Biotech company Novavax (NVAX) has fallen from grace over the past year, with the vaccine maker's shares dropping by 84% over the trailing-12-month period. But Wall Street hasn't given up on the company just yet. Novavax currently has an average price target of $22, according to Yahoo! Finance.
That's nearly 3 times Novavax's share price of $7.60 as of this writing. If Novavax can reach this target within the next year, purchasing its shares now would obviously be a great move. But can the company pull it off?
What happened to Novavax?
Once a promising candidate in the race to develop and market a coronavirus vaccine, Novavax's plans didn't go as expected. For one, Novavax was late to the party. Its vaccine, Nuvaxovid, only earned authorization in the U.S. in mid-2022. By then, the likes of Moderna and the team of Pfizer and BioNTech already dominated the market.
To make matters worse, the coronavirus vaccine space is drastically changing. Before this year, governments took it upon themselves to deal with vaccine makers directly and order vaccines in bulk to help as many people as possible get inoculated. Now that the pandemic has largely subsided, the demand for vaccines has dropped.
Novavax and its peers will be unable to sell to governments in the same way (and in the same quantity) they did before. That explains why these companies have seen their shares plunge.
Even so, Novavax has performed significantly worse than other biotechs in the same boat. That's likely because Novavax generated much lower sales from its vaccine than its peers. The company is still unprofitable, it currently has no other product on the market, and none of its other pipeline candidates have made meaningful progress toward approval in the past year.
Further, the uncertainty surrounding the COVID-19 market makes it difficult to know what the future holds for Novavax. In the first quarter, the company's revenue came in at $81 million, compared to the $704 million reported in the year-ago period. Novavax's net loss of $294 million was also worse than the loss of $203 million reported in the prior-year quarter.
Dropping revenue and worsening net losses are not a good combination for any company.
The (shaky) path forward
At the beginning of the year, Novavax expressed concern regarding its ability to remain in business through the end of 2023. That's not something investors want to hear. However, the company also said it was implementing a strategy to help ensure its survival. This plan includes marketing an up-to-date vaccine for the upcoming fall season, reducing expenses, and making pipeline progress.
Novavax is doing relatively well on these fronts. The biotech expects to release top-line data from a phase 3 strain change study designed to help it update its coronavirus vaccine composition for the 2023-2024 season soon.
Elsewhere, Novavax recently reported positive data from a phase 2 clinical trial for its combo coronavirus/flu vaccine. Novavax also instituted a restructuring plan and is on track to cut some key expenses by 40% to 50% by 2024 (compared to 2022). That all sounds great, but it's also too little, too late.
Considering how much the coronavirus market has dropped, not to mention the competition from much larger and much more successful companies, Novavax is unlikely to carve out a large corner of this space for itself, whatever remains of it, once the pandemic officially ends. Further, while its combined COVID/flu vaccine looks promising, it hasn't even started a phase 3 study.
It is still several years away from approval, at best. And here, too, Novavax will have competition. Companies such as Pfizer and Moderna are working on flu vaccines, with the latter also developing a combo option. In short, Novavax's hopes look bleak. The company is unlikely to match Wall Street's expectations within the next year.
Novavax looks far too risky for most investors to bother. There are much better biotech stocks to consider buying.
