Novavax (NVAX -2.51%) missed Wall Street's revenue estimate in the fourth quarter of 2021. And it didn't matter. As proof, the vaccine maker's shares rose on Tuesday after Novavax's Q4 update following the market close on Monday.
But some things in the company's update really do matter. Here are two numbers that should especially make Novavax shareholders smile.
Image source: Getty Images.
Talking real money
The late Illinois Senator Everett Dirksen is often credited as saying, "A billion here, a billion there, and pretty soon you're talking real money." Dirksen probably didn't use those exact words, but the quote has had staying power. Novavax made shareholders happy in its Q4 update by talking real money.
For the first time in its history, Novavax provided full-year revenue guidance. The company projects 2022 revenue will be between $4 billion and $5 billion. Those two numbers should make shareholders smile, especially considering that Novavax's market cap currently stands at only $6.7 billion.
There's also a key detail that should make those smiles on shareholders' faces even bigger: Most of the anticipated revenue this year should be related to product sales. That's a huge switch from Novavax's revenue in 2021, with $949 million of the $1.1 billion in revenue stemming from grants.
Novavax doesn't appear to be going out on a limb with its revenue guidance, either. The consensus 2022 revenue estimate is $4.35 billion. Novavax chief business and commercial officer John Trizzino noted in the Q4 call that the company has already shipped 44 million doses plus 9 million doses shipped by its partner, Serum Institute of India. Novavax also has an order from the European Union to deliver another 42 million doses in the second quarter.
Upside potential
But does Novavax's revenue outlook depend on securing U.S. Emergency Use Authorization (EUA) for COVID-19 vaccine Nuvaxovid? Nope. When asked this question in the Q4 call, CEO Stan Erck replied, "I think the U.S. represents upside potential for us."
To be clear, Novavax did include some revenue from the U.S. in its 2022 guidance. CFO James Kelly stated, "Under the U.S. government agreements, we have $800 million of funding remaining, and we expect to recognize the majority of this amount during 2022."
However, the projected revenue of $4 billion to $5 billion this year doesn't hinge on Nuvaxovid receiving U.S. EUA -- or full approval from the U.S. Food and Drug Administration (FDA). Novavax chief medical officer Filip Dubovsky emphasized in the Q4 call that the company is "going full blast for our EUA" even though it also plans to file for full FDA approval in the second half of this year.
Trizzino helped differentiate between grants from the U.S. government and the "upside potential" mentioned by Erck. He stated, "We are appreciative of the ongoing support from the U.S. government, and in the future, we see an opportunity to pursue procurement agreements to supply doses to the U.S."
Will the smiles fade in 2023?
Perhaps the most important question for Novavax is: What happens after this year? Investors are clearly concerned about the prospects of declining demand for COVID-19 vaccines in the near future. There's also a potential red flag for Novavax with intensified competition in the COVID-19 vaccine market.
However, Novavax's executives sounded optimistic. Trizzino noted:
We are frequently engaged with health ministers, public health authorities, and KOLs [key opinion leaders] around the globe, and it is clear that there is a strong demand for an effective protein-based alternative that is safe, effective, and refrigerator stable to allow for ease of transport and on-site storage. In addition, as doses of our vaccine are being received across the globe, we believe consumer choice will play an increasingly important role in driving demand. Through Nuvaxovid's reassuring tolerability and safety profile, we are confident that utilization of [our] vaccine can support preferences over time, building additional demand now and into the future.
Perhaps this view is merely wishful thinking. But Novavax seems likely to generate strong cash flow over the next 12 to 18 months. Erck said the company will use the funds to invest in its pipeline, including combination vaccines featuring flu vaccine NanoFlu, and to "explore BD [business development] opportunities." Even if COVID-19 vaccine demand wanes somewhat, it's still possible that Novavax shareholders could have reasons to smile in 2023 and beyond.
