Novavax (NVAX 3.39%) Falling behind rivals in initial coronavirus vaccine race Pfizer and modern They bring products to market. The biotech company launched its vaccine in the U.S. a year and a half later, thus missing out on its biggest revenue opportunity. As a result, the stock price fell and failed to truly rebound. This year, they lost 28%.
But all is not lost. There is still a need for a coronavirus vaccine, and today’s market is undergoing an important shift. It’s no longer a pandemic-style market with people rushing to get their shots. Instead, it follows the flu vaccine market, arguing that people will get vaccinated once a year, which will generate recurring revenue for vaccine makers including Novavax.
Does this make the troubled biotech a buy?
Opportunities for Novavax
This is good news. The U.S. Food and Drug Administration (FDA) recently approved Novavax to launch an updated coronavirus vaccine in time for the fall vaccination season. The FDA approved the Pfizer and Moderna vaccines about three weeks ago, but supply shortages and insurance glitches mean the companies haven’t yet gained the huge lead that could be an opportunity for Novavax.
After all, if the market followed the flu, roughly half the U.S. population would likely get vaccinated. This means that all three companies can generate significant revenue.
Novavax’s vaccine may also appeal to some people who prefer products that rely on technology that has been around for a while. The company uses a protein subunit approach, delivering copies of the spike protein into the body to trigger an immune response. This approach has been used for many years in other vaccines, such as the hepatitis B vaccine. Pfizer and Modera were the first to launch mRNA vaccines as early as 2020.
So what’s holding Novavax back from an earnings and stock performance perspective? The company is currently going through a challenging period. Novavax entered the market late in the early stages of the pandemic, causing its profits to be mismatched by its massive investment in the infrastructure to produce, store and sell the vaccine. Earlier this year, the company even questioned its ability to continue as a going concern.
Subsequently, Novavax launched a turnaround plan that included cutting 25% of its workforce and working to cut costs by 50% from last year by next year. At the same time, he continues to guide his updated vaccine through the pipeline and develop a combined flu/coronavirus drug candidate that could become a winning product in the future. Most people and health care providers prefer one dose to cover both viruses, rather than two doses.
But Pfizer and Moderna are also working on combination drug candidates, representing potential competition. The question is whether Novavax can complete development of the combined drug candidate on its own, given its financial situation.
The company recently said it plans to make incremental investments in the program as a result of its commitment. We’ll have to wait and see how it plays out and monitor the data. This represents an uncertainty.
Novavax also has some risks, as it depends on its coronavirus program and the pipeline isn’t particularly broad. In addition to its coronavirus vaccine, Novavax also has standalone flu vaccine candidates and a malaria vaccine candidate in development.
Sure, Novavax could generate significant revenue from its coronavirus program or a potential future flu vaccine, but this narrow focus remains a weakness for the company — especially since competition in the coronavirus and flu spaces is fierce.
your investment strategy
So is Novavax worth buying now? The answer depends on your investment strategy and tolerance for risk.
If you’re looking for a potential recovery story and don’t mind some risk, you might want to buy some Novavax stock right now. If Novavax takes some market share this vaccination season and manages to steadily improve its position and revenue over time, the stock, trading at 0.4 times sales, will look cheap. This is a logical choice for aggressive investors with a diversified portfolio.
But if you’re a cautious investor, you’d be better off staying away from Novavax — at least until it hits some cost-cutting targets and investors see how it performs in the vaccine market this fall. By then, the company’s long-term prospects may become clearer, which is a key factor in reducing some of the risks currently facing Novavax stock.
Novavax might be a buy for some today, but others would be better off keeping this biotech stock on their watch lists.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool owns and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.