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A lot can happen in just a few years, and Novavax (NASDAQ: NVAX) is the proof of that. Three years ago, the company was rushing toward the coronavirus vaccine finish line — and the shares were soaring. Today, though, the situation is much different. Novavax brought its vaccine to market, but its late arrival meant it lost out on the biggest revenue opportunity.

Since then, the shares have plummeted, and the biotech has been drastically cutting costs and manufacturing infrastructure to keep its business going.

But the story doesn’t end here. In fact, three more years could push Novavax into yet another standout chapter. That’s when the company aims to launch a potentially game-changing product, a combined coronavirus/flu vaccine. Where will Novavax be in three years? Let’s find out.

Image source: Getty Images.

The great wave of vaccine demand

First, here’s a little summary of Novavax’s coronavirus vaccine situation. As mentioned, the company’s product reached commercialization well after the Pfizer and Moderna vaccines, meaning it lost out on the great wave of demand — and revenue opportunity — earlier in the pandemic. Rivals had a chance to establish their positions in the market and serve various countries when need was at its maximum.

We can see this just by looking at Novavax’s revenue last year compared with that of Moderna, a company that also relies on just one product — the coronavirus vaccine — for revenue.

NVAX Revenue (Annual) data by YCharts

The decline in demand in recent times has prompted each vaccine player to reduce infrastructure. But the problem has been particularly painful for Novavax, since the biotech didn’t benefit from vaccine sales as much as its rivals. Earlier this year, Novavax announced a 25% cut to its workforce and an effort to reduce expenses by as much as 50% by next year.

The company is making significant progress, saying just this week that it’s on track to surpass its cost-cutting goals for the year by $100 million. Novavax also said it’s ready to reduce expenses by an additional $300 million next year in order to drive efficiency and further improve cost structure.

All this will not only help Novavax continue operations, it will also allow it to independently fund development of its combined coronavirus/flu vaccine candidate — and get it ready for a 2026 launch. By developing the candidate independently, Novavax bears all the expense, but also gets to keep 100% of eventual profits. So it’s a worthwhile effort if all goes smoothly.

Selling a combined vaccine

So where will Novavax be in three years? If the company meets the financial targets it’s set out, it should be operating an efficient business, selling its coronavirus vaccine and a newly approved combined vaccine to healthcare providers for the fall vaccination season.

Novavax predicts that the coronavirus vaccine should generate north of $1 billion in annual sales. That product, along with the combined vaccine, could create a multi-billion-dollar business. This probably won’t happen in 2026, but it could happen soon thereafter. It’s not yet clear when Novavax may reach profitability, but the company aims to work toward that through its cost-lowering efforts.

That was the positive scenario. There’s also a possible scenario that isn’t as bright. It’s important to remember that Pfizer and Moderna are also working on combined vaccine candidates, and they aim to launch them before 2026. So, once again, Novavax may find itself entering the market later than rivals. This time, the road may not be as difficult, since we’re no longer talking about an acute pandemic situation, but a product to be sold annually over the long term. Still, Novavax may have to work harder to carve out market share, and if it struggles, earnings and the share price may struggle too.

And, unlike Pfizer and Moderna, Novavax remains heavily dependent on coronavirus and flu because its pipeline revolves around those two indications.

What does this mean for you as an investor?

Novavax is taking the right steps to improve its cost structure, and there’s reason to cheer about its progress so far. But the stock still remains risky.

From a financial perspective, the company isn’t out of the woods. In a recent regulatory filing, Novavax reiterated that risks remain and could affect its ability to continue operations. From a pipeline perspective, the focus on flu/coronavirus adds to risk, and the likelihood of once again bringing a product to market after rivals could make it difficult to gain market share.

All this means that, unless you’re an aggressive investor, you may want to continue watching Novavax from the sidelines — at least until the company makes further progress on its cost reduction plan and shows signs it can carve out share in the annual vaccine market.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.

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