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Novavax, Inc. (NVAX)

This biotech missed analysts’ forecasts last quarter, losing $0.29 per share, compared to the estimated loss of $0.15. However, clinical trials are promising, and a takeover/partnership could soon be in the works. Two analysts have raised their 2017 earnings estimates in the past 30 days.

Novavax, Inc. (NVAX)
From The Medical Technology Stock Letter

Novavax, Inc. (NVAX) announced that the timeline for the Phase IIIRESOLVE trial for the RSV vaccine in the elderly remains on time for a Q3:16 release, with a BLA filing/approval set for next year. Management outlined further details of the current RSV season, and the incidence/severity remain intact and highly supportive for the pivotal trial’s success. After two end-of-Phase II FDA meetings that have encouraged an even broader pivotal trial design(s), Novavax has executed to perfection. Results from the second dose rollover trial (n=1330) are due in H2:16 and are also important for the annual vaccine schedule, ACIP recommendation and, logically, partnership terms. That data will include safety and immunogenicity data as the sample size is too small for efficacy results.

NVAX has indicated that its ideal partner(s) should already have global infrastructure capable of launching the first RSV vaccine in certain geographies. The timing of such a deal is still up in the air with the strengthened balance sheet and Phase III results about two quarters away. NVAX is not in a rush to give the breakthrough product away, but acknowledges a partner may want to begin plans now with so much de-risked data already behind. A deal or deals, therefore, may be formed before the RESOLVE data, with terms that include an option for significantly more economics post the results. Importantly, either way, the clock is ticking.

As the potential partner is likely one of the big vaccine makers—these discussions could morph to anywhere from select territories to an ex-US deal to a global deal to an outright acquisition.

The company would be an easy takeover at current valuations. In our view, a deal is much more of a “when” and not an “if.”

The stock pullback after the earnings call, we believe, is due to investors’ wanting things sooner than later. In the current stock market, potential partners, too, are playing the waiting game. The question is always who shows their cards first.

The maternal RSV trial to protect infants is well underway (and started a quarter ahead of schedule). The study can enroll anywhere between ~5,000 and 8,255 pregnant women over 2-4 years and has several interim analyses built into the design.

With ~$500 million in the bank, NVAX is in a very strong financial position to execute its clinical and launch plans. In addition to the large clinical trials underway, the Company is already working with potential payors and developing pharmaco-economic plans for the RSV vaccine launch, including a potential ACIP recommendation. The burn rate no doubt picked up in Q3/Q4 but is expected to taper off coinciding with the peak of the RSV season (April).

While Novavax will hold two more quarterly calls before the RESOLVE data is released towards the end of Q3, a large partnership(s) and/or even acquisition could occur any time before (or after). Either way, we remain confident that the RSV vaccine is on track and that the odds of success are quite high. The depressed stock market, in our view, offers potential partners a little more time to make a decision, unless someone blinks first. But we know the timing of the key data release, and our long-term investment horizon for NVAX is as bright as ever.

NVAX is a BUY under 15 with a TARGET PRICE of 20.

John McCamant, The Medical Technology Stock Letter,, March 3, 2016