This vaccination season could be a key moment for vaccine makers and investors. That's because it's offering us a first glimpse into the future coronavirus vaccine revenue opportunity. Companies have predicted the market may follow that of the flu shot, which suggests 50% of the U.S. population may go for an annual jab. The idea is people will opt for a coronavirus vaccine once a year, and that would equal recurrent revenue for vaccine companies.
In the pandemic's earlier days, Pfizer (PFE 0.55%) and Moderna dominated as Novavax (NVAX 3.54%) fell behind, entering the market much later. This fall, though, these companies all launched updated vaccines around the same time -- so the idea is Novavax has a fair chance of carving out market share. But, could a recent comment by Pfizer indicate trouble for this vaccine underdog? Let's find out.
Will people go for coronavirus vaccines?
First, it's important to say all three companies have produced vaccines backed by positive scientific data. They've also built out the infrastructure necessary to manufacture and deliver these vaccines. The main question moving forward is whether people will indeed go for coronavirus vaccines as readily as they go for flu shots every year.
The flu and coronavirus vaccination season started in September, and so far, about 7 million Americans have gone for an updated coronavirus shot. That's lower than the nearly 20 million who went for an updated booster by around this time last fall.
Now, let's get to those five words Pfizer recently pronounced: "lower-than-expected vaccination rates." The big pharma is seeing lesser demand than it originally predicted, and because of that, it's cut full-year revenue expectations by $2 billion for its vaccine, Comirnaty. (Last quarter, Pfizer forecast annual Comirnaty revenue of $13.5 billion.) On top of this, Pfizer announced a plan to lower costs, realigning them with its long-term revenue opportunity.
Pfizer still emphasized it truly will gain more clarity on what vaccine demand may look like over time only by the end of the year -- once all of those who want a vaccine have gone out and gotten one. And, at that time, it can more accurately predict future revenue levels from the program. So, on a brighter note, Pfizer's forecast cut doesn't mean these past few weeks completely define the vaccine revenue opportunity of the future.
A warning sign
Still, does this observation of demand so far and the cut to revenue predictions mean bad news for Novavax? It's too early to say for sure, but it's definitely a warning sign for investors -- meaning we should proceed with caution if we intend to buy Novavax shares.
The biotech company has forecast vaccine sales of $960 million to $1.14 billion for the year. Of course this is much lower than Pfizer's original revenue expectations, but Novavax also is a smaller player, so the difference between the companies' forecasts isn't surprising.
Now let's imagine Pfizer was excessively optimistic and Novavax was excessively pessimistic when the companies made their original revenue forecasts. In that case, we could imagine Pfizer revising expectations lower and Novavax meeting or beating sales forecasts. But I would like to think both companies had their fingers on the pulse of the market when they made initial forecasts and still have a clear picture of the market today as vaccination unfolds across the country.
This doesn't mean Novavax will fail in the market this fall, but Pfizer's words do sound a warning bell -- and should prompt investors to carefully watch how the situation unfolds. Especially since Novavax depends on its coronavirus vaccine for revenue and has struggled in recent times, which prompted the company to launch its own cost reduction plan.
Is Novavax a buy?
So, what does this mean for investors? Novavax may be down, but it's not out. The company still is likely to generate at least hundreds of millions of dollars from its coronavirus vaccine this year. And it's actively cutting costs to help its cost structure match the vaccine revenue opportunity. So aggressive investors still may opt to scoop up some Novavax shares, and they may reap rewards down the road.
But, if you're a cautious investor, you probably shouldn't buy shares of this vaccine maker just yet. Any disappointment in vaccine sales could weigh on earnings, slow the pace of Novavax's potential recovery, and seriously hurt share performance. And that means Pfizer's latest message is one more reason to watch Novavax from the sidelines right now.
