Novavax (NASDAQ:NVAX) shares tumbled more than 8% in premarket trading Tuesday after JPMorgan analysts downgraded the stock from Neutral to Underweight.
The revision comes on the back of a period of notable outperformance by NVAX, with its stock value rising by 267% since the announcement of its strategic partnership with Sanofi for the COVID-19 vaccine program, Nuvaxovid, on May 10th.
Despite the immediate financial boost from the $500 million upfront milestone payment, which alleviated concerns about the company's financial stability, analysts at JPMorgan consider the current stock levels to “substantially overvalue” the potential revenue that Nuvaxovid could generate for Novavax.
The enthusiasm surrounding the potential of combination COVID-19 and flu vaccines (CICs) to expand the respiratory vaccine market is tempered by the expectation that COVID-19 vaccine demand will be much lower than that for flu, analysts noted.
The development of CIC candidates is seen as a strategy for either backfilling COVID-19 revenue streams or defending existing flu vaccine franchises.
In this context, JPMorgan forecasts peak sales for Sanofi-led Nuvaxovid mono and CIC vaccines at $1 billion and $1.5 billion, respectively. These figures translate to peak revenue contributions to Novavax of approximately $200 million and $140 million, with an overall per-share contribution of $4 in the bank's model.
“Coupled with the $6/sh YE25 cash forecast, but little in the way of a foreseeably value accretive proprietary pipeline, we are returning to an underweight rating of NVAX shares, establishing of Dec-25 PT of $8,” analysts explained.
The new target price implies a downside risk of more than 50% from NVAX’s last closing price of $16.42 on Monday.