Novavax (NVAX 15.33%) faces an uncertain future ahead as the need for COVID-19 vaccines diminishes. And that means it becomes a risky stock to own with no other approved products to rely on for consistent, long-term revenue growth. Its pipeline isn't bare (it does have a flu vaccine in phase 3 trials), but the big concern is that the company isn't generating enough in cash and profits. The situation is so bad that even management issued a warning on its latest quarterly earnings report.

Management casts doubt about its stability

Last month, Novavax released its year-end results. For 2022, the company reported just under $2 billion in revenue, up from $1.1 billion in the previous year. Product sales from its vaccine totaled $1.6 billion and made up the bulk of the top line, versus in 2021 where grant revenue accounted for most of revenue and product sales were nil.

Nonetheless, despite the impressive growth, Novavax still incurred a net loss of $657.9 million for the year -- less than the $1.7 billion loss it reported in 2021. Reporting a loss even amid such strong growth is certainly concerning as it suggests that Novavax would need even more revenue to break even.

Management stated in the earnings press release that "substantial doubt exists regarding our ability to continue as a going concern through one year from the date that these financial statements are issued." Going concern refers to the company's ability to be able to continue pay its bills as they are due, so this is a huge red flag to investors. Unsurprisingly, shares of Novavax crashed following the news.

Just how bad is Novavax's situation?

Novavax has been burning through cash over the past year, even though it has been experiencing growth.

NVAX Cash from Operations (Quarterly) Chart

NVAX Cash from Operations (Quarterly) data by YCharts

As of the end of 2022, the company's cash and cash equivalents totaled $1.3 billion. At first glance, the rate of cash burn looks sustainable, because if Novavax maintained its current rate then it would deplete around $416 million from its day-to-day operations. But the company mentioned in its earnings release that it issued the doubt given the uncertainty in the revenue it might collect in 2023, including funding from the U.S. government.

It's a valid concern because demand for COVID-19 vaccines is unclear, so the company's rate of cash burn may worsen this year. Novavax's business has gotten bigger over the years with its operating expenses now significantly higher than they have been in the past.

NVAX Total Operating Expenses (TTM) Chart

NVAX Total Operating Expenses (TTM) data by YCharts

Revenue finally jumped ahead of operating expenses in 2022, but that may not be the case this year, and that's why there's certainly reason for investors to worry about the business.

Does this means it's time to jump ship?

I don't think Novavax will be out of business in a year, despite the warning from management. It can always issue more shares and drastically cut costs in an effort to slow its cash burn. The problem is that those solutions aren't going to make the healthcare stock a better buy.

In the end, Novavax needs a product it can rely on for long-term revenue growth and that can make it profitable. That's a big hill to climb given Novavax's expenses; even its COVID-19 vaccine wasn't able to get the company to breakeven.

Down around 90% in the past 12 months, Novavax's stock remains incredibly risky, and investors are better off avoiding it as it may fall even further in the future given its concerning financial position.