Today, the entire position on NVAX has been sold.
Moderna has announced a significant expansion of vaccine production as well as the acceleration of development of a modified vaccine to take into account the new SA variant. J&J has announced an approval of their vaccine. A further announcement of a deal with Merck, to co-produce the J&J vaccine, will continue to better balance supply in 2021. Finally, of all things, the Sputnik V vaccine has obtained considerable positive press of late and sales of that product are accelerating.
NVAX was never likely to penetrate the developed world market, as stated in the purchase thesis. My investment proposition was that the vaccine was likely to capture a healthy portion of the developing world market. With the increased production presently underway at both Pfizer and Moderna, almost all of the US population should be fully vaccinated by early summer. Then, that vaccine output will be turned towards the remainder of Europe, Canada and other first world nations. The acceptance for mRNA vaccines is growing and once Moderna has been introduced successfully to a government agency, there is a certain “stickiness” to a future order book.
By 2022, the world should have gone through round one of full vaccinations and then the recurring business book will be boosters. Moderna and Pfizer, in my view, will largely have a lock on developed world booster sales. Western governments, to prevent the spread of variants through international travel contacts, will likely come up with some sort of funding formula to assist developing nations to pay for mRNA vaccines. This will bode well for Moderna and potentially reduce the potential for second tier developers, such as Novavax, to gain traction in the marketplace.
Therefore, I am choosing to sell, and have taken a real capital loss as a result. As stated in the purchase thesis, when I choose to sell, in this case due to a shift in the business outlook, based upon a competitive shift in the marketplace, my policy is not to come up with some half-baked excuse, nor is it to hold on, stubbornly, relying upon some folksy analogy to hope for the best and quietly exit with my tail between my legs at a later date.
It was my assessment that Novavax offered the potential to be a real prize. That may still be the case, but as I have changed my mind on the collectability of the equity, I am getting on the the business of managing the portfolio.
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