If you've looked into Novavax (NASDAQ:NVAX), you know the clinical-stage biotech's primary focus is on its experimental RSV F vaccine. Novavax has had its fair share of ups and downs with that program.

Last year, the company announced disappointing results from a late-stage study of the vaccine in immunizing older adults. However, Novavax has also had some encouraging results from phase 2 studies in older adults and in maternal immunization for infants.

But while the RSV F vaccine rightly deserves the most attention from investors interested in Novavax, there's another pipeline candidate you'll want to watch. The company's experimental NanoFlu influenza vaccine just might be a hidden gem that's on the verge of shining. 

Two gloved hands holding syringe and vial

Image source: Getty Images.

Ferreting out the details

Novavax hasn't talked a lot about its flu vaccine in the past, mainly because there hasn't been much to say. So far, the company has only conducted pre-clinical studies for the vaccine. However, during Novavax's second-quarter update call last week, NanoFlu suddenly became the center of attention.

As was the case with its RSV F vaccine, Novavax used its nanoparticle technology to develop NanoFlu. The nanoparticle vaccine is based on the hemagglutinin antigen (HA) found on the surface of the flu virus. In the pre-clinical studies, Novavax's goal was to evaluate NanoFlu in combination with the company's adjuvant Matrix-M against the two leading flu vaccines from Sanofi (NASDAQ:SNY) -- Fluzone and Fluzone HD.

Those pre-clinical studies were conducted in ferrets. The animals are ideal for studying influenza immunization primarily because flu infections in ferrets closely resembles that in humans. In the studies, NanoFlu produced clearly superior HA inhibition antibody responses compared to Fluzone and Fluzone HD.

Influenza immunogenicity can also be evaluated through micro-neutralization testing, where the antibody stops the flu virus from growing in cells. NanoFlu provided superior micro-neutralizing antibody responses than did Fluzone and Fluzone HD.

The bottom line is that, at least in these pre-clinical studies, Novavax's NanoFlu appeared to be significantly more effective than the top flu vaccines currently on the market. Novavax's vaccine also could hold other advantages, since nanoparticles offer improved purity, potency, and stability.  

Potential timeline

What's next? Novavax plans to quickly move to a phase 1/2 clinical study of NanoFlu. This study is scheduled to begin in September. The goal of this study will be to compare HA inhibition and micro-neutralization responses of NanoFlu to Fluzone HD, as well as the ability for NanoFlu to induce broadly neutralizing antibodies to strains of the flu virus.

The company hopes to have immunogenicity data from the phase 1/2 study in the fourth quarter of this year. If all goes well, Novavax intends to meet with the U.S. Food and Drug Administration (FDA) in the first quarter of 2018 and request accelerated approval to move to a late-stage study of the vaccine.

If the FDA gives its blessing, Novavax could begin a late-stage study as early as the fourth quarter of next year. Assuming the immunogenicity results look good, the company will follow up with lot consistency trials. With a little luck, Novavax could possibly be looking at filing for regulatory approval by late 2019, or the first half of 2020.

How big is the potential?

The influenza vaccine market in the seven largest markets combined is currently more than $3 billion annually. Nearly 60% of that market comes from the U.S. However, the European market is growing rapidly and could be valued at close to $1 billion annually by itself within the next eight years. 

If NanoFlu performs as well in future clinical studies as it did in the pre-clinical studies, Novavax could have a huge winner on its hands. Physicians and government agencies encourage people to get their flu shots today, but because of virus mutations, the shots aren't always effective. There's definitely a need for better efficacy -- something that NanoFlu could provide.

Positive results for NanoFlu could also make Novavax an attractive buyout target. Several big pharma companies are active in the immunization market, including Sanofi, Merck, and Pfizer. The cost to acquire Novavax would be almost like pocket change for these giant drugmakers.   

Potential rewards -- and risks

I recently wrote that the single best reason to buy Novavax stock was that the company could have significant long-term potential. At the time, my view was that there weren't any major catalysts coming up that could drive shares higher. However, that was before the company revealed the news about NanoFlu. Now there could be some potential catalysts in the near future.

Is Novavax stock a buy? I still think it depends on your time horizon -- and your risk tolerance. Even with its planned quick schedule for NanoFlu, we're still looking at some time before it will be known if the vaccine works as well as Novavax hopes it will. An interim analysis of the company's late-stage study of the RSV F vaccine in infants via maternal immunization won't be available until the middle of next year.

There are also significant hurdles remaining. If every experimental drug or vaccine that had promising pre-clinical studies succeeded, we'd have a lot more products on the market today than we do. The reality is that most of them fail. As for NanoFlu -- and Novavax's RSV F vaccine -- only time will tell whether they're successful or not.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.