Novavax's VLP Technology Is a Game Changer

Forget what analysts in the pockets of big hedge funds say, to quote the Wall Street Journal directly, “Novavax is a winner.”

The Maryland-based company released big news last week regarding its Phase II clinical trials of their seasonal influenza virus-like particle vaccine. The studies showed the vaccine was well tolerated and worked well against three types of seasonal flu, including H1N1.

There are several reasons why this is an important development for Novavax (Nasdaq: NVAX), but there is a more daunting reason why this is big news for mankind.

Simply put, without faster processes for producing influenza vaccines that protect against new strains, pharmaceutical companies will be backed up and unable to help slow a pandemic.

Just last month, the World Health Organization reported that the swine flu viruses aren’t producing enough of a key vaccine ingredient, which has limited the amount of vaccine that is available. Its laboratory network went to work to produce a new set of viruses that it hoped would work better, and while some drugmakers have said they are running behind schedule others insist they will be able to start shipping the bigger batches of vaccine soon. Meanwhile, world governments with bigger pockets have placed huge orders with companies like Baxter International Inc. (NYSE: BAX), GlaxoSmithKline PLC (NYSE: GSK), NOVARTIS (NYSE: NVS) and Sanofi-Aventis SA (NYSE: SNY), moving them to the front of the line as other, less fortunate countries are being left to fend for themselves.

As Science Progress points out- for decades, most experts have agreed that the process of manufacturing influenza vaccine using hens’ eggs is archaic and needed to be improved. But because biotech funding seems to follow the trail of super drugs generated by big pharmaceutical companies, the standard has remained.

So what happens the moment a deadlier strain hits? Would this process suffice? No.

Game changer

According to experts at the Department of Health and Human Services, producing a vaccine to protect the entire U.S. population against a pandemic would require an enormous supply of eggs: 900 million are necessary to produce 300 million doses. If strains hit that are too virulent and deadly, this process will fall way short.

Fortunately, Novavax appears to be blazing a path to faster production and better quality of flu vaccines.

The company circumvents the slow boat approach of taking the actual influenza virus, growing it, and then inactivating it. Instead, Novavax's recombinant, cell culture-based VLP technology makes a genetic match to the flu strains of interest. It does not require live flu virus seed that has to be adapted to grow in eggs to create the egg-based vaccine.

This attribute of recombinant virus-like particle (VLP) will lead to a more efficacious vaccine against the flu strains that are circulating around the globe.

The results released as part of this study provided Novavax's first human data to support this hypothesis. Thus, this method could potentially meet the demands of “surge capacity” in the face of a pandemic.

That’s not all.

When VPLs are injected into a patient, the immune system reacts as if it were attacking a real virus, creating anti-bodies against it, and giving the patient immunity when the real strain attacks. Unlike traditional vaccines, these VLPs do not run the risk of becoming virulent again, making them safer to use.

The study showed that Novavax's VLP vaccine was not only well tolerated, but it also induced strong hemagglutination inhibition (HAI) antibody responses against three influenza strains: H1N1, H3N2, and B strains. That demonstrated the potential for VLP vaccines to be cross-protective against flu viruses from different seasons without the addition of an adjuvant.

Furthermore, the responses met the seroconversion criteria for licensure as outlined in the FDA guidance document for influenza vaccine development. And if it’s good enough for the FDA, it’s not implausible to think that the door may have just been opened for other governments to fast-track the testing and licensing of Novavax’s VLP vaccine technology.

Fast track to Europe

It’s not unheard of. Even the European Medicines Agency, the EU’s top drug regulatory body, has accelerated the approval process for the current swine flu vaccine, and countries such as Britain, Greece, France and Sweden say they’ll start using the vaccine the moment it’s greenlighted.

In an interview with The Associated Press, Dr. Keiji Fukuda, the World Health Organization’s flu chief, warned about the potential dangers of untested vaccines, although he stopped short of criticizing Europe’s approach outright:

One of the things which cannot be compromised is the safety of vaccines. There are certain areas where you can make economies, perhaps, but certain areas where you simply do not try to make any economies.

NVAX’s reach across the pond has already begun. In June, the company announced an initial agreement to license its proprietary (VLP) vaccine technology to ROVI Pharmaceuticals of Spain. ROVI will use it to create a comprehensive influenza vaccine solution for the Spanish government under a new 60 million-euro program sponsored and led by the Spanish Ministry of Health and other government groups to develop pandemic and seasonal flu vaccines and establish its only in-border facility. This program, which was announced by Spanish health officials, is being launched to develop safe and effective flu vaccines to serve the entire population of Spain.

