Wednesday, April 29, 2009

Traders Flock to Novavax: SELL!

Common sense will be remembered as one of the first victims of the recent swine flu outbreak in the United States. In another example of following the herd, investors have stampeded into flu vaccine maker Novavax (NVAX-$3.18), which is working on potential treatments against highly pathogenic bird and swine influenza strains. The share price is trading at more than twice Friday’s close—despite knowledge that the company's vaccine candidate is more than two years away from commercial development.

Last month, Novavax published preclinical data showing that its H1N1 virus-like particle (VLP) vaccine candidate (based on the 1918 Spanish influenza strain) protected against both the Spanish flu and an H5N1 avian influenza strain. Nonetheless, even in the midst of a pandemic threat, it is highly unlikely that the Food & Drug Administration would approve an anti-viral with limited testing in (healthy!) humans.

With a quarterly cash burn of $8 million, Novavax does not have enough monies ($34 million at December 31—actually, $27 million if you back out the portion invested in auction rates securities) to shepherd its pandemic and seasonal flu vaccine candidates through human clinical testing. In our opinion, the recent $11 million capital infusion by India’s Cadila Pharmaceutical only delays an eventual restructuring of the company (including the suspension of other
R&D vaccine programs). A read of the 2008 annual report shows that $22 million in 4.75% senior convertible notes comes due on July 15 (although $11.0 million of the debt can be satisfied with the issuance of common stock).

The biggest asset on the company’s balance sheet is something called “crisis.” Back in 2005, this former distributor of soy-based lotions to prevent hot flashes in perimenopausal women repackaged itself as a (self-proclaimed) leader in the development of bird flu vaccines. We are still waiting for that SARS (severe acute respiratory syndrome) antidote, too.

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.


Anonymous said...

ok dipshit what do you have a short position in the stock , maybe a big pharma wants a piece of this and that is why it is trading at 30x normal volume, maybe it will get fast tracked who knows but this is a much better risk to reward stock than citigroup or BofA which lies to people daily about how healthy they are, maybe you should do a little homework and recommend a sell on them two stocks and then maybe you could become a hero. Wow 10Q Detective what a joke you are.

David J. Phillips said...

You are probably one of those clowns who has been long Novavax since 2005, blissfully waiting for the much-heralded flu vaccine that's just around the next quarter....You are obviously not a regular reader; otherwise, you'd be cogent of the fact that the 10Q Detective steered investors clear of Citicorp, Merrill Lynch & other financial companies months before they all exploded!

Anonymous said...

OK I am the clown, guess what your big theory just went down the tubes the day you made your big prediction to sell is the day they retired the 22 million in debt that you were so worried about. So who is the clown now, You are right they would have had a vaccine in two years and you don't think the market moves stocks on anticipation. You think in two years the stock will be at $3.00? and you don't think there is a very good chance the US or some other country fast tracks their vaccine with all the talk about how much money everyone is throwing in to prevent this. Think again cause if you are so inteligent you would retrack your statement and realize there is a whole lot more to go on the upside and very little downside from here

David J. Phillips said...

The has lost about 50% in value in less than a week. Enough of name calling -- let the facts speak for themselves.