Novavax Plans To Update Its Covid Shot — But Is It A Buy?

Novavax (NVAX) nabbed a new chief executive and recently announced a plan to update its Covid vaccine for new variants. But NVAX stock has toppled over the last two years.

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John Jacobs took the helm at Novavax last month, replacing longtime CEO Stanley Erck. Erck retired, but will advise in the near term. Jacobs formerly headed up Harmony Biosciences (HRMY), maker of narcolepsy treatment Wakix. He has also held positions at other big-name pharma companies like Teva Pharmaceutical (TEVA) and Pfizer (PFE).

The new CEO comes in as new authorizations continue for Novavax’s Covid shot. The company recently said it would join Pfizer with BioNTech (BNTX) and Moderna (MRNA), updating its Covid vaccine to keep up with new variants each year. Novavax’s shot is based on protein technology and differs from the messenger RNA vaccines sold by Pfizer and Moderna.

The World Health Organization now allows Novavax’s shot, Nuvaxovid, to be used as a primary series against Covid in people age 12 and older. It’s also allowed as a booster in adults. In the U.S., adults who haven’t gotten another booster series can get the Novavax booster.

Novavax also recently started a midstage study of its flu shot. Further, the company is looking at adding its flu vaccine to its Covid shot.

But Novavax cut its outlook for the year in the third quarter and shares have continued their slide. Demand is declining across the board for Covid vaccines. According to the Centers for Disease Control and Prevention, more than 69% of people in the U.S. are fully vaccinated against Covid. About 16.6% of people age 5 and older have gotten an updated booster shot from Pfizer or Moderna.

So, is NVAX stock a buy today?

Fundamental Analysis Of NVAX Stock

Novavax isn’t measuring up to technical and fundamental guidelines for successfully trading growth stocks.

The company is mired in annual losses, a trend that continued in 2021. That year, Novavax lost $23.44 per share, widening from a per-share loss of $7.27 in 2020 and missing expectations. For 2022, analysts expect Novavax to have lost $7.41 a share.

It’s important to note, losses are common for newly commercial biotech companies — which are usually investing in research and development — but it’s not desirable from a technical perspective.

In 2021, revenue was nearly $1.15 billion, below expectations for $1.26 billion. Still, revenue surged 141%. For 2022, NVAX stock analysts project $2.01 billion in revenue.

During the third quarter, Novavax unexpectedly lost $2.15 per share and reported $735 million in sales. Analysts called for a per-share gain of $1.57. But sales easily beat forecasts for $586.2 million. The loss narrowed from $4.31 per-share loss in the year-ago period. Sales more than quadrupled.

For the fourth quarter, analysts predict losses of $1.19 per share and $383 million in sales. Earnings would narrow from an $11.18 per-share loss in the same three months last year. Sales would grow about 73%.

Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. Novavax’s earnings are shaky with a gain in the first quarter and losses in the second and third. Stocks with a record like Novavax’s are speculative for growth investors and carry a higher risk.

Novavax’s Covid Vaccine

Novavax has launched its Covid shot in the U.S. The vaccine is also used in a number of countries and has an emergency use listing from the World Health Organization.

But the FDA warned against the risk of myocarditis and pericarditis in recipients of the Novavax shot. The same warnings apply to the Pfizer and Moderna vaccines.

These incidents of heart inflammation have occurred mostly in boys and young men. In Novavax’s study, six cases occurred in vaccine recipients and one took place in the placebo group. Of those six, five took place in males. Four were in people younger than age 30.

Overall, the shot proved about 90% effective in preventing mild, moderate or severe cases of Covid. In people age 65 and older, it was nearly 79% protective. Common side effects were injection site pain or tenderness, fatigue, muscle pain, headache, joint pain, nausea/vomiting and fever.

NVAX stock has a Composite Rating of 21 out of a best-possible 99. The Composite Rating is a 1-99 measure of a stock’s technical and fundamental growth metrics. On this measure, NVAX stock outranks 21% of all stocks.

Shares also have a low EPS Rating of 31. The EPS Rating is a measure of profitability and, on that bar, NVAX stock is weak. (Keep tabs on IBD Digital for more on stock ratings.)

Mutual funds hold a good chunk of the biotech stock. As of December, 369 funds owned 30% of Novavax stock. Institutional support is a good sign.

What Does History Say About Novavax Stock?

Novavax uses insect cells to develop molecules for vaccine development at a faster pace than the historical process, which relies on chicken eggs. Although government agencies have seen promise in that technology, NVAX stock is plagued by some high-profile disappointments.

In 2011, the U.S. Department of Health and Human Services’ Biomedical Advanced Research and Development Authority gave Novavax $179 million to develop a flu vaccine. Nine years later, that flu vaccine succeeded in the final-phase test. The next day, Novavax stock popped 4%.

But its vaccine to treat respiratory syncytial virus hasn’t had the same luck. The biotech company received $89 million from the Bill & Melinda Gates Foundation in 2015 to develop the vaccine. A year later, the vaccine didn’t meet its primary or secondary goals in older adults and Novavax laid off nearly a third of its staff.

Novavax stock ended 2016 with a spectacular downfall. Shares plummeted 85% that year.

In 2019, the respiratory syncytial virus vaccine failed in pregnant women and Novavax announced a reverse stock split to avoid delisting from the Nasdaq. The biotech company also sold some manufacturing facilities to Catalent (CTLT) to raise $18 million in cash.

That year, NVAX stock plunged 89%.

Novavax has received funding from the Coalition for Epidemic Preparedness, a global alliance to stop epidemics, as well as the Gates Foundation and the U.S. government.

Technical Analysis Of NVAX Stock

Variant news has impacted Novavax stock.

Novavax stock has a worst-possible Relative Strength Rating of 1. The RS Rating pits all stocks, regardless of industry group, against one another in terms of 12-month price performance. On this measure, NVAX stock ranks in the bottom 1% of all stocks. Leading stocks tend to have RS Ratings of at least 80.

NVAX stock isn’t currently forming a definitive chart pattern, MarketSmith.com shows. On Feb. 9, shares were below their 50-day moving average and 200-day line.

So, Is Novavax Stock A Buy?

On Feb. 9, Novavax stock wasn’t a buy. Shares are below their 50-day line, a bearish sign. Further, the stock isn’t forming a chart pattern showing a clear entry.

(Keep an eye on Stocks Near A Buy Zone.) 

On a fundamental level, NVAX stock is plagued by years of losses. It will be important to see how sales perform amid declining demand for Covid vaccines. It’s also important to keep an eye on earlier-stage programs from Novavax.

To find the best stocks to buy and watch, check out IBD Stock Lists. Make sure to also keep tabs on stocks to buy or sell.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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