Stars Align for Novavax

08/19/2015 7:00 am EST

Focus: STOCKS

John McCamant

Editor, Medical Technology Stock Letter

This biotech stock—a long-standing recommendation of John McCamant and The Medical Technology Stock Letter’s top pick for 2015—continues to report progress.

In the large Phase II trial, Novavax (NVAX) has delivered excellent respiratory syncytial virus (RSV) protein vaccine data in the most difficult-to-treat elderly population (over 60 years old). 

The study is the first ever demonstration of efficacy of an active RSV vaccine in humans and resulted in statistically significant efficacy in prevention of all symptomatic RSV disease (44%) and RSV disease with symptoms of lower respiratory tract infection (46%) in older adults.

Importantly, no serious vaccine related side effects were reported. The vaccine was well tolerated and met all primary, secondary, and exploratory objectives of the trial.

The observed efficacy was similar to or better than multiple recent effectiveness estimates for a number of respiratory vaccines that are currently approved in older adults, including pneumococcal and standard-dose seasonal influenza. 

These data give NVAX enormous confidence and information, as they will meet with the FDA next to agree on a Phase III trial design, estimated to include 8,000-10,000 people.

With the positive Phase II data in the elderly now delivered, in our view, the stars have aligned for NVAX and they should be able to start Phase III by yearend and test in the Northern hemisphere this winter. 

This would mean Phase III data would be just a year away and would be expected to be released the same time next year.

Next up is Phase II RSV vaccine data in maternal woman; results are due shortly, sometime this quarter. 

At a minimum, the RSV vaccine market is as large as the flu vaccine market, which currently stands at $4 billion annually.

Management estimates there are more than 37 million global RSV infections per year in persons over age 65, resulting in an astounding $83 billion cost to healthcare systems worldwide.

Each year in the United States, approximately 14,000 people ages 65 or older die of RSV infections and approximately 900,000 have some sort of medical encounter with a doctor, or emergency room, or are hospitalized.

In our view, an RSV vaccine could be over a $5 billion market opportunity. However, with this outstanding data NVAX may not be a standalone company long enough to see that.

With this cleanly positive and significant data, the NVAX RSV vaccine program has been significantly de-risked, in our view.

It will be first-in-class and best-in-class as no competitor is remotely close to NVAX. In fact, no one has ever been able to show proven protection with an RSV vaccine in humans before today.

As a result of this transformative event, we are raising our buy limit to 15 (from 11) and our target price to $20.

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