JP Morgan report on Novavax

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27 de enero 2015

JP Morgan report on Novavax

Cory Kasimov

North America Equity Research
5 January 2015
Novavax – NVAX (OW, $7 PT)

2015 is shaping up as a news rich year with several key data readouts and the potential initiation of pivotal programs.

What happened in 2014: In 2014, NVAX shares rose 10% vs. the NBI +30% and +13% for the S&P. NVAX initiated four clinical trials in 2H14, setting the stage for an important 2015 with several data readouts expected.
2015 Outlook & Thesis: We are optimistic about the potential of NVAX’s proprietary recombinant nanoparticle vaccine technology (VLP) and believe the platform has been validated by clinical data from several programs (RSV and H5N1/H7N9 flu). NVAX is the leader in developing a vaccine to protect against infection from respiratory syncytial virus (RSV), the leading cause of acute respiratory infections in infants/children and what we view as the last major infectious pediatric disease without preventive therapy. Based on safety and immunogenicity data, we see a high probability of success for the RSV program and believe clinical data around mid- 2015 could drive meaningful upside in shares.

More specifically, NVAX initiated three clinical trials in 2014 for its RSVF protein vaccine program: 1) a Ph2 trial in pregnant women in their 3rd trimester began in 2H14 with safety/ immunogenicity data of mother & child expected in late 3Q15, 2) a Ph1 trial in pediatrics began in 2H14 with safety/ immunogenicity data expected in 3Q15, 3) a relatively large Ph2 trial in elderly pts (1,600 pts) began in 2H14 with safety/ immunogenicity/efficacy signal data anticipated in 3Q15 (importantly, this Ph2 data could define the design of the Ph3 trial, which could begin as early as YE15 in the N. hemisphere or in 1Q16 in the S. hemisphere). On NVAX’s quadrivalent seasonal influenza vaccine program, safety/ immunogenicity Ph2 data is expected towards the end of 1Q15. Additionally, NVAX plans to initiate a Ph1 trial in 1Q15 with safety/ immunogenicity data expected in 2Q15for its combo RSV/influenza product. The co plans to begin a Ph1 trial in 1Q15 for its ebola GP vaccine with matrix-M, with data expected in 2Q15.

Key 2015 Catalysts: We expect important clinical data readouts throughout 2015, incl Ph2 data for the RSV vaccine for maternal immunization and the elderly, and Ph1 data for the RSV vaccine in pediatrics in 3Q15. Ph2 data for the quadrivalent seasonal influenza vaccine is expected in 1Q15, and Ph1 data for a RSV+flu combination vaccine and an ebola vaccine are expected in 2Q15. Importantly, Ph3 studies for the RSV vaccine for maternal immunization and the elderly could potentially begin in late 2015.

Balance Sheet: NVAX ended 3Q with $190M in cash and no debt. Given this cash position and with BARDA funding NVAX’s influenza programs, we estimate the company has sufficient cash to fund programs into 2016.
Valuation and Key Risks: Our (finales del 2015) YE15 price target of $7 per share is based on a blended average of our proprietary probability-adjusted scenario analysis (50%) and a risk-adjusted NPV model (50%). Risks to our thesis/price target include clinical setbacks (particularly for the RSV program) and competition from other companies looking to develop an RSV vaccine.
The Global Vaccine Market is exploding…

From the WHO (Organización Mundial de Salud) website
«The vaccine market accounts for a relatively small share (2-3%) of the global pharmaceutical market sales. However, there has been rapid growth over recent years, with the vaccine market QUADRUPLING in value from USD 5 billion in 2000 to almost USD 24 billion in 2013, according to various sources. WHO growth estimations indicate the market may increase in value to almost 100 billion by 2025, with the arrival of new preventive, therapeutic and adult vaccines. In 2012, according to vaccine manufacturers, vaccines were in pipeline development for at least 31 infectious diseases. However, not all of these vaccines will make it to market. (IFPMA 2012:Delivering the promise of the Decade of Vaccines)

«In addition to the arrival of new vaccines on the market, four factors account for growth in value:

Higher prices for new vaccines in middle-income and developed countries;
Greater demand from developing countries;
Global eradication and elimination efforts for some diseases (polio, measles rubella, etc.);
The addition of adolescent and adult markets to the pediatric market.

The production of vaccines is becoming a profitable and promising niche for the pharmaceutical industry that is particularly attractive for innovative and research based companies.»

According to the New Yorker, the vaccine business is growing faster than the drug business….