Novavax: NanoFlu Vaccine Exceeds Typical Expectations For Flu Treatment

Summary

• Novavax announces positive phase 1/2 NanoFlu Vaccine results.
• NanoFlu was able to show a superior immune response to currently approved standard vaccines for the H3N2 strain that has been responsible for 75% of this year's hospitalizations.
• An interim update is expected by mid-2018 for Novavax's RSV vaccine candidate in phase 3 for treating maternal immunization of infants.
• The financials are in okay shape, but it is highly likely that Novavax will have to raise more cash in the coming months.
• Novavax has a good pipeline of candidates that could potentially eventually create shareholder value.

In after-hours trade on Wednesday, Novavax (NASDAQ:NVAX) announced positive phase 1/2 results for its NanoFlu Vaccine. This positive data sat really well with investors and the stock jumped as much as 28% on the news with higher volume. The reason why the stock has reacted so much to this data is not only because the study was positive. It was able to achieve much higher responses against several flu strains compared to already FDA approved products. With positive phase 1/2 NanoFlu data, and more catalysts approaching in 2018 I would rank it as an excellent buy. This despite the fact that it has since traded lower. I believe it presents a great buying opportunity. Especially with interim data on the way in mid-2018 from a phase 3 study.

Phase 1/2 Data

The phase 1/2 NanoFlu study recruited a total of 330 patients who had to be 60 years of age or older. This study with NanoFlu showed a positive outcome against many strains of the flu virus of this season that caused a lot of hospitalizations. The virus responsible for this years problems is known as the H3N2 flu strain. This strain was responsible for 75% of the hospitalizations due to the flu virus. Why is this substantial? The reason being that this is the worst flu season on record. To make matters worse, the currently approved flu vaccines available to treat this strain are only 10% effective. So this goes back to Novavax's NanoFlu vaccine, and the reason why it jumped by more than 28% on this news. That is because it was able to show that the vaccine was 47% to 64% more effective against a variety of strains of the H3N2 compared to standard flu vaccines. Here are some of the H3N2 strains in which NanoFlu performed better in compared to standard vaccines:

• 47% higher NanoFlu response against homologous strain (A/Hong Kong)
• 64% higher NanoFlu response against forward-drifted strain (A/Singapore)
• 54% higher NanoFlu response against historic strain (A/Switzerland)

With this data on hand, Novavax has announced that it is pushing on to initiate a phase 2 trial for NanoFlu by Q3 2018. I believe that the stock will continue to trade higher based on this news.

More Stock Gains Ahead

The NanoFlu vaccine data will get the stock moving, but there is another item to be on the lookout for. That involves interim data from a late-stage study in RSV for maternal immuniziation of infants. This is in a phase 3 study, and an interim update for this study is expected by mid-2018. If the interim data comes in highly positive, then I believe the stock will likely gap higher. Although, the final data from this study looking at the primary endpoint won't be known until early 2019. Still, this provides another catalyst that could potentially push the stock higher.

Financials

According to the 10-Q SEC Filing, Novavax has cash and cash equivalents of $172.6 million as of September 30, 2017. According to the company it stated that its cash would last 12 months from the date of the filing of the 10-Q (which was November 7, 2017). That means that the company will need to raise more cash in the coming months either through dilution or by other means. The good news is that the phase 3 study of RSV for maternal immunization of infants is being funded by an $89 million grant from the Bill and Melinda Gates Foundation. Still, the company will need the cash for the rest of its pipeline it has going on, and in addition for corporate purposes as well.

Conclusion

It is important to note that the phase 1/2 NanoFlu study came out good, and I believe that it should do well in phase 2 as well. However, there is always a risk still involved that the phase 2 data may not be equivalent. On top of that, the phase 3 RSV maternal immunization of infants is a more important study, and will be a difficult hurdle to overcome. That's because phase 3 studies typically involve more patients, and have a final trial design that must be overcome to prove efficacy of the clinical product. There is no guarantee that the final outcome of the phase 3 study will be positive. In which case, the stock could crash by 50% or more. Despite all that, this news about NanoFlu is positive. I expect the stock price of Novavax to continue to rise in the coming weeks based on this data. That's why I believe that this biotech is a good buy.

Analyst’s Disclosure: I/we 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.