Novavax Nears Vaccine Approval, Manufacturing, Sales And Profits

| About: Novavax, Inc. (NVAX)


Novavax is poised to launch its first vaccine as Phase III testing nears completion.

Both the FDA and Novavax are ready to move fast once the Phase III trial is completed.

We estimate Novavax’s potential vaccine revenues, and company valuation.

Novavax (NASDAQ:NVAX) is poised to become a vaccine manufacturer with sales and profits, pending FDA approval of its first vaccine-an annual shot to prevent RSV disease in older adults.

Both the FDA and Novavax are ready to move fast once the RSV vaccine's Phase III results are in (expected between July and September). Novavax may then submit a Biologics License Application (BLA) to the FDA on a rolling basis, under a "fast track" process that the FDA announced in late May; Novavax hopes for a fast track FDA review of six months versus the standard ten months.

Novavax already has manufacturing capability to meet demand for RSV vaccine in the U.S. market for the launch year and two years thereafter. This week Novavax signed a lease for space near its headquarters for expanded manufacturing capacity. In anticipation of FDA approval, Novavax is taking the following additional steps to ensure a successful launch:

  • Educating the health community about the risks of RSV infection, through the website and with booths at major conferences.
  • Planning its outreach to health professionals who treat older people (e.g., those who administer flu shots).
  • Planning its Medicare pricing negotiations, since Americans over 65 are covered by Medicare.
  • Holding discussions with global drug firms that could market the vaccine outside North America.

Here's the upcoming sequence:

  1. Phase III testing completed by September.
  2. BLA submission and FDA "fast track" review; an FDA approval would trigger vaccine manufacturing, marketing to health professionals about the vaccine and, for the ex-North America market, final negotiations for a licensing agreement.
  3. Following FDA approval, a presentation to the Advisory Committee on Immunization Practices (ACIP) at its next meeting (held every four months); ACIP will decide whether to recommend use of the RSV vaccine.
  4. Assuming ACIP recommends the vaccine, Medicare pricing review, which Novavax expects to take 3-6 months.
  5. Sale of the vaccine.

Our revenue estimate-just for this first Novavax vaccine-starts with fact that hospitalizations for RSV are comparable to those for influenza. RSV accounts for 207,000 hospitalizations per year among Americans over 65, while influenza is associated with more than 200,000 hospitalizations per year, mostly older adults, according to the Centers for Disease Control (CDC). Given this comparability, if the FDA concludes that the RSV vaccine is safe and effective, it is difficult to imagine ACIP recommending against vaccination for older adults. Furthermore, an ACIP recommendation implies Medicare coverage.

Thus we assume that ultimately each American over 60 who chooses to get the annual flu vaccine-about 42 million per year-would also choose to get the annual RSV vaccine, perhaps at the same time. (Novavax would need to succeed in its marketing to the health community to reach this same level of RSV vaccination as flu vaccination.)

Regarding pricing for the RSV vaccine, a reasonable benchmark could be the annual flu vaccine, which Sanofi (NYSE:SNY) and GlaxoSmithKline (NYSE:GSK) sell to the private sector for about $17 per dose (per CDC's website). (These companies are also key Novavax prospects for its ex-North America partner.)

At 42 million vaccinations per year, and with revenues of $17 per dose, Novavax's annual RSV vaccine revenue in the U.S. market would be $714 million. (We do not estimate licensing revenues from a partner marketing the vaccine outside North America.)

We can estimate the value of Novavax based on the average price-to-sales ratio for US drug firms, i.e., 4.37. (That ratio is from the website of NYU Finance Professor Aswath Damodaran.) So if all the assumptions here hold true, beginning with FDA approval of the RSV vaccine, Novavax could be worth $3.1 billion ($714 million times 4.37) on the basis of potential RSV vaccine sales in the U.S. alone. Its current market value is about $1.8 billion.

Disclaimer: Caution: do not rely on any part of this narrative, or the headline, in making any investment decision. No investment recommendation is expressed or implied. Novavax stock may become worthless at any time, e.g., if the company goes bankrupt. Or the stock price could soar, or do anything in between. Before making any investment decision, consult a financial adviser, read the company's 10-K and 10-Q reports, review transcripts of the quarterly conference calls, review and understand the company's financial statements, and make your own decision. The author is merely an amateur individual investor, with no financial training, and the headline and narrative above may have substantive errors, omissions and/or misinterpretations. In fact, the author wrote this article largely in the hope that other Seeking Alpha readers would identify any such errors and point them out in the comments section. Moreover, company circumstances may change at any time, and any such information will not be updated by this author. For these reasons, do not rely on any part of this narrative, or the headline, for any investment decision.

Disclosure: I am/we are long NVAX.

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.

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