Key Takeaways From Novavax's First-Quarter Earnings

Earnings season for developmental-stage biotechs is often a non-event. These companies tend to have little in the way of earnings, and major clinical updates are generally given at the time certain milestones are achieved. So it's not surprising that investors tend not to pay much attention to earnings for these types of companies. With that said, Novavax's (NASDAQ: NVAX  ) first-quarter earnings release and subsequent conference call contained some key information that you should pay attention to going forward. Here are some of the highlights from this next-generation vaccine-maker's earnings release.

Clinical updates you shouldn't sleep on
On April 28, Novavax announced top-line data for its mid-stage dosing study for respiratory syncytial virus, or RSV. The study's primary goal was to find the right mix of the RSV-F protein nanoparticle vaccine and an aluminum phosphate adjuvant. What the study found was that the strongest immune responses in women of child-bearing age were observed with a single dose of the vaccine and the lowest dose of the adjuvant. At the same time, we learned from this study that all dosing formulations generated strong immune responses in terms of antibody production, showing a consistent pattern with the vaccine's three previous trials.  

During the recent earnings call, Novavax's management stressed that this latest clinical data would be used to help convince the FDA that a study examining maternal transfer of immunity could be conducted in a manner that is safe for the baby, as well as the mother. In short, Novavax wants to make its RSV vaccine part of the standard of care during the third trimester of pregnancy, whereby providing immune protection against RSV in newborns. While that would be a stellar business and scientific achievement, the FDA is going to tread lightly when it comes to performing clinical trials on expecting mothers. So we learned during the earnings call that the proposed study will be relatively small in size, targeting a total of 50 patients to be immunized in the third trimester. And if this maternal transfer study is successful, Novavax would move the vaccine into late-stage efficacy trials. Per the call, Novavax plans on conducting a meeting with the FDA for this proposed trial this summer, with the trial slated to begin in the fourth quarter of this year. 

Turning to Novavax's other clinical-stage vaccines, we learned on the call that the company's mid-stage dosing study for its influenza vaccine is set to read out top-line results in the fourth-quarter of this year, providing another potential catalyst for the stock. We also gained some insight into the company's Middle East respiratory syndrome coronavirus, or MERS, program. As the first cases of MERS are now being detected in the U.S., Novavax's clinical candidate might be rushed through development using special FDA protocols, as the vaccine was able to block infections in laboratory-based studies. So this is definitely a story to keep tabs on going forward. 

Business and corporate updates
One of the most interesting recent developments at Novavax from a corporate perspective is the appointment of Sven Andreasson to the position of senior vice president, corporate development. From the earnings call, we learned that Andreasson's job will be to evaluate potential acquisition opportunities, perhaps in a manner similar to the company's last acquisition of Isconova AB. What's interesting is that Novavax's CEO alluded to this very issue later in the call, stating that they are interested in potential acquisitions to help with the commercialization of their RSV and influenza franchises, as they progress into late-stage development.

On the business front, Novavax reported revenue of $7.5 million compared to $3.8 million for the same period a year ago. This near doubling in revenue was due mostly to the extension of the HHS BARDA contract for clinical work and the preliminary manufacturing work for a seasonal influenza clinical trial. The company also reported having $112.8 million in cash and cash equivalents. At its current burn rate combined with incoming revenue, I estimate Novavax to have a cash runway of close to two years, all things being equal. In other words, you shouldn't have to worry about a major capital raise in the near term, unless the company is able to initiate a late-stage trial sooner than anticipated.

Foolish wrap-up
I think there are a lot of good reasons to keep tabs on Novavax going forward and this latest earnings call only added to my positive view of the company. Its RSV franchise will face little in the way of competition, given that AstraZeneca's (NYSE: AZN  ) Synagis is the only approved RSV vaccine and its use is limited to preterm infants. So when I look at RSV's market opportunity, I can't help drawing parallels to Pfizer's (NYSE: PFE  ) blockbuster Prevnar franchise.

Prevnar has become part of the standard of care for the prevention of pneumonia in a diversity of patient populations, driving multibillion-dollar sales in the process. Novavax's RSV franchise is being designed to follow the same business model. In fact, RSV is one of the most common types of infections in the world, so it's entirely possible that Novavax's RSV vaccine could become a blockbuster, if it is eventually approved. Novavax's management echoed this sentiment on the recent earnings call, saying they were not interested in diluting the value of this franchise by partnering with a large pharma. Although securing funding for the necessary registration trials may lead to some dilution down the road, the market opportunity for RSV alone makes this stock one to keep a close eye on moving forward. 

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