Novavax Plunges on Earnings Miss: Falling Knife or Buying Opp?

Key Points

• Novavax continues to develop its COVID-19 vaccine for variants and is working on a COVID-Influenza (CIC) combination vaccine for the 2026 flu season.
• Novavax is partnered with Sanofi, the French pharmaceutical giant, which will take over the commercialization of Novavax’s COVID-19 vaccine in the U.S. and Europe.
• Novavax stock has a 20.36% short interest.

Novavax Inc. NASDAQ: NVAX is a biotechnology company that focuses on developing and commercializing vaccines for serious infectious diseases. Its most significant vaccine, Nuvaxovid, is for COVID-19. The hype surrounding the potential for Nuvaxovid drove Novavax shares as high as $331.68 in February 2021. However, the reality of missteps resulting in being “late to the party” caused shares to crater to $3.53 by February 2024. Shares have since surged as high as $23.86 in June 2024 on a $1.2 billion licensing deal with Sanofi NASDAQ: SNY before sinking under $10.00 on its Q2 2024 earnings report.

Novavax operates in the medical sector, competing with COVID-19 vaccine makers Pfizer Inc. NYSE: PFE, Moderna Inc. NASDAQ: MRNA and BioNTech SE NASDAQ: BNTX.

The Sanofi Deal That Raised Novavax Stock From the Dead

While COVID-19 has been mostly in the rearview mirror in the United States, Novavax is still trying to capitalize on its vaccines. On March 10, 2024, Novavax surprised investors and mostly the short sellers with a surprise deal with French Pharmaceutical giant Sanofi. The deal has the potential to reap up to $1.2 billion in revenues. This announcement sent shares surging from $4.20 up to $13.50 in a day.

The Deal Has Potential For Up to $1.27 Billion in Revenues

The deal comprised of an upfront payment of $500 million with the potential for $770 million contingent on achieving various development, regulatory and launch milestones. Sanofi took a 5% equity stake for $70 million in Novavax. Sanofi will license Novavax’s adjuvanted COVID-19 vaccine starting in 2025. Adjuvanted refers to the added substance Matrix-M, which is intended to boost the immune response. Sanofi will pay tiered double-digit royalties on Sanofi sales of Novavax's COVID-19 vaccine. Sanofi will also pay up to $200 million in milestone payments and mid-single-digit royalties for additional Sanofi vaccine products developed with Novavax's Matrix-M technology.

Novavax is Still Trying To Capitalize on COVID-19

The deal still enables Novavax to develop its combination COVID-Influenza (CIC) vaccine, which will start Phase 3 clinical studies. Novavax hopes to get it approved for the 2026 flu season. It also has a preclinical respiratory syncytial virus (RSV) vaccine in development. Novavax has an updated COVID-19 vaccine specifically targeting the KP.2 and KP.3 variants awaiting FDA approval. Novavax filed with Health Canada for authorization of its 2024-2025 Formula COVID-19 vaccine (NVX-CoV2705) to be used for individuals 12 and older. It's worth noting that Novavax has been operating for 35 years and only has FDA approval for its COVID-19 vaccine.

NVAX Stock Forms a Head and Shoulders Pattern

The daily candlestick chart for NVAX indicated a bearish head and shoulders pattern. This pattern is formed of 3 peaks. The left shoulder peaked at $17.40. The head is the highest peak at $23.86. The right shoulder peaked at $17.81. The neckline at $10.15 was breached on the Q2 2024 earnings gap down to $8.87, but shares surged back above the neckline to recover back to $11.60. The high 22.36% short interest likely triggered short covering. The daily relative strength index (RSI) is flat at the 42-band. Pullback support levels are at $10.15, $8.61, $7.49 and $6.00.

Novavax Underwhelms with Its Q2 2024 Earnings Report

Novavax reported Q2 2024 EPS of 9 cents, missing consensus estimates by 68 cents. Revenues dropped 2.1% YoY to $415.5 million missing consensus estimates for $415.5 million. Product sales were $19.9 million, compared to $285.2 million in the year-ago period. The FDA notified Novavax that its BLA for prototype vaccine NVX-CoV2601 was accepted for review with an action date in April 2025. Its CIC vaccine is on track to initiate a Phase 3 trial in Q4 2024.

As of January 1, 2025, Sanofi assumed primary commercial responsibility for their updated 2024-2025 formula COVID-19 vaccine (NVX-CoV2705) in the United States, Europe and selected major markets.

Novavax Cuts Guidance

Novavax anticipates lower vaccine deliveries in 2024, resulting in lowering its full 2024 revenue guidance to $700 million to $800 million, down from previous guidance of $970 million to $1.17 billion versus consensus estimates of $937.2 million.

Novavax CEO John Jacobs commented, “Rather than focus our efforts on seasonal commercial execution of a single vaccine asset, we will instead invest our time, energy and capital on the development of an expanded pipeline that uses our recombinant nanoparticle technology platform to develop new assets, focused on infectious disease and respiratory as well as potentially vaccines in other disease or areas and categories.”

Novavax analyst ratings and price targets are at MarketBeat. There are 5 analyst ratings on NVAX stock, comprised of 2 Buys, 2 Holds and 1 Sell. Consensus analyst price targets are 38% higher at $16.00.