In the early days of the pandemic, investors took their bets Novavax (NVAX 0.65%) would be a winner of the coronavirus vaccine. The stock is up a staggering 2,700% in just one year. When the biotech’s vaccine candidate lagged, however, investors lost confidence.
However, Novavax’s vaccine has finally reached commercialization and recently received clearance for use as a booster as well. With its shares down nearly 90% this year, one might wonder if Novavax represents a big buying opportunity. Or should you avoid this struggling stock considering its late arrival on the vaccine scene? Let’s find out if Novavax is a buy, sell or hold in 2023.
The great earning opportunity
It is clear that Novavax missed a revenue opportunity at the height of the pandemic. The company’s vaccine began gaining approvals in some countries about a year ago. It’s a year after the leaders Pfizer And Modern entered the market. And the United States only licensed Novavax’s vaccine in July.
As a result, Novavax hasn’t generated nearly as much revenue as biotech fellow Moderna. Both Moderna and Novavax are easy to compare because they market only one product: the coronavirus vaccine.
NVAX Revenue data (quarterly) for YCharts
It’s also fair to say that the revenue opportunity is set to decline from peak levels. Most of the people who wanted vaccines have already gotten them. And there will be less urgency to get vaccinated once the pandemic becomes endemic.
That said, the opportunity isn’t over. Moving forward, the annual booster market is a recurring source of revenue. The exact size of the global market will depend on the price of vaccine doses and the number of people vaccinated. Moderna predicts that the size of the market will follow that of the flu and could be between $8 and $32 billion.
So, yeah, the bad news is that Novavax has missed the moment when companies could generate huge levels of revenue in a short period. But the good news is that Novavax can still participate in the vaccine market long-term and possibly generate significant annual revenue.
A forecast of 2 billion dollars
This year, Novavax is forecasting total revenue of $2 billion. Since the company entered the market at a later stage in the pandemic, it may experience a smaller decline in vaccine revenue than today’s vaccine leaders. That means there may be a little bit more stability in the revenue story going forward.
The vaccine today offers Novavax a source of product revenue. And that’s good. However, I wouldn’t necessarily buy Novavax stock just because of its position in of today coronavirus vaccine market. It is vital to consider the long-term opportunity.
Novavax is further ahead in the development of a potential breakthrough vaccine. The company is working on a combined coronavirus/flu candidate. The program is expected to begin Phase 2 studies later this year.
Moderna is also studying combination candidates for respiratory viruses, including the coronavirus. Moderna’s programs are still in phase 1. Knowing the speed of Moderna’s development in the past, it could ultimately beat Novavax in this new vaccine race. But there is room for more than one player in this market over time, as long as Novavax doesn’t fall too far behind.
Need to buy or sell?
Considering all of this, is Novavax a buy, sell, or hold in 2023? It depends on your comfort with the risk. It appears that Novavax may carve out a share in the long-term coronavirus market. And it could also become a player in the flu market.
Prior to the pandemic, it successfully took flu vaccine candidate NanoFlu through Phase 3 trials. The company has not yet announced a regulatory filing plan for NanoFlu. But the coronavirus and the flu are two areas that could represent short-term revenue.
Novavax has other candidates in the works, but they are early stages. So at this point, the company is really dependent on the coronavirus and flu programs.
All of which means that Novavax is probably a stock to avoid if you’re a cautious investor. We have some clues about the post-pandemic market. But the uncertainty remains.
That said, if you already own Novavax stock, it might be worth keeping. And if you don’t own Novavax yet and are an aggressive investor, it might be worth buying some stock.
As mentioned above, Novavax’s vaccine is generating revenue now. And its combined candidate could be among the successful coronavirus vaccines of the future. These two elements could drive earnings growth. And that could spell a win for investors over time.