Novavax: Endlessly Frustrating, Endlessly Fascinating - Rating Upgrade

Novavax, Inc. (NASDAQ:NVAX) has been a frustrating yet fascinating stock for investors. Despite previous sell recommendations, the company has shown promise with its COVID-19 vaccine development. The stock's performance has been volatile, but it has the potential for significant growth if successful in its vaccine trials.

Novavax, Inc. (NASDAQ:NVAX) has been a stock of contrasts for investors. Despite previous sell recommendations, the company has shown resilience in its COVID-19 vaccine development journey. The stock's performance has been volatile, but it holds potential for significant growth if successful in its vaccine trials.

The company's struggles are well-documented. It faced numerous delays in securing approvals for its COVID-19 vaccine, Nuvaxovid, which hindered its ability to challenge the market dominance of Moderna (MRNA) and Pfizer (PFE) / BioNTech's (BNTX). Despite these setbacks, Novavax secured a $1.6 billion funding from the U.S. government for vaccine development and manufacturing. However, the company reported substantial losses in 2020 ($418 million), 2021 ($1.74 billion), 2022 ($658 million), and 2023 ($545 million).

In May 2024, French pharmaceutical giant Sanofi (SNY) came to Novavax's rescue, paying it $500 million upfront to gain the rights to market and sell Nuvaxovid in most territories after 2025. The deal also included milestone payments and royalties on sales. This partnership has been a turning point for Novavax, as it has collected milestone payments and anticipates further earnings from the deal.

In its Q2 earnings call, Novavax's Chief Financial Officer (CFO) Jim Kelly reported that the company ended the second quarter with over $850 million in cash and receivables, including a $175 million milestone payment from Sanofi. The company expects to earn an additional $50 million in milestones in the fourth quarter of 2025 upon the transfer of marketing authorization for the U.S. and Europe. This financial boost has allowed Novavax to reduce its cost of sales and operational expenses, setting the stage for potential profitability.

Looking ahead, Novavax's 2025 guidance projects revenues of $1 billion to $1.05 billion, with a net profit margin of over 50%. The company is also exploring partnerships for its Phase 3 ready flu / COVID combo shot and other vaccine candidates. While there are numerous "ifs, buts, and maybes" to consider, Novavax appears to be on a path toward financial recovery and growth.

However, the optimal solution for all parties would have been for Sanofi to fully acquire Novavax. The current deal leaves Novavax with crumbs on the table, but the company retains the right to develop products with its technology and find new partners. This flexibility could be a significant advantage for Novavax in the long run.

In conclusion, while Novavax has faced numerous challenges, the recent partnership with Sanofi and the company's financial health suggest a promising future. Investors should keep a close eye on the company's progress in vaccine trials and potential partnerships to gauge its long-term value.