Novavax Revenue Guidance Does Little to Change Neutral Stance on the Stock

Shares of Covid-19 vaccine play Novavax (NASDAQ:NVAX) may have seen a small upward bounce after its earnings released earlier this week. That does not mean NVAX stock is out of the woods yet.

With internal and extraneous factors weighing it down, NVAX stock is now a pale shadow of its old self. It hasn’t managed to pick up enough momentum to break above the $100 level after dropping below the mark in mid-January. This is a far cry from the 52 week high of $277.80, which was reached on Sep. 8, 2021.

It is a shame the company could not get its Covid-19 shot past the finish line in the U.S. This is despite starting the vaccine pursuit almost at the same time as the others which have tasted success. Novavax’ travails have to do more with execution rather than technology or funding.

So, where is NVAX stock headed both in the near-term and long-term? Does it hold any promise or will it continue to test the patience of investors, at least the ones who have stuck by it even amid the uncertainty?

Novavax’s Revenue Guidance Saves Day For Stock

Maryland-based Novavax’s fourth-quarter scorecard revealed that the company has yet to realize revenue from its Covid-19 vaccine. Total revenue came in at $222 million, comprising roughly $95 million in grants and $127.21 million in royalties. The topline slumped 25.8% year-over-year from the $279.66 million reported for the year-ago period, but increased sequentially from the previous quarter’s $178.84 million.

Loss from operations more than doubled to $824.971 million, pushing the company deeper into the red. The fourth-quarter net loss per share widened from $2.70 to $11.18. The loss would have been even wider if not for the roughly 10 million increase in the number of outstanding shares.

Cash and cash equivalents at the end of the fourth quarter stood at $1.5 billion, a decline from the end-of-third-quarter level of $1.94 billion.

Despite all these sore points, why did NVAX stock climb? Novavax managed to appease Wall Street with its revenue guidance. The company is targeting total revenues of $4 billion to $5 billion in 2022 vis-à-vis the consensus of $4.99 billion.

Is NVAX Stock Guidance a Stretch Goal?

Novavax’s Covid-19 vaccine, which goes by the name Nuvaxovid, has now authorizations from 12 regulatory agencies, giving it access to 38 countries. The World Health Organization has also issued an emergency use listing for the vaccine.

The company has already begun shipments to the European Union, Australia, Indonesia and South Korea.

Novavax has had its fair share of manufacturing issues in the past. A Politico report in late 2021 suggested that the biopharma’s vaccine batches weren’t able to consistently hit the 90% purity goal set by the Food and Drug Administration. Citing sources, the publication said the company doesn’t have the wherewithal to manufacture a “high-quality vaccine on a consistent basis.”

Chief Executive Officer Stanley Erck dispelled these concerns in his introductory remarks on the earnings call:

“[We’ve] achieved our target of annual capacity of more than 2 billion doses with the ability to meet the current and future global demand for our vaccine.”

The three core target areas for the Covid-19 shot, Erck said, are “primary vaccinations, boosters and pediatric population.”

Since December 2021, Novavax has shipped 54 million vaccine doses to the countries where it has received authorizations. It has a firm commitment for the supply of an incremental 42 million doses to Europe in the second quarter.

With the U.S. approval still hanging in limbo, does the revenue guidance looks farfetched?

The company clarified on the earnings call that the U.S. opportunity represents “upside potential.” This clears the air on the impact of any potential delay in U.S. authorization on revenue.

Hitting the 2022 revenue goal clearly depends on the company’s ability to deliver the shots and its uptake. The latter, in turn, is a function of how the pandemic evolves, and securing authorizations for pediatric indication and the third booster shot.

Bottom Line on NVAX Stock

A host of uncertainties still cloud Novavax’s outlook. 2022 is going to be a key year for the company, as it successfully transitions to a commercial-stage biopharma. But there is limited visibility on the path to the revenue goal of $4 billion to $5 billion.

When probed on the timing of revenue flow through 2022, the company was a little circumspect and suggested that it depends on customers’ timing. All the same, the company did say it has advance purchase agreements in place.

Moreover, there isn’t any backup pipeline product that can pick up slack from any potential Covid-19 revenue disappointment. Not much has changed since early February, when I recommended taking a neutral stance. The bullish camp may entice investors by flaunting the cheap valuation. It is too early to make a call purely based on valuation. Until more clarity emerges, it is advisable to continue to remain on the sidelines.