Investing

This Biotech Stock Plunged 20% but Wall Street Expects a 195% Recovery

Trey Thoelcke

Published: March 15, 2024 9:15 am

Investing in biopharmaceutical stocks comes with more risks than some other types of stocks. Just one unsuccessful clinical trial or a lack of funding can doom biotech startups. But the rewards can be great when investors are on to a winner. Take Novavax Inc. (NASDAQ: NVAX) for example, one of the winners in the race for a COVID-19 vaccine. The Maryland-based vaccine maker was founded in 1987. Its share price fell last year as the pandemic faded from public consciousness. However, the stock is projected to almost triple in the coming year. So what’s up here? Let’s have a look.

A Healthy Recovery for Novavax?

The company engages in discovering, developing, and commercializing vaccines to protect against serious infectious diseases. It offers a vaccine platform that combines a recombinant protein approach, nanoparticle technology, and its patented Matrix-M adjuvant to enhance the immune response. Novavax focuses on urgent health challenges, such as vaccines for COVID-19, influenza, and a combination of the two. The company is commercializing a COVID-19 vaccine under the brand names of Nuvaxovid and Covovax, adjuvanted for adult and adolescent populations as a primary series and for both homologous and heterologous booster indications. It is also developing an adjuvant malaria vaccine.

The company’s market cap is about $732 million. That is less than those of competitors such as AstraZeneca PLC (NASDAQ: AZN), BioNTech S.E. (NASDAQ: BNTX), and Moderna Inc. (NASDAQ: MRNA).

The recent quarterly report was disappointing for several reasons, including revenue that fell short of expectations. The company called it a transition year, in which it made significant strides in streamlining operations and preparing for future product launches. It also projected flat to lower revenue for 2024 due to ongoing headwinds.

One headwind for Novavax was a dispute with a global vaccine organization called Gavi, the Vaccine Alliance. Novavax terminated a purchase agreement with Gavi in 2022, and the two disagreed about whether an advance payment was refundable. The dispute now appears to have been settled.

Novavax’s updated Covid vaccines received authorizations from Canada and the WHO late last year, but the company laid off 12% of its workforce early this year.

Shares are up more than 27% since the settlement of the dispute and are nearly 9% higher than at the beginning of the year. They have traded for as high as $11.36 apiece in the past year, and the all-time high is more than $300 a share, back in their meme stock days of 2021.

So, the stock has not fared well. Let’s see where the share price could go from here.

Who Is Rooting for Novavax?

Five analysts have price targets that range from $4 to $38, but notice that the low target is less than the current share price. That is, at least one analyst expects the price to slip. However, reaching the high target would be a gain of about 625% for the stock. Still, the consensus recommendation is to hold shares. Yet, the most recent analyst call (the only one seen this year) was a maintained Buy rating.

Will the stock recover and soar this year? Analysts are not in agreement about its prospects.