What goes up can go down -- and often does.
On Dec. 18, Novavax (NASDAQ: NVAX) stock was up more than 18% year to date. By the end of the following day, the biotech's share price had plunged more than 20%. Novavax stock is now down close to 9% in 2017. What happened? The company provided an update on progress of its RSV F vaccine and NanoFlu influenza vaccine that wasn't what investors expected.
But is Novavax a stock to buy after the recent drop? Let's look at both sides of the argument.
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Yes, it's a buy
The primary case for buying Novavax begins with the potential for its pipeline candidates. First, the biotech's RSV F vaccine could address an enormous unmet need. RSV, or respiratory syncytial virus, causes more hospitalizations among U.S. children under the age of one than any other factor. It causes more deaths in children in that age group across the world than any other disease except malaria.
Novavax's vaccine uses an antigen based on the RSV fusion (RSV F) protein to vaccinate infants through immunization of pregnant mothers. This approach of maternal immunization of infants could be a really good one, based on results from a phase 2 study. Novavax now has a late-stage study in progress and expects an interim analysis of the data in mid-2018. If all goes well, the biotech should report primary outcome results in early 2019 and file for regulatory approval by the end of 2019.
There's also excitement among Novavax investors over the potential for its nanoparticle-based influenza vaccine, NanoFlu. Pre-clinical results from NanoFlu were so good that Novavax kicked its program into high gear. NanoFlu handily beat Sanofi's leading flu vaccines Fluzone and Fluzone HD in generating antibody responses in ferrets, which are used because flu infections in the animals closely resemble those in humans.
Novavax says that it should have a complete phase 1/2 data package ready in February 2018. That's a little later than initially expected. However, it's still a quick turnaround, considering the phase 1/2 study didn't begin until less than four months ago.
The opportunity for NanoFlu is huge. Around two-thirds of older Americans receive flu vaccinations currently. The Centers for Disease Control and Prevention (CDC) want to increase that rate to 90% by 2020. If NanoFlu is successful in further studies, Novavax could have a big winner on its hands.
No, it's not
The most compelling argument against buying Novavax stock is it's highly risky. As a case in point, the company's RSV F vaccine has already flopped in a late-stage study in immunizing older adults. The vaccine didn't meet its primary endpoints nor its secondary endpoints.