Is Novavax Stock A Sell After Expressing 'Substantial Doubt' About Its Future?

Novavax stock is a sell after the company says it has "substantial doubt" about its future.

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May 7, 2023 • 5 min read

Novavax (NVAX), when it reported its disappointing fourth-quarter results in February, expressed "significant uncertainties" about the future of the company. NVAX is now at its lowest level in three years.

The company's revenue in 2023, the funding it will receive from the U.S. Government for its Covid Shot and any pending arbitration is uncertain.

The company stated on February 28 that "given these uncertainties there is substantial doubt regarding our ability continue as a running concern for one year." This statement follows on from the company's fourth-quarter loss being higher than expected and its revenue expectations falling short.

NVAX stocks plummeted in response on March 1.

Nuvaxovid is a new version of Covid that the company plans to introduce in the next few months. This will be done to meet the requests from the public health authorities. In this effort, it will be joined by Pfizer (PFE), Moderna (MRNA), and other companies.

The company plans to also reduce its spending, manage cash flows and evolve scale/structure. Novavax also said that it plans to expand its portfolio beyond Nuvaxovid.

Is NVAX a good buy today?

Novavax reported a loss of $2.28 a share in the fourth quarter. This was a narrower loss than the $11.18 loss per share of a year ago, but it missed expectations for a loss per share of only $1.01. Sales jumped 61%, to $357 Million, as a result of higher Covid sales, offset by lower revenue from grants and royalties. Sales also fell short. Analysts had expected sales of $383 million.

Novavax's stock is out of sync with investment advice that suggests investors look for stocks with recent earnings and sales growth between 20%-25%.

Early-stage biotech firms often experience losses as they invest heavily in research and developments. However, these losses are not desirable from a technological perspective. Novavax, which posted a profit in the first quarter 2022, is not expected to be profitable for another quarter this year, despite its gain.

Analysts expect Novavax's current quarter to show a loss per share of $3.42 on sales of $95.6 million. The losses would be reversed from the gains of a year ago. Sales would plummet 86%.

Stocks that have records such as Novavax’s are considered to be speculative.

The company's loss per share last year was $8.42. This is a continuation of a long-standing trend. Sales jumped 73%, to $1.98billion. This year, losses are expected to be slightly lower at $6.18 per share. Sales are expected to drop to $897.6 millions.

Novavax's Covid shot is made using a different protein-based technology. Pfizer, Moderna and other rivals use messenger RNA platforms that are newer. Novavax is a good alternative to mRNA for those who are not comfortable with it.

Nuvaxovid is now authorized in many countries, and the World Health Organization has listed it as an emergency drug. It is allowed for people 12 years and older in the U.S. as part of a primary series. Officials in the United States also allow it to be given as a booster for adults who are hesitant about receiving an mRNA vaccination.

Novavax, like Pfizer and Moderna, carries a warning about the risk of myocarditis or pericarditis - forms of swelling around and in the heart.

Most of these cases have been in young boys and men. Novavax studied six cases of heart inflammation in vaccine recipients, and one in the placebo group. Five of the six cases were male. Four of the six cases were among people under 30 years old.

The shot was about 90% effective at preventing mild, medium or severe Covid. Nearly 79% of people 65 years and older were protected. Side effects include injection site pain and tenderness, fatigue or muscle pain, headaches, joint pains, nausea/vomiting, and fever.

NVAX has a Composite rating of 35, out of the maximum 99 possible. The Composite Rating measures a stock’s fundamental and technical growth metrics on a scale of 1-99. NVAX stock is ranked higher than more than one third of stocks on this measure.

The EPS rating of the shares is also low at 60. NVAX stocks are ranked in the top half on this bar. Keep an eye on IBD Digital to learn more about stock ratings.

Mutual funds own a large portion of biotech stocks. In March, 345 funds held 45% of Novavax. The support of institutions is a positive sign. This number has been declining since September 2021.

Novavax is a new technology that uses insect cells instead of chicken eggs to create molecules for vaccines at a much faster rate. NVAX is a stock that has been plagued by high-profile failures, despite the fact that government agencies saw promise in this technology.

In 2011, the U.S. Department of Health and Human Services, Biomedical Advance Research and Development Authority granted Novavax $179,000,000 to develop a vaccine against influenza. The flu vaccine was successful in its final phase test nine years later. The stock of Novavax jumped 4% the next day.

The same has not been true for its vaccine against respiratory syncytial viruses. In 2015, the Bill & Melinda Gates Foundation gave the biotech company $89 million to develop the vaccine. Novavax laid nearly a third off its staff after the vaccine failed to meet its primary and secondary goals among older adults.

Novavax's stock price ended 2016 in a dramatic decline. The shares plummeted by 85% in 2016.

In 2019, the respiratory virus vaccine was not effective in pregnant women. Novavax also announced a reverse split of its stock to avoid being delisted from Nasdaq. The biotech firm also sold certain manufacturing facilities to Catalent to raise $18 millions in cash.

The NVAX share price plummeted 89% in that year.

Novavax received funding from the Coalition for Epidemic Preparedness (CEP), a global alliance that aims to stop epidemics. It also received funding through the Gates Foundation, and the U.S. Government.

John Jacobs, the former CEO of Harmony Biosciences HRMY, has recently taken over as president and CEO at Novavax. Jacobs replaced long-time former CEO Stanley Erck.

Novavax's stock has been affected by a variety of news.

Novavax has a Relative strength rating of 5, which is a low score. The RS Rating compares the price performance of all stocks over a 12-month period, regardless of their industry. NVAX is ranked in the bottom 5% on this measure. Leading stocks have RS Ratings above 80.

MarketSmith.com shows that NVAX is not currently forming any definitive chart patterns. On April 14, the shares were well above their 50-day average but still below their 200 day line.

Novavax wasn't a buy on April 14. The shares were a sell when they fell below their 50 day moving average during the second half of 2020.

Keep an eye on stocks near a buy zone.

Fundamentally, NVAX is plagued with years of losses. It is important to monitor how sales are performing in the face of declining demand for Covid's vaccines. Novavax's earlier programs are also worth keeping an eye on.

IBD Stock Lists is a great resource to find out what stocks you should be buying and watching. Keep track of stocks you want to sell or buy.

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