Astrazeneca PLC (AZN) and Novavax, Inc. (NVAX) are two of the leading COVID-19 vaccine developers that have been in the news. While neither of these companies will have a first-mover advantage if and when their vaccines are eventually brought to market (vaccines developed by Moderna and Pfizer-BioNTech are already being deployed with an Emergency Use Authorization (EUA) granted by the FDA), their late-stage clinical trial results of AZN and NVAX are said to show a lot of promise.
Both AZN and NVAX are expected to generate massive returns in the coming months when their vaccines hit the market and help to beat back the spread of COVID-19. However, nothing is for certain and there are several factors that could determine the prospects of these two stocks.
While AZN has returned 71.8% over the past five years, NVAX has gained 229.2%. In terms of their year-to-date performance, NVAX is a clear winner with 167.5% returns versus AZN’s 0.2%. But which of these two stocks is a better pick now? Let's find out.
Latest Movements
Following the European Medicines Agency (EMA) approval, AZN began the delivery of millions of its coronavirus vaccines on February 5 as part of an initial 17 million doses that are due to be delivered over the next few weeks, with more planned in March. The company, along with IDT Biologika, is also exploring options to accelerate output of its COVID-19 vaccines in the second quarter of 2021 to help support Europe’s immediate vaccination needs.
Also this month, AZN announced this month that the primary analysis of the Phase III clinical trials from the United Kingdom, Brazil and South Africa of its OVID-19 vaccine showed that the vaccine is safe and effective in preventing COVID-19, with no severe cases and no hospitalizations more than 22 days after the first dose. The results demonstrated vaccine efficacy of 76% after a first dose. The company also announced this month that its Forxiga (dapagliflozin) has been approved in China to reduce the risk of cardiovascular (CV) death and hospitalization for adults with heart failure. NVAX this month announced the start of the rolling review process by multiple regulatory agencies for authorization of its COVID-19 vaccine, NVX-CoV2373. The reviews are expected to be continued while the company completes its pivotal Phase 3 trials in the United Kingdom and United States and through initial authorization for emergency use granted under country-specific regulations. The company announced on February 3 that it has executed a binding Heads of Terms agreement with the government of Switzerland to supply six million doses of NVX-CoV2373 to the country.
NVAX announced in January that NVX-CoV2373 met the primary endpoint with a vaccine efficacy of 89.3% in its Phase 3 clinical trial conducted in the United Kingdom. NVAX also announced a memorandum of understanding with the Canadian government to produce NVX-CoV2373 in Canada. Last month, the company executed an Advance Purchase Agreement with the Commonwealth of Australia for 51 million doses of NVX-CoV2373.
Recent Financial Results
AZN’s total revenue has surged 11.2% year-over-year to $7.41 billion for the fourth quarter ended December 31, 2020, driven primarily by its growth in revenue from fast-growing new medicines. The company’s revenue from product sales have increased nearly 12% year-over-year to $7.01 billion. And its gross profit increased 11.3% year-over-year to $5.89 billion. Its operating profit increased 157.7% year-over-year to $1.49 billion. Its core EPS increased 19% year-over-year to $1.07.
NVAX’s revenue for the third quarter (ended September 30, 2020) increased significantly from $2.51 million in the third quarter of 2019 to $157.02 million because of increased developmental activities relating to NVX-CoV2373 under the CEPI agreement, participation in OWS and the DOD contract. However, the company’s net loss widened from $18.04 million in the year ago quarter to $197.31 million.
Past and Expected Financial Performance
AZN’s revenue has increased at a CAGR of 5.1% over the past three years. Analysts expect the company’s revenue to increase 7.3% for the quarter ending March 31, 2021 and 20% in 2021. AZN’s EPS is expected to grow 47.3% in 2021.
In comparison, NVAX’s revenue increased at a CAGR of 98.5% over the past three years. The market expects the company’s revenue to increase 19,165.6% for the quarter ending March 31, 2021 and 481.2% in fiscal 2021. NVAX’s EPS is expected to grow 456.2% in fiscal 2021.
Profitability
AZN’s trailing-12-month revenue of $25.87 billion is much higher than NVAX’s $204.75 million. Moreover, AZN is more profitable with a gross profit margin of 80.5% versus NVAX’s 8.2%.
Also, AZN’s ROE and ROA of 17.7% and 5.2%, respectively, compare favorably with NVAX’s negative values.
So, AZN is more profitable.
Valuation
In terms of trailing-12-month p/s, NVAX is currently trading at 70.14x, which is much more expensive than AZN, which is currently trading at 5.09x. NVAX is more expensive both in terms of trailing-12-month ev/s (80.50x versus 5.81x), and trailing-12-month price to book (176.39x versus 10.79x).In terms of trailing-12-month price/cash flow also, NVAX’s 262.21x is much higher than AZN’s 30.08x.
POWR Ratings
AZN has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. However, NVAX has an overall rating of D, which represents a Sell.
In terms of Value, AZN has a B grade, which is consistent with its lower-than-industry trailing-12-month p/s ratio. NVAX’s C grade for Value is reflective of its higher-than-industry trailing-12-month p/s ratio.
AZN’s B grade for Quality as compared to NVAX’s D grade is justified given AZN’s significantly higher gross profit margin.
Beyond what I have stated above, our POWR Ratings system has also rated both AZN and NVAX for Growth, Momentum, Stability, and Sentiment. Get all AZN’s ratings here. Also, Click here to see the additional POWR Ratings for NVAX.
Of 240 stocks in the F-rated Medical – Pharmaceuticals industry, AZN is ranked #16. And NVAX is ranked #328 in the 481-stock F-rated Biotech industry.
The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
The Winner
Th coronavirus vaccines produced by AZN and NVAX have both been found to be effective. However, AZN is considered a better buy considering its diversified operations. Also, NVAX is significantly overvalued compared to AZN.
Click Here to learn about other top rated Medical - Pharmaceuticals stocks. Click here to access the top-rated stocks in the Biotech industry that are expected to perform better than NVAX.
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AZN shares were unchanged in after-hours trading Friday. Year-to-date, AZN has gained 3.40%, versus a 5.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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