Scenario
Sarel Oberholster
The pricing ratios in this scenario is 1.5 times Revenue and 3.5 times Operating Income. The Novavax share price target result from this scenario is around $62 for the 2022 period. The Discounted Cash Flow calculation indicates a target price of $112 on a longer-term basis but does not fully reflect the short-term risks.
This scenario sees Novavax struggling to compete with its vaccine candidate on price and on volumes in a post-Omicron, post-Pandemic and post-primary vaccination market.
Novavax Pricing Model – Competitive Failure Scenario
Sarel Oberholster
The pricing ratios in this scenario is 1 times Revenue and 4 times Operating Income. The Novavax share price target result from this scenario is around $25-$30 for the 2022 period. The Discounted Cash Flow calculation fails for this scenario.
Novavax_Share_Pricing_Model_After_Omicron_Jan_2022_V1.0_Anticipated_Best_Case.xlsx
Novavax_Share_Pricing_Model_After_Omicron_Jan_2022_V1.2_Competitive_Failure_Case.xlsx
This article was written by
Disclosure: I/we have a beneficial short position in the shares of NVAX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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