Biotech company Novavax (NVAX 22.61%) has had a terrible year on the stock market, with its shares down by 86% year to date. But zooming out helps: Novavax's shares are up by an impressive 302% over the past three years. The company does still face some challenges. The coronavirus vaccine market, where it plans to make its money for the next few years, could shrink substantially starting next year.

Novavax's shareholders could continue to take it on the chin for the next few months, but what do the company's long-term prospects look like? Is it still worth purchasing shares of this vaccine maker?

Chart showing decline in both Novavax's price and the S&P 500 in 2022, with Novavax's decline far lower.

NVAX data by YCharts.

Novavax's place in the COVID-19 vaccine market

Novavax's COVID-19 vaccine, Nuvaxovid, has earned approval or emergency use authorization in dozens of countries worldwide. The biotech expects to generate between $2 billion and $2.3 billion in revenue this year -- presumably from this product, which is its only approved one at the moment.

However, Novavax had previously said it expected revenue between $4 billion and $5 billion. The company cut its guidance in half, citing "evolving market dynamics" for the change. These dynamics probably relate to a decrease in demand for COVID-19 vaccines. The pandemic isn't over yet, but more and more people are living as if it is.

Tens of millions of people, especially in first-world countries, are already vaccinated. Those who remain unvaccinated don't seem convinced that Novavax's product, the first protein-based coronavirus vaccine authorized in the U.S., differs substantially from the mRNA-based vaccines that currently lead the market. 

Fortunately, there may be a way for Novavax to improve its prospects. So far, Nuvaxovid has only been authorized for primary vaccines in the U.S. Novavax has applied for authorization for Nuvaxovid as a booster option in the country. The company is currently waiting for feedback from regulators. Even if the pandemic officially ends, COVID-19 is likely here to stay for awhile, and so is the booster market. Plenty of people will seek to get inoculated every year.

With a market capitalization of only $1.5 billion -- which is lower than the sales it expects for this year -- Novavax does not need to generate tens of billions from Nuvaxovid to be successful. Even a few hundred million in annual revenue from this product would work wonders for the biotech company

Looking beyond the pandemic 

Novavax also has a couple of promising candidates in its pipeline. First, there is NanoFlu, a potential influenza vaccine for seniors. Flu vaccines are generally not very effective. Furthermore, adults over 65 are disproportionately represented in flu-related hospitalizations and deaths. NanoFlu achieved all its primary endpoints in a phase 3 study.

The company also created a vaccine that combines NanoFlu and Nuvaxovid and targets COVID-19 and the flu. It recently reported positive results from a phase 1/2 clinical trial from this candidate. According to the biotech, the combined vaccine was able to generate immune responses against both the flu and the coronavirus.

There is still a long way to go for this investigational vaccine, but it could be highly successful if approved, as it would save patients the trouble of having to make two trips instead of one. Furthermore, Novavax's potential malaria vaccine is undergoing a phase 2 study, and company boasts a few more vaccines in phase 1 trials.

Is Novavax a buy?

Novavax's performance on the market in the past year is hardly surprising. In my view, the company's shares had risen far too much and had become overvalued. However, the company now looks a bit undervalued, with a market cap of just $1.5 billion and a forward price-to-sales of 0.7 (anything under 1 is generally considered very good). 

Novavax looks likely to continue generating decent sales from Nuvaxovid, given that it has been approved or authorized in plenty of countries worldwide and given its impending authorization in the U.S. as a booster option. Many regions also still lack access to coronavirus vaccines, and Novavax will look to target some of them.

And within the next few years, the biotech could record important clinical and regulatory wins. That's why Novavax's stock looks like a buy at these levels, at least for investors willing to be patient.