This isn't news to anyone, but the market has been struggling all year. Indeed, the S&P 500 is in bear market territory, defined as a 20% (or more) drop from its most recent high. But some stocks are performing even worse.
Take biotech company Novavax (NVAX 8.18%). This vaccine maker is down by 64% since the beginning of the year. While the broader market sell-off hasn't helped Novavax, the company has encountered its own issues, too. Should investors give up on Novavax?
COVID-19 isn't over
The world has made tremendous progress in the fight against COVID-19. Government-imposed restrictions are mostly a thing of the past in most countries, and millions of people are vaccinated and boosted against the disease. Still, the pandemic isn't over, and there is still the need for effective vaccines against the coronavirus.
Novavax's candidate, Nuvaxovid, has been granted approval or Emergency Use Authorization (EUA) in many countries in Europe and Asia as well as in Australia and Canada. The biotech is currently awaiting word from regulators in the U.S. for an application for EUA it submitted back in January. On June 7, an advisory committee convened by the U.S. Food and Drug Administration (FDA) gave a very favorable opinion of Novavax's vaccine.
Following this important nod, the FDA's likelihood of granting Nuvaxovid EUA is very high, although it isn't 100%. While the COVID-19 vaccine market is competitive, Novavax could carve out a niche for itself. That's good news for the future of the company, especially given that COVID-19 could become endemic. In the first quarter, Novavax brought in revenue of $703.9 million, compared to the $447.2 million in revenue reported during the first quarter of 2021.
The bulk of Novavax's top line came from the 31 million doses of Nuvaxovid it sold. The company also reported some royalty revenue in connection with agreements it signed with its license partners. Novavax racked up $203.4 million in net income during the first quarter, marking its first period of profitability as a commercial-stage biotech. The company recorded a net loss of $222.7 million in the comparable period of the previous fiscal year.
Novavax expects revenue of $4 billion to $5 billion for the entire fiscal year. Through the various agreements it has signed with governments and other third parties worldwide, it has committed about 2 billion doses of its vaccine -- and it expects more orders to come in during this year and the next.
The company will continue generating solid revenue from Nuvaxovid well into 2023 and perhaps beyond that.
The sell-off went too far
Even with revenue soaring this year, Novavax's shares continue to lag the market. One reason behind this poor performance may be that the company has encountered manufacturing issues. Further, many thought the FDA would grant EUA to Nuvaxovid much faster. Novavax is still awaiting a final decision from the agency. But investors have to remember that the world is no longer in a state of extreme emergency.
So it is not surprising that the FDA is taking longer to issue EUA to Nuvaxovid, at least when compared to the time it took to give the green light to the very first vaccines. Further, Novavax is working on solving its manufacturing issues, efforts that include getting new manufacturing sites up and running. Management believes it can meet the demand for its vaccine with its current manufacturing capacity.
COVID-19 vaccination rates remain low in many parts of the world. Novavax is counting on this factor to continue driving revenue and earnings growth. The company boasts another vaccine candidate that targets the omicron variant of the coronavirus, as well as a combo coronavirus/flu vaccine.
Meanwhile, Novavax's forward price-to-earnings ratio is just 2.4 -- compared to the biotech industry's average of 11.2. At these levels, Novavax looks like a steal for investors focused on the long term. The company's recent woes in the market have created an excellent buying opportunity for investors.