Regulators recently approved an updated COVID shot from Novavax.
Struggling Biotech Novavax (NVAX 0.25%) it was a hot buy a few years ago, as it was in the midst of developing a vaccine for COVID-19. Ultimately, he produced an approved vaccine, but it was a bit late and didn’t end up generating nearly as much revenue as he might have if he had gotten approval much earlier. And from 2022, a sale followed, with the stock losing more than 91% of its value.
Recently, there has been some renewed excitement in Novavax, however, and its shares are up more than 150% this year. And there is a catalyst that could drive that rally even higher. So should investors consider the stock now?
Regulators approve its updated COVID-19 vaccine
It may seem like a similar story to investors, but Novavax has gotten approval for a COVID-19 vaccine — once again. On August 30, the healthcare company announced that the Food and Drug Administration (FDA) has granted Emergency Use Authorization for its new COVID vaccine, which is an updated formula which targets the new variants currently in circulation.
Cases of COVID have increased this year, and there are concerns that in the next flu season, there could be a further increase. Data from the Centers for Disease Control and Prevention (CDC) indicate that hospitalizations are higher than last year, although they are still significantly down by 2022. The data below is for the week ended August 10 compared to the same week in previous years. .
| Year | Hospitalization rate per 100,000 people |
|---|---|
| 2024 | 4.6 |
| 2023 | 2.9 |
| 2022 | 9.3 |
Source: CDC.
Because this time could be different
Novavax says its vaccine “is the only protein-based option available in the United States for use in individuals 12 years of age and older to prevent COVID-19.” But the problem is that the demand may not be that significant. Unless COVID cases and hospitalizations increase significantly, there may not be a need for the government to justify paying for updated COVID shots. Manufacturers of COVID vaccines Pfizer and Modern have experienced a significant decrease in revenue related to COVID, and that has made investors downgrade in their growth prospects.
If not for a license agreement that Novavax announced with the health giant Sanofi before this year to develop the products, the stock of Novavax may be in a very different trajectory. There has been some hope around Novavax’s business because of the deal, but aside from a $500 million upfront payment and the hope of more milestone payments in the future, it’s not a game changer for Novavax.
The company still needs a consistent revenue-generating product it can count on to help it stay out of the red. While Novavax reported a profit of more than $162 million during the most recent period (which ended June 30), that was largely due to receiving $391 million from Sanofi, which is part of the initial initial payment.
Is Novavax stock a buy?
Shares of Novavax rose after news of the Sanofi deal this year, but early indications are that the recent approval of its updated COVID shot is not resonating with investors as it did not result in a strong peak of the assessment, and rightly so. Revenues from their COVID vaccine may not only be unpredictable, but may only provide a temporary boost.
Until the company has a more promising product in its pipeline, which does not center around COVID or seasonal flu infections (where there is a lot of competition), investors are better off avoiding Novavax stock as it is likely to remain highly volatile.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.