Could this be the catalyst Novavax needs to get its stock back up again?

Fighting biotechnology Novavax (NVAX 0.17%) was a hot buy a few years ago as a vaccine for COVID-19 was in full swing. It eventually produced an approved vaccine, but it was a bit late and didn’t end up generating as much revenue as it could have if it had gotten approval much earlier. And since 2022, a selloff has ensued, with the stock losing more than 91% of its value.

However, there has been some excitement in Novavax recently, and its stock is up more than 150% this year. And there’s a catalyst that could drive that rally even higher. So should investors consider the stock now?

Regulators approve updated COVID-19 vaccine

It may seem like a similar story to investors, but Novavax has won approval for a COVID-19 vaccine — once again. On August 30, the healthcare company announced that the Food and Drug Administration (FDA) had granted emergency use authorization for its new COVID vaccine, which is an updated formulation that targets new variants currently in circulation.

The number of cases of COVID has increased this year and there are concerns that in the coming flu season there could be another increase. Data from the Centers for Disease Control and Prevention (CDC) shows that hospitalizations are higher than they were last year, although they are still down significantly from 2022. The data below is for the week ending August 10, compared to the same week from previous years. .

Source: CDC.

Why this time could be different

Novavax claims its vaccine “is the only protein-based option available in the US for use in people 12 years of age and older to prevent COVID-19.” But the problem is that the demand may not be that significant yet. Unless COVID cases and hospitalizations increase significantly, the government may not need to justify paying for updated COVID vaccines. The makers of the COVID vaccines Pfizer and Modern have experienced significant declines in revenue related to COVID, and this has caused investors to bullish on their growth prospects.

If not for a licensing agreement that Novavax announced with the healthcare giant Sanofi earlier this year to develop products, Novavax stock may be on a much different trajectory. There was some hope surrounding Novavax’s business because of the deal, but aside from a $500 million upfront payment and the hope of more milestone payments in the future, it’s by no means a game changer for Novavax.

The company still needs a consistent revenue-generating product to rely on to help it stay out of harm’s way. While Novavax reported a profit of more than $162 million in its most recent period (which ended June 30), that was largely due to receiving $391 million from Sanofi, which is a part of the initial down payment.

Is Novavax stock a buy?

Shares of Novavax rallied on news of the Sanofi deal this year, but early indications are that the recent approval of the updated COVID injection isn’t resonating with investors because it doesn’t result in a valuation bump, and rightly so. Revenue from its COVID vaccine may not only be unpredictable, but may only provide a temporary boost.

Until the company has a more promising product that doesn’t focus on COVID or seasonal flu infections (where there’s a lot of competition), investors would be better off avoiding Novavax stock, as it’s likely to remain highly volatile.