Novavax (NVAX +0.37%) was once a leading contender to dominate the coronavirus vaccine market. The company faced several challenges, however, and although it successfully launched its vaccine, Nuvaxovid, revenue and earnings have remained inconsistent for years, and the stock has delivered subpar returns. Unfortunately for Novavax, it is unlikely to perform significantly better over the medium term.
Here's why it'd be best for investors to avoid this company.
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There is a deal of uncertainty around Novovax
Last year, Novavax signed an agreement with Sanofi, granting the France-based biotech giant the rights to commercialize Nuvaxovid in the U.S. and other countries worldwide. Sanofi also acquired the right to use Novavax's proprietary Matrix-M adjuvant technology in some of its vaccines in development. The deal was worth an upfront payment of $500 million and up to $700 million in payments upon hitting certain milestones, in addition to royalties on sales of Nuvaxovid and other products that Sanofi will develop, which may utilize Novavax's technology.
NASDAQ: NVAX
Key Data Points
Novavax benefited from this deal, but moving forward, there is far too much uncertainty surrounding it. For one, demand for coronavirus vaccines might no longer be what it once was. That's on top of regulatory changes, especially in the U.S., that are expected to limit healthy patients' ability to access the vaccine. And amid all that, Nuvaxovid trails the leading vaccines in this niche. These dynamics will all affect Novavax's royalty revenue.
Novavax could benefit from Sanofi making pipeline progress with vaccine candidates that use the former's Matrix-M adjuvant technology. However, this is yet another uncertain potential stream of catalysts that depends on the slow and risky process of developing and marketing drugs and vaccines. Considering how much uncertainty is involved here, Novavax's medium-term prospects don't look all that attractive.
Pipeline candidates are long shots
Novavax could fix that problem by developing and marketing newer vaccines. However, there are at least two issues here. First, the company's track record over the past five years hasn't been great. The company was overshadowed by others in the large (at some point) coronavirus vaccine market, partly due to internal issues that led to significant delays in launching Nuvaxovid.
Second, Novavax's leading candidates -- a stand-alone flu and a combined coronavirus/flu vaccine -- will encounter significant competition. Other companies have made significant progress in developing novel flu vaccines and have reported strong results from mid- and late-stage clinical trials. Furthermore, its combination vaccine could cannibalize sales of Nuvaxovid in a coronavirus market that is no longer attractive. All these factors make Novavax a highly risky stock that is not worth investing in at this time.
