Novavax (NVAX -0.42%) reported its second-quarter results after the market closed on Monday. CEO Stanley Erck stated in a press release announcing those results, "We are pleased with our progress since the start of the second quarter."
But investors certainly aren't pleased. Novavax stock crashed in after-hours trading after its Q2 update. And there are three words that explain why.
The root cause
"Evolving market dynamics." We can summarize the root cause behind Novavax's dismal Q2 update in those three words. The company used the words itself in a public statement that accompanied its Q2 results.
Let's first explore how these evolving market dynamics showed up in Novavax's Q2 results. First, the company reported revenue in the quarter of $186 million. This total was down from $298 million in the prior-year period -- when Novavax didn't yet have its vaccine on the market anywhere.
Novavax's Q2 revenue was also way below analysts' expectations. The consensus estimate was for revenue of $1.02 billion. This big miss extended to Novavax's bottom line. The company reported a Q2 net loss of $510 million, or $6.53 per share. Analysts were anticipating positive earnings of $5.50 per share.
Importantly, only $55 million of Novavax's Q2 revenue stemmed from sales of its COVID-19 vaccine. Another $23 million came from royalties, milestone payments, and adjuvant sales to license partners. Grants made up the remainder of the company's revenue.
With this dismal performance, Novavax unsurprisingly slashed its full-year revenue guidance. The company previously projected 2022 revenue of between $4 billion and $5 billion. Now, it forecasts full-year revenue of only $2 billion to $2.3 billion.
Novavax isn't the only company facing the changing dynamics of the COVID-19 market. Moderna took a $499 million inventory write-down in its second quarter due to lower-than-anticipated demand for its vaccine leading to doses expiring before they were used. BioNTech, which markets COVID-19 vaccine Comirnaty with Pfizer, disappointed investors with its Q2 results and full-year guidance as well.
However, Novavax is hurting worse than any of its rivals. Just look at how the different vaccine stocks have performed this year. The reason is simple: The company is much later to the party than the others. Simply put, Novavax's repeated delays in getting its COVID-19 vaccine to market appear to have caused it to miss out on the opportunity for significant commercial success at this stage in the game.
Had Novavax launched its vaccine last year in key markets, it probably would have generated a lot more revenue. Now, though, the demand for COVID-19 vaccines has fallen off quite a bit. That's especially the case in low- and middle-income countries served by COVAX.
Demand has slid in the U.S. as well. Over 223 million Americans are fully vaccinated. However, less than half that total have received a booster dose so far. An even lower percentage of people eligible for the second booster have received one.
Some had predicted that a large percentage of people who refused to take the messenger RNA vaccines from Moderna and Pfizer-BioNTech would be willing to take Novavax's protein vaccine. Perhaps that would have been the case if Novavax had been able to launch its vaccine last year, but it doesn't appear to be happening now.
Three other words
Despite Novavax's disappointing Q2 update, there are three other words that investors should remember: It's not over. Novavax still has an opportunity to be successful in the COVID-19 market.
I wrote in July that there are two things Novavax must do to mount a monster comeback. First, the company has to win authorizations for its omicron booster. Second, Novavax needs to achieve success with its combination COVID-flu vaccine program.
Both of these prerequisites are still achievable. Novavax expects to report results from its clinical study evaluating its omicron booster in the third quarter and file for U.S. authorization in the fourth. The company also plans to initiate a late-stage study of its combo COVID-flu vaccine in 2023.
Perhaps evolving market dynamics will yet again work against Novavax. However, I don't think the stock is a lost cause just yet.