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Novavax's (NVAX) Shares Surge 211% YTD: Time to Buy the Stock?
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Novavax (NVAX - Free Report) has skyrocketed 211.2% in the year-to-date period against the industry’s 3.1% fall, as seen in the chart below. The stock also outperformed the sector and the S&P 500. Shares of the company are currently trading above its 200-day moving average.
NVAX Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
This surge in share price can be attributed to Novavax’s recently signed multi-billion dollar deal with pharma giant Sanofi (SNY - Free Report) to market its protein-based COVID-19 vaccine and also use it to develop novel COVID-19-influenza combination vaccines. The positive cashflows generated from this deal were a major reason that the company removed its ‘going concern’ warning.
Management has also undertaken multiple restructuring initiatives that are aimed to lower operating expenses and enhance profitability.
Solid Partner in Sanofi
The partnership is a big win for NVAX. As part of this deal, the company received a payment of $570 million from Sanofi, which includes $70 million in equity investment. With a pharma giant like Sanofi, which has more experience and an established supply chain marketing its vaccine, Novavax’s COVID-19 vaccine would now have access to a wider audience. The company is eligible for cost reimbursement by Sanofi for certain R&D costs. The deal also allows both companies to develop their combined COVID-19-influenza combination vaccines and adjuvanted products at their expense.
The collaboration deal with Sanofi likely breathes new life for Novavax, which had been facing uncertainties in its business. The deal bodes well for NVAX as it provides the management with funds to support its ongoing pipeline programs. Per the deal, the company is eligible to receive milestone payments of up to $700 million and royalties on sales of the COVID-19 vaccine from Sanofi.
Encouraging Restructuring Initiatives
To extend its existing cash runway and curb cash burn, in May 2023, Novavax announced that it is initiating a cost reduction plan. Management lowered the combined research and development (R&D) and selling, general and administrative (SG&A) expenses by a third in 2023 compared with expenses incurred in 2022. It further expects to lower the combined expenses by 40% in 2024 compared with 2022 figures.
Since the beginning of 2023, Novavax has reduced current liabilities by nearly $1.7 billion, including an additional $831-million reduction in first-quarter 2024. In January 2024, management decided to undertake another cost reduction plan, wherein it will reduce its global workforce by 12%. Through these restructuring measures, management aims to rationalize its manufacturing footprint.
Stock Valuation & Estimates
From a valuation standpoint, Novavax seems to be trading at a premium to the industry. Going by the price/sales (P/S) ratio, the company’s shares currently trade at 2.82 forward sales, higher than both the 1.98 for the industry and the stock’s mean of 2.52.
Image Source: Zacks Investment Research
Estimates for Novavax’s 2024 earnings have improved significantly from a loss of 14 cents per share to earnings of 49 cents in the past 60 days. Over the same timeframe, earnings estimates for 2025 have also increased from 33 cents to 51 cents.
Image Source: Zacks Investment Research
Conclusion
Compared with other COVID-19 vaccine makers like Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) , Novavax was not able to reap benefits related to the pandemic due to the delayed launch of its COVID-19 vaccine. During last year’s vaccination season, Novavax’s sales suffered due to delayed approval of its vaccine formulation and product launch. This year, the company already filed for the FDA’s approval of its updated COVID-19 vaccine, which could allow the company to participate alongside its peers in the upcoming vaccination season. We believe that this early participation could allow NVAX to capitalize on the opportunity.
The positive cash flow generated from the Sanofi deal also allows Novavax to fund the late-stage clinical program on its own influenza and COVID-19-influenza combination (CIC) vaccines, which is planned to start by this year’s end. Management intends to market this CIC vaccine by 2026. NVAX is also progressing well with its preclinical pipeline, which includes a vaccine for H5N1 bird flu. It is also advancing core technology for different uses like mucosal vaccination and high-density nanoparticles.
An encouraging data readout from any of the above studies could help this #3 Ranked stock surge further. Investors who already own the stock may stay invested as Novavax faced its biggest obstacle — the threat to going concern — quite well and already started preparing to advance its clinical pipeline. Any major drop in the stock’s price can be an opportunity for long-term investors to buy it. Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth.
