Novavax Inc. learned just how badly the Street treats negative surprises, as its shares (NASDAQ:NVAX) plummeted, hitting a one-year low of $1.16, following the phase III failure of its respiratory syncytial virus (RSV) F-protein recombinant nanoparticle vaccine candidate in older adults.

Top-line data indicated the Resolve (RSV-E-301) trial of the RSV F vaccine in 11,856 adults 60 and older missed the pre-specified primary and secondary efficacy endpoints, with tolerability as the only bright spot.

Novavax closed Friday at $1.29 for a loss of $7.05, or 84.5 percent. Shares of the Gaithersburg, Md.-based company had not fallen below $2 in more than three years and last traded at $1.16 in May 2012.

The primary objective of the randomized, observer-blinded, placebo-controlled trial, conducted across 60 U.S. sites, was to show efficacy in preventing moderate to severe RSV-associated lower respiratory tract disease (RSV msLRTD), defined by the presence of multiple lower respiratory tract symptoms. The secondary objective was to demonstrate efficacy by reducing the incidence of symptomatic respiratory disease due to RSV (RSV ARD). The trial also evaluated the safety of the unadjuvanted, 135-mcg dose of the RSV F vaccine compared to placebo.

In the primary endpoint of RSV msLRTD the vaccine was outperformed by placebo, with 28 older adults (0.47 percent) developing RSV msLRTD vs. 26 (0.44 percent) for placebo. In the secondary endpoint, 102 (1.72 percent) of vaccine subjects experienced RSV-ARD vs. 117 (1.97 percent) on placebo.

On a conference call, company officials somberly acknowledged that initial analyses and review of the trial data indicated no issues with execution, data collection or integrity, and product quality. The arms were well-balanced, with no significant differences across age, gender, race, ethnicity and other factors.

But Novavax is not giving up on the vaccine. Stanley Erck, president and CEO, ruled out the prospect that the candidate doesn't work in older adults, referring to "a preponderance of data that tell a consistent story" across animal models and nine trials across diverse populations that consistently showed "robust immune responses by every measurement that we have." He also dismissed the prospect that vaccine material changed from batch to batch, citing "a robust comparability package" and lack of "a smoking gun."

Instead, Erck zeroed in on the RSV attack rate, which he called "the lowest ever reported," as the clear difference between the phase II RSV-E-201 trial, which reported positive findings in older adults last year, and the phase III trial. RSV ARD attack rates and RSV msLRTD attack rates of 2 percent and 0.4 percent, respectively, were reported in the phase III compared with rates of 4.9 percent and 1.8 percent, respectively, in the phase II study. (See BioWorld Today, Aug. 11, 2015.)

Historically, annual seasonal RSV ARD attack rates in older adults are estimated to range between 3 percent and 7 percent, according to the company.

Calling out the attack rate contrasted the company's firm belief in May, during its first-quarter earnings call, that the RSV season was consistent with those of previous years.

"Was it bad luck?" Erck asked. "Yes. Was it predictable? No."

'A NUMBER OF SIGNIFICANT OVERHANGS'

To bolster its support for a path forward, Novavax also reported top-line results from the phase II rollover trial of the RSV F vaccine in older adults.

The randomized, observer-blinded, placebo-controlled trial enrolled 1,329 older adults from the prior phase II study, conducted at the same 10 U.S. sites, to evaluate safety and serum anti-F IgG antibody concentrations in response to immunization with the vaccine.

Exploratory objectives evaluated the efficacy of a second annual dose of the vaccine to prevent RSV ARD and RSV msLRTD.

Participants previously randomized to 135 mcg of the vaccine or placebo were re-enrolled and re-randomized in the current trial to receive either vaccine or placebo, resulting in the analysis of four trial arms.

The rollover trial showed immunogenicity in the active vaccine recipients, including a sixfold increase in anti-F IgG in the placebo-vaccine arm that was consistent with the phase II efficacy findings.

Although anti-F IgG was higher at baseline in the vaccine-vaccine arm compared to the placebo-vaccine arm, the vaccine-vaccine arm still showed more than a twofold increase in anti-F IgG from the higher baseline.

Although attack rates were similarly low, "we did observe that a second season immunization could provide efficacy," said Gregory Glenn, R&D president.

Erck conceded that the findings change the trajectory for Novavax.

"First, it's clear that there will not be a [biologics license application] filed in 2017," he said, promising to provide additional details on a filing timetable and the nature of additional trials, expected to begin by year-end, during an analyst day meeting scheduled for Oct. 11.

Although data are pointing Novavax toward a prime boost strategy, the company is considering all of its options for RSV F.

In the meantime, the phase III findings have no impact on the phase III maternal immunization program that is underway and expected to report data in 2018, according to Erck, and other programs remain on track.

"From everything we know, we believe that we remain in the lead in the global pursuit of an RSV vaccine and that we will have the first licensed product," he said. "To date, we are the only company to have demonstrated efficacy with an RSV vaccine in any population."

Analysts were unmoved. Piper Jaffray's Edward Tenthoff downgraded the stock from overweight to neutral and dropped the price target from $14 to $1.

J.P. Morgan analyst Jessica Fye downgraded shares in the same fashion, writing, "Beyond the lack of demonstrable efficacy, this stark season to season variability highlights a key risk for potential future studies; namely the lack of a predictable control arm. While we expect the company will provide additional color at the upcoming Investor Day, we see a number of significant overhangs NVAX will need to address to restore investor confidence."