Friday, March 16, 2018

Novavax: Disappointing Stock Sales


Investing in a biotech goes far beyond whether or not the company can get key drugs approved. How the company finances the cash burning trials is very crucial to long-term valuation and that is where Novavax (NVAX) is crushing shareholders.

Despite a couple of promising vaccines in 2017, Novavax spent the whole year selling stock through At Market Issuance Sales Agreements. The problem with the multiple vaccine programs is that the small biotech burned $138.7 million of cash last year.

The company ended the year with $157.3 million in cash on the balance sheet, yet chose to make the following stock sales in 2017 and early 2018.

So despite promising programs, Novavax sold 50.9 million shares at an average price of only $1.25. The numbers are incredibly disturbing knowing the stock price is now at $2.13.

And even with the large cash balance, management kept selling stock at around $2 through March 9 this year. On one side, Novavax has already raised a lot of the cash needed to fund operations, but the company is diluting shareholders like crazy in the process.

The stock action has been positive as some excitement builds for the Prepare and the NanoFlu vaccines, but this is where the historical delays kill shareholders. Every month, the company is burning over $10 million in cash. Those delays are very costly considering the earliest Novavax will have any of these trials completed is in Q1/19. Based on history, this date won't be hit.

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2 comments:

Anonymous said...

Stans loves crush retail, its coming!

Mark Holder said...

Looking at the 10-year chart, NVAX and CEO Stan Erck hasn't done that great of a job.