Novavax No Longer Expected To Become Profitable This Year

 Novavax (NVAX) cut its full-year guidance in half in early August after reporting a wide second-quarter sales miss, and NVAX stock plunged.

For the year, the biotech company now expects $2 billion to $2.3 billion in sales, down from its prior guidance for $4 billion to $5 billion in sales. Novavax remained confident in its Covid shot, though, saying it has shipped more than 23 million doses since the beginning of July.

Authorizations have been rampant and continuous, however. Officials in multiple countries, including the U.S., have signed off on Novavax's Covid shot for adolescents age 12-17. Regulators in New Zealand, Switzerland and Europe recently allowed Novavax's Covid booster.

The company is also testing a pediatric vaccine in children as young as 6 months old, and just asked the Food and Drug Administration to sign off on its booster shot.

But pressure remains for NVAX stock. The FDA has warned against the risk of heart inflammation in recipients of the shot, echoing warnings for Moderna's (MRNA) and Pfizer's (PFE) shots in boys and young men. Officials in Europe have also added a warning for several allergic reactions to the shot, following two cases.

Novavax also is working on two methods of blocking omicron subvariants. It doesn't expect to have an updated Covid booster shot until the fourth quarter, however. Preliminary data suggest its BA.1-blocking booster can also handle BA.4 and BA.5 subvariants of omicron.

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 and missing expectations. This year, analysts expect Novavax to lose 34 cents 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 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 $2.06 billion in revenue. The company just slashed its outlook and now expects $2 billion to $2.3 billion in sales.

During the second quarter, Novavax unexpectedly lost $6.53 per share and reported $185.9 million in sales. Both measures widely missed expectations. Analysts called for a gain of $5.54 per share and $1.02 billion in sales. Losses also widened year over year and sales fell 38%.

For the third quarter, analysts predict adjusted earnings of $1.45 per share and $591 million in sales. Earnings would swing from a $4.31 per-share loss in the same three months last year. Sales would grow about 230%.

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 a loss in the second. Stocks with a record like Novavax's are speculative for growth investors and carry a higher risk. Further, analysts' estimates for the third quarter and full year have come down recently.

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 vaccine proved about 90% effective in preventing mild, moderate or severe cases of Covid. In people age 65 and older, it was nearly 79% protective. The most 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 12 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 12% of all stocks.

Shares also have a low EPS Rating of 36. 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 June, 496 funds owned 28% of Novavax stock. Institutional support is a good sign.

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.

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 Oct. 4, shares were below their 50-day line and 200-day moving average.

On Oct. 4, Novavax stock wasn't a buy. Shares were a sell on Aug. 9 when they tumbled below their 50-day line in high volume following the disappointing second-quarter report and guidance cut — a bearish sign. Previously, NVAX stock had mostly closed above or in line with that key mark since late June.

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 as Novavax plays catch-up with its Covid vaccine and booster shot. It's also important to keep an eye on earlier-stage programs from Novavax.

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