Image Source: Novavax.
Novavax (NVAX -0.72%) released its third-quarter earnings report this week, and investors in the clinical-stage vaccine company didn't appear to be thrilled with the results. Both revenue and net loss appear to have come up a bit short of analyst expectations for the period, which is putting some selling pressure on the stock and is causing a continuation of the stock's multi-month sell-off. However, there could be reason to believe that investors who sold off their shares may be missing the forest for the trees, as the company also announced some big news that could bode quite well for the company's future.
By the numbers
Novavax recorded third-quarter revenue of $6.5 million, which represented a 21% decrease when compared to the same quarter last year. At the same time, spending has ramped up dramatically in order to advance the company's pipeline. Mix those two facts together and it's no wonder the company reported a net loss of $33.1 million, or $0.12 per share. Both of those numbers came up well short of the $11 million in revenue and $0.09 loss that investors were hoping for, which appears to be putting some selling pressure on its stock today.
Turning to its balance sheet, the company continues to be very well capitalized as it currently holds more than $290 million in cash and cash equivalents. The company has burned roughly $71 million through the first nine months of the year, so it certainly appears that it has enough capital to fund its operations for at least another two years, if not longer. Add in some expected revenue from a government contract and a $89 million grant from the Bill & Melinda Gates Foundation and Novavax appears to be on sound financial footing.
Beyond the numbers
While coming up short on revenue and earnings is never a good thing, I personally don't think investors should read too much into the results since this company derives its revenue from milestone payments, and results are bound to be lumpy. In addition, even with the recent sell-off, shares are still up roughly 35% since the start of the year, so seeing a bit of selling pressure shouldn't be much of a surprise. Also, as with most clinical-stage biotechs, investors should be far more concerned with clinical updates than financial statements, and the company shared some big news on that front today that matters most to the future of the company.
Image Source: Novavax.
Novavax has officially initiated its first phase 3 trial of its experimental Respiratory Syncytial Virus (RSV) vaccine in older adults. This trial, dubbed "Resolve," will enroll more than 11,000 adults at 60 sites in the U.S. to measure the efficacy of the vaccine at preventing moderate to severe RSV-associated lower respiratory tract disease. Top-line results are expected to be released in the second half of 2016.
While seeing the start of its first phase 3 trial is certainly encouraging, Novavax also believes that it will be able to initiate yet another phase 3 trial soon as well. The company is planning on starting its second phase 3 trial to test its RSV vaccine's ability to protect infants through maternal immunization. While the company is still in discussions with regulators to finalize the design of the trial, the company believes the trial will begin in the first quarter of 2016.
In the release, Gregory Glenn, M.D., Novavax's senior vice president of R&D, stated:
The initiation of the first Phase 3 trial of our RSV F Vaccine in older adults underscores our accomplishments to date and positions the company to bring the first RSV vaccine to market. Our recent data announcements demonstrate the safety and robust immunogenicity of the RSV F Vaccine across all three target populations: older adults; infants via maternal immunization; and pediatrics.
Now what
All in all, I think the news of the beginning of the phase 3 trial should give long-term-focused investors plenty of reason to be optimistic here, as RSV remains a huge healthcare burden around the world. In the U.S. alone roughly 2.5 million infections are recorded each year in adults over age 65, causing nearly 14,000 deaths. Given that there is currently no approved RSV vaccine available, if Novavax can make it through phase 3 as well as it did phase 2, then there should be plenty of upside left in this beaten-down name.
