Novavax (NASDAQ:NVAX) has recently experienced a significant ride. Its stock skyrocketed roughly 370% due to a promising partnership deal with pharma giant Sanofi (NASDAQ:SNY), only to post a notable pullback and shed 42% as investor sentiment shifted back towards a bearish stance. However, NVAX could still present a buying opportunity.
The surprise turnaround comes despite Novavax still presenting potential catalysts that could propel another impressive run for its shares. This includes the possibility of co-developing a combination COVID-19/flu vaccine with Sanofi and the opportunity to develop other products using its Matrix-M adjuvant vaccine technology. Investors might want to wait for the share price to shift from its current negative price momentum for a window of opportunity.
Novavax Is Making Strides
Novavax is a biotechnology company working to create next-gen vaccines for acute infectious diseases. The company’s 2024-2025 COVID-19 vaccine has recently received unanimous approval from the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices for use in individuals six months or older.
This makes the vaccine the singular protein-based option available in the U.S. for individuals aged 12 and up. The vaccine has demonstrated effectiveness across variant strains, with no preference between JN.1 or KP.2 compositions.
The company continues to make strides with its strategic priorities. Key achievements include preparing an updated COVID-19 vaccine for the 2024-2025 season. Furthermore, the company plans to launch a Phase 3 trial for its COVID-19-influenza combination and standalone influenza vaccines, focusing on high-risk groups such as adults aged 60 and older.
In addition, Novavax has announced a lucrative co-exclusive licensing agreement with Sanofi. This partnership could lead to multi-billion dollar revenue opportunities for Novavax and includes co-commercializing the COVID-19 vaccine, developing novel COVID-19-influenza combination vaccines, and new vaccines employing Novavax’s Matrix-M adjuvant.
Novavax’s Recent Financial Results and Outlook
Novavax’s financial results for the first quarter of 2024 indicated minor progression. The company reported earnings per share of -$1.05, slightly better than analysts’ estimates of -$1.06. However, the total revenue of $93.86 million missed analysts’ expectations of $101.16 million. Despite this shortfall, the company’s revenue increased from the $81 million achieved in the same period in 2023.
Sales costs rose to $59 million from $34 million year-over-year in Q1, with increased expenses tied to excess, obsolete, or expired inventory. Also, losses on the firm’s purchase commitments were recorded under third-party supply agreements and unutilized manufacturing capacity.
R&D expenses dropped significantly to $93 million from the previous year’s $247 million, mainly due to manufacturing and clinical research spending cuts. However, despite the cost reductions, Novavax reported a net loss of $148 million for Q1 2024, albeit improved from the net loss of $294 million in Q1 2023.
The company’s cash, cash equivalents, and restricted cash dropped to $496 million at the end of Q1 from $584 million at the end of 2023.
Management has also offered updated guidance. The combined revenue and Sanofi Agreement Payments are projected to be between $970 million and $1.17 billion, marking an increase from previous estimates of $800 million to $1 billion. The combined R&D and SG&A expenses remain relatively unchanged, predicted to fall between $700 million and $750 million.
What Is the Price Target for NVAX Stock?
The stock has been highly volatile, with a beta of 2.51. The shares have pulled back from the recent high, though they are still up 146% year-to-date. They trade towards the middle of the 52-week price range of $3.53 – $23.86 and demonstrate negative price momentum, trading below the 20-day (13.32) and 50-day (12.25) moving averages.
Analysts following the company have been mostly bullish on the stock. For example, BofA analyst Alec Stranahan recently raised the price target on the shares from $12 to $18 while maintaining a Neutral rating, noting Sanofi is the ideal partner for the company, being a world leader in flu/pediatric vaccines.
Overall, Novavax is rated a Moderate Buy based on five analysts’ cumulative recommendations and recently assigned price targets. The average price target for NVAX stock is $19.33, representing a potential upside of 63.26% from current levels.
Concluding Thoughts on NVAX
In the face of recent investor uncertainty, Novavax continues to show promise with its strategic trajectory and significant strides in a co-development venture with Sanofi. Though its Q1 financial results revealed some areas of constraint, the company’s updated revenue guidance, in light of the Sanofi Agreement, displays an optimistic future outlook, underlining the potential investing opportunity once the negative price momentum shifts. The current market dynamics signal a good time for investors to keep a keen eye on Novavax.
