Should You Buy Novavax on the Dip?

Novavax, Inc. (NVAX) in Gaithersburg, Md. is a biotechnology company that specializes in developing and commercializing vaccines to fight various respiratory illnesses. Its product pipeline includes its COVID-19 vaccine candidate NVX-CoV2373, nanoparticle influenza vaccine candidate NanoFlu, and respiratory syncytial virus fusion protein nanoparticle candidate ResVAx, etc.

NVAX’s COVID-19 vaccine candidate has received emergency use approvals from several countries so far this year.

However, given the increasing number of fully approved vaccines already available in the market, NVAX’s latest approvals failed to generate a positive reaction from investors. The stock has plummeted 41.7% in price year-to-date and 7.7% over the past five days to close yesterday’s trading session at $83.44.

Click here to checkout our Healthcare Sector Report for 2022

Here is what could shape NVAX’s performance in the near term:

International COVID-19 Vaccine Approval

Several countries are inking purchase agreements with NVAX for its recombinant nanoparticle protein-based COVID-19 vaccine candidate NVX-CoV2373, which is currently undergoing pivotal phase 3 trials. On January 28, NVAX signed a vaccine purchase agreement with the Israeli government. The company will deliver five million doses of the vaccine, with an option to purchase five million additional doses, pending regulatory approval.

Earlier this month, NVAX submitted a request for emergency use authorization of its COVID-19 vaccine with the U.S. FDA. On February 3, NVAX received conditional marketing authorization for its vaccine from the Medicines and Healthcare products Regulatory Agency in Great Britain and provisional vaccine approval from the New Zealand government. And earlier this week, the Singapore Health services authority and Health Canada also approved the NVX-CoV2373 vaccine.

Mixed Financials

For its fiscal third quarter, ended Sept. 30, 2021, NVAX’s total revenues increased 13.9% year-over-year to $178.84 million. This can be attributed to a 127.1% rise in government contract revenues.

However, the company’s total expenses increased 38.5% from the same period last year to $485.99 million. NVAX’s loss from operations worsened 58.4% from the prior-year quarter to $307.14 million. And its net loss widened 63.4% from its year-ago value to $322.43 million, while its loss per share worsened 34.3% year-over-year to $4.31.

Lawsuits

Several law firms have filed class-action lawsuits against NVAX. The lawsuits allege that the company has made false and misleading statements to the market by downplaying the manufacturing problems of its NVX-Cov2373. Furthermore, NVAX allegedly overstated its production capabilities.

POWR Ratings Reflect Uncertainty

NVAX has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

NVAX has a C grade for Quality. The company’s trailing-12-month net profit margin is negative 89.31%. However, its levered free cash flow margin is 71.75%, justifying the Quality grade.

Among 449 stocks in the Biotech industry, NVAX is ranked #139.

Beyond what I have stated above, view NVAX ratings for Growth, Momentum, Stability, and Sentiment here.

Bottom Line

NVAX has made solid progress on its COVID-19 vaccine, with multiple international approvals and purchase agreements. However, with several vaccines with more than 90% efficacy already available in the market, investors have remained bearish about the stock despite the company’s latest approvals. Thus, we think investors should wait until NVAX releases its phase-three clinical trial results for its COVID-19 vaccine candidate before investing in the stock.

How Does Novavax, Inc. (NVAX) Stack Up Against its Peers?

While NVAX has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Vertex Pharmaceuticals Inc. (VRTX), Amgen Inc. (AMGN), Sino Biopharmaceutical Limited (SBHMY), which have an A (Strong Buy) rating.

Click here to checkout our Healthcare Sector Report for 2022

NVAX shares were trading at $84.06 per share on Friday morning, up $0.62 (+0.74%). Year-to-date, NVAX has declined -41.25%, versus a -7.69% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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