Down more than 68% year to date, Novavax (NVAX -1.29%) shares just can't catch a break. Between interest rate-driven chaos in the market and a slew of regulatory and logistical setbacks for the biotech's attempt to profitably commercialize its coronavirus vaccine candidate, Nuvaxovid, the era of Novavax as a high-flying pandemic stock appears to be over.
Now, investors are once again faced with determining whether the company remains a good investment, given its issues. Let's analyze three of the newest reasons that it might be better for shareholders to bug out rather than stay the course.
1. Sales are worse than expected and may not improve
The most pressing reason that shareholders might want to consider selling is that Novavax's financial performance isn't living up to expectations. Per its earnings update on May 9, the company picked up only $586 million in sales of its Nuvaxovid jab over the first quarter. Given that management stands by its revenue guidance of between $4 billion and $5 billion for 2022, Novavax will need to massively step up to avoid disappointing investors even further.
That's a problem as Novavax and other coronavirus vaccine makers are increasingly expected to face falling demand now that the global vaccine market is saturated with ample supply. Furthermore, the demand situation probably won't improve, at least not for the vaccine candidate that Novavax is trying to bring to market at the moment. While there's likely a huge audience clamoring for access to an omicron-variant-specific vaccine or a multivalent vaccine which could be effective against multiple variants, the biotech isn't anywhere close to finishing anything of either sort, despite running a couple of ongoing clinical trials.
And that's before even getting into the fact that powerful competitors like Pfizer and Moderna are already splitting the U.S. market, not to mention being ahead with regard to variant-specific updated vaccines. In sum, Novavax investors have some bad financial-performance news in hand, and there might be more on the way as its product struggles to win market share, assuming it eventually gets approved in the U.S.
2. Dose deliveries are running far behind schedule
Another reason to consider selling your shares of Novavax is that it's continuing to struggle with getting its shots into arms, even where its vaccine is approved. Earlier this year, its deliveries of doses to the Philippines and the EU were delayed, and things don't appear to have improved too much since then. That delay led authorities in the Philippines to raise the possibility of canceling or renegotiating the country's order since it had satisfied its needs in the meantime using other suppliers.
Novavax claims that it'll be able to deliver around 2 billion doses of Nuvaxovid before the close of 2022. But as of its Q1 earnings report, it had sold a scant 31 million doses, meaning that its sales are nowhere near a pace that might meet management's stated target. Such an enduring and large gap between expectation and reality is likely to eventually leave shareholders with losses.
3. Regulators will soon pass judgment
Working with regulators hasn't been as seamless as investors might wish. Even getting the Food and Drug Administration (FDA) to tell the company when it plans to have an advisory board review its submission package has taken more time than usual. Part of the issue seems to be that regulators keep requesting additional data about its manufacturing processes. In the summer of last year, the biotech was forced to put off plans for its regulatory submission more than once as a result of similar hiccups.
Regardless, on June 7, the FDA advisory committee will weigh in on Novavax's request for its jab to get Emergency Use Authorization (EUA) in the U.S. Though the committee's vote is not binding, the FDA typically abides by its ruling in its final consideration on whether to approve or reject a medicine, so there's a substantial chance of a big price movement in the aftermath of the advisory meeting.
As the company is currently running behind on its dose deliveries, ostensibly because of lingering manufacturing issues, the risk of a rebuff from regulators is quite substantial. Furthermore, regulators may be loath to approve its submission on an emergency basis, as there's plenty of vaccine available, from more than one manufacturer. Therefore, it might be a better idea to sell Novavax stock or invest in a different biotech stock to avoid any additional exposure.