Is VBI Vaccines Stock a Buy?

Coming into 2020, you might have expected the only really big story for VBI Vaccines (VBIV -1.99%) would be Sci-B-Vac, its hepatitis B vaccine. While the company has certainly achieved progress in that realm, investors' attention has focused largely on VBI's new vaccine candidate, which targets three types of coronavirus: SARS, MERS, and SARS-CoV-2 (the virus that causes COVID-19).

Both stories have translated into good news for VBI Vaccines this year. The biotech stock is up over 130% year to date in August (down from July, when it skyrocketed by as much as 347% over its January 2020 price). But is VBI Vaccines stock a buy now?

Gloved hands inserting a syringe into a vial.

Image source: Getty Images.

Pros

There's no question that the biggest reason to consider buying shares of VBI remains the potential for Sci-B-Vac. The vaccine has already been approved in Israel. VBI announced positive results from a second phase 3 study of Sci-B-Vac in January 2020. Its next step is to secure regulatory approvals in the U.S. and in other key markets, a process that will begin in the fourth quarter of this year.

VBI also has a hepatitis B therapeutic candidate, VBI-2601, that's being evaluated in an ongoing phase 1b/2a clinical study. The biotech expects to report proof-of-concept data from this study within the next few months.

In June, VBI Vaccines presented positive data for experimental glioblastoma cancer vaccine VBI-1901 at the American Association for Cancer Research's annual meeting. The company plans to report data from one arm of an ongoing phase 2a study of the vaccine candidate in the fourth quarter of 2020. It also hopes to initiate a pivotal late-stage study next year.

The program next farthest along in VBI's pipeline is cytomegalovirus (CMV) prophylactic vaccine VBI-1501. While the company received positive feedback from the Food and Drug Administration last year about the design of a phase 2 study for the vaccine candidate, VBI hasn't yet moved forward with the mid-stage clinical trial.

In addition, VBI claims several preclinical programs. The most significant of these is its pan-coronavirus vaccine candidate, VBI-2901. The Canadian government has awarded the company up to 56 million Canadian dollars ($42 million) to fund the development of the experimental vaccine through phase 2 clinical studies.

Cons

The biggest knock against VBI Vaccines right now is that it continues to lose a lot of money and isn't anywhere close to achieving profitability. This means that the company will almost certainly have to raise additional cash in the future through stock offerings (which dilute the value of existing shares) or by taking on debt.

There's also a risk that Sci-B-Vac won't become a commercial success. Sales of the vaccine in Israel remain very low and fell year over year in the second quarter of 2020. Although the chances of FDA approval for Sci-B-Vac seem relatively good, it's always possible that the regulatory filing could hit a snag.

Assuming the vaccine does win FDA approval next year, VBI will face stiff competition. GlaxoSmithKline and Merck, two of the biggest drugmakers in the world, market hepatitis B vaccines. Dynavax Technologies is also in the mix with its Heplisav-B vaccine. The total U.S. market for adult hepatitis B vaccines is around $400 million per year. VBI could have a challenge in carving out a significant share of this relatively small market.

After Sci-B-Vac, all of VBI's pipeline candidates have a lot of hurdles to jump before they could potentially win regulatory approval. History shows that the odds are stacked against vaccine candidates in phase 1 and phase 2 testing.