Shares of biotech Novavax (NVAX 3.54%) have plunged 91% in the past year as the company has struggled to make its mark in the coronavirus vaccine market. Novavax's lack of success in this space is even more troubling, considering global COVID-19 vaccine sales will drop substantially starting this year, so even the leaders in the field have struggled of late.
But has Novavax's sell-off gone too far? One would think so looking at Wall Street's projections for the biotech. The company's average price target of $50.80, per data from Yahoo! Finance, represents a monster upside of 741% over its share price of $6.04 as of this writing. While it seems highly unlikely that Novavax will soar by that much anytime soon, perhaps the broader question is whether there's a substantial upside ahead for the company.
Let's look into Novavax's business and find out.
Novavax's quarterly update scared investors
Novavax's coronavirus vaccine, Nuvaxovid, has earned approval or authorization in dozens of countries worldwide. Thanks to sales related to this product, the biotech's latest financial update looked pretty good on the surface. For fiscal 2022, Novavax reported total revenue of $1.9 billion, almost 73% higher than in the previous year.
And while Novavax is still unprofitable, its net loss shrank to $658 million, compared with a loss of $1.7 billion recorded in 2021. Clearly, Novavax seems to be moving in the right direction, but there's a problem. Because of the unpredictability and uncertainty of the coronavirus vaccine market, management can't be sure that the company's funds will be enough to keep the business going through the next year.
That's a scary warning that naturally led to a collapse in the company's shares.
Is there any hope left for Novavax?
Things could get more complicated for Novavax as we move toward the commercial stage of the COVID-19 markets. Several other corporations already dominate this space and have left Novavax far behind. For instance, Moderna generated sales of $19.3 billion last year. But even this leader is projecting only about $5 billion in 2023, an estimate that could increase if the company earns additional sales from key markets as it expects. At any rate, Moderna's total for 2023 is unlikely to get close to $19 billion.
Novavax didn't issue guidance for the coming year, but analysts expect the company's top line to be almost $900 million. At first glance, that could make Novavax a decent target, considering this total is higher than the company's market capitalization of $524 million. But again, this industry is highly unpredictable. So Novavax may or may not achieve that total, and unlike Moderna, it badly needs things to work in the coronavirus vaccine space to stay in business.
The company is seeking to cut expenses and costs, which would help extend its cash runway. Elsewhere, Novavax does have another promising candidate in the clinic. It is a combined COVID-19/flu vaccine. Such a product could be highly successful if approved. Imagine making just one trip and getting only one shot from your physician to for protection from the coronavirus and the flu -- a much more convenient option.
But even this promising product can do little to rescue Novavax's hopes. For one, it is only in a phase 1/2 study. Even assuming it successfully passes that stage and starts a late-stage clinical trial relatively soon, it will still be at least 18 months -- and that's a generous estimate -- before it makes it to the market if it passes all clinical and regulatory hurdles in its way with flying colors. Furthermore, other companies, including Moderna, have similar investigational vaccines in the works.
Sure, if everything works perfectly for Novavax -- that is, if it generates revenue in line with analysts' predictions this year and its coronavirus/influenza combination vaccine makes steady progress -- its stock will soar from its current levels. But the slightest misstep could leave investors with worthless shares of a company. I once had hopes that despite the issues it has encountered, including manufacturing problems that delayed the authorization of Nuvaxovid, Novavax would be able to turn things around.
But that seems highly unlikely now, which is why I've given up on Novavax. Most investors should do the same in favor of much more promising biotech stocks.
