Struggling biotech Novavax (NVAX +15.56%) was a hot buy a few years ago as it was in the midst of developing a vaccine for COVID-19. Ultimately, it did produce an approved vaccine, but it was a bit late and did not end up generating nearly as much in revenue as it could have if it had obtained approval much earlier. And since 2022, a sell-off has ensued, with the stock losing more than 91% of its value.
Recently, there's been some renewed excitement in Novavax, however, and its shares are up over 150% this year. And there's a catalyst which could potentially drive that rally even higher. So should investors consider the stock now?
NASDAQ: NVAX
Key Data Points
Regulators approve its updated COVID-19 vaccine
It may seem like a similar story for investors but Novavax has obtained approval for a COVID-19 vaccine -- yet again. On Aug. 30, the healthcare company announced that the Food and Drug Administration (FDA) granted Emergency Use Authorization for its new COVID vaccine, which is an updated formula that targets new variants currently in circulation.
COVID cases have been rising this year, and there are worries that in the upcoming flu season, there could be a further uptick. Data from the Centers for Disease Control and Prevention (CDC) indicates that hospitalizations are higher than they were last year although they are still down significantly from 2022. The data below is for the week ended Aug. 10 compared against the same week in prior years.
| Year | Hospitalization rate per 100,000 people |
|---|---|
| 2024 | 4.6 |
| 2023 | 2.9 |
| 2022 | 9.3 |
Source: CDC.
Why this time could be different
Novavax touts that its vaccine "is the only protein-based option available in the U.S. for use in individuals aged 12 and older to prevent COVID-19." But the problem is that demand may still not be all that significant. Unless COVID cases and hospitalizations spike significantly, there may not be a need for the government to justify paying for updated COVID shots. COVID vaccine makers Pfizer and Moderna have been experiencing significant declines in COVID-related revenue, and that has made investors bearish on their growth prospects.
If not for a licensing agreement which Novavax announced with healthcare giant Sanofi earlier this year to develop products, Novavax's stock may be on a much different trajectory. There has been some hope around Novavax's business due to the deal, but aside from an upfront payment of $500 million and the hope of more milestone payments in the future, it's by no means a game changer for Novavax.
The company still needs a consistent revenue-generating product which it can count on to help it stay out of the red. While Novavax reported a profit of more than $162 million during the most-recent period (which ended on June 30), that was largely due to receiving $391 million from Sanofi, which is a portion of the initial upfront payment.
Is Novavax stock a buy?
Novavax stock spiked after news of the Sanofi deal this year, but early indications are that the recent authorization of its updated COVID shot isn't resonating with investors as it isn't resulting in a sharp spike in valuation, and rightfully so. Revenue from its COVID vaccine can not only be unpredictable, but it may only provide a temporary boost.
Until the company has a more promising product in its pipeline, which doesn't center around COVID or seasonal flu infections (where there is plenty of competition), investors are better off avoiding Novavax stock as it's likely to remain highly volatile.
