Novavax (NASDAQ: NVAX) Share prices have both risen and fallen in recent years. Investors initially bet that the biotech company would emerge victorious in the coronavirus vaccine race, sending its shares up 2,700% in 2020. But as Novavax fell behind on the path to commercialization, its shares fell — and even the eventual regulatory approval and market launch of that vaccine didn’t help much.
However, in recent times, Novavax has taken steps to improve its profitability prospects. And in the wake of the big news earlier this month, shares rose again, giving investors hope that the company may be just at the beginning of a period of positive momentum. Is it time to buy? Before you make a decision, here are three things you should know.
1. Novavax’s new partnership could boost sales growth, but don’t expect pandemic-level sales
Novavax’s vaccine only came onto the market after the shots had been developed by Modern And Pfizer had already acquired dominant market shares. This meant it missed out on its biggest revenue opportunity and struggled to compete with these established leaders.
But it’s a recent deal with Sanofi could boost sales growth. The pharmaceutical giant is the global leader in flu vaccines and has the commercial infrastructure and experience to bring one to healthcare providers. That’s why Sanofi’s agreement to co-commercialize Novavax’s vaccine from next year is such positive news for the smaller company.
In addition, Sanofi acquired rights to use the Novavax vaccine as part of multi-inoculation shots that combine a COVID-19 booster with flu vaccines or other vaccines. If Sanofi is able to generate strong sales of such combination vaccines, it would result in the biotech receiving significant royalty payments.
Obviously, COVID-19 vaccine revenues are unlikely to reach the levels seen during the public health crisis. As the threat has subsided, demand for COVID vaccines has declined, so this could be a steady earnings story rather than an explosive one.
2. Novavax has already taken important steps towards recovery
Novavax, after raking in lower-than-expected vaccine revenue, issued a going concern warning last year that closing its doors was a possibility. At the same time, the company launched a major cost-cutting plan.
The Sanofi deal, which included a $500 million upfront payment and up to $700 million in milestone payments, allowed Novavax to drop that caveat, significantly reassuring investors.
And Novavax’s own efforts are another reason to believe the company is moving in the right direction. The company cut its research and administrative costs by 50% year-over-year in the first quarter and is targeting expenses of $700 million to $750 million this year. The biotech is also poised to launch a new phase in its cost-cutting efforts next year with the aim of reducing annual costs to $500 million.
So Novavax has made significant progress in cost savings on its own. Between that and the Sanofi investment, the company’s recovery story could get stronger.
3. Combination vaccines could be a game changer for Novavax
This past vaccination season, people showed much more interest in flu shots than in COVID shots. About 29% of American adults opted for a coronavirus vaccine or booster, while 47% got the annual flu shot, according to a Gallup poll.
And that’s why Novavax’s combination of coronavirus and flu vaccine could be so important. It could be attractive to the population that already takes the flu shot every year, by offering them the convenience of two vaccinations in one.
Novavax could even multiply its successes with combination vaccines thanks to the deal with Sanofi. First, Novavax continues to develop its own combination COVID/flu candidate, which will begin Phase 3 trials in the second half of this year. Second, as mentioned above, Sanofi now has the rights to combine the Novavax coronavirus vaccine with its flu vaccines – and if this produces a commercialized product, Sanofi would pay royalties to Novavax.
Novavax could therefore eventually generate revenue from more than one combination vaccine.
Should You Buy Novavax?
Novavax stock was a risky buy just a few months ago. But today the situation looks much brighter. Of course, it will take some time for Novavax to gain share in the coronavirus vaccine market, and sales of potential combination vaccines are not imminent – ​​those candidates must successfully pass clinical trials and gain approval first.
But right now, Novavax is moving in the right direction and doing so with a powerful partner. So if you’re looking for a promising recovery story purchase, Novavax might be the one for you.
Should you invest $1,000 in Novavax now?
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
3 Things You Need to Know If You Buy Novavax Today was originally published by The Motley Fool
