Should you buy Novavax stock after this regulatory win?

Vaccine manufacturer Novavax (NVAX -3.01%) he’s having a good year. In May, the company announced a lucrative partnership with the French biotech giant Sanofi (SNY -1.24%)causing the share price to rise. Novavax has made quite a comeback for a company that raised doubts about its ability to stay in business just 18 months ago. But Novavax is not finished. The biotech just announced a regulatory win that has some investors excited. Let’s find out if Novavax stock is worth buying given these developments.

Ready for the new season

Although we are no longer in a state of emergency, COVID-19 is still here. Many people, especially those who are most vulnerable, continue to inoculate against the disease. Some vaccines originally granted Emergency Use Authorization (EUA) in the US are no longer available. It is the case with Johnson & Johnsonhis vaccine. However, Novavax remained a notable player in this field. The biotech recently said its updated vaccine received EUA from the US Food and Drug Administration (FDA) in time for the fall season.

It is also featured on the Centers for Disease Control and Prevention’s list of recommended vaccines.

How much will Novavax benefit from this win? Probably not very much. First, the company will almost certainly continue to play second fiddle Modern and the team of Pfizer and BioNTechwhich have dominated this market since its inception. Second, Novavax is preparing to hand over the rights to its COVID-19 vaccine to Sanofi in most countries in 2025. This was part of their deal. Sanofi will also use Novavax’s adjuvant technology for some vaccine candidates it is developing.

Novavax will receive referral payments and royalties for the sale of its COVID-19 vaccines and all others that use its proprietary technology. This is in addition to a $500 million payment from Sanofi. In the second quarter, Novavax generated $415.5 million in revenue. While that was down from $424.4 million in the year-ago period, it would have been much worse without a portion of the payment from the Sanofi partnership.

Still, Novavax improved with earnings per share of $0.99, up from $0.58 in the year-ago period.

What’s next for Novavax?

How much will Novavax generate from royalties from the Sanofi partnership? That depends on several factors, including whether the French biotech giant can successfully develop more vaccines using Novavax’s adjuvant technology. Of course, Novavax plans to develop its own products. The company is working on two products: a standalone flu vaccine and a combined COVID/flu vaccine. Novavax plans to begin Phase 3 studies for both products in the fourth quarter, with data expected in mid-2025.

The performance of Novavax will depend in part on two factors. First, if these late-stage candidates can produce positive study results and go on to gain approval. Second, it will also depend on how well (or poorly) it performs in the market – regulatory approval is no guarantee of commercial success. At this point, it’s hard to predict how things will play out. That makes the stock inherently risky, given that if things don’t go Novavax’s way, the biotech’s stock could fall off a cliff.

So while Novavax has opened a new chapter, its long-term prospects for its partnership with Sanofi and how profitable it will be beyond the next 12 months, as well as its own internally developed products, remain uncertain. Novavax could prove its doubters wrong, but investing in this long-term stock at this point seems somewhat speculative. There are much more attractive biotech companies to consider.