Novavax (NVAX) stock nearly tripled over two days in May after inking a roughly $1.3 billion licensing deal with Sanofi (SNY) for its Covid vaccine.


Under the terms of the deal, Sanofi will pay Novavax $500 million up front and up to $700 million in additional milestone payments. Novavax will also receive tiered royalties on sales. Sanofi also made a $70 million investment in Novavax stock.

The deal is a negative for Covid vaccine rivals Pfizer (PFE) and Moderna (MRNA), Leerink Partners analyst David Risinger said in a report. Their vaccines using mRNA, or messenger RNA, technology. Novavax’s shot, Nuvaxovid, is based on protein technology.

“Simply put, Novavax’s Covid vaccine results have shown better tolerability cross-trial than mRNA vaccines (which are associated with greater risk of temporary fever/malaise) and a commercial tie to the established Sanofi FP flu portfolio of effective vaccines for people of all ages is a significant advantage over the uncertain effectiveness of mRNA flu/Covid combo vaccines,” he said.

Novavax is expected to turn a profit in the second quarter as sales accelerate sequentially. Though, in the first quarter, sales missed expectations. Losses were narrower than expected, however.

All in all, is Novavax stock a buy right now?

Fundamental Analysis Of NVAX Stock

In the first quarter, Novavax lost $1.05 per share and reported $93.9 million sales. Losses were a penny better than expected, according to FactSet. Further, that narrowed from a year-earlier loss of $3.41 per share. Sales grew almost 16% to $93.9 million, but missed projections for $101.2 million.

Importantly, neither metric is in line with investing advice, which suggests investors find stocks with at least 20% to 25% recent sales and earnings growth.

For the second quarter, Novavax stock analysts project a per-share gain of 20 cents. That would decline 31% year over year. Sales are expected to fall 73% to $245.8 million. Over the last year, the second and fourth quarters have reaped bigger sales for Novavax.

The third quarter is expected to see smaller sales and losses once again. But the fourth quarter could be profitable again with adjusted earnings of $1.30 per share reversing from a year-earlier loss. Analysts also project nearly 81% sales growth to $526.1 million.

But analysts don’t have longer-term quarterly estimates for Novavax.

Last year, Novavax lost $5.41 per share and had $983.7 million in sales. This year, Wall Street calls for a gain of 6 cents per share on $951.7 million in sales.

Novavax’s Covid Vaccine

Novavax protein-based approach offers an alternative for people uneasy with the mRNA technology.

Sanofi could play a big part in spreading that message, says Risinger, the Leerink analyst.

“We are interested in seeing how effective Sanofi FP is at raising consumer awareness of Novavax’s better tolerability than (Pfizer’s) Comirnaty or (Moderna’s) Spikevax,” he said. “Recall that consumer hesitancy regarding Covid boosters has been driven in part by fears about malaise/fatigue associated with Comirnaty and Spikevax.”

The deal allows Sanofi to develop combination vaccines using Nuvaxovid, including a flu/Covid shot. For each new product, Novavax will receive additional launch and sales milestones of up to $200 million plus ongoing product royalties.

Risinger says mRNA technology allows for speedier vaccine production.

“That said, Novavax’s vaccine has demonstrated strong protection to date, and we will be interested to see if mRNA vaccines can show differentiated (effectiveness) in coming years, and if so, to what degree the (effectiveness) advantage offsets worse tolerability from a commercial standpoint,” he said.

It’s important to note, Sanofi isn’t helping Novavax commercialize in 2024. Nuvaxovid is available in the U.S. under emergency use authorization. Its full approval is still pending. Further, contracting for the fall of 2024 has already taken place.

Improved Ratings

Novavax stock has an IBD Digital Composite Rating of 87 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, shares outrank 87% of all stocks.

Shares also have a lower EPS Rating of 54. The EPS Rating is a measure of profitability and, on that bar, NVAX stock tops more than half of all stocks.

Mutual funds hold a good chunk of the biotech stock. As of March, 237 funds owned 32% of Novavax stock. Institutional support is a good sign. But the number of funds that own shares has declined every quarter since June 2022.

Technical Analysis Of NVAX Stock

Following the Sanofi deal, Novavax rocketed by triple digits over two days in May.

Shares now have a top Relative Strength Rating of 99. 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 outranks 99% of all stocks. Leading stocks tend to have RS Ratings of at least 80.

But Novavax stock isn’t forming a definitive chart pattern, according to MarketSurge.

Promisingly, shares are well above their key moving averages. Novavax stock bounded above its 50-day and 200-day lines on May 10 after the company announced the Sanofi deal.

So, Is Novavax Stock A Buy?

No, Novavax stock isn’t a buy. Savvy investors are encouraged to buy a stock after it breaks out of a base. Novavax shares aren’t forming a chart pattern.

The Sanofi deal is a positive for Novavax and could eventually be worth billions of dollars, the company said in its news release. But longer-term sales are expected to be below 2024 estimates. It will be key to watch how the Sanofi deal develops over time, especially where new products are concerned.

(Keep an eye on Stocks Near A Buy Zone.) 

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 X, the platform formerly known as Twitter, at @IBD_AGatlin.


Is Eli Lilly Stock A Buy Or A Sell As FDA Plans Meeting To Discuss Alzheimer’s Drug?

The Cream Of The Crop: 5 Biotechs That Outrank Most Stocks

Want More IBD Insights? Subscribe To Our Investing Podcast!

Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks

See Stocks On The List Of Leaders Near A Buy Point

Source link