Following the recent post on all swine flu stocks and other non-stock swine flu investments and how they stand to benefit or suffer under various scenarios, I’ve been keeping my eye on Novavax (NVAX) news especially. Today, a series of interviews were provided by the Novavax CEO Rahul Singhvi to discuss the swine flu vaccine work they’re doing. The video is telling in that while he presents a compelling case for the novel technology being employed to quickly develop a vaccine, Bloomberg did a very good job in challenging the assumptions that this may be a profitable venture for Novavax and also questioned why this work wouldn’t be awarded to more prominent proven players like Novartis, GSK and Sanofi. More commentary and analysis below:
What Novavax Has Going for it:
- According to Novavax’s CEO, they have already begun working on development of a vaccine using their novel Vaccine-Like Particle (VLP) technology.
- Non egg-based technology provides for rapid development and characterization of the vaccine, and rapid deployment of commercial quantities of vaccine, cutting the cycle time from a typical 6 months to 12 weeks in an Emergency Use Authorization situation.
- Lower risk of contamination (Not to cause alarm for existing options – this assumes batch failure during production; highly unlikely a contaminated batch would ever make to market under conventional means given obvious turbidity/detection and subsequent sterility testing in the process, but NVAX’s closed processing in disposables hypothetically provides for much better sterility assurance than conventional egg-based open aseptic manufacturing), thus lower risk of catastrophic supply chain interruptions.
What is working against Novavax:
- Novavax is by no means the only player in VLP. VLP manufacturing has been around for years and other companies have currently approved products on the market that utilize VLP. It’s just a different approach to combating the pathogen, but other companies are working on non-egg based flu vaccine technology as well (I believe GSK and perhaps others).
- I took a look at their website and didn’t see any mention of filling/packaging capacity. With 300 million Americans to vaccinate, in an all-out pandemic, putting out a few hundred thousand doses a week wouldn’t be sufficient. Companies like GSK, Novartis and Sanofi each have several high speed filling lines and decades of commercial supply history. Conversely, once the bulk vaccine is manufactured (the most complex and timely piece in the supply chain), the material could potentially be filled at a contract manufacturer if adequate filling capacity didn’t exist.
- While it’s possible that Novavax will have an effective swine flu vaccine ready for rapid deployment, it’s unlikely their competitors wouldn’t be nipping at their heels. The government would surely not entrust the sole supply of a critical vaccine to a single unproven supplier if alternatives existed.
- While a successful vaccine candidate utilized for Emergency Use Authorization would be a medical and PR win for Novavax, it may not be a sustainable source of revenue long term, as the vaccine business is rather lackluster compared to small molecule (ex some recent blockbuster vaccines; but this took decades to evolve) and I think investors would invariably catch on as conditions were improving during a pandemic and ask, “What’s next?”.
Disclosure: I am long NVAX with puts at 2.50 May expiry.
Update: Summer 2009 Swine Flu Stock Article
Rationale: I’m not trading on the fundamentals, but on the media sensationalism and fear that would grip the country if the flu does become pandemic and more virulent. We could very well see the stock trade much higher than it did Monday, especially if news of a governmental emergency use order were enacted. I view this as a very low probability, a Black Swan Event, but one with an enormous payoff if it occurred. Trading updates and blog post updates can be followed at this Twitter.
While WHO’s move to a Level 5 should have been expected upon reading the definitions, it conjures up images of “DEFCON 4” like we’re on the verge of a nuclear apocalypse. As I stated in my previous swine flu stock articles, anyone who claims to have a prediction for the outcome of this evolving situation has no credibility. The most renowned experts in the field say we’re going to just have to wait and see. Even if this peters out in a month, following summer, this same strain could very well mutate further and re-emerge next flu season. Historically, influenza pandemics have come in waves. Only time will tell.
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