By Grant Zeng, CFA
GeoVax Exited 3Q13 With Reasonable Balance Sheet
On Nov 12, 2013, GeoVax Labs (GOVX) announced its financial results for the third quarter ended September 30, 2013.
Revenues were $1,004,211 and $2,242,812 for the three-month and nine-month periods of 2013, respectively, related to grants from the National Institutes of Health (NIH) in support of its HIV/AIDS vaccine development efforts. This compares to $638,000 and $2,197,761 of grant revenue reported for the comparable periods of 2012. As of September 30, 2013, there is approximately $1.0 million in unused grant funds remaining and available for use.
Research and development (R&D) expenses were $879,107 and $2,314,291 for the three-month and nine-month periods of 2013, respectively, as compared to $601,690 and $2,386,460 for the comparable periods of 2012. R&D expenses include direct costs funded by NIH grants, as well as vaccine manufacturing costs and expenses related to the Phase I clinical trial of the Company's therapeutic HIV vaccine. Costs associated with the ongoing Phase I clinical trial of GeoVax's preventive HIV vaccine, being conducted by the HVTN, are funded directly by the NIH and are not reflected in GeoVax's financial statements.
General and administrative (G&A) expenses were $316,452 and $1,345,179 for the three-month and nine-month periods of 2013, respectively, as compared to $334,166 and $1,339,300 for the comparable periods of 2012.
Net loss was $190,148 ($0.01 per share) for the three months ended September 30, 2013, compared to $296,779 ($0.02 per share) for the same period in 2012. For the nine months ended September 30, 2013, the Company's net loss was $1,413,229 ($0.07 per share) as compared to $1,525,055 ($0.09 per share) in 2012.
As of September 30, 2013, GeoVax held $1,720,616 in cash and cash equivalents.
We believe fundraising will be an area of focus for management for the remainder of 2013. Management has indicated that in addition to equity capital, they are also seeking other sources of funding through additional government and/or third party support of its programs.
GeoVax is On Track to Advance its HIV/AIDS Vaccine Programs
Therapeutic HIV Vaccine Program
· GeoVax expects to complete GV-TH-01, the Phase I clinical trial of the Company's first-generation HIV vaccine, during 2013, with final results and evaluation of trends to be reported in the first quarter of 2014. The primary endpoint of this 9 patient "treatment interruption" study is to document the safety and immunogenicity of GeoVax's vaccine in HIV-positive patients with well-controlled infections who are being treated with oral HIV medications. Following the vaccination series, the trial includes a short period of drug treatment interruption to evaluate the vaccine's ability to control the infection in the absence of continuing drug therapy. The combined vaccination period, treatment interruption period and treatment reinstitution period for each patient is approximately 11 months. Vaccine efficacy will be directly assessed through a brief period of anti-retroviral drug cessation. These results might indicate the vaccine's potential ability to treat HIV infection either as a standalone therapy or in conjunction with an oral drug regimen.
· In a follow-on study, GeoVax plans to initiate a Phase I clinical trial with GeoVax's second-generation vaccine in combination with standard-of-care antiretroviral drug therapy. The primary endpoint will be to evaluate the safety and immunogenicity of GeoVax's DNA/MVA vaccine. An exploratory objective will investigate the vaccine's effect on clearing viral reservoirs. GeoVax expects to begin this trial in mid-2014.
Preventive HIV Vaccine Program
· In October 2013, GeoVax presented additional results from HVTN 205, a multicenter, randomized Phase IIa trial, at the 2013 AIDS Vaccine Meeting in Barcelona, Spain. HVTN 205 evaluated the safety and immunogenicity of the Company's first generation preventive HIV vaccine. At 6 months post-vaccination, patient antibody levels had declined less than 3-fold, indicating significant durability of the antibody response. The antibody responses after vaccination also had high affinity binding, a characteristic which has been associated with prevention of HIV infection in preclinical models.
· GeoVax expects to complete HVTN094, a 48-patient Phase I clinical trial testing the safety and immunogenicity of its second-generation vaccine, in 2013. Top-line results should be available during the first quarter of 2014. This study is being conducted by the HIV Vaccine Trials Network (HVTN) with financial support from the National Institute of Allergy and Infectious Disease (NIAID) of the National Institutes of Health (NIH). GeoVax is actively engaged in discussions with the HVTN regarding the design of a Phase II clinical trial following the successful completion of HVTN094. GeoVax currently anticipates the trial to include a Phase IIa study, with the primary endpoint of expanding the safety profile of the Company's second-generation vaccine.
We think GeoVax has made great progress in its HIV/AIDS vaccine clinical programs. The recent failure of HVTN505, a 2500-patient Phase IIb trial conducted by the National Institutes of Allergy and Infectious Disease (NIAID), strengthened our confidence in GeoVax's vaccine technology. The vaccine studied in HVTN 505 used an adenovirus vector of genetic material from the HIV virus, similar to the vaccine used in the Merck trial (STEP/Phambili) that was halted in 2007. In contrast, GeoVax's boosting vaccine uses a poxvirus vector (modified vaccine Ankara) which has been associated with clinical success.
GeoVax has important near-term milestones, including the completion of two key Phase I clinical trials. Entering 2014, the company will continue to place emphasis in advancing its clinical progress. GeoVax should be entering into a Phase IIa trial with its preventive vaccine in mid-2014. The company also plans to initiate a second Phase I trial with its therapeutic vaccine in 2014. As other HIV vaccines have fallen by the wayside over the past several years, GeoVax continues to move forward with its unique approach to HIV prevention and treatment through effective vaccination.
We maintain our Outperform rating on GeoVax and reiterate our 12-month price target of $1.50.
GeoVax has developed the technology for the development of both preventive and therapeutic HIV/AIDS vaccines. The Company’s vaccine candidates have completed Phase IIa and will enter into Phase IIb clinical trials soon, which are the only HIV vaccines for America/Europe entering efficacy trial.
The Company has a modest cash burn rate ($4 to $5 million annually) due to generous government support. Down the road, we believe GeoVax will continue to seek non-dilutive government and non-government support for its HIV vaccine development. If the Phase IIb trial proves to be positive, we believe it would be likely for the Company to find a partner from big pharma or biotech companies who seek to boost or enter into the anti-HIV/AIDS market.
GeoVax has a strong position in intellectual property. The excellent relationship with Emory University put the Company in a better position to get the most advanced vaccine technology in the first hand, therefore providing a sustainable growth engine for the Company.
Based on the current fundamentals of the Company, we believe current valuation is attractive. With a decent pipeline and mid-stage candidates, GeoVax is only valued at about $10 million in market cap. This is a huge discount in our view. We understand that HIV/AIDS vaccines have been tough to develop and that this is a high risk area for any biotech company especially for smaller ones with limited resources. However, we think GeoVax has done great job so far in the HIV/AIDS vaccine area and is well positioned to continue to create shareholder value down the road.
We see GeoVax as a risk reward opportunity with significant long term positive returns. Our price target of $1.50 represents a market cap of $30 million.
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By Grant Zeng, CFA