Vaccine maker Novavax (NVAX -2.24%) is having a good year. In May, the company announced a lucrative partnership with France-based biotech giant Sanofi (SNY 0.62%), sending its stock price soaring. Novavax has made quite a comeback for a company that raised doubts about its ability to stay in business just 18 months ago. But Novavax isn't done. The biotech just announced a regulatory win that has some investors excited. Let's find out whether Novavax's shares are worth buying, given these developments.
Ready for the new season
Though we are no longer in a state of emergency, COVID-19 is still here. Plenty of people, especially those who are most vulnerable, continue to inoculate themselves against the disease. Some vaccines that were initially granted emergency use authorization (EUA) in the U.S. are no longer available. That's the case with Johnson & Johnson's vaccine. However, Novavax has remained a notable player in this field. The biotech recently said that its updated vaccine received EUA from the U.S. Food and Drug Administration (FDA) in time for the fall season.
It is also featured on the Centers for Disease Control and Prevention's list of recommended vaccines.
How much will Novavax benefit from this win? Likely not a whole lot. For one, the company will almost certainly still play second fiddle to Moderna and the team of Pfizer and BioNTech, which have dominated this market since its inception. Second, Novavax is getting ready to hand over the rights to its COVID-19 vaccine in most countries to Sanofi in 2025. That was part of their deal. Sanofi will also use Novavax's adjuvant technology for some vaccine candidates it is developing.
Novavax will receive milestone payments and royalties for the sale of its COVID-19 vaccines and all others that use its proprietary technology. That's in addition to a $500 million payment from Sanofi. In the second quarter, Novavax generated revenue of $415.5 million. Even though that decreased from the $424.4 million in the year-ago period, it would have been much worse without part of the payment from the partnership with Sanofi. Novavax improved on the bottom line.
The company's net income was $0.99, much better than the $0.58 reported in the year-ago period.
What's next for Novavax?
How much will Novavax generate from royalties from its partnership with Sanofi? That depends on multiple factors, including whether the France-based biotech giant can successfully develop more vaccines using Novavax's adjuvant technology. Of course, Novavax is planning to develop its own products. The company is working on two products: a stand-alone influenza vaccine and a combined COVID/flu vaccine. Novavax plans to start phase 3 studies for both products in the fourth quarter, with data expected in mid-2025.
Novavax's performance will partly depend on two factors. First, whether these late-stage candidates can produce positive results and go on to earn approval. Second, it will also depend on how well (or poorly) they perform in the market -- regulatory approval is no guarantee of commercial success. At this point, it's hard to predict how things will unfold. That makes the stock inherently risky, considering if things don't go Novavax's way, the biotech's shares might fall off a cliff.
So, although Novavax opened a new chapter, its long-term prospects regarding its partnership with Sanofi and how lucrative it will be beyond the next 12 months, as well as its own internally developed products, remain uncertain. Novavax could prove its doubters wrong, but investing in this stock for the long run, at this point, looks somewhat speculative. There are much more attractive biotech companies to consider.
