Novavax, Inc. NASDAQ: NVAX), is a clinical-stage vaccine company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. The Company operates through the recombinant vaccines segment. The Company, through its recombinant nanoparticle vaccine technology, produces vaccine candidates to respond to both known and newly emerging diseases.
On September 15, 2016, the company released negative results of its respiratory syncytial virus, or RSV, vaccine trial for older adults. The company’s stock dropped from $7.79/share to $1.29/share on the news and has yet to recover.
RSV is a common source of dangerous infections in both infants and the elderly, leading to an estimated 16,000 deaths and sickening 900,000 among older adults. The company continues to see promise in RSV vaccines, now focusing on its RSV vaccine candidate for infants via maternal immunization. Novavax continues to believe there is a lucrative market opportunity for the RSV-F franchise, and anticipates bringing the first RSV vaccine to market.
The company recently announced financial results and business progress for the 1st quarter. Novavax reported a net loss of $43.9 million, or $0.16 per share, compared to a net loss of $77.3 million, or $0.29 per share, for the first quarter of 2016. Novavax revenue in the first quarter of 2017 increased 35% to $5.7 million, compared to $4.2 million for the same period in 2016, primarily due to increased revenue recorded under the BMGF grant relating to ongoing Prepare clinical trial. Equities analysts predict that Novavax, Inc. will post ($0.62) EPS for the current fiscal year.
As per management, the company continues to make significant progress in the execution of its two key clinical trials of RSV F vaccine for both infant via maternal immunization and in older adults.
Novavax looks forward to reporting important clinical data from its older adult trial in the next 90 days. It has also been in discussion with the FDA about conducting an informational analysis of the Prepare trial that would provide an indication of its vaccine’s potential efficacy. The company believes that it can conduct this analysis in late 2017.
Additionally, management also envisages continued adoption and use of its proprietary adjuvant, Matrix-M, in a number of internal and partnered programs.
Novavax’s products are likely to enhance revenue growth prospects for the company given its product development capabilities and marketing network in different geographies. Notwithstanding NVAX positive growth plan, meaningful & sizeable contribution from the same is partially constrained due to large investment requirements and still evolving commercialization pathway for its product pipeline. Also, the company is likely to face initial integration/gestational issues.
From a stock perspective, NVAX remains in a sweet spot given its promising pipeline potential. Upcoming clinical trial and filing of study documents are the next key triggers.
The following are excerpts of analyst’ outlook on the stock:
Firm: Rating: Price: Date:
Cantor Fitzgerald NEUTRAL $2.00 1-12-2017
FBR & Co. OUTPERFORM $12.00 1-18-2017
Chardan Capital HOLD $1.50 1-18-2017
Seven investment analysts have rated the stock with a hold rating, three have given a buy rating and one has given a strong buy rating to the stock. The stock currently has a consensus rating of “Hold” and a consensus target price of $5.61.
About the company: Novavax is a clinical-stage vaccine company, focuses on the discovery and development of recombinant nanoparticle vaccines and adjuvants. Through its recombinant nanoparticle vaccine technology, it produces vaccine candidates to treat both known and newly emerging diseases. The product pipeline focuses on a range of infectious diseases with vaccine candidates in clinical development for respiratory syncytial virus (RSV), seasonal influenza, pandemic influenza, and the Ebola virus (EBOV).
The lead adjuvant for human applications, Matrix-M, is in clinical trial for pandemic influenza H7N9 vaccine candidate. It is also testing Matrix-M in conjunction with its EBOV vaccine candidate in a clinical trial. It is developing additional pre-clinical stage programs in a range of infectious diseases, including Middle East respiratory syndrome (MERS).
Key highlights for the 1st quarter 2017:
- The company continues enrollment during the second season in the RSV Phase 3 Prepare clinical trial for infants via maternal immunization.
