On Monday, Pfizer (NYSE:PFE) announced a breakthrough in its search for a novel coronavirus vaccine. The company’s candidate — developed in partnership with Biontech (NASDAQ:BNTX) — has now reached 90% efficacy in preventing the disease in healthy volunteers. Needless to say, this news came as a bolt out of the blue. Prior to the big announcement, Pfizer had only released limited progress reports about its vaccine candidate. Now it has made a huge wave. So, what does that mean for Novavax (NASDAQ:NVAX)? Not surprisingly, the prognosis for NVAX stock is grim.
While the market absolutely exploded to the upside in some sectors on Monday, not all names reaped the benefits. Hard-hit stocks dealing in travel, experiences, and retail blasted off — some up 20% or more in a single session. Even the struggling movie theater chain AMC (NYSE:AMC) surged 51% on the day.
On the flip side, however, many stocks got crushed on the Pfizer news. The tech and work-from-home names were obvious losers. Likewise, the other Covid-19 stocks should soon follow suit.
Is NVAX Stock Done For?
Many of the hot tech stocks of the past six months got utterly crushed on Monday, with double-digit losers across the board. Adding to the drama, Beyond Meat (NASDAQ:BYND) got shellacked in the evening when its quarter fell short of expectations. This — on top of big earnings whiffs from other companies — has traders starting to wonder what will be the next shoe to drop.
Look no further than the Covid-19 space. That’s because the rush to cash in on testing and therapeutic stocks will dry up once the new Pfizer vaccine is widely distributed. And with Pfizer’s vaccine in circulation, there will be little reason for the other vaccine makers like Novavax to carry on. After all, people only need one solution — as long as Pfizer’s vaccine works, that should be game, set and match.
As if that weren’t enough, Eli Lilly (NYSE:LLY) also recently reported that its novel coronavirus therapeutic has received approval from the Food and Drug Administration (FDA). That will allow the company to widely distribute its product, helping keep people with mild Covid-19 cases from needing hospitalization.
With these big news breaks, then, the hype around Covid-19 stocks should soon draw to a close. We now have got an FDA-approved therapeutic to deal with the virus, plus a vaccine just around the corner. That means Novavax and others will be left looking for scraps — if they end up getting anything at all.
Downbeat Earnings and Another Stock Offering
Novavax shares would have already been struggling given the news. However, things took an abrupt turn for the worse on Tuesday. NVAX stock tumbled nearly 13%. Traders dumped their shares for a couple of reasons.
First, the company just released its third quarter earnings, and they weren’t good. Novavax lost $197 million for the quarter, a loss of $3.21 per share. That was much worse than expected. Additionally, the company only scored $157 million in Q3 revenues, missing the average analyst estimate of over $230 million. Finally, the company’s cash pile of nearly $572 million may seem formidable, but that kind of money moves quickly when you’re losing nearly $200 million in operations per quarter.
To address that, Novavax concurrently launched a new at-the-market (ATM) stock offering, with which the company is looking to raise up to $500 million in cash. ATM offerings allow a company to sell new stock during the course of normal trading. That can be okay in certain situations. However — with the Pfizer vaccine on the horizon and NVAX’s poor earnings — it’s going to be awfully hard for the company to issue more stock without tanking the value of its already existing shares.
Bottom Line
Novavax had a great run. For one, management deserves a lot of credit for developing such a strong vaccine candidate. Before the outbreak of the pandemic, Novavax was a small, little-known company. Now its involvement in the government’s “Operation Warp Speed” has made it a high-profile name.
Ultimately, though, it couldn’t get the job done in time. Anyone that still owns NVAX stock should take advantage of any remaining enthusiasm for the company and sell while there’s still a window.
With its new stock offering, Novavax management figured that out, too — they’re looking to sell shares while they’re still at a relatively high price. You should consider following that lead. Soon, traders will be focused on buying up cruises, airlines and restaurant stocks while the pandemic picks slump. And down the line, if you want to revisit NVAX stock, wait for a much lower price.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