Image: Shutterstock
Novavax's (NVAX) Shares Surge 211% YTD: Time to Buy the Stock?
Novavax (NVAX - Free Report) has skyrocketed 211.2% in the year-to-date period against the industry’s 3.1% fall, as seen in the chart below. The stock also outperformed the sector and the S&P 500. Shares of the company are currently trading above its 200-day moving average.
NVAX Stock Outperforms Industry, Sector & S&P 500
This surge in share price can be attributed to Novavax’s recently signed multi-billion dollar deal with pharma giant Sanofi (SNY - Free Report) to market its protein-based COVID-19 vaccine and also use it to develop novel COVID-19-influenza combination vaccines. The positive cashflows generated from this deal were a major reason that the company removed its ‘going concern’ warning.
Management has also undertaken multiple restructuring initiatives that are aimed to lower operating expenses and enhance profitability.
Solid Partner in Sanofi
The partnership is a big win for NVAX. As part of this deal, the company received a payment of $570 million from Sanofi, which includes $70 million in equity investment. With a pharma giant like Sanofi, which has more experience and an established supply chain marketing its vaccine, Novavax’s COVID-19 vaccine would now have access to a wider audience. The company is eligible for cost reimbursement by Sanofi for certain R&D costs. The deal also allows both companies to develop their combined COVID-19-influenza combination vaccines and adjuvanted products at their expense.
The collaboration deal with Sanofi likely breathes new life for Novavax, which had been facing uncertainties in its business. The deal bodes well for NVAX as it provides the management with funds to support its ongoing pipeline programs. Per the deal, the company is eligible to receive milestone payments of up to $700 million and royalties on sales of the COVID-19 vaccine from Sanofi.
Encouraging Restructuring Initiatives
To extend its existing cash runway and curb cash burn, in May 2023, Novavax announced that it is initiating a cost reduction plan. Management lowered the combined research and development (R&D) and selling, general and administrative (SG&A) expenses by a third in 2023 compared with expenses incurred in 2022. It further expects to lower the combined expenses by 40% in 2024 compared with 2022 figures.
Since the beginning of 2023, Novavax has reduced current liabilities by nearly $1.7 billion, including an additional $831-million reduction in first-quarter 2024. In January 2024, management decided to undertake another cost reduction plan, wherein it will reduce its global workforce by 12%. Through these restructuring measures, management aims to rationalize its manufacturing footprint.
Stock Valuation & Estimates
From a valuation standpoint, Novavax seems to be trading at a premium to the industry. Going by the price/sales (P/S) ratio, the company’s shares currently trade at 2.82 forward sales, higher than both the 1.98 for the industry and the stock’s mean of 2.52.
Estimates for Novavax’s 2024 earnings have improved significantly from a loss of 14 cents per share to earnings of 49 cents in the past 60 days. Over the same timeframe, earnings estimates for 2025 have also increased from 33 cents to 51 cents.
Conclusion
Compared with other COVID-19 vaccine makers like Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) , Novavax was not able to reap benefits related to the pandemic due to the delayed launch of its COVID-19 vaccine. During last year’s vaccination season, Novavax’s sales suffered due to delayed approval of its vaccine formulation and product launch. This year, the company already filed for the FDA’s approval of its updated COVID-19 vaccine, which could allow the company to participate alongside its peers in the upcoming vaccination season. We believe that this early participation could allow NVAX to capitalize on the opportunity.
The positive cash flow generated from the Sanofi deal also allows Novavax to fund the late-stage clinical program on its own influenza and COVID-19-influenza combination (CIC) vaccines, which is planned to start by this year’s end. Management intends to market this CIC vaccine by 2026. NVAX is also progressing well with its preclinical pipeline, which includes a vaccine for H5N1 bird flu. It is also advancing core technology for different uses like mucosal vaccination and high-density nanoparticles.
An encouraging data readout from any of the above studies could help this #3 Ranked stock surge further. Investors who already own the stock may stay invested as Novavax faced its biggest obstacle — the threat to going concern — quite well and already started preparing to advance its clinical pipeline. Any major drop in the stock’s price can be an opportunity for long-term investors to buy it. Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.