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Novavax’s Manufacturing Issues May Be Its Top Vaccine Struggle, Analyst Says

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A Novavax scientist working on vaccine development in March 2020.

Andrew Caballero-Reynolds/AFP via Getty Images

There was plenty of bad news to go around for

Novavax

as the company reported earnings and pushed back the timeline for its Covid-19 vaccine on Monday. Manufacturing problems are the most serious issue, according to J.P. Morgan analyst Eric Joseph.

“Among the several disappointing updates from the recent earnings print / call, the most troubling to us is the clear challenge the company still faces in manufacturing its vaccine candidate at large scale,” Joseph wrote in a research note published Wednesday.

Joseph said his confidence is dwindling that the company can meet the production targets it has set for this year, given raw-material shortages and “seemingly inconsistent batch production.”

As other Covid-19 vaccine makers continue to ramp up their own manufacturing capacities, Joseph suggested that the case for

Novavax’s

Covid-19 vaccine, at least in the short term, is collapsing.

Joseph downgraded Novavax to Neutral from Overweight, and set a target for the stock price of $161, down from $285. The stock closed Tuesday at $138.18, after falling 13.9% during the session. It was down another 3.2% in early trading on Wednesday.

Novavax (ticker: NVAX) shares are down 43.2% so far this month, as investors’ fears mount that the company will miss out on the near-term Covid-19 vaccine market. Despite strong efficacy data, the company now trails behind

Moderna

(MRNA) and

Pfizer

(PFE), whose similarly efficacious vaccines have been administered to hundreds of millions of people globally.

In a statement to Barron’s early Wednesday, Novavax said that it was confident in its vaccine and in its manufacturing network, and that it had made “extraordinary progress” in bringing its vaccine to market.

“We are confident that we are well positioned to meet our global manufacturing targets for the second half of this year and to complete our global regulatory submissions in the third quarter,” the company said. “We also look forward to reporting out the results of our phase 3 trial in the U.S. and Mexico in the coming weeks.”

In his note on Wednesday, Joseph wrote that he expected the Phase 3 trial to yield positive data. But he said he saw little hope of the stock rising in response.

“The company continues to face challenges acquiring sufficient quantities of raw materials needed for production runs… resulting in delays in the scale-up of manufacturing capacity,” Joseph wrote.

Novavax has said it would be able to make 100 million doses of its vaccine a month by the end of the third quarter of this year, and 150 million doses a month in the fourth quarter. But Joseph said that challenges remain to hitting those milestones.

“Against the backdrop of steady competitor execution, we see these manufacturing challenges… being a key hurdle to NVX-CoV2373 being a material commercial player, particularly as larger market focus shifts from the pandemic to seasonal management of COVID-19,” he wrote.

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