Battered Biotechs to Buy: Novavax (NVAX)
Novavax, Inc. (NASDAQ:NVAX) is easily going to go down as one of the biggest losers among biotechs in 2016. In just a single day, NVAX stock dropped 85% off a disappointing late-stage clinical trial.
The devastation was such that it brought out the dark humorists. Renowned Wall Street guru Dennis Gartman commented coldly that NVAX stock investors won’t be able to send “junior” to college.
While I wouldn’t want the karma that comes from schadenfreude, there’s no mistaking that this was a tough pill to swallow. But the question becomes, was the fallout in NVAX stock justified?
Investors clearly panicked over the Phase 3 results of Resolve — Novavax’s proposed vaccine for respiratory syncytial virus (RSV). The disappointment was twofold. First, the latest test revealed that Resolve was no more effective than placebo. Second, the prior Phase 2 trial was very promising, and expectations were raised. Exacerbating the situation is that Resolve is the company pipeline’s flagship product. People saw the writing on the wall, and dumped out of NVAX stock as quickly as they could.
However, that argument ignores the other products in the pipeline that are making progress. One should especially look at Novavax’s emerging viruses division, which includes research on ebola and Middle East Respiratory Syndrome (MERS). As the Zika virus is demonstrating, biological threats can impact anywhere at any time. That means there’s still a case for NVAX stock as a viable opportunity.
For now, Novavax is the biggest loser among biotech stocks. However, it also has a chance to be one of the more remarkable comeback stories in 2017.
Geron Corporation (NASDAQ:GERN) is another name among biotechs that’s giving long-term investors fits. Year-to-date, GERN stock is down more than 54%.
A majority of the losses came from January, and shares never recovered. A dramatic spike in market value earlier this month lifted hopes, but they were quickly dashed by unfavorable news.
The latest overhang on GERN stock stems from Geron’s research into myelofibrosis treatments. The clinical studies are sponsored by Janssen Biotech, which is owned by Johnson & Johnson(NYSE:JNJ). Of the two treatment options, one has already been deemed ineffective. Thus, everything is riding on the other treatment. Should results later disappoint, Geron risks losing a major sponsorship for this study.
That also makes GERN stock an all-or-nothing affair.
From a trading perspective, the risky setup is not at all ideal for beginner or conservative investors. Then again, biotech stocks have never been known for their steadfast constitution. What can be said from a scientific point of view is that efficacy data from Geron’s myelofibrosis pilot study shows encouraging performance. There are also positive signs from the company’s therapy for myelodysplastic syndromes.
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