Shares of Novavax, Inc. NVAX dropped 13.3% on Sep 22 after analysts at JP Morgan recently downgraded the stock’s recommendation from Neutral to Underweight due to waning sales of its COVID-19 vaccine Nuvaxovid.
JP Morgan also cut the 12-month target price set on the company’s shares to $27, a substantial price cut from the earlier set target price of $132.
The decision to revise the recommendation on Novavax’s stock by JP Morgan’s analysts was taken a month after the company announced alongside its second-quarter 2022 results that it is reducing its revenue guidance for 2022 by half. Management lowered the guidance for total 2022 revenues from the previously-expected guidance of $4-$5 billion to $2-$2.3 billion. The analysts at JP Morgan cited that they expect the company’s management to further slash these revenue forecasts based on the recent vaccine dynamic in Europe and the United States.
The analysts also pointed out that Novavax faces “mid- and longer-term headwinds to meaningful Nuvaxovid uptake." Per its Q2 earnings call, the company does not expect to generate revenues from vaccine sales in the United States and the World Health Organization-backed COVAX facility for the remainder of the year. Management acknowledged the fact that the late product launch of their COVID-19 vaccine and the dominance of mRNA-based vaccine developed by Pfizer PFE/BioNTech BNTX and Moderna MRNA was responsible for the loss of Novavax’s market share in the COVID vaccine market in the United States.
Shares of Novavax have plunged 84.3% compared with the industry’s 26.8% decline.
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Novavax’s COVID-19 vaccine is also its first marketed product. However, the product launch was delayed by almost a year due to the postponement of the regulatory filing with the FDA. The FDA filing, supposed to have been done by management in May 2021, was completed after multiple delays in January 2022. This delayed filing resulted in a subsequent delay in emergency approval resulting in a substantial loss of market share for the company.
Novavax’s COVID vaccine is currently authorized in the United States and Europe as a primary two-dose regimen for adults and adolescents aged 12 years and older. However, the late product launch has been detrimental to the stock’s performance. A majority of the population has already completed primary vaccination using Pfizer/BioNTech and Moderna’s approved mRNA-based vaccines.
Last week, the vaccine received authorization in the European Union for use as a booster dose in adults aged 18 years and older. A regulatory filing is pending before the FDA authorization of the Novavax vaccine as a booster dose in adults.
Compared to Novavax’s COVID vaccine, mRNA-based vaccines have high efficacy rates. The COVID-19 vaccines developed by Modernaand Pfizer/BioNTech are presently the only COVID-19 vaccines which have received full approval in the United States. While Moderna’s vaccine is approved for adults, the Pfizer/BioNTech vaccine is approved for use in both adults and adolescents. Both these vaccines are also authorized for use in individuals aged six months and above in the United States. A third and fourth booster dose of Moderna and Pfizer/BioNTech vaccines have been authorized for certain age groups by the FDA.
Novavax is also lagging in the development of Omicron-specific vaccines. Earlier this month, Moderna and Pfizer/BioNTech also secured EUA from the FDA for their respective Omicron BA.4/BA.5-adapted bivalent vaccines as a single booster dose. While Moderna’s Omicron booster is approved for individuals 18 years of age and older, Pfizer/Moderna’s version is approved for people 12 and older. These vaccines have been specifically developed to cater to the U.S. market, where the Omicron subvariants BA.4 and BA.5 are the most prevalent variants.
Novavax is also advancing its own Omicron-based COVID vaccine in clinical development. While the top-line data is expected in third-quarter 2022, management expects to initiate a regulatory filing with the FDA for this Omicron-specific vaccine candidate by 2022-end.
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Novavax currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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