With its shares down more than 48% this year, I can't blame Novavax (NVAX 3.54%) shareholders for getting skittish. The vaccine developer's fortunes have taken a battering amid quite a few delays in getting its first product, a coronavirus shot, approved. And now, seemingly with one foot over the finish line, there are a couple of fresh issues with the company that should give investors pause.
Neither of the obstacles I'll discuss today are insurmountable, but they both pose substantial risk to Novavax's stock, so let's take a look.
Image source: Getty Images.
U.S. regulators are taking their sweet time
The biggest reason why Novavax investors need to be careful right now is that the U.S. Food and Drug Administration (FDA) hasn't approved its coronavirus vaccine yet despite having its application packet since Jan. 31.
While the FDA assented to similar requests for Emergency Use Authorization (EUA) from competitors like Pfizer and Moderna within a handful of weeks, the process is dragging on with Novavax's candidate, and it's unclear why. For the sake of comparison, both Moderna and Pfizer had their submission materials considered by the FDA's non-binding advisory committee within three weeks, and their jabs were approved shortly thereafter.
But as of March 15, the FDA hadn't even set a date for its advisory committee to meet to discuss Novavax's jab. And when regulators do pick a date for the meeting, they tend to pick a date that's several weeks out so that the relevant people have time to prepare. So, it's looking like the candidate won't get a decision for at least another month, adding even more time onto an already lengthy development cycle that started in 2020.
It's true that the domestic need for additional coronavirus vaccine doses is nowhere near as urgent as it was when the first candidates were approved, which somewhat explains the slow pace.
Still, it's worrisome that regulators are sitting on the application for so long. If they end up issuing critical feedback, it'll be bad news for investors -- to say the least. And it might have knock-on consequences for other vaccine stocks that haven't yet commercialized their candidates, too.
It'll also put the FDA in opposition to the scores of global regulatory bodies that have deemed it appropriate to give the jab the green light for distribution. Most recently, the company's vaccine candidate won regulatory approval on an emergency basis in India to be administered to people between the ages of 12 and 18 -- and there's a slew of other approvals that are likely on the way.
The European rollout is going slowly
Aside from the potential issue with U.S. regulators, Novavax investors should additionally pay close attention to how the biotech's vaccine distribution is going in the E.U.
In Germany, it has a market share of only 3% of the 90,000 doses being administered on average each day. There are also some preliminary signs that a similarly low uptake rate is occurring in Italy. Furthermore, there are indications that previously unvaccinated people aren't as keen to get vaccinated with the company's shot as was originally anticipated.
The slow adoption is partially a result of the fact that shipments in the E.U. only started being dispatched toward the end of February. It's entirely possible that its share of daily vaccinations will increase over the next few months, but it's still worth keeping an eye on.
Management's 2022 revenue guidance calls for up to $5 billion in sales, but now it's unclear if the assumptions that went into that figure still hold up. After all, key customers like health ministries may cancel their orders or decline to renew their purchase for next year.
And for shareholders, that's yet another reason to be cautious, as none of the currently planned initiatives like getting the candidate approved for a wider set of patient populations are likely to have a big enough effect in the near term.
Nonetheless, I don't suggest that investors sell their shares right now. The pandemic isn't over yet, and so there will likely be more opportunities for Novavax's jab to shine.
