Novavax (NVAX) Up 36.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Novavax (NVAX). Shares have added about 36.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Novavax due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Q2 Earnings & Revenues Beat Estimates
Novavax reported second-quarter 2023 earnings of 58 cents per share, which beat the Zacks Consensus Estimate of a loss of $1.24. In the year-ago quarter, the company posted a loss of $6.53 per share.
Revenues in the quarter amounted to $424.4 million, topping the Zacks Consensus Estimate of $257.6 million. In the year-ago quarter, the company reported revenues of $185.9 million.
Quarter in Detail
During the quarter, the company recorded product sales of $285.2 million, which were significantly higher than the product sales of $55.5 million in the year-ago quarter.
The reported product sales beat the Zacks Consensus Estimate and our model estimates of $167 million and $143 million, respectively.
Grant revenues rose 27% year over year to $137.1 million for the same period.
Novavax recorded $2.2 million of revenues from royalties and adjuvant sales to licensing partners, a substantial decline from the year-ago quarter’s revenue of $22.7 million.
In the reported quarter, research and development (R&D) expenses were $219 million, down 24% year over year. The downside was primarily caused by reduced clinical and manufacturing spending during the quarter.
Selling, general and administrative (SG&A) expenses were down 13% year over year to $94 million. The downside can be attributed to the company’s spending reduction following the cost reduction plan initiated during the second quarter.
As of Jun 30, 2023, Novavax had $518 million of cash and cash equivalents compared with $637 million as of Mar 31, 2023.
2023 Guidance
Management revised its sales guidance for the full year 2023.
Novavax lowered its total revenues forecast to $1.3-$1.5 billion, down from the previously issued guidance of $1.4-$1.6 billion. This guidance includes product sales, which are now expected to be between $0.96-$1.14 billion, a $100 million cut from the previously issued guidance of $1.06-$1.24 billion. Grant revenues are forecasted in the range of $340-$360 million (maintained).
Management guidance for combined R&D and SG&A expenses remained unchanged at $1.3-$1.4 billion.
During the Q2 earnings call, Novavax’s CFO James Kelly stated that if the 2023 guidance is successfully achieved, it expects the current cash balance and expected cash flow to fund its business operations for the next 12 months.
In an interview with CNBC, CEO Jacobs also noted that Novavax expects to generate minimal product sales in third-quarter 2023. Management expects to record product sales during the fourth quarter, provided the FDA authorizes/approves its updated COVID vaccine.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -741.44% due to these changes.
VGM Scores
At this time, Novavax has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Novavax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Novavax belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Alkermes (ALKS), has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Alkermes reported revenues of $617.4 million in the last reported quarter, representing a year-over-year change of +123.5%. EPS of $0.55 for the same period compares with $0.06 a year ago.
For the current quarter, Alkermes is expected to post earnings of $0.45 per share, indicating a change of +2150% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alkermes. Also, the stock has a VGM Score of A.
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