As the hottest vaccine stock du jour, Novavax (NVAX 1.27%) has a long and bright future ahead. Thanks to its coronavirus jab, which was recently awarded an Emergency Use Authorization (EUA) by regulators in the U.S., the company's fortunes are improving rapidly in ways they've never attained before.
But its share price hasn't followed with an upward trajectory; in the last 12 months, Novavax stock collapsed by more than 73% despite a smorgasbord of global approvals for its vaccine and a constant drumbeat of new purchase orders from governments.
Will the vaccine maker manage to pull through for its shareholders over the next three years, or is its time in the limelight already drawing to a close?
More product launches are nearly guaranteed
The most important thing for investors to know is that over the next three years, Novavax will almost certainly commercialize at least a couple more of its pipeline programs. One big earner will probably be its NanoFlu jab for seasonal influenza, which already successfully concluded a phase 3 clinical trial. Beyond that, the biotech is investigating NanoFlu's efficacy in conjunction with its coronavirus vaccine, and that could be an even bigger seller ultimately, though it's only in phase 1/2 trials at the moment.
The company is also testing a candidate for respiratory syncytial virus (RSV) in phase 3 trials, meaning that it'll likely be out the door within a couple years. Per estimates made by analyst Eric Joseph in late 2018, the RSV vaccine could make as much as $850 million per year in the U.S., whereas NanoFlu could be worth as much as $200 million annually. But other estimates including global sales put annual NanoFlu revenue at as much as $783 million per year, so the picture may be rosier than the prior numbers imply.
Regardless of what ends up happening with NanoFlu and the RSV candidate, Novavax will no doubt continue to work on its coronavirus vaccine program -- updating it to combat the latest viral variants, and testing its candidates as booster doses. Its omicron-specific candidate is the closest to completion, and future iterations will probably target multiple variants at once with the objective of getting higher efficacy.
But returns from further investments in its coronavirus vaccines will depend heavily on how they perform compared to powerful competitors like vaccines from Moderna and Pfizer, not to mention factors like the intensity of the pandemic and the competence (or lack thereof) of any resulting public-health response. If any of Novavax's entries are able to prevent coronavirus infections more effectively than other shots -- and there's some preliminary evidence that one of its candidates might -- that would be a powerful tailwind for its sales, and also its share price. But that potential tailwind is unlikely to last forever.
COVID vaccine drop-off could be painful
Despite the high likelihood that the company will commercialize a couple of new vaccines by July of 2025, a major risk is looming. Perhaps the biggest problem for investors is the uncertainty surrounding the future progression of the pandemic, as that could have profound consequences. Will Novavax end up growing consistently over the next three years or shrink sharply? If the pandemic takes an unexpected downturn and case counts dwindle, Novavax won't be able to sell nearly as many of its doses as otherwise. Other vaccine manufacturers face the same cliff, but they have the advantage of already capturing significant profits over the last two years.
Wall Street analysts have already drawn up a few quite pessimistic predictions about where the biotech's top and bottom lines are likely to go. Next year, the average estimate across six analysts is that Novavax will make only around $3.1 billion, which is less than the nearly $4.4 billion predicted for this year. Of course, estimates can be off by quite a lot, and it's conceivable that there will be an enduring level of demand for doses even after 2023. Still, shareholders and potential investors should note that finding significant sales growth will be difficult if coronavirus vaccine revenue collapses, even with the commercialization of a couple new vaccines.
Thus, Novavax could well be smaller in three years than it is today, though that outcome is far from guaranteed. Whether it grows or shrinks, it'll have a significantly larger product portfolio, and that's likely to sustain the company after 2025 whatever its size.