In the pipeline: U.S., Asia, Australia, India

Under separate agreements, ROVI will receive exclusive licenses to Novavax's portable VLP vaccine technology to commercialize flu vaccines in Spain and Portugal, and non-exclusive licenses in Europe, Latin America and Africa. As part of the deal, Novavax is also set to receive royalties from ROVI's sales of their products, and will retain exclusive rights to the vaccine in North America, Asia and Australia.

In July, Cadila Pharmaceuticals announced the launch of a joint venture with Novavax in India. Under that agreement, the two will launch a joint venture, called CPL Biologicals Pvt. Ltd., which will develop and manufacture vaccines, biological therapeutics and diagnostics in India.

Novavax told The Associated Press that the deals would

bring the company development funding needed now and will be worth tens of millions of dollars in future royalty and milestone payments once the vaccines are approved and marketed.

The safety of flu vaccines is a concern both here and abroad. Flu vaccines have been used for 40 years, and many experts say extensive testing is unnecessary, since the swine flu vaccine will simply contain a new ingredient: the swine flu virus, but European officials won’t know if the new vaccine causes any rare side effects until millions of people get the shots. Still, they say the benefit of saving lives is worth the gamble.

Novavax’s safety results strongly support moving forward with larger head-to-head trials of the VLP and egg-based vaccines, the first of which is scheduled to start this autum in elderly adults, according to the company.

Dr. Penny Heaton, Chief Medical Officer and Vice President of Development of Novavax:

The safety and immunogenicity results from this study give us confidence to move our seasonal influenza VLP vaccine candidate forward into late phase development,. Given the immunogenicity results we saw with our VLP vaccine candidate as compared with the egg-based vaccine, we are now particularly excited to begin the larger head-to-head study in elderly adults this Fall.

Takeover target

Make no mistake, NVAX’s ability to produce more powerful vaccines in a little under two weeks and the study’s numerous other results have changed the game. Some on Wall Street now feel that the company has painted a clear "take-over bulls-eye" on their back, but that isn’t causing anyone to become distracted at Novovax headquarters. Everyone is more strongly committed and supportive of accelerated development of Novavax's pandemic influenza vaccines, including the novel H1N1 2009 influenza VLP vaccine.

Dr. Rahul Singhvi, President and Chief Executive Officer of Novavax says:

We are working tirelessly with partners and governments worldwide to potentially provide H1N1 vaccine to regions without an indigenous supply. The current influenza pandemic underscores the potential for Novavax's advanced influenza vaccine technology to have significant public health impact by providing vaccine in time to those in need.

Expect more news from the company as new milestones are reached and other study results are announced. I wouldn't be surprised to hear something positive as early as as next week.

Biotech investors interested in seeing more details about these stories and accessing the complete database of clinical trials and upcoming FDA decisions can access that information here.

Disclosure: Long NVAX

Comments

[hoopdreamer...:]

If it's such a game changer, takeover target why did the insiders just sell hundreds of thousands of shares?

Do you or biomedreports get paid by the company's for these informercial articles? Your pal Havrilla wouldn't reply.

Sep 07 11:28 PM

[one eye:]

Hoopdreamer, the last insider sale for NVAX was in early July, Pre july 4th, really and every sale was for less than $3 per share.

They Sold Hundreds of thousands, slightly less than 500k. You forgot to mention that these same Insiders picked up an almost Identical amount In July of the Previous year for Free. I don't know if they were required to sell because of the circumstances of how they received them and neither do you.

There hasn't been a single sale since then. The Announcements about Spanish funding and a JV in India came afterwards as did the ongoing delays in Vaccine Manufacturing through the Old Egg Method.

But it really doesn't matter why they sold. The Technology is a Game Changer simply because of the Production method.

Sep 08 12:38 AM

[M. E. Garza:]

Dreamer.. For what it's worth, you will see the following texts on any of the articles which appear in our publication/news portal:

"BiomedReports is not paid, compensated or in any way incentivized to report news and developments about publicly traded companies."

In addition, we always disclose our position(s)- as required by federal law.

Good luck to you.

Sep 08 05:39 AM

[longterm:]

About time someone writes an article that identifies what makes this company special. If it wasn't for Rodman and Renshaw locking in their bonuses, this stock would be trading much higher.

Sep 08 12:17 PM

[Value Added:]

NVAX is interesting, but it's quite the gamble. This company is a one-horse wonder, and if there are any hiccups in the technology, they are in trouble. Plus, the recent run-up in price shows that much of the potential for the company has already been priced into the stock. Too risky for me - this company is in the same category as early stage startup.

