Novavax (NVAX) Q2 2023 earnings report

Shares of Novavax jumped 10% Tuesday after the Covid vaccine maker reported a surprise second-quarter profit.

Novavax posted a net income of $58 million, or 58 cents per share, for the quarter. That compares with a net loss of $510.5 million, or $6.53 per share, reported during the same quarter last year. 

The biotech company generated second-quarter sales of $424.4 million, up from the $185.9 million from the same period a year ago. 

Here’s what Novavax reported compared with Wall Street’s expectations, based on a survey of analysts by Refinitiv. 

• Earnings per share: 58 cents per share, vs. a loss of $1.39 per share expected
• Revenue: $424.43 million, vs. $239.2 million expected

Novavax CEO John Jacobs told CNBC that the company pulled forward some sales that “might have drifted” into the third quarter from prior Covid vaccine purchase agreements, recognizing those sales instead in the second quarter. 

He noted that there will be “little to no sales” in the third quarter because the Food and Drug Administration won’t make a decision on Novavax’s new Covid shot until late September. The company can only start rolling out the vaccine to the public after a potential approval from the agency. 

Most of Novavax’s revenue in the third quarter will come from grants, according to Jacobs. He said the company will squeeze “most of the seasonal opportunity” of its new shot into the fourth quarter, when the nation typically sees Covid cases and vaccinations peak. 

The results come as Novavax works to strengthen its financial position, particularly after it raised doubts about its ability to stay in business earlier this year.

The company is pinning its hopes on the launch of its updated Covid shot in the U.S. commercial market this fall, a global cost-cutting push announced in May and a promising vaccine pipeline to help it stay afloat. 

Novavax on Tuesday lowered its full-year revenue forecast to $1.3 billion to $1.5 billion, down slightly from the $1.4 billion to $1.6 billion guidance provided in May. 

But Jacobs noted that the adjustment reflects part of a cash settlement the Canadian government agreed to pay for forfeiting Covid vaccine doses that were previously scheduled for delivery.

The new guidance does not include $100 million in cash that Canada paid during the second quarter – an amount that “would have been revenue” had the parties completed the transaction, he said.

“We’re still on track for the revenue, but we’d rather have it in cash,” Jacobs told CNBC. “That’s a good thing for Novavax.” 

Novavax also said it’s continuing to execute its global cost-cutting plan, which involves slashing 25% of the company’s workforce and consolidating the company’s facilities and infrastructure, among other efforts. 

The plan is expected to reduce 2024 research and development as well as selling, general and administrative expenses costs by approximately 40% to 50% compared with 2022.

SG&A expenses usually include the costs of promoting, selling and delivering a company’s products and services.

The company reported R&D expenses of $258 million and SG&A expenses of $162 million last year.

Separately on Tuesday, Novavax announced a new strategic partnership agreement with SK bioscience, a South Korea-based biotech manufacturer. 

The agreement extends a previous contract manufacturing arrangement between the two companies, which provided SK bioscience with the rights to exclusively manufacture and commercialize Novavax’s Covid vaccine in South Korea and the non-exclusive rights to do so in Thailand and Vietnam. 

Novavax CEO Jacobs noted the company will receive royalty payments for sales in those markets and an upfront payment of $4 million from SK bioscience.

SK bioscience will also purchase $85 million in Novavax’s common stock at $13 per share, reflecting a 59% premium to the past 90-day trading value. 

The agreement also removes $195 million in manufacturing liabilities from Novavax’s balance sheet, according to Jacobs. In exchange, Novavax will pay SK bioscience $65 million in cash.