Novavax: Why Investors Are Excited Now

Sep.25.13 | About: Novavax, Inc. (NVAX)

Novavax, Inc. (NASDAQ:NVAX) describes itself as a clinical-stage biopharmaceutical company creating novel vaccines and vaccine adjuvants to address a broad range of infectious diseases worldwide. Using innovative proprietary recombinant protein nanoparticle vaccine technology, the company produces vaccine candidates to efficiently and effectively respond to both known and newly emergent diseases.

On Tuesday September 24, Novavax released a lot of information that has investors excited. Novavax has been working to bring its manufacturing platform and production process out of the Phase I and II stage into a process that it considers locked and suitable for Phase III and commercialization. My attempt with this article is to highlight for investors the important data points.

1. Game on

Novavax announced today it is preparing for the next round of clinical studies with the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority (BARDA), for its quadrivalent seasonal influenza vaccine and its pandemic influenza vaccine. This is an important step toward ultimate commercialization and shareholder value.

2. Well financed

Novavax also announced a public offering of $82.6 million in equity priced at $3.14 per share, near its 52-week high of $3.50 per share. It's always a good sign that large investors are willing to pony up so much money despite a stock trading near its high. The PR was vague on details as to the extent this funding will secure Novavax, but the CEO spilled the beans during the Q&A session of the presentation that followed:

We're looking to fund the program in ways that we have our flu program to the extent that we can with non-diluted financing, but it also requires investor participation. This money that we raised is designed to take us into 2016, which will get us a long way on all 3 different programs, and then, we'll see where we go from there.

Looks like investors don't have to worry about any more dilution or capital concerns or anything else financial for quite a while.

3. Possible stockpile purchase coming for Novavax H7N9 vaccine

Novavax's CEO deep in the Q&A session gave a cautionary yet eye-opening response to an analyst question:

It's somewhat difficult to predict the actions of the U.S. government or other governments. But if history prevails, BARDA and the U.S. government have, in the past, stockpiled hundreds of millions of dollars of H5N1 vaccine. They have purchased, as I think Gale pointed out, over $1 billion worth of H1N1 - Lou pointed out the H1N1, and I think that the government does stockpile. Having said that, there is not a stockpile plan in action like this minute for H7N9, but I would be surprised if there weren't at some point.

Over $1 billion in possible orders for just one vaccine for a company excited to have $80 million in financing would likely have investors causing a stampede to get into the stock. As the CEO pointed out there's no such order yet, but he would be surprised if one doesn't come.

Most of the presentation was filled with complex details about the science behind what Novavax is doing. I won't try to bore you with the details. It's the results that are exciting for the investment thesis. Financially, Novavax is very sound with plenty of cash in the bank, its programs moving forward, and it's sitting on a wild card of a possible government order to stockpile one of its vaccines. Investors can now sit back and watch the events and developments unfold, be they positive or negative, attempt to study the science and get an edge if they wish and not have to worry about the funding angle of Novavax. Often funding is a worry that eats up most of the time, research and concern of investors in development-stage biotechs. Novavax investors: worry no more.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.