Sep 08 12:50 PM

[User 351140:]

As a medical professional I agree that this is game changer company, it is great technology and if it shows sucess with just one vaccine it will triple or quadruple. And to answer to one of the comments it is not one "horse wonder". They are working on vaccine for RSV which would be huge and nobody has vaccine for this virus. We use globulin shots against RSV produced by Medimmune and given once a week during winter time to all premie babies. If they develop anything against RSV the pay off will be even bigger than with flu vaccines. Granted though it will take them 2-3 years to get RSV vaccine if at all.

Sep 08 01:06 PM

[one eye:]

One Trick Pony and a Start up at that, The Spanish Government doesn't agree with that premise and neither does one of India's premier Pharma's. But, it doesn't really matter whether its early, middle or late stage in the Start Up phase, what matters was its ability to take a sample of H1N1 and produce a Vaccine within 6 weeks.

This means that they will be the "go to " company, if a Mutation occurs.

Sep 08 01:24 PM

[longterm:]

Check out the number of countries trying to align with Novavax - many with less restrictive FDA protocols. Before the swine flu goes pandemic, look for someone like Baxter to come in and expand their product line.

Sep 08 03:44 PM

[Moon Kil Woong:]

Thanks for the reccomendation. I am always interested in investing in companies that can provide benefits to humanity. This type of work certainly justifies research and investment. Looking at its market cap and run-up it looks like they are certainly getting it now.

The major problem now is determining what exactly the company should be valued at. It seems a bit hyped and has shot through most rosy targets already.

Sep 08 10:43 PM

[one eye:]

I would think they will consolidate for a while but with Any other Country agreements will only give it another excuse to go up.

Vical is another which goes the non-egg route...I think, VCIL is symbol.
Am not positive as to its Pedigree.

Sep 09 05:46 PM

[Fred W:]

Your comment made sense until you said "this company is in the same category as early stage startup." Your definition of an early stage startup must be very "interesting"--wonder what you would have clasified Pets.com as back in 2000--a pre-pubescent ink stain on pieces of paper with Delaware C-corp being the only legible marks.


On Sep 08 12:50 PM Value Added wrote:

> NVAX is interesting, but it's quite the gamble. This company is a
> one-horse wonder, and if there are any hiccups in the technology,
> they are in trouble. Plus, the recent run-up in price shows that
> much of the potential for the company has already been priced into
> the stock. Too risky for me - this company is in the same category
> as early stage startup.

Sep 10 12:00 PM

[M. E. Garza:]

I got to meet one of the pricipals at this week's Rodman and Renshaw Medical Conference and I must say that I am more impressed than I already was. Very strong leadership at the company.

Sep 12 07:35 AM

[Mark Bern:]

One Eye - Your last point is very well taken. If there is a mutation in the H1N1 swine flu virus as it spreads across the globe, there will not be enough time for the traditional virus makers to retool and make a new vaccine that would be effective against the new strain. There may be no other alternatives than to give fast-track approval to NVAX in order to have a chance to save mankind!

I know that was a bit of hype on my part. But, in reality, if the virus were to mutate and increase in virility, the world could be facing a real problem without turning to the likes of NVAX. So far the primary mutation is not that deadly. But the point is: it did mutate once already. Will we be so lucky if it does so again?


On Sep 08 01:24 PM one eye wrote:

> One Trick Pony and a Start up at that, The Spanish Government doesn't
> agree with that premise and neither does one of India's premier Pharma's.
> But, it doesn't really matter whether its early, middle or late stage
> in the Start Up phase, what matters was its ability to take a sample
> of H1N1 and produce a Vaccine within 6 weeks.
>
> This means that they will be the "go to " company, if a Mutation
> occurs.

Sep 13 09:44 PM

[aavery6801:]

All sounds good.My only concern is that this info is readily available, and yet the stock is down 7% today with the Dow up 100. Everything from Chico's to Vonage is up. NVAX is the worst performer on my watch list of 50 stocks.

Is some hedge fund -for-hire shorting this stock down to make for a lower takeover target price for Bax, GSK or our India friends?

Sep 16 01:30 PM

[F N:]

NVAX has been performing very poorly since the company announced that it will be doing a common share offering.
Problem is, it has yet to announce when and at how much.
Very frustrating.

M.E. Garza, do you think that you can get an answer from them.
They are killing the stock with this delay.

I know I was looking at the stock and am annoyed as I have yet to see more news on this common share offering issue.

Sep 24 06:43 AM

[F N:]

I think that NVAX has a chance to be one of the big ball players in this H1N1 epidemic along with CVM and VICL.

Has anyone else heard any news on the common share offering.
A friend who is deeply invested into NVAX said that he heard that the share offering is speculated to be between $5.50 - $6. Has anyone else heard anything about this? Please advise.

Sep 24 04:36 PM

[F N:]

Looks like they already priced their secondaries about a month + ago.

Oct 02 04:25 PM