NVAX NEWS
John Engle
Novavax: Catalysts Building Toward A Crescendo
Sep. 13, 2017 11:13 AM • nvax
Summary
At a conference on Sep. 7, Novavax gave updates on its pipeline candidates, upcoming catalysts, and its forward-looking strategy.
Initial data for its maternal RSV vaccine trials, now in their third year, will be published in 2018.
NanoFlu, a novel flu vaccine, stood out again as a product candidate with the potential to supplant current vaccines; initial Phase 1/2 data will be available in Q4 2017.
The shape of future trials for the previously failed older adult RSV vaccine will depend on the progress of NanoFlu.
Novavax continues to trade at a steep discount to its true value; major upcoming catalysts should lift it significantly higher.
Today or any day that phone may ring and bring good news.
—Ethel Waters
Novavax (NVAX) has had a long and bumpy road. Suffering badly after its key trial of an adult RSV vaccine went bust in 2016, the stock has tumbled downward, sitting below $1 a share for some time. A brief uptrend in July 2017 that saw the stock climb to $1.51 a share when a conference call was announced to discuss the future of the older adult RSV program. The market, unimpressed with a call that covered exactly what it promised to cover, pushed NVAX back down to around $1. Since then the stock has listed, slowly and sporadically climbing toward $1.15, almost exactly where it was the day before the July presentation.
While the July presentation and subsequent Q2 earnings report at the start of August have not done much to elevate NVAX’s share price, a presentation on Sep. 7 at the Citi 12th Annual Biotech Conference points the way forward and offers some fresh insights on the company’s strategy and future (the presentation slides were made available to non-attendees this week).
The presentation laid out the key upcoming catalysts, as well as some strategic considerations as the company continues to grapple with its failed RSV vaccine trial. I have already presented an in-depth bull case for NVAX on Seeking Alpha, and the latest presentation has not changed that thesis. But it does offer further texture and validation of the positive view. This article examines what new information emerged from the conference, and what it means for NVAX’s future.
The Heart of NVAX: Maternal RSV Vaccine
The ongoing Phase 3 trial of its maternal RSV vaccine is the hinge on which everything turns for NVAX. With $187.3 million in cash reserves reported at the end of Q2 2017, the company has some runway, but not enough to get safely to Q4 2018, at the current projected burn rate. So the interim trial results, to be reported in the second half of 2018, will come at a crucial time. Positive results will reinvigorate investor confidence and drive a surge in share price that will allow NVAX to raise capital, either through a share offering or partnership agreements without cratering shareholder value.
I explained in my previous article on NVAX why the maternal RSV trial should meet with far greater success than its predecessor. In short, a low attack-rate season during the older adult vaccine trial likely contributed to its failure to meet key endpoints. The new trial is designed to eliminate most of its predecessor’s weaknesses by being conducted across multiple seasons and countries.
The interim data presentation will be a make-or-break moment for NVAX. But the impressive Phase 2 results and improved Phase 3 trial design give excellent cause for confidence.
The Future is NanoFlu
Chronologically speaking, there is a significant upcoming catalyst that predates the critical maternal RSV vaccine results: In Q4 2017, NVAX will present safety and immunogenicity data from the in-progress Phase 1/2 trial of NanoFlu.
NanoFlu has flown under the radar until recently, but analysts have lately been zeroing in on its potential. Animal trials have indicated superior immunogenicity and efficacy to current vaccines. The forthcoming Phase 1/2 data will shed light on whether this new vaccine’s breakout performance in models will translate into similar outstanding results in human subjects. There is significant reason for optimism: Comparing NanoFlu to past flu vaccine trials and established models, it is likely that it will hold up in human trials.
Provided the Phase 1/2 trial shows positive topline results, the data will be used to drive discussions with BARDA, as well as with potential private development partners. NVAX is eyeing an aggressive timeline, pushing to reach the end of Phase 2 meeting with the FDA in Q1 2018. Positive results would draw investors’ attention. The market will consider the forward-looking timeline for NanoFlu, which stretches into 2020, with renewed interest. The data and subsequent partnership discussions will buoy NVAX’s share price, lifting it back to more respectable levels even before the interim maternal RSV vaccine data is presented. It won’t soar until investors get validation on the RSV vaccine trial, but it will help lift it off the mat.
On the other hand, while another flop would not endear investors to NVAX, the downside is limited. NVAX’s share price appears to place little to no value on the NanoFlu program. That is likely to change toward the end of 2017.
Resurrecting the Older Adult RSV Vaccine
In its July conference call, NVAX presented topline data from a new Phase 2 older adult trial, as well as further insights drawn from the failed Phase 3 trial. The Phase 2 results showed superior response in patients treated with an adjuvanted formulation of the vaccine. The post-hoc analysis of the Phase 3 trial showed that patient sub-populations did in fact experience significant vaccine effect. In particular, patients with COPD showed profound benefits from the older adult RSV vaccine.
Armed with this knowledge, NVAX now has two pathways it can pursue. Firstly, it can undertake a Phase 2 efficacy trial in a susceptible sub-population (specifically sufferers of COPD), and secondly, it can embark on another large-scale Phase 3 trial, based on the structure of the current maternal trial, using the adjuvant formulation. NVAX has stated that its decision to initiate either or both will depend on the status of NanoFlu development. This statement indicates that NVAX recognizes the limitations of its financial position, and that it must prioritize protocols that can demonstrate results in the relatively near-term. With success in NanoFlu’s early trials and positive topline results for the maternal RSV vaccine, NVAX will have more room to maneuver and to eventually resurrect the older adult vaccine program.
Conclusion
When considering NVAX, investors must consider, near-, mid-, and long-term factors. Over the near-term, there are a number of small catalysts that should help to buoy NVAX’s share price. Foremost among them is the Phase 1/2 NanoFlu trial. The study has been well designed, and NanoFlu’s efficacy in established models demonstrates huge potential. With little downside risk, investors can reap a significant upswing off the back of positive results and follow-on news.
Investors are then faced with the crucial mid-term question of whether the Phase 3 trial for the maternal RSV vaccine will succeed. Again, the study design, success in Phase 2 trials, and an adjuvant demonstrated to enhance vaccine efficacy all point toward the path of optimism, but certainly not certainty. With $187.3 million in cash reserves reported at the end of Q2 2017, the company has some runway, but not enough to get safely to Q4 2018, at the current projected burn rate. This is the hinge catalyst that will likely determine the outlook for current NVAX shareholders over the next couple years.
Then, looking to the longer-term, investors must consider NVAX’s pipeline and financing. Provided things shake out well in its trials, NVAX will have access to a wide range of partnerships, as well as to a restored share price that could withstand the hit of a secondary offering.
There are opportunities with NVAX over a range of time-horizons, but investors must remain wary of the company-specific risks. As each major catalyst comes into focus, investors must carefully consider the probabilities they assign to each, and pay close attention to developments as they unfold.
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.
