Novavax Lags on Q2 Earnings & Sales, Cuts '24 Outlook

Novavax NVAX posted earnings per share of 99 cents in second-quarter 2024, missing the Zacks Consensus Estimate of $1.82. However, earnings rose 71% year over year.

Revenues in the quarter amounted to $415.5 million, also missing the Zacks Consensus Estimate of $453.7 million. The top line declined 2% on a year-over-year basis.

Quarter in Detail

In the reported quarter, the company recorded $19.9 million in product sales compared with $285.2 million in the year-ago quarter. While this reported figure did beat our model estimates of around $15 million, it missed the Zacks Consensus Estimate of $26 million.

During the quarter, NVAX recorded $395.6 million in licensing, royalties and other revenues compared with the year-ago quarter's revenues of $2.2 million. This figure includes $391 million associated with the upfront payment of $500 million received by management as part of the recently signed agreement with pharma giant Sanofi SNY for its protein-based COVID-19 vaccine, Nuvaxovid.

Management did not record any grant revenues during the quarter. Management recorded $137.1 million as grant revenues in the year-ago quarter.

In the reported quarter, research and development (R&D) expenses were $107 million, down 51% year over year. The downside was caused by a reduction in clinical and manufacturing spending during the quarter.

Selling, general and administrative (SG&A) expenses were up 8% year over year to $101 million, primarily due to certain fees paid in association with signing the Sanofi Agreement.

As of Jun 30, 2024, the company had $1.1 billion of cash and cash equivalents compared with $496 million as of Mar 31, 2024.

Guidance

For 2024

Novavax expects total revenues in the range of $700-$800 million in 2024, a cut down from its previously-issued guidance of $970 million to $1.17 billion (which includes nearly $70 million in equity investment). This fall in guidance is likely due to lower COVID-19 vaccine uptake in ex-U.S. markets.

This revised guidance includes nearly $425 million in licensing, royalties and other revenues. This includes $400 million of revenue recognition associated with the $500 million upfront payment from the Sanofi agreement and the rest in royalty and other revenues from partner-related activities.

It expects full-year product revenue guidance to be $275-$375 million.

The company maintained its full-year combined R&D and SG&A expenses in the band of $700-$750 million.

Beyond 2024

Management issued new guidance on combined R&D and SG&A expenses for the full years 2025 and 2026. It now targets the combined expenses to be below $500 million for 2025 and below $350 million for 2026. It also expects a portion of the costs of both these years to be reimbursed by Sanofi.

The remaining $100 million of the upfront payment from Sanofi will be evenly split across 2025 and 2026.

Despite the curtailed guidance and lower-than-expected results, Novavax's shares were up 9% on Aug 8, likely due to the reduction in operating expenses beyond 2024. Year to date, the stock has surged 143.3% against the industry's 3.5% fall.

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Recent Updates

In May, NVAX signed a multi-billion-dollar deal with Sanofi. Beginning next year, the company will gain rights to co-market Nuvaxovid globally, except in certain countries where Novavax has existing partnership agreements. The France-based drugmaker also has the sole license to develop and market the Novavax vaccine in combination with its influenza vaccine.

In return, Sanofi will make an upfront payment of $500 million to Novavax and up to $700 million in milestone payments, totaling up to $1.2 billion. It will be eligible to receive tiered double-digit percentage royalty payments on sales by Sanofi of Nuvaxovid, Sanofi's influenza-COVID combination vaccine and any other combination vaccines that Sanofi may develop, including Nuvaxovid.

Both companies will still have the right to develop their own combined COVID-19-influenza combination vaccines and adjuvanted products at their own cost. In addition to the above deal, Novavax also received an equity investment of nearly $70 million from Sanofi in exchange for a 4.9% stake.

Novavax has submitted two regulatory filings with the FDA — one seeking to obtain an emergency use authorization (EUA) for its updated 2024-2025 formula COVID-19 vaccine and another seeking full approval for the COVID-19 vaccine. While the decision for the first filing is expected to be received before the start of the 2024-2025 vaccination season, a final decision for the second filing is expected by April 2025.

Management is also on track to initiate a late-stage study on its COVID-19-Influenza Combination (CIC) vaccine and standalone influenza vaccines by this year's end. It intends to report data from this study in mid-2025.

Zacks Rank & Key Picks

Novavax currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the overall healthcare sector include Entrada Therapeutics and Fulcrum Therapeutics FULC, each sporting a Zacks Rank #1 (Strong Buy).

In the past 60 days, estimates for Entrada Therapeutics' 2024 loss per share have improved from 14 cents to 13 cents. Estimates for 2025 have improved from $3.44 to $3.21 during the same period. Year to date, shares of Entrada Therapeutics have lost 4.2%.

Earnings of Entrada Therapeutics beat estimates in two of the last four quarters while missing the mark on two other occasions. Entrada delivered a four-quarter average earnings surprise of 42.18%.

In the past 60 days, estimates for Fulcrum Therapeutics' 2024 loss per share have improved from $1.24 to 48 cents. Estimates for 2025 have improved from $1.71 to $1.51 during the same period. Year to date, shares of Fulcrum Therapeutics have risen 32.5%.

Earnings of Fulcrum Therapeutics beat estimates in each of the last four quarters. Fulcrum delivered a four-quarter average earnings surprise of 393.18%.

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