Take Long View

What: The shares of Novavax (NASDAQ:NVAX), a clinical-stage biotechnology company focused on vaccines, had a January to forget, as shares shed 34% of their value during the month, according to data from S&P Capital IQ. 

The company wasn't alone in its plunge as the SPDR S&P Biotech ETF (NYSEMKT:XBI), an ETF that invests primarily in small-cap biotechnology stocks, had an awful month, as well.

XBI Chart

So what: Despite the horrendous decline, the company only had two news items released during the month that were worthy of mention, neither of which can explain the market's reaction.

  • Novavax announced that it was raising $300 million from a convertible bond offering. Those notes mature in 2023, and if converted to shares, would do so at a price of $6.81, representing a 22.5% premium to Novavax's share price at the time of issuance.
  • The company presented at the JP Morgan Healthcare conference, where it confirmed that its RSV F vaccines trials are on schedule, and that the company expects new clinical readouts in the second half of the year.

Now what: Until Novavax can bring its vaccines to market and start to generate revenue, its stock is going to be subject to the whims of the biotech market, so it's no surprise to see its shares fall so much when the XBI takes a hit. Novavax stock also finished a very prosperous 2015, so perhaps traders were simply in profit-taking mode with the company's shares during the month as they bailed out of the biotech sector.

Regardless of its stock's short-term price movements, Novavax's future remains tied directly to the success of its RSV F vaccine, and with late-stage clinical data being reported later this year, it should be an interesting year for investors. If the data continues to look promising, then it's likely that the vaccine will be in regulators' hands by 2017. Given that the RSV virus afflicts tens of millions of patients around the world, each year it looks to hold blockbuster potential.

Investors with a high tolerance for risk might want to consider giving Novavax's discounted share price a closer look.

Brian Feroldi has no position in any stocks mentioned. 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.