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Shares of Novavax, Inc. (NASDAQ:NVAX) shot up almost 10% in after hours trading on Monday as the company announced positive results of its avian flu virus vaccine in animal studies.

The company's Virus Like Particle [VLP] vaccines were shown to provide protection against pandemic influenza and cross protection against various strains of the virus, including the Indonesian strain identified in 2005 and the Vietnam strain of 2003.

In the pre-clinical study both rats and ferrets showed a robust immune response to the vaccine. In fact, according to the company, ferrets make the best test models for the vaccine as these animals most closely resemble the immune response of humans against most strains of the flu virus, including H5N1.

With the positive set of data, presented at the Phacilitate Vaccine Forum in Baltimore, the company has confidence in initiating human clinical trials "later this year," according to Dr. Rick Bright, Vice President of Novavax's Global Influenza Programs.

On January 17, the Department of Health and Human Services [DHHS] awarded about $133 million to GlaxoSmithKline (NYSE:GSK), Novartis (NYSE:NVS), and Iomai (IOMI) for various programs to develop avian flu virus vaccines.

Novavax stock dropped following the news. Almost immediately, as if prepared in advance, the company issued a press release of its own stating that its flu vaccine program is progressing normally and will not be affected by the government's decision. The statement also re-emphasized the point that its program was never dependent on government help, and that the company has enough financial and scientific resources to advance the vaccine into human clinical trials later in 2007.

While the company does have more than $75 million in cash and equivalents as last stated by Yahoo!Finance, it does carry a relatively hefty debt load of $22 million. Last year, the company reported a negative operating cash flow of almost $5 million. But that was for pre-clinical animal studies.

If the company intends to advance human trials well into 2007 and 2008, that $75 million will most surely not be enough, especially with such large debt. Novavax will either need to file for a secondary offering, or partner with a larger company.

It all depends on how successful preliminary results from the human trials prove to be.

Related Reading:
- GlaxoSmithKline, Novartis and Iomi Land Avian Flu Vaccine Contracts
- Project BioShield Has Given Biotechs Little Motivation to Protect Americans

NVAX vs. IOMI vs. NVS vs. GSK 1-yr chart


nvax chart

Source: Novavax Advances Avian Flu Vaccine Despite Government Snub