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During a recent meeting, an advisor to the Food and Drug Administration called Novavax‘s (NVAX) omicron data “the most impressive” he had seen — and NVAX stock jumped.
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The comment came from Dr. James Hildreth during the FDA’s Vaccines and Related Biological Products Advisory Committee meeting on June 28. Another panelist, Dr. Wayne Marasco suggested the world could be seeing the limitations of shots from Pfizer (PFE) and Moderna (MRNA).
Pfizer and Moderna use messenger RNA technology. Novavax’s Covid shot uses a protein technology. Its prototype omicron-fighting booster appeared capable of handling three sub-variants of the strain.
Still, the FDA has yet to authorize Novavax’s first Covid shot for emergency use. The same panel voted 21-0 in favor of recommending the shot earlier this month. One panelist abstained. But the FDA says it’s still evaluating updated manufacturing information Novavax submitted in early June.
Novavax enthusiasts suggest the protein-based shot could offer an alternative for people concerned about the newer mRNA technology. The Novavax vaccine is available abroad. But the U.S. is mostly saturated by the mRNA shots. The Centers for Disease Control and Prevention estimate three-quarters of adults are fully vaccinated. Still, a large portion of people have not received booster shots.
The FDA has expressed concern that Novavax’s Covid vaccine — like Pfizer’s and Moderna’s — could be tied to cases of heart inflammation in young males. Novavax, on the other hand, argues that demographic already has a higher risk for the inflammation, known as myocarditis and pericarditis.
So, is NVAX stock a buy today?
Fundamental Analysis Of NVAX Stock
Novavax isn’t measuring up to CAN SLIM guidelines for successfully trading growth stocks.
The company is mired in annual losses, a trend that continued last year. In 2021, Novavax lost $23.44 per share, widening from a per-share loss of $7.27 in 2020. Analysts expected a loss of $13.70 per share in 2021. This year, analysts expect Novavax to become profitable with per-share earnings of $23.50.
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 CAN SLIM perspective.
Last year, revenue was nearly $1.15 billion, below expectations for $1.26 billion. Still, revenue surged 141%. This year, NVAX stock analysts project $4.27 billion in revenue. The company calls for $4 billion to $5 billion in sales.
During the first quarter, Novavax earned $2.56 per share, minus some items. That turned around from a $3.05 per-share loss in the year-earlier period, but lagged forecasts for $2.69. Sales grew more than 57% to $704 million. But analysts predicted a more bullish $845.2 million.
For the second quarter, analysts predict adjusted earnings of $5.27 per share, which would swing from a year-earlier loss of $4.75. Sales would grow more than 235% to $997 million.
Savvy investors should look for companies reporting recent quarterly revenue and earnings growth of at least 20%-25%. Novavax became profitable in the first quarter. Still, stocks with a record like Novavax’s are speculative for growth investors and carry a higher risk.
Novavax’s Covid Vaccine
Novavax’s Covid vaccine has gained authorizations from several regulatory agencies and an emergency use listing from the World Health Organization. It could soon launch in the U.S. as well, depending on decisions from the FDA and CDC.
Briefing documents posted ahead of a recent meeting suggest there could be a “causal association” between the vaccine and heart inflammation. 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. It’s important to note, the mRNA-based vaccines from Pfizer and Moderna carry the same concerns.
Doses are now shipping to a number of geographies, including Europe, Australia, Indonesia and South Korea.
In a Phase 3 U.K.-based study, the vaccine was 82.5% effective against all Covid. A study in teens age 12-17 found the vaccine was 82% effective against the delta variant. Further, the company says its vaccine is reactive against the omicron variant when combined with a booster shot at six months.
NVAX stock has a Composite Rating of 28 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 just 28% of all stocks.
Shares also have a low EPS Rating of 37. 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 March, 790 funds owned 26% 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. The Gates Foundation and the U.S. government also gave Novavax money to help speed its Covid vaccine efforts.
Technical Analysis Of NVAX Stock
Variant news has impacted Novavax stock.
Novavax stock has a Relative Strength Rating of 8. 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 tops just 8% 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 June 29, shares were above their 50-day line but below their 200-day moving average.
So, Is Novavax Stock A Buy Or A Sell?
As of June 29, Novavax stock was not a buy. Shares were narrowly above their 50-day line, but are not currently forming a new chart pattern. Investors are encouraged to buy a stock when it crosses a buy point and is within its 5% chase zone.
(Keep an eye on Stocks Near A Buy Zone.)
On a fundamental level, NVAX stock is plagued by years of losses and its revenue remains low. It will be important to see how sales perform, especially if the FDA allows the vaccine. 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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