Novavax (NVAX -9.65%) was an early leader in the coronavirus vaccine race. And its shares reflected that. They soared 2,700% in 2020. But last year was a tough one for the company and investors. Novavax fell behind in its regulatory authorization requests, and share gains turned modest compared to the previous year's mind-boggling increase. The stock climbed only 28%.
Today, the situation has changed once again for Novavax -- for the positive. About 38 countries have authorized its coronavirus vaccine, and blockbuster revenue is on the way. Here are three numbers that signal that now is time to buy shares of this vaccine latecomer.
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1. 2022 guidance
Novavax reported 2021 earnings earlier this week, and for the first time ever, the company offered revenue guidance. Novavax expects to generate between $4 billion and $5 billion in total revenue for the full year 2022. That's thanks to sales of its coronavirus vaccine.
Revenue in the billions isn't a surprise. About a year ago, Novavax already suggested it expected billions of dollars in revenue in the quarters following its vaccine launch. But until Novavax actually won authorizations and started delivering doses, many investors remained hesitant. This guidance may reassure them.
Of course, Novavax's annual revenue guidance pales in comparison to that of bigger rivals Pfizer and Moderna. They expect coronavirus vaccine revenue of $32 billion and $19 billion, respectively. But that's OK. Novavax doesn't have to crush bigger rivals or take ownership of most of the market to succeed. It's important to remember that this is Novavax's first commercialized product. If it brings in blockbuster-level sales -- as the company predicts -- it's already a big deal.
In addition to generating major revenue, the vaccine is setting Novavax up for the next step. That's eventually selling a potential combination coronavirus/flu vaccine annually to governments. Novavax's candidate is in a phase 1/2 trial right now.
2. 2 billion doses
Novavax also said during its earnings call that it has reached its capacity goal. That means the company is ready to produce 2 billion doses of vaccine annually. This is a significant milestone. That's because the manufacturing ramp-up was what held up the company's regulatory requests last year. In order to win authorization, companies must show regulators that they actually can produce vaccine at scale.
What's impressive here is Novavax's path over the period of only two years. The company went from zero manufacturing capacity to a worldwide network. Novavax now has "significant" bioreactor capacity at various sites. This is for antigen production. And it has secured raw materials at its own production site as well as at two contract manufacturing sites. So, it looks as if Novavax has moved past its early manufacturing problems -- and is ready to carve out its spot in the market.
More good news is that 2 billion doses isn't just a random production figure. Novavax has advance purchase agreements from various countries for as many as 430 million doses, a commitment for 110 million doses to the U.S. government, and licensing agreements with certain companies for up to 400 million doses. And Novavax also has a 1.1 billion dose agreement with Gavi -- an organization that provides equitable access to vaccines. So, demand is there -- and Novavax can deliver.
3. A dirt cheap valuation
As I mentioned earlier, Novavax shares have had it rough in recent times -- and that has left them at a dirt cheap valuation. The stock is trading for only 3.1 times this year's average earnings estimate. And today the stock is trading nearly $70 lower than Wall Street's very lowest 12-month share price estimate.
Considering vaccine sales ahead, the stock is greatly undervalued. Now, you might agree with me there -- but you might also have some doubts about Novavax's revenue potential in the years to come. After all, there is the possibility that vaccine revenue will drop post-pandemic.
Right now, it's impossible to predict an exact revenue level a few years down the road. But there are some indications that revenue won't drop drastically. Experts say the virus will continue to circulate well beyond the pandemic. And that means the most vulnerable people will need vaccination. It looks as if the scenario may follow that of the flu with an annual vaccine (or booster).
As I mentioned earlier, Novavax is readying a potential combination flu/coronavirus vaccine. This could be a revenue and profit driver for the long term. And that makes the price of Novavax's stock today a true bargain.
