Why Novavax Stock Crashed in November

By George Budwell Markets Fool.com

Image source: Getty Images.

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What happened

According to data fromS&P Global Market Intelligence, shares of Novavax (NASDAQ: NVAX) fell 16.3% in November. The vaccine maker's stock slumped after it announced a 30% reduction to its workforce in an effort to reduce its cash burn rate moving forward.

So what

This latest setback apparently kept Novavax's shares from enjoying a boost from Donald Trump's surprise victory over Hillary Clinton last month. The broad-based iShares Nasdaq Biotechnology ETF (NASDAQ: IBB), for instance, rose by nearly 6% in November, presumably because of Trump's less caustic rhetoric toward the industry's controversial practice of hiking the prices of older medicines:

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IBB data by YCharts.

Now what

Novavax is attempting to minimize dilution for shareholders while its experimental RSV vaccine winds its way through a late-stage study in pregnant women. The stated goal of this study is to assess the vaccine's ability to preventRSV in infants via maternal immunization.

The problem is that the biotech exited the most recent quarter with only $300 million in cash, and this study isn't scheduled to read out until mid-2020, according to clinicaltrials.gov. Moreover, this RSV vaccine candidate essentially showed no benefit whatsoever in its late-stage trial in elderly adults earlier this year, implying that its chances at conveying immunity in infants through an indirect route such as maternal immunization is probably slim at best.

With a long wait ahead for any major clinical catalysts and the specter of dilution rearing its ugly head, investors may want to watch this speculative biotech from the safety of the sidelines for now.

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George Budwell owns shares of iShares NASDAQ Biotechnology Index. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.