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Why Novavax Stock Imploded in February

By George Budwell – Updated Apr 11, 2019 at 11:51AM

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Novavax's latest clinical failure may prove to difficult to overcome.

What happened

Novavax (NVAX 1.89%), a developmental-stage vaccine company, lost 69% of its value in February, according to data from S&P Global Market Intelligence. Novavax's shares tumbled on the last day of the month after the company reported that its respiratory syncytial virus (RSV) vaccine, ResVax, failed yet again in a pivotal trial.

Back in 2016, the vaccine missed badly as a preventive measure against RSV infection in elderly adults. This time around, ResVax failed to produce a significant level of protection against RSV infection in newborns exposed to the vaccine while in the womb via maternal immunization.

Check out the latest earnings call transcript for Novavax.

Chalkboard chart showing a downward-trending arrow.

Image Source: Getty Images.

So what

Although Novavax's management was quick to point out that ResVax did show some signs of efficacy that could perhaps pave the way for regulatory approval in the U.S. and Europe, the market clearly didn't agree with their positive assessment. And the market is probably right in this case. Frankly, it's hard to imagine regulators granting approval to a vaccine under these circumstances -- even though RSV is the leading cause of hospitalizations in infants and there are no preventive treatment options available at present.   

Now what

On the bright side, Novavax does have a promising flu vaccine candidate, NanoFlu, under development. So there is a chance that Novavax could rise from the ashes of this latest clinical failure. The bad news, though, is that the company doesn't appear to have the cash necessary to execute a late-stage trial for NanoFlu, if one is indeed required by regulators -- and it most likely will be if history is any guide. As such, investors may want to take a cautious approach with this beaten-down biotech stock for the moment.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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