You might think it could be game over for Novavax (NASDAQ: NVAX) after the clinical-stage biotech reported its second late-stage failure for experimental respiratory syncytial virus (RSV) vaccine ResVax last month. Unsurprisingly, the biotech stock crashed hard, losing more than two-thirds of its value on the major pipeline setback.
But Novavax is still plugging away. The company provided a fourth-quarter update on Monday. While investors might not have cared much for the company's financial results, they likely were interested in Novavax's plans in the wake of the disappointing news in February for ResVax. Here's what's next for Novavax.
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Another angle for ResVax
Although ResVax failed to meet the primary endpoint of preventing RSV lower respiratory tract infection (LRTI) of infants in its phase 3 study, Novavax noted in February that the experimental vaccine was more promising on other fronts. In particular, the vaccine reduced severe RSV hypoxemia (low concentration of oxygen in the blood) in infants during the first few months of their lives. ResVax also reduced hospitalizations associated with RSV LRTI by a statistically significant level.
Novavax plans to complete its assessment of the data from the phase 3 study for ResVax, then meet with regulatory authorities about a potential path forward for approval of the vaccine. During the biotech's Q4 conference call, CEO Stanley Erck said that one of three scenarios could unfold next for ResVax.
The first -- and best-case -- scenario is that the FDA and European regulators think that the phase 3 data is sufficient on its own to move forward with regulatory filings. The second possibility is that the regulatory agencies allow Novavax to submit for approval of ResVax based on the phase 3 data but require a post-approval clinical study. The third scenario is that Novavax has to conduct an additional phase 3 study focusing on reducing hospitalizations and severe RSV hypoxemia.
Novavax hopes to meet with regulatory agencies in either the second quarter or early third quarter of this year. Erck stated that the company hopes to avoid conducting an additional clinical trial to be able to file for approval of ResVax but is prepared to move forward as needed to pursue approval for its RSV vaccine.
In addition, Novavax continues to talk with potential partners about ResVax. Erck said that the company is considering the possibility of multiple partners in different geographies. He added, though, that "an important element for our potential partners is how our various regulatory discussions proceed."
Regardless of what happens with ResVax, Novavax remains excited about the potential for its nanoparticle-based flu vaccine, NanoFlu. The company reported encouraging phase 1/2 results for the experimental vaccine in January. Also, Novavax met with the FDA last year and obtained an agreement that an accelerated approval pathway could be available for NanoFlu.
Erck said that Novavax plans to meet again with the FDA within the next couple of months. The purpose of this meeting will be to discuss the phase 2 data for NanoFlu and a proposed design for a pivotal phase 3 clinical study. Novavax also intends to further explore the potential for the accelerated approval pathway.
Assuming the FDA gives a green light for moving forward, Novavax will move as quickly as possible to initiate the phase 3 study for the vaccine. It's also possible that the company could seek out a licensing partner for NanoFlu. Erck stated that Novavax hasn't made a decision yet on whether to try to monetize the vaccine before or after the phase 3 results are available.
Stretching out the cash
One next step that is an absolute must for Novavax is to stretch its cash for as long as possible. The company reported cash, cash equivalents, marketable securities, and restricted cash of $103.9 million as of Dec. 31, 2018. However, Novavax burned through $45.3 million in the fourth quarter. Its current cash stockpile won't fund operations for very long.
Novavax admitted as such in its 10-K filing to the U.S. Securities and Exchange Commission (SEC). The company stated that "there is substantial doubt about our ability to continue as a going concern" through the entire next year without obtaining additional cash.
CFO John Trizzino noted that Novavax raised around $41 million in cash in the first quarter of 2019 by selling additional shares. He said that the company took this step even though its stock price has been beaten down because management "concluded that it was more important to add to our balance sheet as we negotiate with potential partners and regulators."
It's a total guess as to what regulators will decide as the next steps for ResVax. The odds are likely stacked against Novavax being allowed to file for approval without conducting another study, but there's at least a chance that it won't have to do so.
Although Novavax had to acknowledge the possibility that it couldn't raise additional money in its 10-K filing, the likelihood is that won't be an insurmountable problem. I think the company should be able to issue more shares to raise the capital that it needs.
The problem, though, is that Novavax could run into problems in meeting its listing requirements with Nasdaq. If the stock trades below $1 per share for too long, it can be delisted. Novavax could be forced to do a reverse stock split to boost its stock price to continue trading on the Nasdaq stock exchange.
Novavax will live to fight another day -- and probably another year. It's not game over for the biotech yet.
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