Shares of Novavax, Inc. (NVAX 2.82%), a clinical-stage biotech developing vaccines, have risen about 10.7% as of 3:05 p.m. EDT on Thursday. A positive response to the company's earnings pushed the stock up a couple days ago, but Thursday's bump comes in response to recent insider share purchases.
Earlier Thursday morning Novavax filed a couple forms the U.S. Securities and Exchange Commission requires when insiders buy or sell shares. There are a million reasons for insiders to sell shares of the company they work for, but just one reason to buy. That's why investors were thrilled to see the company's CEO, Stanley Erck, and CFO, Barclay "Buck" Phillips, broadcast their positive outlook with a combined purchase of 75,000 shares.
You should never blindly follow the trading activity of others, even if they're running the company. As with the recent post-earnings bump, there just isn't much here to get excited about.
According to the SEC filings, Erck purchased 50,000 shares at about $0.84 each. That's a bit larger than my typical stock purchases, but $41,980 from a CEO that earned $3.88 million last year seems more like a publicity stunt than a vote of confidence. The purchase brought the total number of shares Erck owns up to just 128,279, which at recent prices works out to about $118,016 invested in the company.
Erck's shares were worth a great deal more before the market hammered Novavax stock after its lead candidate, an RSV vaccine failed to show any protective benefit in older adults last year. We might find out if the vaccine has a chance as a maternal vaccination before the end of the year, but in the meantime, the company is burning through its cash reserves.
Novavax finished March with $211.2 million in cash, equivalents, and securities, after losing $43.9 million during the first quarter. It looks like the company will need to raise capital with a value-diluting share offering during the quarters ahead. With its share price languishing below $1, though, the company is in danger of delisting from the NASDAQ exchange.
It's crunch time for this biotech stock. I suggest watching the show unfold from the cheap seats.