NVAX data by YCharts.

Shares of Novavax (NASDAQ:NVAX), a clinical-stage vaccine company focused on treating respiratory syncytial virus, or RSV, influenza, and Ebola, collapsed in September, falling by a whopping 34%, based on data from S&P Capital IQ.

If you’re looking to place blame, look no further than the following two downside catalysts.

By far the biggest negative for Novavax was the release of top-line data from its phase 2 study of its RSV F vaccine, which is designed to protect infants via maternal immunization. RSV is an infection of the lungs and breathing passages that can cause major problems in persons with underdeveloped and compromised immune systems.

Now here’s the catch: On the surface, the data hit the mark. Its RSV F vaccine was deemed safe and well tolerated, and RSV F vaccine-treated patients demonstrated a significant rise in antibody levels compared with the control group, where the placebo produced no statistically significant changes in antibody levels. Following the data release, Novavax announced plans to move its RSV F vaccine into late-stage studies.

However, Wall Street has serious concerns as to whether the RSV F vaccine can provide maternal immunization to infants, and, even if it can, whether the data is deemed strong enough to encourage physicians to prescribe the vaccine. Based on the tumble in Novavax’s stock following the data release, the assumption is it may not sell well if approved. 

The other issue (which was a cross-sector issue among all biotech) was the discussion by presidential hopeful Hillary Clinton of implementing prescription-drug reforms to control out-of-control drug-price inflation. Chances are that Novavax’s vaccines would avoid the ire of consumers with its pricing, but the possibility of reform is clearly a concern for all drugmakers.

Source: Flickr user NIAID.

However, with Novavax stock losing 34% last month, the question that should be asked is whether there are reasons for Novavax to rebound.

On one hand, Novavax has largely made cash a minimal concern, which is a good thing if you’re looking to invest in this stock. Its RSF V vaccine will be supported in late-stage trials by an $89 million grant from the Bill and Melinda Gates Foundation, which comes on top of the $314.9 million in cash and cash equivalents that it reported at the end of the second quarter. With the likelihood that grants could sustain future vaccine research, Novavax’s cash runway isn’t a concern.

But investors should also keep in mind that vaccines are often dependent on outbreaks and government demand. Both of these factors can be lumpy, and they don’t guarantee the success of a vaccine -- especially one that Wall Street doesn’t seem to believe will sell well. This means that Novavax could be losing money for many years to come, which is somewhat worrisome considering that it’s already valued at $1.9 billion.

I’d suggest sticking to the sidelines until Novavax manages to get a vaccine approved by the Food and Drug Administration, and makes substantial headway with regard to reducing its quarterly losses.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy