Can Novavax Stay Ahead of the Competition?

By Cory Renauer Markets Fool.com

Last September, Novavax (NASDAQ: NVAX) stunned investors with a spectacular pivotal-trial failure. The clinical-stage biotech's lead candidate was miles ahead of possible competitors from GlaxoSmithKline(NYSE: GSK) and AstraZeneca (NYSE: AZN), but the upsetting results threw a wrench in the timelines.

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More recently the company has pivoted toward a Zika virus candidate that still isn't ready for human testing. Again, Novavax isn't the only company aiming at this target. Let's see if we can gauge the odds of success for its candidates in light of potential incoming competition.

Tough nut to crack

Respiratory syncytial virus (RSV) might be the largest public health menace that most people never think about. Most healthy adults might mistake it for a common cold, but RSV leads to a stunning 900,000 medical interventions in the U.S. each year.

The virus is also tricky to prevent. The medical community has been experimenting with various vaccines to prevent the spread of RSV since the mid-1960s without much success. The combination of enormous medical burden and lack of viable options led analysts to predict that peak sales of Novavax's RSV F Vaccine candidate would top $4.5 billion per year.

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Such lofty estimates followed encouraging results from a midstage trial with about 1,600 patients that suggested the vaccine effectively prevented RSV infection in older adults. Unfortunately, the benefit was just strong enough to be considered statistically significant,and it couldn't be repeated in a much larger registrational study with similar patients. In fact, a slightly higher percentage of patients receiving the vaccine became infected than in the group receiving a placebo.

Now what?

As promised, Novavax recently began a 300-patient study with the RSV F vaccine candidate in older adults. Unlike previous studies it has run in this population, this one will introduce a two-dose regimen and its proprietary vaccine booster, the Matrix-M adjuvant, to some of the patients in the study.

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Unfortunately, a sample size of 300 patients probably won't be enough to yield meaningful conclusions about the adjuvant or the two-dose regimen, but it could inform further studies. While Novavax is exploring its options with RSV F vaccine in older adults, a maternal immunization study currently under way could support an application, if it's successful. The study is tracking rates of RSV infection among infants through their first year of life after their pregnant mothers receive the experimental vaccine. The trial is well under way, but results aren't expected until 2020.

That might not be soon enough. AstraZeneca is currently enrolling 1,500 healthy preterm infants into a midstage trial pitting its RSV vaccine candidate, MEDI8897, against a placebo. The big British pharma expects results in 2018, and the candidate's direct injection into infants, instead of pregnant mothers, could lead to a pivotal trial wrapping up around the same time that Novavax's candidate completes its ongoing maternal immunization study.

If Astra's progress in RSV vaccination isn't troubling enough, GlaxoSmithKline also has a candidate in clinical-stage development. Its vaccine candidate with the unwieldy name of GSK3003891A is in a midstage study with healthy women to determine an effective dosage for further trials, and it should have top-line results ready this March. Also, a separate midstage dose-determination study with Glaxo's RSV candidate in infants should produce some top-line data in early 2018.

Difficult races ahead

Novavax contends its RSV candidate failed to provide a significant protective benefit in older adults due to an abnormally mild viral attack rate during the failed pivotal trial in that population. If that's the case, it might have a chance in the ongoing maternal immunization study. Following the pivotal failure in older adults, success seems like a long shot. If it produces positive data in 2020, though, the tiny biotech could find itself neck-and-neck with AstraZeneca, which has a great deal more resources to shepherd its vaccine through regulatory hoops as quickly as possible.

Glaxo is a bit further behind than Astra, but it too has resources to speed a promising candidate through costly late-stage development. Novavax, on the other hand, finished last September with about $300.3 million in cash, cash equivalents, and marketable securities. It also burned through about $222.9 million during the first nine months of last year while running two huge trials. Now that the older-adults pivotal trial has finished, the biotech's cash burn rate should subside somewhat. Unfortunately, it looks like Novavax will need to raise capital through a value-diluting share offering before we know if there's any hope left for its unproven RSV candidate.

Image source: Getty Images.

If the maternal immunization study doesn't produce airtight data showing a significant benefit for infants, the company will have little to fall back on. Recently, Novavax has pointed to some encouraging preclinical data with a Zika virus candidate, but it's miles behind potential competitors that include GlaxoSmithKline and Sanofi. Both big pharmas are working hand-in-hand with U.S. government agencies to develop a Zika vaccine. It's early still, but given that Novavax has precious little capital to fund new drug development, its hard to see how it could possibly keep pace with its deep-pocketed peers in the race to develop a viable Zika vaccine.

This beaten-up biotech stock could provide some outstanding gains if its lead candidate triumphs in the ongoing maternal vaccination study. Unfortunately, a pipeline devoid of additional candidates nearing the finish line means an all-too-likely failure could lead to heavy losses. For now, it might be best to watch the race unfold from the cheap seats.

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Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.