Novavax, Inc. (NVAX) is a late-stage biotechnology company focused on discovery, development, and commercialization of vaccines to prevent serious infectious diseases. The company’s lead vaccine candidates, ResVax and NanoFlu, are currently in Phase Three clinical trials. It is also involved in the development of a COVID-19 vaccine, which has also entered Phase Three clinical trials in the U.S. and U.K.
NVAX has secured substantial funding from the U.S. government for late-stage clinical development of its COVID-19 vaccine candidate — NVX‑CoV2373. It has also signed supply agreements with countries including Australia, Canada, and the United Kingdom.
However, NVAX’s slow progress in developing its COVID-19 vaccine candidate is a major concern because its competitors Pfizer (PFE) with partner BioNTech (BNTX), and Moderna (MRNA) are way ahead in the vaccine race. PFE and MRNA have not only received emergency approvals from governments of several countries, but have also commenced their mass vaccination drives, with thousands of people already vaccinated. Also, according to many specialists, NVAX’s vaccine candidate could lag PFE’s and MRNA’s in terms of efficacy.
Even though strategic collaborations for the development and commercialization of its vaccines have helped NVAX’s stock gain 11.3% year-to-date, the uncertainty related to the arrival date of its vaccine candidate has made our proprietary rating system rate NVAX as “Neutral.”
Here is how our proprietary POWR Ratings system evaluates NVAX:
Trade Grade: C
NVAX is currently trading higher than its 50-day and 200-day moving averages of $110.12 and $89.40, respectively, indicating that the stock is in an uptrend. However, the stock’s slight decline over the past month reflects short-term bearishness.
NVAX reported a net loss of $197.31 million in the third quarter ended September 30, 2020. Although its revenue has increased 6,163.4% year-over-year to $157.02 million due to increased development activities relating to NVX-CoV2373 vaccine, the company reported negative EPS over this period.
On January 8, NVAX finalized an Advance Purchase Agreement with the Commonwealth of Australia for 51 million doses of NVX-CoV2373. With the continued increase in COVID-19 transmission worldwide, the deal should allow the company to generate higher revenues and stand out in the market.
In December, the company announced the initiation of PREVENT-19, its pivotal Phase Three study in the United States and Mexico to evaluate the efficacy of its COVID-19 vaccine. While this should bode well for NVAX, there are concerns whether the company will be able to meet its 2021 targe.
Buy & Hold Grade: C
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade consider, NVAX is not well-positioned. The stock is currently trading 34.5% below its 52-week high of $189.40, which it hit on August 5 last year.
The company’s revenue has grown at a CAGR of 40.7% over the past five years. However, its EBITDA has declined 51.2% year-over-year, while its EPS declined 17.6% over this period. The decline can be attributed to the fact that NVAX’s vaccines are still in their clinical trial phases and are not yet available in the market, while two competing vaccines are already being mass deployed.
Peer Grade: C
NVAX is currently ranked #135 of 481 stocks in the Biotech industry. Other popular stocks in this industry are BioNTech SE (BNTX), Bio-Techne Corporation (TECH) and Arrowhead Pharmaceuticals, Inc. (ARWR).
While BNTX beat NVAX by gaining 29.4% year-to-date, TECH and ARWR returned 5.2% and 7.8%, respectively, over this period.
Industry Rank: B
The Biotech industry is ranked #47 of the 123 StockNews.com industries. The companies in the biotech space manufacture drugs, therapies, vaccines, and medical diagnostic tests for the treatment of health disorders and illnesses.
As the second strain of the coronavirus continues to spread, the biotech sector should continue to witness massive growth and capital inflows soon. The companies in this industry are racing to meet the soaring demand for necessary items amid the rising infections. An urgency to find a cure for the disease has opened many opportunities, making the biotech sector an attractive space for prospective long-term investments.
Overall POWR Rating: C (Neutral)
Despite strong pandemic-related demand and strategic partnerships, NVAX is rated a “Neutral” due to stiff competition and weak financials, as determined by the four components of our overall POWR Rating.
As a global race for finding a cure for the coronavirus is closing in, NVAX’s COVID-19 vaccine, which is still in its clinical trial phase, could be a roadblock for the stock. This, along with its poor financial performance in the last reported quarter, does not position the stock well for riding the industry’s strong growth.
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NVAX shares were trading at $127.11 per share on Wednesday afternoon, up $2.97 (+2.39%). Year-to-date, NVAX has gained 13.99%, versus a 1.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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