Novavax (NASDAQ:NVAX), a pre-revenue vaccine developer, is stuck between a rock and a hard place. Following the latest clinical failure of its respiratory syncytial virus (RSV) vaccine, ResVax, last month, the company could be forced into making some extremely tough choices soon.
Can this clinical-stage biotech find a shareholder-friendly way out of this mess? Let's dig deeper to find out.
Points to consider
Earlier this week, the company released its fourth-quarter and full-year results. During the accompanying conference call, President and CEO Stanley C. Erck laid out three possible scenarios for ResVax going forward:
- ResVax's ability to hit on key secondary endpoints may be enough to convince regulators to approve the vaccine outright. The company plans to discuss this possibility with regulators in the U.S. and the EU as soon as possible.
- Alternatively, regulators might approve the vaccine based on these promising hints of efficacy in severe RSV cases, but with the understanding that Novavax would conduct a post-licensure trial.
- Thirdly, regulators may require the company to undertake yet another late-stage trial prior to granting approval.
Which of these outcomes is most likely? Unfortunately for Novavax and its long-suffering shareholders, the first two scenarios are probably out of the question for a number of reasons -- above and beyond the fact that ResVax whiffed on its primary endpoint in this late-stage maternal immunization study.
Put simply, there was always a strong chance that regulators were going to require a second confirmatory trial -- even if ResVax hit its primary endpoint in this latest pivotal study.
Why? Because vaccines have the potential to trigger public safety disasters. If a vaccine has an undetected safety issue, the consequences can be dire due to the sheer number of patients treated with these products. GlaxoSmithKline's Shingrix and Dynavax Technologies' Heplisav-B both had to undergo multiple late-stage trials prior to approval for this very reason.
Bottom line: A regulatory approval based on a single, late-stage trial that missed its primary endpoint would be an extraordinary outcome from a historical standpoint. It could happen, but the odds are decidedly against it.
Check out the latest earnings call transcript for Novavax.
Novavax needs a partner. Even if the company decides to admit defeat on the RSV front, it doesn't have enough cash to carry the promising flu vaccine, NanoFlu, over the finish line. The biotech, after all, had a measly $103.9 million in cash, cash equivalents, marketable securities, and restricted cash at the end of 2018. And even with an additional $41 million from stock sales this quarter, Novavax doesn't have anywhere near enough to conduct another late-stage trial, file for a regulatory approval, and subsequently build a sales team from scratch.
The good news is that Novavax is reportedly engaging potential partners about helping to carry the load with its RSV program. But unless this effort results in a major partner coming on board, Novavax may have to continue tapping the public markets for funding for the foreseeable future.
All told, this downtrodden biotech still has a shot at turning things around, but it won't be easy by any stretch of the imagination. Investors, in kind, may want to watch this story unfold from the safety of the sidelines for now.