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Novavax Missed Q1 Estimates By a Mile: Should Investors Worry?

By all counts, this should be Novavax’s (NASDAQ: NVAX) year. The company’s NVX-CoV2373 COVID-19 vaccine is now on the market in multiple countries. Novavax could be close to winning a long-awaited U.S. Emergency Use Authorization (EUA) for its vaccine.
With all of that in mind, investors were hopeful that the company’s first-quarter results announced after the market closed on Monday would provide a nice catalyst. Unfortunately, that didn’t happen. The vaccine stock plunged in after-hours trading after Novavax missed Wall Street’s Q1 estimates by a mile. Should investors be worried?
Image source: Getty Images.

Something’s amiss
Novavax reported Q1 revenue of $704 million, up more than 57% year over year. This figure included $586 million in sales of NVX-CoV2373 plus another $19 million of royalties and adjuvant sales to the company’s partners. In addition, Novavax received grant revenue of $99 million in Q1, a sharp decline from the $447 million received in the prior-year period.
Strong revenue growth heavily stemming from product sales might seem to be a big positive for Novavax — and it is. However, Wall Street had much higher expectations with the consensus Q1 revenue estimate of a little over $845 million.
The story was similar with Novavax’s bottom line. The company posted earnings of $203 million, or $2.56 per diluted share. This was much better than the net loss of $223 million, or $3.05 per share, in the prior-year period. Again, though, analysts wanted even more: The average estimate was for Q1 earnings of $2.69 per share.
Why did Novavax fail to meet Wall Street’s views? The company delivered only 42 million doses of NVX-CoV2373 globally in the first quarter. Management stated in the Q1 conference call that there has been no order from Gavi so far and that the timing of any deliveries to COVAX (which distributes vaccines to low- and middle-income countries) is “unclear.”  
Looking on the bright side
These top- and bottom-line misses, combined with the steep after-hours sell-off, could make it easy for investors to overlook several positive aspects of Novavax’s Q1 update. Arguably the most important of these is that the company recorded its first profitable quarter ever.
Novavax also ended the first quarter with a cash stockpile of $1.6 billion. The company shouldn’t have any problems funding its clinical programs.
Management stated in the Q1 call that they expect the volume of delivered doses will increase in the second quarter. As a result, Novavax’s product sales should continue to grow. The company also reaffirmed its full-year 2022 revenue guidance of between $4 billion and $5 billion.
Novavax also anticipates filing additional regulatory submissions in the second quarter. It looks for label expansions in countries where NVX-CoV2373 is already authorized in the “near future.” 
The company plans to file for full approval of its COVID-19 vaccine in the U.S. in the second half of 2022. That could set the stage for full-blown commercialization efforts, including targeted marketing, next year.
Worry or worry not?
Let’s return to the original question: Should investors worry after Novavax’s Q1 update? My answer is that “worry” is too strong of a word. But there are some reasons for concern.
Novavax is without question in better shape financially than it’s ever been. The company is poised for stronger growth going forward. The Q1 revenue and earnings misses could quickly be forgotten if Novavax delivers on its full-year revenue guidance.
However, the company faces some big uncertainties. If Gavi renegotiates and drastically cuts the doses ordered, Novavax’s 2022 outlook could be in jeopardy. On a related note, sustained vaccine hesitation in developed countries could hurt the company’s prospects to sell more doses.
Investors are assuming that the U.S. Food and Drug Administration (FDA) will soon give a green light to NVX-CoV273. An FDA advisory committee is scheduled to review Novavax’s EUA filing on June 7, 2022. Any snags in this process would raise a yellow flag. However, there’s no reason to anticipate problems at this point.
This could — and should — still be Novavax’s breakout year. But there have been so many bumps in the road thus far that investors are understandably nervous.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

By all counts, this should be Novavax‘s (NASDAQ: NVAX) year. The company’s NVX-CoV2373 COVID-19 vaccine is now on the market in multiple countries. Novavax could be close to winning a long-awaited U.S. Emergency Use Authorization (EUA) for its vaccine.

With all of that in mind, investors were hopeful that the company’s first-quarter results announced after the market closed on Monday would provide a nice catalyst. Unfortunately, that didn’t happen. The vaccine stock plunged in after-hours trading after Novavax missed Wall Street’s Q1 estimates by a mile. Should investors be worried?

Image source: Getty Images.

Something’s amiss

Novavax reported Q1 revenue of $704 million, up more than 57% year over year. This figure included $586 million in sales of NVX-CoV2373 plus another $19 million of royalties and adjuvant sales to the company’s partners. In addition, Novavax received grant revenue of $99 million in Q1, a sharp decline from the $447 million received in the prior-year period.

Strong revenue growth heavily stemming from product sales might seem to be a big positive for Novavax — and it is. However, Wall Street had much higher expectations with the consensus Q1 revenue estimate of a little over $845 million.

The story was similar with Novavax’s bottom line. The company posted earnings of $203 million, or $2.56 per diluted share. This was much better than the net loss of $223 million, or $3.05 per share, in the prior-year period. Again, though, analysts wanted even more: The average estimate was for Q1 earnings of $2.69 per share.

Why did Novavax fail to meet Wall Street’s views? The company delivered only 42 million doses of NVX-CoV2373 globally in the first quarter. Management stated in the Q1 conference call that there has been no order from Gavi so far and that the timing of any deliveries to COVAX (which distributes vaccines to low- and middle-income countries) is “unclear.”  

Looking on the bright side

These top- and bottom-line misses, combined with the steep after-hours sell-off, could make it easy for investors to overlook several positive aspects of Novavax’s Q1 update. Arguably the most important of these is that the company recorded its first profitable quarter ever.

Novavax also ended the first quarter with a cash stockpile of $1.6 billion. The company shouldn’t have any problems funding its clinical programs.

Management stated in the Q1 call that they expect the volume of delivered doses will increase in the second quarter. As a result, Novavax’s product sales should continue to grow. The company also reaffirmed its full-year 2022 revenue guidance of between $4 billion and $5 billion.

Novavax also anticipates filing additional regulatory submissions in the second quarter. It looks for label expansions in countries where NVX-CoV2373 is already authorized in the “near future.” 

The company plans to file for full approval of its COVID-19 vaccine in the U.S. in the second half of 2022. That could set the stage for full-blown commercialization efforts, including targeted marketing, next year.

Worry or worry not?

Let’s return to the original question: Should investors worry after Novavax’s Q1 update? My answer is that “worry” is too strong of a word. But there are some reasons for concern.

Novavax is without question in better shape financially than it’s ever been. The company is poised for stronger growth going forward. The Q1 revenue and earnings misses could quickly be forgotten if Novavax delivers on its full-year revenue guidance.

However, the company faces some big uncertainties. If Gavi renegotiates and drastically cuts the doses ordered, Novavax’s 2022 outlook could be in jeopardy. On a related note, sustained vaccine hesitation in developed countries could hurt the company’s prospects to sell more doses.

Investors are assuming that the U.S. Food and Drug Administration (FDA) will soon give a green light to NVX-CoV273. An FDA advisory committee is scheduled to review Novavax’s EUA filing on June 7, 2022. Any snags in this process would raise a yellow flag. However, there’s no reason to anticipate problems at this point.

This could — and should — still be Novavax’s breakout year. But there have been so many bumps in the road thus far that investors are understandably nervous.

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

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