Novavax (NVAX) shares are moving sideways on a mixed second-quarter report and a cut to its full-year guidance.
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That followed a nearly 26% drop on July 30 after an analyst downgraded the stock to a sell rating. Two stocks are rated buy. One has a hold rating and another rates NVAX shares as sell.
The company is preparing for its fall vaccination campaign, with a focus on the JN.1 variant. Novavax says its updated vaccine is active against currently circulating strains, including KP.2 and KP.3. The company says the vaccine is now available at major pharmacies in the U.S.
Novavax’s vaccine is based on protein technology, which sets it apart from rivals’ messenger RNA-based vaccines Pfizer (PFE) and Modern (MRNA). This could appeal to those uncomfortable with newer mRNA technology. But Novavax’s Nuvaxovid has long been available under emergency authorization, while its rivals have full approval.
Novavax shares remain volatile. Shares hit a nearly two-year high of 23.86 on June 6 but closed down nearly 7% after Novavax said in a Securities and Exchange Commission filing that the Food and Drug Administration had set an April date for deciding whether to formally approve Nuvaxovid.
Novavax has also entered into a licensing agreement with Sanofi (SNY) on May 14, and shares nearly tripled. Sanofi will pay Novavax $500 million up front and up to $700 million in additional milestone payments. Novavax will also receive tiered royalties on sales. Sanofi also made a $70 million investment in Novavax stock.
The deal is negative for Pfizer and Moderna, Leerink Partners analyst David Risinger said in a report.
“Simply put, Novavax’s Covid vaccine has shown better tolerability across multiple trials than mRNA vaccines (which are associated with a higher risk of transient fever/malaise). Furthermore, the commercial tie-in to Sanofi FP’s existing flu portfolio of effective vaccines for people of all ages is a significant advantage over the uncertain effectiveness of mRNA flu/Covid combination vaccines,” he said.
Novavax reported a profit in the second quarter and sales accelerated sequentially. Earnings beat expectations on an adjusted basis, but sales were disappointing.
All in all, is Novavax stock a buy or a sell in August 2024?
Fundamental Analysis of NVAX Stocks
In the second quarter, Novavax earned $1.54 per share, minus some items, on $415.5 million in sales. Earnings easily topped expectations at $1.39 per share and grew 75% year-over-year. Sales were below the Street’s call for $458.6 million and were down 2% year-over-year, though they were up sequentially.
Importantly, only earnings growth was in line with prudent investment advice, suggesting that investors seek out stocks with recent revenue and earnings growth of at least 20% to 25%.
For the third quarter, Novavax stock analysts are forecasting a loss of 78 cents per share on $59 million in sales. The loss would narrow year over year, but sales would fall by about 68%.
Analysts have no long-term quarterly estimates for Novavax.
Last year, Novavax lost $5.41 per share on $983.7 million in sales. The company has just lowered its guidance for the year, now expecting $700 million to $800 million in sales, down from its previous forecast of $970 million to $1.17 billion.
Novavax’s Covid vaccine
Novavax’s protein-based approach offers an alternative for those wary of mRNA technology.
Sanofi could play a big role in spreading that message, says Risinger, the Leerink analyst.
“We are interested to see how effective Sanofi FP is in raising consumer awareness of Novavax’s better tolerability than (Pfizer’s) Comirnaty or (Moderna’s) Spikevax,” he said. “Remember, consumer hesitancy about Covid boosters has been driven in part by fears about malaise/fatigue associated with Comirnaty and Spikevax.”
The deal allows Sanofi to develop combination vaccines with Nuvaxovid, including a flu/COVID vaccine. For each new product, Novavax will receive additional launch and sales milestones of up to $200 million plus ongoing product royalties.
According to Risinger, mRNA technology enables faster vaccine production.
“That said, Novavax’s vaccine has shown strong protection so far and we are interested to see whether mRNA vaccines can show differentiated (efficacy) in the coming years and, if so, to what extent the (efficacy) advantage outweighs the poorer tolerability from a commercial perspective,” he said.
It is important to note that Sanofi is not helping to commercialize Novavax in 2024. Nuvaxovid is available in the U.S. under emergency authorization. Full approval is still pending. Furthermore, contracting for fall 2024 has already taken place.
Novavax shares have improved ratings
Novavax shares have an IBD Digital Composite Rating of 69 out of a possible 99. The Composite Rating is a 1-99 measure of a stock’s technical and fundamental growth metrics. On this measure, stocks score higher than 69% of all stocks.
Shares also have an EPS rating of 71. The EPS rating is a measure of profitability and by that standard, NVAX stock ranks above 71% of all stocks.
Mutual funds own a large portion of biotech stocks. In June, 251 funds owned 30% of Novavax shares. Institutional support is a good sign.
Technical Analysis of NVAX Stocks
Following the Sanofi deal, Novavax shot up triple digits in two days in May. Shares continued to climb, hitting a recent intraday high of 23.86 on June 6.
Shares now have a Relative Strength Rating of 96. The RS Rating measures all stocks, regardless of industry group, against each other in terms of trailing 12-month price performance. On this measure, NVAX stock outperforms 96% of all stocks. Leading stocks typically have RS Ratings of at least 80.
But according to MarketSurge, Novavax stock is not showing a definitive price pattern.
Stocks also fell below their 50-day moving average on July 30. On August 19, stocks were below that ceiling. Stocks remain well above their 200-day moving average.
So is it a buy or sell stock for Novavax in August 2024?
Novavax shares were a sell on July 30 when shares fell below their 50-day line on heavy volume. Shares were not an entry for investors to watch on September 13.
The Sanofi deal is positive for Novavax and could ultimately be worth billions of dollars, the company said in its press release. It will be important to watch how the Sanofi deal plays out over time, especially as it relates to new products.
(Keep an eye on stocks near a buy zone.)
To find the best stocks to buy and watch, check out IBD Stock Lists. Be sure to also keep an eye on stocks to buy or sell.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
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