I wrote in November 2017 that I thought Novavax (NVAX 2.95%) stock could double by the end of 2018. It only took the stock until the end of February to accomplish that goal. And that was before Novavax's exciting announcement, made after the market closed on Wednesday.
Investors had eagerly awaited the biotech's update of results from its phase 1 study of experimental flu vaccine NanoFlu. The wait is over. Based on those results, Novavax stock soared in after-hours trading Wednesday evening. Is now the time to buy the hot biotech stock -- or is it smarter to wait?
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Fantastic news
Novavax's management team was on cloud nine back in August 2017 when the company announced pre-clinical results for NanoFlu. The biotech quickly advanced the nanoparticle-based flu vaccine into clinical testing. Now the highlights from the results for the phase 1 portion of the clinical study are available. If I could only use one word to describe those top-line results, that word would be "fantastic."
This clinical study included around 330 patients ages 60 and older who were separated into three groups. Two of those groups received NanoFlu at different doses. The other group received Sanofi's Fluzone HD, one of the leading flu vaccines currently on the market.
Novavax reported that the NanoFlu vaccine induced significantly higher hemagglutination inhibition (HAI) antibody responses against H1N1 and H3N2 influenza strains and comparable HAI responses against the B/Brisbane strain. Those H3N2 antibody responses are very encouraging because H3N2 has been associated with around three-fourths of this season's flu-related hospitalizations. And it's been an especially nasty flu season.
What did Novavax mean by "significantly higher" HAI antibody responses? When compared to Fluzone HD, NanoFlu produced a 47% higher response in the A/Hong Kong strain of H3N2. Novavax's vaccine achieved a 64% higher response in the forward-drifted H3N2 strain known as A/Singapore. NanoFlu also produced a 54% higher response in the historic strain of H3N2 called A/Switzerland.
Catalysts and crunches ahead
These results were so positive that Novavax has submitted the details for publication in a peer-reviewed medical journal. The biotech will share these detailed results after publication. Novavax now expects to advance to the phase 2 study in the third quarter of 2018. Both the medical journal's publication of the results and initiation of the phase 2 clinical trial could serve as catalysts for Novavax stock in the months ahead.
Those aren't the only catalysts that could be on the way, though. Novavax anticipates an interim analysis for a late-stage study evaluating its RSV F vaccine for maternal immunization of infants in mid-2018. The company expects to report the primary end-point results from this study by early 2019.
But there could also be a cash crunch in the not-too-distant future. As of Sept. 30, 2017, Novavax had $172.6 million in cash, cash equivalents, and marketable securities. That's probably not enough to fund operations through the end of this year.
I suspect we'll see a stock offering from Novavax soon. Many biotechs conduct these offerings when their stocks spike on good news, so the timing could even be imminent. The bad news for investors, though, is that these stock offerings dilute the value of existing shares. Usually that means the stock price takes a hit.
Buy now or wait?
So, should investors excited about the prospects for NanoFlu buy Novavax stock now or hold off? It depends on how much of a risk-taker you are.
While the results Novavax announced Wednesday were great, they're still only from an early-stage study. The company has a long way to go before NanoFlu could potentially be approved. Also, Novavax has already run into one setback for its RSV F vaccine. I think the chances of success in maternal immunization of infants are pretty good, but there's definitely no guarantee that the results from the late-stage study will be positive.
On the other hand, if you're not afraid to take on some risk, I think that Novavax looks like a pretty good stock to buy right now. If either NanoFlu or the RSV F vaccine proves successful, the biotech will be worth a lot more than it is right now. I also think that there are some big pharma companies in the vaccine market that will soon start looking long and hard at the potential of acquiring Novavax.
Again, Novavax remains a speculative play and isn't for the faint of heart. But after the latest NanoFlu news, I'm more optimistic about the stock than I have been in the past. And remember, I thought the stock could double this year, so my optimism was already pretty high.
