With its stock up by around 1,230% since February of 2020, Novavax (NVAX 4.70%) brought a whole new sizzle to the market during the race to develop a coronavirus vaccine. Since the start of the pandemic, the company has grown like a weed -- and frequently also wilted like a houseplant left too long in direct sunlight. This year, the stock is down by nearly 40%.
Can the company's global sales of coronavirus vaccine restore the market's confidence in its ability to make more profits tomorrow than it did today? Let's investigate one tailwind and one headwind for this stock, so we can get a better idea about how it's likely to perform in 2022.
Green: Its vaccine revenue is a waterfall of cash
The biggest green flag for Novavax's future is that its coronavirus shot is selling like wildfire, supplying the business with tons of cash that it can reinvest in its pipeline or other growth initiatives.
Over the last two years, its quarterly revenue has burgeoned by 5,200%; trailing-12-month revenue is now $1.2 billion. In the same period, Novavax's cash holdings swelled by 976.8%, reaching $1.9 billion. The company also spent $1.97 billion on research and development (R&D) over the last 12 months; that means if it stopped having any income today, it would likely still have enough money for nearly a year.
A lot of the new revenue was realized before its vaccine even had widespread regulatory approval by public health authorities like the World Health Organization, as it does now. And there's quite a bit more to come.
On Jan. 31, the company submitted its package of data to regulators in the U.S., where the jab isn't approved yet. A couple of days earlier, it signed a fresh advance-purchase agreement with Israel for a total of 5 million doses. What's more, other existing advance-purchase agreements still have unexercised options for expanding the number of doses delivered.
So it's highly probable that Novavax will continue to reap the benefits of global demand for vaccines. But there's just one factor that might get in the way.
Red: The competition will continue to stiffen over time
Novavax doesn't sell its vaccine in a vacuum; its competitors are more powerful, more entrenched, and even more flush with cash because of the successful launches of their candidates. And that's a red flag.
Pfizer, Moderna, and Johnson & Johnson are vaccine stocks that need no introduction. What's more, all of them received widespread approval to sell their coronavirus jabs long before Novavax, not to mention beating it to the punch with their applications to expand the group of eligible patients.
Whereas Novavax is aiming for a regulatory submission in Q1 of this year to request that adolescents become eligible for its vaccination, Pfizer's candidate is already approved for that age group in the U.S., plus an even younger one. As though that weren't enough, Pfizer's product is also approved for use as a booster in some populations -- and Novavax isn't even allowed to be administered in the U.S. yet.
Expect the company to face headwinds in getting established in big markets like the U.S. where it's starting the game at a substantial disadvantage. It's also fair for investors to expect competition to get fiercer and more threatening over time.
Like Novavax, Moderna is also working on a combination shot for influenza and coronavirus. While Moderna started its project later and it lacks an influenza shot nearing commercialization like Novavax's NanoFlu, Novavax won't be able to count on any uncontested markets anytime soon. That isn't a kiss of death for the stock, but it does suggest that there will be future pressure on its profit margin, even if sales of coronavirus shots aren't its only income stream.