Why JPMorgan Is So Bullish on Novavax

Health and Healthcare

Published: September 21, 2018 10:45 am

Last Updated: January 11, 2020 5:32 pm

Novavax Inc. (NASDAQ: NVAX) is one of those small-cap biotech stocks that has the hallmarks of a rags-or-riches company. It might be worth more money down the road than can easily be imagined, or it might be a bust. Friday’s trading session showed Novavax on the leaderboard after an analyst upgrade from JPMorgan.

The stock was raised to Overweight from Underweight in a less than common two-notch upgrade by Eric Joseph at JPMorgan. What changed in the bearish-to-bullish move was the view of a favorable risk/reward profile ahead of trial data for its respiratory syncytial virus (RSV) infection treatment in infants. The data are expected to be seen in the first quarter of 2019.

Now that the stock has pulled back from its highs on receding expectations, JPMorgan sees 50% to over 100%, depending on how strong the RSV data comes out. The call also warns of up to 80% downside if the trial fails, but that is deemed a less likely outcome by the firm.

Analyst calls such as this do come with big risks. After all, some clinical data from biotechs and pharmaceuticals alike may be widely expected to be positive, but that doesn’t assure a positive outcome. This is one of the factors that leads to the rags or riches for biotech investors.

The Centers for Disease Control and Prevention website discusses RSV as having an estimated 57,000 children younger than five years old in the United States being hospitalized due to infection. The cold-like virus also causes one to two out of every 100 children younger than six months old to potentially need to be hospitalized for an RSV infection.

Novavax is not just a one-trick pony when it comes to vaccines and candidates. Its clinical stage pipeline includes various stages beyond RSV of a nanoparticle seasonal influenza vaccine and an ebola vaccine. Its RSV vaccine for infants via maternal immunization is also listed as being supported by an $89.1 million grant from the Bill & Melinda Gates Foundation.

Novavax was up 2.8% at $1.47 on Thursday ahead of the analyst upgrade, but its shares were up 7% at $1.57 mid-morning on Friday. Its stock had been indicated up 11% at $1.64 in the premarket, and its shares briefly hit a high of $1.70 before backing off. Novavax has a $602 million market capitalization and a 52-week range of $0.96 to $2.75.