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Novavax (NVAX) Stock Falls 10% After Ending Agreement With Gavi

Despite a strong rally seen in today’s market, not all stocks are participating in the fun. One company that’s currently sitting out this rally is vaccine maker Novavax (NASDAQ:NVAX). Shares of NVAX stock are currently do…

Despite a strong rally seen in today’s market, not all stocks are participating in the fun. One company that’s currently sitting out this rally is vaccine maker Novavax (NASDAQ:NVAX). Shares of NVAX stock are currently down 10% as investors digest a key announcement from the company.

Yesterday, Novavax announced that it will be terminating its agreement with Gavi, a vaccine alliance, to sell its Covid-19 vaccine to low- and middle-income countries.

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The reason for this termination appears to be tied to a lack of interest in Novavax’s vaccine from Gavi. The coalition reportedly did not procure the 350 million doses it initially agreed to take last year. Thus, while no penalties are reportedly on the table for this termination, it’s unclear as to whether Novavax will need to return any of the $700 million in funds it received as part of this agreement.

For a company that’s already lowered its forecast again this month due to waning demand for vaccines and an apparent supply glut, investors are turning bearish on this company. Novavax also recently received World Health Organization (WHO) approval for its vaccine.

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Why Is NVAX Stock Plunging Today?

Besides the obvious effects this agreement termination has on Novavax’s fundamentals, there’s a human element here to consider. A supply glut of vaccines in wealthier countries may not portend to lower-income countries equally. Thus, it’s unclear if this termination will have a negative effect on the member countries Gavi serves.

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That said, the ultimate economic impact of this termination for Novavax also remains unknown. The company is already seemingly in difficult financial shape. The WHO’s approval of its vaccine came at a time that was not advantageous for the company. It appears the narrow window that vaccine makers had to get their vaccines approved has closed. This market is not a highly profitable one, outside of the companies that got to market early.

There’s always the potential of another outbreak and Novavax’s technology could be used to combat the next viral strain we see. However, at this point, NVAX stock appears to be more speculative than a fundamental bet on growth, as it once appeared. Thus, today’s selloff appears to be warranted.

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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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