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Novavax Gets First Sell Rating Since 2020. It’s Got a Covid Vaccine Problem, Analyst Says.

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A healthcare worker prepares a dose of Nuvaxovid vaccine.

Jeroen Jumelet/ANP/AFP via Getty Images


Novavax

stock was dropping Friday after receiving a Sell-equivalent rating — the first since December 2020 and the only one from Wall Street.

Bank of America Securities analyst Alec Stranahan initiated coverage of


Novavax

(ticker:


NVAX

) at an Underperform rating on Friday, with a $35 price target. The stock was down 5% to $55.50 on Friday, a far cry from its September 2021 highs, when it traded at around $270.

Despite the pullback, Stranahan sees room for the shares to trade lower still. Driving his bearish take is skepticism surrounding the durability of the company’s Covid-19 vaccine, Nuvaxovid.

“We see a difficult commercial setup for Nuvaxovid based on decreasing C-19 booster use, unclear benefit as a heterologous option, and waning immunity against new variants,” he wrote.

The vaccine also faces fierce competition from other vaccine manufacturers, including


Pfizer

(


PFE

) and


BioNTec

h (


BNTX

), and


Moderna

(


MRNA

). Preliminary data points that the vaccines developed by competitors may hold up better against Omicron than Nuvaxovid, Stranahan added. If priced correctly, the vaccine may have a bigger uptake across developing countries, he wrote, an idea supported by the fact that most allocated doses to date have been to the World Health Organization. But he foresees that revenue from the vaccine could decline after an initial blip as more people get the first dose of the vaccine.

Outside of the Covid-19 vaccine, Novavax’s development pipeline “is on the lighter side,” Stranahan wrote. Assuming declining revenue from Nuvaxovid and sustained operating expenses at around $2 billion a year, he expects profitability to turn negative from 2023 to 2027 until additional vaccines are approved. 

The company’s seasonal flu vaccine, NanoFlu, could eventually provide some upside. Given that the company has focused on Covid-19 vaccines over the last two years, it is still unclear what benefits NanoFlu could have over other readily available vaccines, he wrote. Novavax has also “fallen to the back of the pack” in developing an RSV, or respiratory syncytial virus, vaccine, Stranahan added. 

The last time Novavax had a Sell-equivalent rating was in December 2020, according to FactSet. Today, five of the eight analysts covering the stock rate it a Buy, while two rate it a Hold and one — Stranahan — rates it Underweight.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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