Bank of America Downgrades Novavax to Underperform, Sets Target Price at $7

Bank of America has downgraded Novavax shares to "underperform" with a target price of $7, citing high cash burn and a challenging sentiment toward vaccines. The broker reduced its estimates for Nuvaxovid and the CIC program, expecting total revenues of $1.417bn for 2025 and 2026.

Bank of America (BofA) has downgraded Novavax shares to "underperform" with a target price of $7, reflecting mounting concerns over the vaccine maker's long-term growth prospects. The broker cited high cash burn and a challenging sentiment towards vaccines as primary reasons for the downgrade [1].

Novavax has shown progress in stabilizing its operations, having reduced operating expenses by roughly two-thirds from pandemic-era highs. However, analysts at BofA are wary of key growth drivers remaining uncertain, particularly the demand for its COVID-19 shot, Nuvaxovid, which is expected to fade as the vaccine targets the JN.1 variant while the dominant strain in circulation is now NB.1.8.1. Additionally, the Food and Drug Administration's updated vaccine framework requires more rigorous and costly trials for new strains, complicating potential partnerships for Novavax’s experimental COVID-19/influenza combination vaccine [1].

The heightened regulatory bar and the potential for Novavax to face increased scrutiny due to the appointment of Robert F. Kennedy Jr. as the new head of the Department of Health and Human Services (HHS) further exacerbate the challenges. Kennedy's appointment has sparked concerns among investors and analysts, potentially impacting the biotech sector's overall sentiment and development ventures [4].

In response to these challenges, Novavax has been working on retrenchment efforts, which have led to a short-term lift amid funding cuts to some mRNA rivals. However, BofA believes the outlook for sustainable growth is limited. The broker estimates total revenues of $1.417 billion for 2025 and 2026, reflecting a cautious approach to the company's financial projections [1].

Investors should closely monitor Novavax's ability to navigate these challenges and adapt to the evolving regulatory landscape. The company's stock price has been volatile this year, swinging sharply as investors weigh its retrenchment efforts against a narrowing path for growth in a post-pandemic market [1].

References:
[1] https://www.citybiz.co/article/734030/novavax-shares-cut-to-underperform-by-bank-of-america-on-growth-concerns/
[4] https://www.usatoday.com/story/money/2024/11/15/rfk-jr-health-job-pharma-stocks/76341822007/