With its shares down by more than 90% in the last year, the future looks grim for Novavax (NVAX 1.16%). In light of the pessimistic messaging from its management and the low expectations that professional analysts have for it over the next couple of years, shareholders now face the prospect of the company's potential collapse.

But could this just be the darkest period of the stock's night, right before the dawn of a new and reinvigorated Novavax that could grow abundantly? Probably not. Here's why you should sell your shares, and soon. 

The argument for selling

The crux of Novavax's problem is that its coronavirus vaccines were approved too late to gain a significant share of the global market, which competitors like Pfizer and Moderna cornered quite rapidly thanks to favorable receptions from regulators and sufficient manufacturing capacity to meet demand on a reasonable timetable. 

Due to a series of mishaps with its manufacturing operations, Novavax's Nuvaxovid jab didn't get an Emergency Use Authorization (EUA) from the Food and Drug Administration until mid-July 2022 -- almost two years later than Pfizer's vaccine got its EUA in October 2020. There isn't much that Novavax can do to make up that lost ground now, as demand for coronavirus vaccines is expected to fall.

Last year, the company sold $2 billion worth of its shots. However, that wasn't enough to make it profitable. Novavax burned $508.9 million in 2022, leaving it with $1.3 billion on the books. For a biotech with a product on the market, that's a huge red flag as it means there's little hope of breaking even in the near term unless it significantly hikes prices. Wall Street analysts expect it to bring in roughly half as much revenue in 2023, which is another red flag. 

But now, Novavax has bigger issues -- like keeping the lights on for the next 12 months. Management is saying that cutting costs is a priority. Still, that might not be enough if it has to hand back a $697 million advance payment that one of its customers, Gavi, is demanding via an arbitration process after claiming that it never received the vaccine doses it ordered.

In its latest earnings report, Novavax's CEO was even quoted as saying that "substantial doubt exists regarding our ability to continue as a going concern." It doesn't get much clearer than a CEO saying that a company might go under. So why even consider doing anything other than selling your shares?

Why a few people might be willing to buy

Despite all of these issues, there is an ill-advised thesis in favor of buying Novavax that you should definitely not try to implement. 

At present, the biotech is valued at liquidation-sale prices, with a price-to-sales ratio of only 0.2. That's dramatically lower than the biotech industry's average ratio of 7.4. So any purchase of its shares will be incredibly cheap, though it's also clear that investors will not be getting a healthy company for the price. After all, a bankruptcy filing may be in Novavax's near-term future.

At the same time, Novavax has late-stage candidate vaccines for influenza and respiratory syncytial virus (RSV) that could be commercialized within the next few years. Given the unprofitability of its coronavirus vaccine, it would still need to figure out how to manufacture its jabs with better unit economics before those programs would be enough to save the company, assuming it survives long enough to try to commercialize any of them.

If you're looking for slivers of hope, those programs might be enough to convince you that things might improve for Novavax. Another sliver of hope might come from any decision to license its vaccine technology to other biotechs, particularly its Matrix-M adjuvant. There's no indication of a deal like that being in the works yet, and it might not result in enough money to help anyway. 

Overall, the prospects for Novavax are poor, even when considering its valuation, pipeline opportunities, and potential tech licensing deals. So, unless you're interested in taking a bet with extremely long odds -- and without much in the way of a consolation prize if things don't work out -- sell your shares, and don't buy more.