Novavax revenue could fall even further – and that’s actually good news

Adreadful, bad, gloomy, horrible. Choose your favorite from these adjectives, and it will definitely apply to Novavaxit is (NASDAQ: NVAX) second quarter update.

The vaccine maker said Monday its second-quarter revenue fell nearly 57% year-over-year to $186 million. This is particularly concerning, given that Novavax’s COVID-19 vaccine wasn’t on the market anywhere a year ago.

Additionally, Novavax reduced its full-year revenue forecast. It previously forecast revenue of $4-5 billion for 2022. Now the company is looking for revenue of just $2-2.3 billion.

Unsurprisingly, Novavax stock crashed on the atrocious, bad, dismal and horrific news. There are reasons to believe that the company’s revenues could fall even further in the near future. Believe it or not, this could actually be good news for Novavax.

Future revenue decline

The idea that Novavax’s revenue might drop is not one that I made up. In fact, the projection is based on the company management’s own words.

John Trizzino, executive vice president, chief commercial officer and chief commercial officer of Novavax, discussed during the company’s second quarter conference call the likely direction of the COVID-19 vaccine market. He said Novavax expects the market to be between 25% and 50% larger than the current flu vaccine market.

The global flu vaccine market totaled $6.59 billion in 2021, according to Fortune Business Insights. If we use the low end of the Trizzino lineup, that would translate to a COVID-19 vaccine market of around $8.25 billion per year.

Trizino also said Novavax believes it can capture 20% to 25% of the COVID-19 vaccine market in the future. Again, if we use the lower end of its range, that would mean Novavax sales would be around $1.6 billion, well below the company’s 2022 revenue forecast.

Good news?!

How could a drop in revenue, even remotely, be good news for Novavax? The answer is simple: the revenues that Trizino anticipates would be recurring.

Novavax’s market capitalization is currently less than $3.2 billion. Based on the midpoint of the company’s revenue forecast, vaccine stock is trading at less than 1.5 times forecast sales. That’s an extremely low valuation for any biopharmaceutical company with a product already on the market.

The main reason for this low valuation is that there is considerable uncertainty about the future demand for COVID-19 vaccines. If Novavax is able to generate annual sales of $1.6 billion, the company will be worth significantly more than its current market capitalization.

Keep in mind that we used the most pessimistic figures provided by Trezzino. We also did not take into account the growth of the flu vaccine market which he used as a benchmark for his projections. The global flu vaccine market is expected to reach $10.7 billion by 2028. If we use the upper end of Trizzino’s ranges, that would give Novavax a potential annual revenue of around $4 billion.

Eight Important Words

However, Trizino added eight important words: “This is all very speculative in nature.” His projections could be wrong.

But I would say that Trizzino’s projections are not far-fetched. It is not unreasonable to expect that COVID-19 could turn into a somewhat larger market than the flu vaccine. Many experts believe that COVID-19 will be rampant. It is still often more serious than the flu.

Could Novavax really capture at least 20% of this market? I don’t think that’s out of the question.

Novavax’s current woes are due, in large part, to the fact that the company’s COVID-19 vaccine is not yet cleared as a booster in most countries. The company could get those recall authorizations in Europe fairly quickly. It plans to file for authorization in the United States for its omicron targeting booster in the fourth quarter of 2022.

In addition, Novavax holds the lead in the development of a combined COVID-19/influenza vaccine. It plans to advance a combination vaccine into late-stage testing next year.

Maybe Novavax will still fail along the way. However, it’s entirely possible that the company will be able to generate solid revenue on a recurring basis beyond 2023. If so, investors will have to find new adjectives to describe Novavax – and they will be positive. .

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Keith Speights has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.