Novavax shares enter Warp Speed with cash injection

The biotech has been singled out for a $1.6bn payment for US Covid-19 vaccine development.

Corporate strategy

If there was any doubt about Novavax’s credentials as one of the best-performing stock of 2020, the not inconsiderable matter of a $1.6bn cash injection from the US’ Government's Operation Warp Speed has assured the biotech’s position as an investor darling.

Shares in Novavax, which started the year at $4, were up 28% in early US trading today, to $102.64. The company is the beneficiary of the biggest sum pledged so far by Operation Warp Speed – the White House-backed Covid-19 vaccine development project – trumping the $1.2bn handed out to Astrazeneca and Oxford University.

Novavax has form in attracting so-called "non-dilutive" funding, secured from sources other than investors. In May the company managed to snag a total of $388m from the Coalition for Epidemic Preparedness Innovations, the largest award that body has paid out to date.

The CEPI money funded the phase I/II trial of Novavax’s recombinant nanoparticle vaccine, NVX-CoV2373, and its accompanying adjuvant – and almost certainly helped put the company in the running for inclusion in Operation Warp Speed.

Roll of the dice

The $1.6bn will be used to fund a 30,000-subject phase III trial starting in the autumn of this year, build out manufacturing and supply the US government with 100 million doses by "as early as late 2020”.

To say that this is a big gamble on the part of the US government is an understatement. Novavax has never successfully brought a vaccine to market and unlike others in the Covid-19 vaccine race the company has not published any human data on its candidate. 

Results from the CEPI-funded phase I/II trial in 130 subject in Australia are due this month, and Novavax has promised immunogenicity data alongside safety results. Despite lack of evidence linking the presence of neutralising antibodies with protection from the virus, this is becoming an important benchmark in ranking rival vaccine approaches.

Biontech/Pfizer’s BNT162b1 has already set a high bar for others in the field. The mRNA vaccine produced strong neutralising antibody levels in all 36 dosed subjects, according to a non-peer reviewed preprint, with some achieving levels 46x higher than patients who had recovered from Covid-19.

Second bite of the cherry?

If Novavax’s NVX-CoV2373 fails to come near the results from Biontech the $1.6bn investment could look like an expensive folly on the part of the US government. It is not immediately clear whether the funding is tranched or contingent on certain milestones but it seems possible that the 100 million doses will be delivered before the pivotal trial reads out. By which time a substantial proportion of the money will presumably have been spent. 

And this might not be the end of the US government’s largesse towards Novavax. In its press statement the company said today’s award also allowed for “a follow-on agreement with the US government for additional production and procurement to support OWS’s vaccine production goal”.

But for the US to reach for its chequebook again Novavax will have to deliver convincing data at the approaching readout  – something that, as those with more experience of investing in biotechs than the US government will know, is not a dead cert.

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