These days, the real economy and the stock market seem to be in stark contrast to one another. While the annual U.S. real gross domestic product (GDP) growth rate has improved since the lows reported in June 2020, it's still far from from positive territory. Yet, the stock market is not reflecting the state of the economy, and has been busy reaching new highs. Some market experts fear that the stock market is in bubble phase and may soon crash, while some others believe that the upcoming coronavirus stimulus can take the market even higher.
Whatever be the outcome, biotech stocks such as Novavax (NVAX 0.64%) and Gamida Cell (GMDA 5.52%) will mostly remain unaffected and continue their robust growth trajectory in 2021 -- especially given recent positive news surrounding both of their businesses.
With its share price up over 153% so far this year and over 2,500% in 2020, Novavax has emerged as the darling of the stock market. In a world in which doubts are being raised about the efficacy of currently available vaccines against the emerging strains of COVID-19, Novavax might have a solution.
On Jan. 28, Novavax reported overall efficacy of 89.3% for its COVID-19 vaccine candidate, NVX-CoV2373, from a phase 3 trial with over 15,000 participants conducted in the U.K., where over half of the candidates were infected with a more highly transmissible strain of the virus. The efficacy was 95.6% for patients infected with the original COVID-19 strain. Pfizer (PFE -4.71%) and Moderna (MRNA 2.44%) had reported efficacy of 95% and 94.1%, respectively, for their COVID-19 vaccines against the original strain in 2020.
NVX-CoV2373 demonstrated efficacy of 85.6% against the U.K. strain and only 49.4% against the South African strain of the virus. Yet, the fact that this is the one of the few COVID-19 vaccine candidates that has shown some efficacy against the dreaded South African virus variant in a real-world setting, differentiating it from currently available COVID-19 vaccines. Johnson & Johnson's (JNJ 1.88%) vaccine candidate, which was recently approved for use in South Africa, achieved 57% efficacy against the strain during trials.
Novavax has managed to demonstrate an acceptable safety profile for NVX-CoV2373 in its trials. The company's COVID-19 vaccine regimen comprises of two doses, just like those of Pfizer and Moderna. Yet, unlike Pfizer's vaccine, it does not require ultra-low temperatures for storage and distribution. NVX-CoV2373 is also an adjuvanted vaccine, which means that it contains other ingredients that help boost the immune response. Hence, the actual amount of antigen (the substance in the vaccine which invokes the immune response) required is quite low. This can allow for faster manufacturing of doses, making it a preferred choice for mass vaccination programs across the world.
Although the data readouts from the U.S. trial for NVX-CoV2373 have been delayed due to challenges with vaccine manufacturing and patient enrollment, the company expects U.S. Food and Drug Administration (FDA) to grant Emergency Use Authorization (EUA) based on data from the U.K. trial. Novavax has already started the rolling review process with several regulators across the world such as European Medicines Agency (EMA), Health Canada, FDA, and U.K. Medicines and Healthcare products Regulatory Agency (MHRA). The next few months could bring in many lucrative deals for the company, which is planning for an annual manufacturing capacity of 2 billion doses. Canada has already entered into a tentative agreement with Novavax for manufacturing vaccines at Montreal facility. The company may also enter into a vaccine supply deal with European Union in the next few weeks. However, healthcare investors should keep out an eye for any setbacks related to regulatory approvals and vaccine manufacturing.
Novavax is currently trading at a forward price-to-earnings (P/E) multiple close to 15, which is high for an unprofitable business. While the company is also developing vaccines to fight the respiratory syncytial virus (RSV) and influenza, the COVID-19 vaccine program is by far the most important one at this point. Currently, the company carries over $500 million in cash and $456 million total debt. In the light of a very promising COVID-19 vaccine program and a young unstable balance sheet, healthcare investors should keep an eye on this stock this month.
2. Gamida Cell
Clinical-stage biotech Gamida Cell has recently become the talk of the town, and for good reason. On Feb. 10, the Novartis (NVS 0.26%)-backed company's shares jumped over 25% in a single day, after it came out with promising phase 3 efficacy and safety data for lead cell therapy candidate, omidubicel. The investigational drug proved superior in helping patients with high-risk blood cancers undergoing a bone marrow transplant to recover faster, develop fewer infections, and shortened hospital stays as compared to the standard umbilical cord blood transplant patient.
Omidubicel might now become the first FDA-approved cell therapy for bone marrow transplantation, which is an area with huge unmet demand. The company plans to file a biologics license application (BLA) seeking FDA approval for omidubicel in bone marrow transplant indication in the second half of 2021. The company is also studying this drug candidate in an early stage trial for a blood disorder called severe aplastic anemia.
Omidubicel, also known as NiCord, has been developed using the company's proprietary nicotinamide (NAM) cell-expansion platform technology, which is used to increase both the number and efficacy of any type of donor cells. In addition to being a superior treatment option over the currently available umbilical cord blood transplant, omidubicel can also offer an off-the-shelf treatment option to around 5,200 blood cancer patients who are eligible for a bone marrow transplant, yet unable to undergo it due to low availability of matching donors. Within three years from its launch, the company expects omidubicel to treat around 2,000 U.S. patients annually and capture 20% share of the bone marrow transplantation market, which is estimated to be worth $13.9 billion by 2026.
Gamida Cell is also working on GDA-201, another cell therapy developed with the NAM platform, which is an off-the-shelf infusion of natural killer cells (a type of immune cell than can kill cancer cells), to treat blood cancers such as non-Hodgkin lymphoma and multiple myeloma. The company aims to leverage its platform to develop several other types of cell therapies.
Gamida Cell offers a favorable risk-reward proposition to healthcare investors, since omidubicel is a significantly de-risked pipeline asset and can revolutionize the bone marrow transplantation space. The company has cash reserves of $127 million, which it expects to last until the end of 2022 without any additional infusion of funds. This is a reasonable expectation, considering the company's annual cash burn rate (calculated using operating expenses as proxy) is only $55 million. With upcoming catalysts such as submissions of BLA for omidubicel, an investigational new drug (IND) application for GDA-201 scheduled for 2021, and the possibility of Novartis increasing stake from the current 15% in the company, Gamida Cell's stock seems well-positioned to continue its upward growth trajectory for the next few months, if not the next several years.