Biotech company Novavax (NVAX 3.54%) went from being relatively unknown just four years ago to becoming one of the U.S. COVID-19 vaccine market leaders. The company has faced many trials and tribulations in this period, however. And in the past three years, the stock is down by a whopping 94%.
If Novavax can mount a comeback, now may be as good a time as any to press the buy button while its shares are changing hands for just about $5.46 apiece.
Or perhaps Novavax hasn't hit rock bottom yet and will continue to see its share price plunge. Which scenario is more likely? Let's dig in and find out.
The tricky COVID-19 vaccine market
While the pandemic isn't officially over, we have made tremendous progress in fighting it, partly thanks to Novavax and other companies that developed and marketed COVID-19 vaccines. However, many of these corporations are now generating substantially lower sales from these products: They are, in a way, victims of their success. Novavax is no different.
In the third quarter, the company's total revenue of almost $187 million was much lower than the total of $734.6 million reported in the year-ago period. And while the market is forward-looking, Novavax's guidance doesn't inspire much confidence. For the fiscal year 2023, it expects its top line to come in between $900 million and $1.1 billion.
Last year, the company's revenue was $2 billion. Of note, Novavax has decreased its guidance this year, as have other leaders in this field, including the team of Pfizer and BioNTech. Here's what that says about Novavax's prospects: The coronavirus vaccine market is hard to predict, and if anything, the demand isn't as high as some had anticipated.
This uncertainty is a significant problem for Novavax since the market does not like uncertainty. Without a clear path forward, making a case to invest in the stock isn't easy.
Is there any hope left for Novavax?
Novavax's problems extend to its pipeline, which is relatively unimpressive. That's one of the differences it has with Moderna, whose coronavirus-related sales have also plummeted this year. However, Moderna has recorded solid clinical progress outside of this one area in the past three years and is inching closer to earning approvals for brand-new products.
That hardly applies to Novavax. While the World Health Organization (WHO) recently recommended a malaria vaccine that uses Novavax's proprietary Matrix-M adjuvant technology and will be rolled out next year, it is also unclear whether it can make significant contributions to the biotech's top line. Furthermore, Novavax's most advanced non-coronavirus products are currently in phase 2 studies. The first is an influenza vaccine, while the other is a combined COVID/flu vaccine.
Both could meet a serious need. Despite the availability of vaccines against the flu, it continues to cause thousands of hospitalizations and deaths every year, especially among the elderly. And having to make one trip to get inoculated against COVID and the flu is much more convenient than two separate trips. However, neither vaccine will earn approval anytime soon. In the best-case scenario, it will take two years, assuming they register positive results in clinical trials.
To add to all these issues, let's not forget that Novavax said at the beginning of the year that it was in a precarious financial situation, although the company has since made efforts to cut expenses. Novavax's hopes don't seem too bright, and that's why short sellers are making a meal of the stock. Most investors might not want to short the stock. However, unless one has a significant tolerance for risk and volatility, Novavax isn't worth investing in right now, not by a long shot.
There are much better biotech stocks to consider on the market.
