More Bad News For Novavax: A Citi Downgrade

Novavax, Inc. NVAX, a small-cap clinical-stage vaccine company that focuses on therapies for both known and newly emerging diseases, has lost some support from a Wall Street analyst.

The Analyst

Citi's Joel Beatty downgraded Novavax's stock from Buy to Neutral.

The Thesis

Investor expectations for Novavax were high throughout 2016, but top-line Phase 3 data from the company's RSV F nanoparticle vaccine for the prevention of RSV in the elderly was disappointing and resulted in the stock falling from the $7 level to around $1 in late 2016. The stock has failed to gain any significant buying momentum since then and Beatty's downgrade could further dampen investor sentiment. (See Beatty's track record here.)

Novavax's stock was downgraded because the delay in phase 1/2 NanoFlu data by two months to February 2018 makes the analyst "more cautious" as to the study's outcome, he said. It's unclear if the data will show the differentiated immunogenicity profile compared to Fluxone HD.

"Management tells us that CDC has been unable to provide Novavax with the exact H3N2 strain currently circulating, so NVAX plans to grow this virus in-house," the analyst said. "However, given the lack of even some initial data being announced today using some historical strains, we're becoming more cautious on whether this study will show clear differentiation, and thus we're lowering our POS to 20 percent (from 30 percent)."

Price Action

Shares of Novavax were trading lower by more than 20 percent Tuesday morning. 

Related Links:

Can Novavax Stage A Comeback In Q4? One Analyst Thinks So

Is There Life Left In The Novavax Clinical Program?