Here's the Worst Mistake Novavax Investors Can Make in 2023

Novavax (NVAX -1.22%) has taken investors on a wild ride since the start of the pandemic. The shares skyrocketed more than 2,000% back in 2020 as investors bet on Novavax bringing a vaccine to market. The biotech succeeded. But that success came later than expected. And as a result, the stock sank 92% last year.

Today, vaccine makers face the transition into a post-pandemic world. That means lower demand for their products compared with the earliest days of the pandemic. And that's why investors are wondering whether the opportunity to win with a Novavax investment is over. Before deciding what to do, let's check out the worst mistake Novavax investors can make in 2023.

A missed opportunity

First, a bit of background. Novavax launched its COVID-19 vaccine a year after rivals in many countries and about 18 months later in the U.S. That meant it missed out on the initial opportunity to vaccinate when countries needed products the most. For example, rival Moderna generated $17.7 billion in vaccine sales in 2021.

That said, Novavax still has generated significant revenue from its vaccine. For example, in the third quarter the biotech brought in more than $600 million from the product. And the vaccine is set to help Novavax record $2 billion in revenue for the full year. This is big considering the vaccine is Novavax's first commercialized product.

At the same time, vaccine sales are helping increase the company's cash level to $1.3 billion as of the end of September. Novavax can use this cash to pay for development of candidates in its pipeline.

It's important to remember that, though vaccine revenue probably will decline for all vaccine makers, the market isn't about to disappear. Novavax has $2.4 billion in advance purchase agreements (APAs) for future delivery. And it's very likely people who usually go for annual flu vaccines may also go for annual COVID-19 shots. That's about half of the U.S. population.

A year of transition

Now, let's talk about 2023. It should be a year of transition. As mentioned above, we should be shifting from a pandemic to an endemic situation. When that happens, companies will sell vaccine doses to pharmacies and healthcare providers instead of to governments. This means different logistics and costs.

Also, given this likely transition from pandemic to endemic, demand in 2023 may not represent average long-term demand. It may take another year or two to see exactly what percentage of the population actually goes for annual coronavirus boosters.

Let's get back to our main point. What's the worst mistake Novavax investors can make this year? Seeing it as a year that will truly determine vaccine demand and revenue and making an investment decision based on that.

I wouldn't be overly negative or positive after looking at quarterly vaccine revenue this year. It will be important, though, to see if Novavax is able to progressively carve out reasonable market share. That will set it on the right path to play a role in the long-term coronavirus vaccine market. Because it looks as if this market could be significant. Novavax predicts an $18 billion market opportunity in 2025. And Moderna says the post-pandemic market could be worth $12 billion to $24 billion, depending on vaccine price.

What should Novavax investors do?

So, considering all of this, what should a Novavax investor do this year? The answer is simple: Watch and wait. It's generally not a good idea to sell your shares at a loss -- especially since Novavax should continue to generate revenue from its vaccine in the coming years. And the company could eventually score a big win with its combined coronavirus-flu vaccine candidate. That's in phase 2 studies right now.

Novavax still remain risky. Market sentiment doesn't yet favor the shares. Investors haven't forgotten Novavax's troubles with its manufacturing ramp-up -- the troubles that slowed down its path to commercialization. So cautious investors shouldn't buy the stock just yet. But if you already own Novavax shares, you may want to hold on and get ready to watch what happens beyond 2023. This year, alone, won't be enough to tell us whether Novavax will be a long-term winner in the coronavirus space.