8 Reasons To Buy This $1.30 Lottery Ticket

| About: Novavax, Inc. (NVAX)

Novavax (NASDAQ:NVAX) reported earnings on Friday. It beat on the bottom line but was a little light on the top line. It had a mild selloff in reaction. I think the market is missing the potential of this small biotech and it is a great high risk/high reward pick for aggressive investors who like to spread several bets around in this space.

Novavax - "Novavax, Inc., a clinical-stage biopharmaceutical company, focuses on developing recombinant vaccines for infectious diseases using its virus-like particle platform (NYSE:VLP) technology. It develops vaccine product candidates that target pandemic influenza, including H1N1 and H5N1 strains; seasonal influenza; and respiratory syncytial virus (RSV)." (Business Description from Yahoo Finance).

8 Reasons to buy NVAX at under $1.50 a share:

  • Insiders are showing confidence in its prospects and have been net buyers of over 350,000 shares over the past six months.
  • Revenues are going up exponentially. NVAX booked under $1mm in sales in FY2010, it took in just under $15mm in revenues in FY2011 and analysts have it having over $35mm in revenues in FY2012.
  • The company is significantly improving its cash burn rate. It lost $6.3M in 4Q10, but only $3.7M in 4Q11.
  • The stock has a solid balance sheet with over $18mm in net cash which should be sufficient until the company becomes cash flow positive.
  • It has two full years on a 3yr/$97mm government contract. The contract can also be extended for another two years for an additional $82mm.
  • It is ridiculously below analysts' price targets. The median analysts' price target for the five analysts that cover NVAX is $4 a share, more than double its current price.
  • There are two major catalysts I see for the stock over the next 12-18 months. (A) It achieves positive cash flow or (B) It attracts the interest of a larger player and is bought out at a substantial premium to gain access to its attractive vaccine technologies.
  • The stock looks like it has bottomed at these levels (See Chart)

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Disclosure: I am long NVAX.