In the early days of the pandemic, investors bet Novavax (NVAX 2.31%) would be a coronavirus vaccine winner. The stock soared a mind-boggling 2,700% in just one year. When the biotech's vaccine candidate fell behind, though, investors lost faith.
However, Novavax's vaccine finally reached commercialization, and it recently won authorization to be used as a booster too. With its shares down almost 90% this year, you may be wondering if Novavax presents a great buying opportunity. Or should you avoid this struggling stock considering its late arrival to the vaccine scene? Let's find out whether Novavax is a buy, sell, or hold in 2023.
The big revenue opportunity
It's clear Novavax missed out on the height-of-the-pandemic revenue opportunity. The company's vaccine began winning authorizations in certain countries about a year ago. That's a year after leaders Pfizer and Moderna entered the market. And the U.S. only authorized Novavax's vaccine back in July.
As a result, Novavax hasn't generated nearly as much revenue as fellow biotech Moderna. Both Moderna and Novavax are easy to compare because they commercialize only one product: the coronavirus vaccine.
NVAX Revenue (Quarterly) data by YCharts
It's also fair to say the revenue opportunity is set to decline from peak levels. Most people who wanted vaccines already got them. And there will be less urgency about getting vaccinated once the pandemic shifts to an endemic situation.
That said, the opportunity isn't over. Moving forward, the annual booster market represents a recurrent source of revenue. The exact size of the global market will depend on the price of vaccine doses and the number of people getting vaccinated. Moderna predicts the market size will follow that of the flu and could settle anywhere between $8 billion and $32 billion.
So, yes, the bad news is Novavax missed out on the time when companies could generate enormous levels of revenue in a short period. But the good news is Novavax still can participate in the long-term vaccine market and possibly generate significant annual revenue.
A $2 billion forecast
This year, Novavax has forecasted total revenue of $2 billion. Since the company entered the market in a later stage of the pandemic, it may see less of a drop in vaccine revenue compared to today's vaccine leaders. This means there may be a bit more stability in the revenue story from here moving forward.
The vaccine today offers Novavax a source of product revenue. And that's positive. Still, I wouldn't necessarily buy Novavax shares only for its position in today's coronavirus vaccine market. It's critical to look at the long-term opportunity.
Novavax is furthest along in the development of a potential game-changing vaccine. The company is working on a combined coronavirus/flu candidate. The program is set to start phase 2 studies by the end of this year.
Moderna also is investigating combination candidates for respiratory viruses, including coronavirus. Moderna's programs still are in phase 1. Knowing the speed of Moderna's development in the past, it could eventually beat Novavax in this new vaccine race. But there's room for more than one player in this market over time -- as long as Novavax doesn't fall too far behind.
Should you buy or sell?
Considering all of this, is Novavax a buy, sell, or hold in 2023? It depends on your comfort with risk. Novavax looks like it could carve out a share in the long-term coronavirus market. And it also may become a player in the flu market.
Prior to the pandemic, it brought flu vaccine candidate NanoFlu successfully through phase 3 trials. The company hasn't yet announced a regulatory submission plan for NanoFlu. But coronavirus and flu are two areas that could represent near-term revenue.
Novavax has other candidates in the pipeline, but they're earlier stage. So, the company really depends on the coronavirus and flu programs at this point.
All of this means Novavax probably is a stock to avoid if you're a cautious investor. We have some clues about the post-pandemic market. But uncertainty still remains.
That said, if you already own Novavax stock, it may be worth holding. And if you don't yet own Novavax and are an aggressive investor, it may be worth buying some shares.
As mentioned above, Novavax's vaccine is generating revenue now. And its combined candidate could be among the successful coronavirus vaccines of the future. These two elements could drive earnings growth. And that could score a win for investors over time.
