Biotech company Novavax (NVAX 4.95%) achieved an important milestone in July when it earned emergency use authorization (EUA) for its COVID-19 vaccine, Nuvaxovid, in the U.S. However, since that momentous event, the company's shares have lagged the market. What's going on?
The vaccine maker has encountered some headwinds related to Nuvaxovid. But despite these troubles, Novavax's prospects aren't dead in the water. Let's consider one reason to be excited about its chances to turn things around, and one reason its shares could sink deeper.
Red flag: Nuvaxovid's sales are flopping
Some investors and analysts had high hopes for Nuvaxovid, especially in the U.S. market, but elsewhere too. Since many people are still hesitant to get the jab, and some of that hesitancy may be because some otherwise popular vaccines are mRNA-based, it isn't crazy to think that a protein-based vaccine such as Nuvaxovid would attract mRNA skeptics. Alas, Nuvaxovid didn't live up to its promise in the second quarter.
During the period, Novavax reported total revenue of $185.9 million, for a substantial 37.6% year-over-year decline. Novavax's product sales, presumably from Nuvaxovid, were $55 million, whereas it recorded no product sales in the second quarter of 2021 since the vaccine wasn't on the market yet. The biotech also reported grants and royalty revenue.
To make matters worse, Novavax lowered its revenue guidance for the year. The company had initially said it expected its top line to clock in between $4 billion and $5 billion. Now that's expected to be between $2 billion and $3 billion. To be fair, Novavax may be suffering from an overall decline in demand for COVID-19 vaccines -- a factor beyond its control.
But that was cold comfort to its shareholders, many of whom swiftly decreased (or closed) their positions on the heels of its latest quarterly update, sending Novavax's shares tumbling.
Green flag: Potential avenues for growth
Novavax's prospects in the COVID-19 vaccine market could improve even if the demand for vaccines continues to adjust downwards, as the world (hopefully) exits the pandemic stage of the disease. The biotech recently applied for EUA for Nuvaxovid as a booster option for adults in the U.S. Almost 79% of Americans have already received at least one dose of a vaccine, and 67.3% are fully vaccinated, which is why the primary vaccination market is limited.
But the booster market looks much more promising. If COVID-19 enters an endemic phase, many -- especially those most at risk -- will continue to get boosted regularly. Management thinks Nuvaxovid can get a "significant share of the recurring COVID market."
Novavax does have other things to look forward to ahead. The company boasts another program in late-stage trials: NanoFlu, a potential influenza vaccine targeting adults age 65 and older. NanoFlu has already demonstrated solid results in a phase 3 clinical trial.
This is the product on which Novavax had pinned its hopes before the pandemic. The flu continues to be particularly dangerous for seniors, and NanoFlu could help decrease annual hospitalizations and deaths. Novavax's candidates in earlier studies include a combined flu/coronavirus vaccine, and another investigational candidate against malaria. But Nanoflu, and Nuvaxovid's potential EUA in the booster market, present the best opportunities for the company.
Don't give up just yet
Novavax's market cap is only $3.1 billion as of this writing. Again, the company thinks it will record revenue between $2 billion and $3 billion this year alone. Novavax's forward price-to-sales ratio right now is a very low 1.3, so the biotech may have fallen a bit too much.
At these levels, it's worth scooping up its shares, given that its hopes in the COVID-19 market are far from over and other programs are coming through the pipeline. It isn't time to abandon this promising biotech stock.