Title: Unconventional Picks for Investors Seeking Opportunities in Post-Pandemic Markets
In the post-pandemic years, several businesses that shone brightly have taken a nose-dive, or at least seen their shares drop drastically. Two such companies are Teladoc Health and Novavax, both of which have underperformed the market since 2021. However, these healthcare powerhouses are making tireless efforts to reclaim their past glory and offer lucrative returns to their investors. Let's delve deeper into why they could stage a comeback.
1. Teladoc
The pandemic saw a massive surge in demand for virtual healthcare, and Teladoc was a frontrunner in the telemedicine revolution. Powering consultations, prescriptions, and referrals straight to patients' homes, Teladoc quickly expansion its repertoire to include virtual therapy (via BetterHelp) and services for individuals with chronic illnesses (like diabetes, with Livongo's acquisition). Initially, Teladoc's financials showed promising signs; revenue growth soared, and it seemed to be inching towards profitability.
However, the pandemic-driven tailwind finally fizzled out, growth slowed down, and net losses spiraled in some quarters – mostly due to non-cash impairment charges. Can Teladoc limp back to its former glory?
Changes are afoot at Teladoc, with a new CEO at the helm in Charles Divita. Under his leadership, the company is keen on boosting its offerings and expanding internationally. Teladoc's international revenue is growing more swiftly than its overall revenue – a testament to the potential opportunities internationally. Furthermore, with telemedicine here to stay, Teladoc could stand to profit – especially considering its fat gross margins (usually around 70%).
To see profits, Teladoc needs to rev up its top-line growth and better manage costs, particularly in advertising and marketing. If they succeed in this venture, Teladoc could bring about a barrage of returns for its investors who jump aboard today.
2. Novavax
Novavax has seen a considerable drop in its stock price since 2021 – but it has fared better this year. Novavax signed a lucrative deal with Sanofi in 2023, granting the latter rights to its COVID-19 vaccine in most countries, as well as the opportunity to utilize Novavax's proprietary adjuvant technology for vaccine development. Novavax pocketed a substantial upfront payment of $500 million, up to $700 million in milestone payments, and future royalties.
This partnership has given Novavax the space to focus on developing other vaccines – such as its leading candidates targeting influenza and a combined COVID/flu vaccine. Novavax embarked on phase 3 clinical trials for these vaccines, only to see the trials halted due to reported adverse reactions. However, the clinical hold was eventually lifted.
If these two vaccines pass their phase 3 trials, lock in approvals within a few years, and carve out promising niches in the hotly contested COVID-19 and influenza vaccine markets, Novavax's stock will surely soar. With a market cap of just $1.4 billion, it doesn't even need blockbuster-level revenue to be successful.
The fine print
Both Teladoc and Novavax offer substantial upside potential. But they also carry above-average risk. Teladoc is grappling with a fiercely competitive market and high advertising and marketing costs. Although it attracts new customers, its business has yet to become profitable. International expansion could further stretch its resources.
Novavax could navigate additional regulatory hurdles, its vaccine candidates might flop in phase 3 trials, and even if they succeed, they might fall short of investor expectations compared to other competition's offerings. Success in both companies will rely on a combination of factors going right. Investors considering a position should keep this top-of-mind.
- In their quest to return to profitability, Teladoc is heavily investing in international expansion, hoping to leverage the growing demand for telemedicine services worldwide and capitalize on its high gross margins.
- Amidst the challenges of navigating regulatory hurdles and proving its vaccine candidates effective in phase 3 trials, Novavax's partnership with Sanofi has provided it with a financial boost, which it is using to fund further vaccine research and development in the influenza and combined COVID-19/flu markets.
