Back in November 2017, I predicted that Novavax (NVAX 2.52%) stock could double by the end of 2018. To be sure, that prediction was only a calculated guess. There was no way to definitively know what would happen. My prediction nearly came true by late February -- but Novavax capitalized on its high-flying stock by issuing new shares to generate cash. And the stock immediately fizzled.
With only a few weeks remaining in the year, it doesn't look like Novavax will double. However, the stock still has turned in an impressive performance so far in 2018 with shares up 60% year to date. Here are three key reasons behind Novavax's big gain.
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1. A big splash at a major conference
Novavax kicked off 2018 with a big splash at the most prestigious conference in the industry, the J.P. Morgan Healthcare Conference. The most important part of the biotech's presentation was what Novavax called "an informational analysis" from the phase 3 clinical study of respiratory syncytial virus (RSV) vaccine ResVax in maternal immunization of infants.
Granted, this informational analysis didn't provide a true sneak peek at results from the study. But Novavax wanted to make sure there was a reasonable likelihood of success with the ResVax program while preserving the secrecy of the detailed progress of the clinical study.
To accomplish this goal, the Data Safety Monitoring Board's statistician performed an unblinded analysis to answer yes or no to one question: Did the vaccine achieve an efficacy threshold of at least 40% after day 90 of the clinical study? The answer to that question was affirmative, giving Novavax stock a huge boost in January.
2. Encouraging early results for NanoFlu
While ResVax is Novavax's lead pipeline candidate, the company has another experimental vaccine that has attracted a lot of interest. Last year, Novavax reported encouraging preclinical results for nanoparticle-based influenza vaccine NanoFlu. This led to the biotech rapidly advancing NanoFlu into a phase 1/2 clinical study.
Novavax initially planned on announcing results from the phase 1 portion of this study by the end of 2017. However, the update was delayed due to challenges with securing wild-type viruses needed to test NanoFlu with the flu strains circulating at the time. Investors' anticipation built up in the weeks leading to Novavax's announcement on Feb. 28, 2018.
The preliminary phase 1 results for NanoFlu turned out to be very good. Novavax reported that NanoFlu induced significantly higher antibody responses in two flu strains and comparable responses in another strain as did Sanofi's Fluzone HD, a leading flu vaccine currently on the market. While the biotech stock gave up some of its gains after the announcement of these results -- an apparent case of "buy the rumor, sell the news" -- the encouraging potential for NanoFlu was nonetheless an important factor behind Novavax's success this year.
3. Solid pipeline progress
As mentioned earlier, Novavax's stock offering after its good news early in 2018 caused its share price to drop. With no major catalysts to provide a spark, the stock continued to move downward for the most part through early August. Things began turning around, though, after Novavax announced in its Q2 update that the FDA agreed to make an accelerated approval pathway available to NanoFlu.
The rebound continued in September with a couple of positive developments. Investment firm J.P. Morgan stated in a note that it thought that the phase 3 results for ResVax to be announced in early 2019 will be positive. Novavax also began its phase 2 clinical study of NanoFlu in older adults in late September.
Overall, investors were pleased with the solid progress Novavax was making with its top pipeline candidates, ResVax and NanoFlu. That led to solid momentum heading into the final stretch of 2018.
Looking ahead
There are several major developments coming up for Novavax. Most important is the expected announcement of top-line results from the phase 3 study of ResVax in the first quarter of 2019. If those results are positive, Novavax should be on track to submit for regulatory approval in the U.S. and in Europe by early 2020.
The company also plans to report top-line results from the phase 2 study of NanoFlu in the first quarter of 2019. If all goes well, that should lead to a pivotal phase 3 study that would likely begin in the second half of next year.
Wall Street analysts project that Novavax's share price could double over the next year. If the biotech announces good news for ResVax and NanoFlu, their predictions could come true.
