Novavax Inc. (NVAX) is a clinical stage biopharmaceutical company with a couple of promising candidates in its pipeline. Its RSV vaccine and seasonal influenza vaccines are in phase II of clinical trials. The company expects to initiate the phase III studies for seasonal influenza vaccine in 2014. As is the case with most biotechnology companies, the release of data from Phase II for RSV and influenza vaccine will be a major catalyst for share prices.
Novavax Inc. is a development stage biopharmaceutical company focused on developing recombinant protein nanoparticle vaccines. The company has proprietary rights to the technology being used, known as recombinant vaccine technology, comprised of virus like particles ((VLPs)), and the recombinant nanoparticle vaccines. VLPs resemble viruses and are self-assembling protein structures.
The company has a total of four clinical stage products in its pipeline. The main purpose of the company's vaccines is to allow countries the world over to better brace themselves and respond effectively in case of outbreaks of rapidly multiplying diseases, both identified and newly emerging. Novavax is dedicated in employing its technology platforms to create vaccine solutions that are geography-specific.
An effective method of judging the promise of development stage biotechnology companies is by partners. This is because highly informed industry players are in a pretty good position to judge the potential of ongoing clinical trials and engage in strategic partnerships accordingly.
The company has international partnerships including: a joint venture with Cadila Pharmaceuticals India, licensing arrangement in Korea with LG Life Sciences; a collaboration for development of RSV vaccines with PATH; a development contract with U.S. Department of Health and Human Services Office of Biomedical Advanced Research & Development Authority (BARDA) for seasonal and pandemic influenza; and a research collaboration with the U.S. Department of Homeland Security to develop a VLC vaccine for protection from foot and mouth disease. Novavax acquired 97.4% of the shares of Isconova AB, in July of 2013. The competitors of Novavax are Sanofi Pasteur Inc., Merck & Co. Inc., GlaxoSmithKline plc, MedImmune LLC, and Novartis Inc.
The vaccine candidates of Novavax are still in the clinical trial phase. These vaccines are designed with the purpose of addressing infectious diseases globally. The clinical-stage pipeline of NVAX consists of four products targeting the respiratory syncytial virus (RSV), seasonal influenza, pandemic influenza, and rabies. RSV vaccine has entered phase 2 of the clinical trials, after successful preclinical and phase 1 trials. The vaccine aims to use the maternal immunization strategy to protect the infants from the disease. The RSV is a major cause of respiratory diseases worldwide. Despite the severity of the RSV infections, no vaccines are available. The success of clinical trials of NVAX could prove to be a breakthrough event for the company. Seasonal influenza vaccines have also entered phase 2 of the clinical trials; while Pandemic Influenza is in phase 1 of the clinical trials. Novavax genetically engineers the rabies vaccine candidate which is being developed under a joint venture with CPL Biologics Private Limited. The preclinical immunogenicity studies have been completed by CPL and the preclinical toxicology studies are underway. The adjuvant pipeline consists of projects on Avian influenza, seasonal influenza, and Malaria & HIV partnered with J&J/Crucell; 3 projects with Genocea and Malaria with Jenner Institute.
The large amount of M&A activity is driven by the biotechnology industry valuations and Novavax is no exception in this regard. The shares are up 30% annual and approximately 80% in the last two years. Despite this appreciation, it is still trading at a huge discount to mean sell side target price of $4.9. A total number of 5 brokers have a price targets ranging for $3 to $9.5, with a unanimous buy rating on the stock.
Novavax has a year to date performance of 52.91%, as of October 30th, exceeding the S&P 500's performance of 23.08%. The stock has so far seen an upward trend through the year.
The earnings growth rate of NVAX of -17.39% is substantially lower than the S&P rate of 6.90%. This implies that the earnings of Novavax have decreased as compared to the previous year.
The company will be presenting in the 25th Annual Piper Jaffray Healthcare Conference on the 3rd and 4th of December, 2013. The event will be helpful for the company for investment purposes.
The clinical trials of Respiratory Syncytial Virus (RSV) vaccine candidate entered Phase 2 in the first week of October. Any positive news regarding results of these trials over the next 3 to 6 month period is expected to have a positive impact as well. The results of the pre-clinical study of the RSV vaccine have been favorable, thus far. Hence, positive results of phase 2 studies are expected. The data for influenza VLP vaccine H7N9 (Australia) is expected to be announced in the fourth quarter of 2013. In the second quarter of 2014, the data for the phase 2 seasonal influenza dose confirmation trial is expected. Positive results from this trial would lead to the initiation of phase 3 of seasonal influenza trial in the second half of 2014. The data for RSV women of childbearing age trial is expected to be released in the second quarter of 2014.
Fundamentals and Potential Risks
The company ended the previous quarter with cash of around $40.5 million and quarterly cash burn from of operations of around $7.6 million.
The company's expenses have consistently exceeded its revenue since its inception. This has resulted in net losses; despite the losses the company has managed to fare well. The expenses of the company are high because of the research and development efforts for the vaccine candidates. Furthermore, they have limited financial resources and the company may raise funds through offerings, which could have a negative impact on the stock prices.
Novavax is also subjected to contract risk with HHS BARDA. The regulations of the contract allow that HHS BARDA may choose to delay certain of the activities and in such case Novavax would have to fund the activities themselves. Furthermore, if the company fails to meet the milestones HHS BARDA may elect not to extend the contract period. This is a potential risk which may cause a serious setback to the company.
Another risk factor inherent in all development stage companies is the failure of the clinical trials. The company is anticipating positive results from the trials and any negative result may prove detrimental for the company.
The prospects of Novavax Inc. are lucrative in the long run based on the success of the influenza and RSV vaccines trials. The company has enough funding and financial footing to see it well through the trial stages of its vaccines, and also divert the threat of dilution. However, the risks of the company must be assessed before investing in the company.
Novavax is producing VLPs using baculovirus expression system in insect cells which uses disposable low cost equipment.
News from the Annual Piper Jaffray Healthcare Conference may have a positive impact on the stock price. The data for influenza VLP vaccine expected to be announced in the fourth quarter of 2013 can be a good catalyst for valuations.
Furthermore, the Global Vaccine Market is anticipated to grow at a CAGR of 11.36% and reach approximately $84 billion by 2022 according to Research & Markets. This bodes well for most vaccine manufacturers and is also a positive indicator for Big-Pharma interest in Novavax or its products.