After posting eye-popping growth of 3,560% so far this year, it is safe to say that Novavax (NASDAQ: NVAX) has already made a handful of millionaires. On the other hand, it is unlikely that the company – which describes itself as a “late-stage biotechnology company” – will be able to replicate the same performance in the next few years without generating massive revenue from new product sales. Investors looking for wealth no doubt think that the candidate for coronavirus vaccine could drive tremendous growth.
However, there is no guarantee that NVX-CoV2373 will make it fast enough through the rest of its clinical trials to capture a significant market share, especially considering that many other companies are working on similar projects. Plus, the present value of the stock may already reflect the market’s expectation that the vaccine project will succeed. If the attempt fails, it would lead to massive losses. Therefore, I think it is more prudent to estimate Novavax’s future revenue based on its most advanced pre-pandemic program – the NanoFlu seasonal flood intensive for older adults.
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NanoFlu will soon drive major revenue expansion, but will it be enough?
NanoFlu is Novavax’s most advanced vaccine project, and the company has been developing it for years. The vaccine candidate has recently completed its final phase of clinical trials, proving superior effectiveness in a direct comparison with an established flu vaccine on the market. In summary, NanoFlu is safe and effective, and it could be approved as a sale next year.
Novavax estimates the size of the flu vaccine market for older adults – those 65 and older, which Novavax targets – at more than $ 4 billion in the US and the EU If Novavax can capture 35% of that market, it will at least $ 1.4 billion profit each year. 35% is a conservative and reasonable estimate of market share, as Novavax has only two real competitive products, one of which is less proven than the potential treatment of the company. $ 1.4 billion is more than 27 times its subsequent 12-month revenue, so it’s hard to see how the market can have anything but a positive reaction.
There’s only one problem with this story: Even with the massive increase in revenue, Novavax’s stock could still be greatly overestimated based on its price-to-sales ratio.
NVAX data provided by YCharts
The COVID vaccine program is a more likely millionaire maker than NanoFlu
The investment metric that compares a company’s share price to its sales revenue on a per-share basis is known as the price-to-sale ratio (PSR), and understanding it is key to interpreting Novavax’s prospects. Biotech companies tend to trade about 7 times their sales per share, but Novavax currently trades about 96 times its next-12-month revenue of about $ 50 million.
In that regard, going back to the revenue estimate for NanoFlu, Novavax does not look favorably as a millionaire-maker stock. For a hypothetical biotech company with annual sales of $ 1.4 billion and a similar number of excellent stocks as Novavax, we would expect the price per share in the first year to be around $ 160 after the release of the new vaccine . This price would rise with subsequent years of growing turnover, but it would probably not exceed Novavax’s current price of around $ 143. People who invest right now are not likely to become millionaires. The stock may still grow substantially with a successful release of flu vaccine, but it is hard to imagine it growing as explosively as this year.
On the flip side, if its coronavirus vaccine project does not come to fruition, it is very likely that the stock will decline, erasing some of this year’s expansion, despite excellent revenue growth from NanoFlu sales.
In conclusion, Novavax will not be a shareholder of millionaire maker based on the sale of flu vaccines, which are the most likely source of revenue over the next few years. Given the market obsession with coronavirus vaccines, however, there is no telling how many more inflated shares of Novavax could be created if the company continues to report positive clinical trial data. For this reason, I think Novavax still has the potential to make even more of its investors into millionaires, although it is far too risky to bet on after its long run of wild growth.
