Novavax (NVAX -4.82%) has been one of the more promising COVID-19 vaccine stocks to invest in since the pandemic began. But while rival Moderna (MRNA -2.45%) has been generating billions in revenue from its vaccine, Novavax continues to wait for an Emergency Use Authorization in the U.S. market.
There's still hope for Novavax to grab some market share, especially with the Food and Drug Administration (FDA) recently permitting a second booster shot for individuals 50 and over and those with weakened immune systems. As Novavax's share price continues falling to new lows, investors may see the risk-reward ratio become a bit more tenable.
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Good news could come any day
In, January, Novavax submitted its COVID-19 vaccine for Emergency Use Authorization (EUA) from the FDA. Based on how quickly the agency authorized similar vaccines produced by other companies (less than a month), news of approval or denial could theoretically come any day for Novavax. However, there's no strict timeline for investors; the regulatory agency has only stated that it "will review the EUA request as expeditiously as possible using its thorough and science-based approach."
If the news comes back positive, Novavax's stock could surge in value. While the Novavax COVID-19 vaccine, known as Nuvaxovid, is already approved in dozens of countries outside the U.S., a green light from the FDA would drive a lot of excitement and quickly bolster the company's financial prospects. In its fourth quarter 2021 report, Novavax anticipated 2022 revenue to be between $4 billion and $5 billion. That estimate reflects revenue from all sources, including grants, royalties, and Nuvaxovid sales.
The risk remains high for investors
The bad news is that Novavax's share price could continue to drop if there's no news from the FDA, or worse -- if the agency decides not to authorize the vaccine.
While the FDA has approved booster shots, the agency increasingly seems to be promoting mRNA vaccines, like those from Moderna and Pfizer (PFE -3.85%). Notably, the FDA recommends that people who received the Johnson & Johnson (JNJ -1.15%) vaccine turn to an mRNA shot for their booster. Novavax is not an mRNA vaccine. That doesn't mean Novavax wouldn't be approved as another option, but doing so could unravel another layer of complexity, requiring the agency to explain to the public the differences between vaccine types and determine if people who received mRNA vaccines should be eligible for Novavax boosters.
Novavax's window to benefit from its COVID vaccine shrinks with each day that it isn't available for use. While Nuvaxovid does have approval outside the U.S. market, there's much more competition on the global scale. The World Health Organization has nine other vaccines beyond Novavax's for which it has already granted an Emergency Use Listing.
A low price shouldn't be an excuse to buy Novavax
While the S&P 500 has risen 8%, Novavax is down 66% so far this year -- not the best performance for this healthcare stock. The danger, of course, is that shares could fall even lower. Compared to companies that already have COVID vaccines authorized for use in the U.S., Novavax trades at the lowest multiple of future profits:
MRNA PE Ratio (Forward) data by YCharts
Note that Moderna is discounted compared to both Pfizer and Johnson & Johnson. This is relatively unsurprising: investors are more confident in the latter options because of their robust and diverse operations. Investors are paying a discount for risky stocks, and Novavax is among the riskiest in this group because its vaccine doesn't yet have authorization from the FDA.
Novavax isn't worth gambling on
As close as Novavax's COVID vaccine is to the finish line of FDA authorization, it isn't there yet. Predicting what the agency will do is next to impossible and investors shouldn't assume that a long wait for news is either good or bad.
Either way, investors should look beyond the biotech's COVID-19 vaccine, as any revenue from Nuvaxovid could fall sharply in a year or two if the pandemic lessens. Novavax has two vaccines -- NanoFlu, for the flu, and ResVax, for respiratory syncytial virus -- that are both in late-stage trials and could generate revenue in a post-pandemic world. However, even if both are approved, they still might not bring in as much revenue as Novavax is currently generating. Investment banking firm HC Wainwright & Co. predicts NanoFlu could peak at $1.7 billion in revenue, and that ResVax revenue could top $2 billion. While that may sound promising, it's worth noting that Novavax has incurred operating expenses in excess of $2.8 billion over the trailing 12 months.
In short, this stock isn't worth taking a chance on. Even if the FDA approves the company's vaccine, with the bulk of the population already vaccinated, that Novavax victory would likely be short-lived. At this stage of the pandemic, there may not be enough COVID-19 vaccine market share left to warrant Novavax's hefty valuation.
Investors looking for growth stocks are better off searching for more established businesses with less risk.
