Novavax (NVAX -1.79%) investors are likely feeling frustrated. First, they had to wait as the company delayed filing for an Emergency Use Authorization (EUA) for its COVID-19 vaccine. And now, after the company filed for an EUA in late January, they are waiting on the Food and Drug Administration (FDA) to authorize it.
Although there hasn't been a formal announcement from the agency that Novavax won't obtain the authorization, the writing could be on the wall that another vaccine may not be necessary for the U.S. market. And a recent development involving another vaccine maker could confirm the worst for Novavax investors.
Johnson & Johnson suspends COVID-19 vaccine guidance
Rival COVID-19 vaccine maker Johnson & Johnson (JNJ -0.34%) reported its latest earnings results earlier this month. One of the surprising revelations in that report was that the company was suspending guidance on its COVID-19 vaccine. Johnson & Johnson's revenue from its COVID-19 vaccine totaled just $457 million for the first three months of 2022, and of that, $75 million was from the U.S. market -- that's less than the $100 million it reported in the prior-year period. J&J previously forecast that its COVID-19 vaccine could generate between $3 billion and $3.5 billion in sales this year. That's a far cry from the more than $50 billion that Pfizer will bring in from its COVID-19 vaccine products in 2022.
The obvious argument is that Johnson & Johnson's vaccine was never a strong rival to Moderna or Pfizer. Out of the gate, its single-shot vaccine was less than 70% effective when it first applied for EUA (while Moderna and Pfizer were both up around 95%). However, the problem doesn't appear to be due to efficacy. After all, all three are approved for use.
Why this is bad news for Novavax
The more troubling aspect of Johnson & Johnson suspending its guidance is due to the reasons behind it. The company cited oversupply and "demand uncertainty" as to why it would no longer offer any projections. If vaccinating as many people as possible was paramount, then as long as a vaccine was approved for use in the U.S., it shouldn't matter whether they come from Moderna, Pfizer, or Johnson & Johnson. A lack of demand could confirm what may already be evident at this point: the FDA isn't in any rush to approve another vaccine.
Novavax has been waiting for months, and there hasn't been any indication of whether the agency will approve its vaccine or not. Although second booster shots have been approved for individuals over 50 and people with weakened immune systems, even that doesn't appear to be leading to robust demand for more vaccines.
Novavax is crashing hard and could continue to fall lower
Year to date, shares of Novavax are down 66% in contrast to the S&P 500's 13% decline. The problem is that investors have long been bullish on Novavax because of the potential for its vaccine in the U.S. market. And the danger is now that approval may not be coming despite a high efficacy rate of more than 90%. Even if the FDA finally does give the thumbs up, Novavax could be fighting for a limited market share.
The good news is that the company does have revenue coming in from its vaccine as it is approved in other parts of the world. Novavax projects total revenue of up to $5 billion this year, which could make 2022 a solid year for the business as its top line came in at $1.1 billion last year, primarily through grant revenue. But that might not be enough for a company that incurred a net loss of $1.7 billion over the past 12 months. Plus, investors looking ahead could be concerned that without EUA for the vaccine, the company's combination flu and COVID-19 vaccine could face similar struggles.
Novavax was already a risky stock before this development, and it certainly doesn't look to be any better of a buy right now. Although its shares are much cheaper than when the healthcare stock was trading at more than $277 last year, this still isn't a suitable buy for risk-averse investors.