- Enrollment in the first quarter of 2017 expanded to Argentina, Australia, Chile, New Zealand and South Africa. The second season of enrollment has substantially benefitted from the establishment of the operational infrastructure and experience from the first global season, leading to meaningfull increases in enrollment and enhanced momentum as the company moves toward the third global season of enrollment.
- Initiation of a randomized, observer-blinded, multi-arm, dose-ranging Phase 2 clinical trial, in one and two dose formulations, both with and without adjuvants, of its RSV F Vaccine in older adults (60 years of age and older). The trial will assess safety and immunogenicity of these formulations in older adults as measured by serum microneutralization titers against RSV/A and RSV/B, palivizumab competing antibodies (“PCA”) and anti-F IgG.
Upcoming key events/monitorable:
- Initiate a Phase 1 clinical trial of the Company’s recombinant seasonal influenza vaccine candidate before the end of the year.
- Initiate a Phase 1 clinical trial of the Company’s Zika vaccine candidate before the end of the year.
- Announce top-line data from the Phase 2 safety and immunogenicity clinical trial of the RSV F vaccine in older adults in the next 90 days.
- The company also guides it will be filing revised study documents and conduct an informational analysis of the Prepare trial that would provide an indication of the RSV F Vaccine’s potential efficacy against the trial’s primary endpoint before the end of the year.
Q1 2017 Results
Earnings: Novavax revenue in the first quarter of 2017 increased 35% to $5.7 million, compared to $4.2 million for the same period in 2016, primarily due to increased revenue recorded under the BMGF grant relating to ongoing Prepare clinical trial.
Profitability: Novavax reported a net loss of $43.9 million, or $0.16 per share, for the first quarter of 2017, compared to a net loss of $77.3 million, or $0.29 per share, for the first quarter of 2016.
Research and development expenses decreased 45% to $37.7 million in the first quarter of 2017, compared to $69.0 million for the same period in 2016. The decrease was primarily due to reduced costs associated with the clinical trials and development activities of RSV F Vaccine and lower employee-related costs.
General and administrative expenses decreased 16% to $8.9 million in the first quarter of 2017, compared to $10.5 million for the same period in 2016. The decrease was primarily due to lower professional fees for pre-commercialization activities.
Interest income (expense), net for the first quarter of 2017 was ($3.0) million, compared to ($1.9) million for the same period in 2016.
Liquidity: As of March 31, 2017, the company had $211.2 million in cash and cash equivalents and marketable securities compared to $235.5 million as of December 31, 2016. Net cash used in operating activities for the first quarter of 2017 was $38.6 million, compared to $69.8 million for same period in 2016. The decrease in cash usage was primarily due to decreased costs relating to RSV F Vaccine and lower employee-related costs.
Key risk factors and potential stock drivers:
- The company is in the process of obtaining regulatory approvals for its upcoming products. Therefore, any positive announcement related with approvals, outcome of ongoing trials, could be a near term trigger for stock performance.
- Over medium to longer term, successful launch & commercialization of existing and future products would be critical given the considerable investments undertaken in R&D and infrastructure development during the recent past.
- Given high investments incurred related to the marketing products in different markets, cash drainage in its ongoing R&D activities and uncertainties related to the outcome of recent trials, overall return/profitability indicators could remain muted during the initial gestation period.
- The company is likely to generate substantial net losses and negative cash flow from operations over the near to medium term. Therefore, its available cash balance might not be adequate to fund its anticipated level of operations. Therefore, timely arrangement of incremental funding would remain a critical liquidity & financial flexibility factor.
Stock Performance:
On Tuesday, May 16th, 17, NVAX shares surged to $1.13 on an average volume of 10M shares exchanging hands. The current RSI is 61.97.
In the past 52 weeks, shares of NVAX have traded as low as $0.73 and as high as $8.49
At $1.00, shares of NVAX are trading above its 50-day moving average (MA) at $1.05 and below its 200-day MA at $2.31.
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