Novavax, Inc. (NASDAQ:NVAX) shares have pulled back in recent days off of very clear technical resistance amid a generally weak broad market tape that has been defined by a flight from risk assets, especially those in the Nasdaq. Hence, it shouldn’t come as a big surprise to see some profit-taking in the stock following gains of nearly 100% since August.

That said, this technical and market-driven pullback may be an important opportunity given what lies ahead for the company.

Novavax, Inc. (NASDAQ:NVAX) is a story we like because it represents a compelling narrative into some very important catalysts that are starting to close in.

In our experience, there are two types of opportunities in the biotech space. The first, and the hardest, is to understand the real chances of success for a pipeline asset based on superior understanding of the science and the drug.

The second, and far more commonly productive, is to understand where the 50/50 point for an upcoming catalyst is, and to see that the current price of the stock is far undershooting the potential for a positive outcome.

In essence, the market must eventually travel to where it is in balance in terms of appreciating the odds of a positive and a negative outcome.

In this case, NVAX shares remain well below a balanced appreciation for the potential for a positive outcome in both its upcoming ResVax and NanoFlu data reveals.

The first to hit will be its respiratory syncytial virus (RSV) vaccine candidate, ResVax, in the first quarter of 2019. The company is also slated to release phase 1/2 trial data for its experimental flu vaccine, NanoFlu, in the first half of next year as well.

As we have noted, the company could be preparing for both to strike gold based on its recent board appointee (Rachel King), who could be said to be perfect as an addition for takeout negotiations given her VC and big pharma background, and the fact that her term on the board expires very quickly, just a few months after the results for both drugs will have been revealed.

In any case, if both are successful, both will be billion-dollar sales beasts.

The stock is currently trading at a market cap of well under a billion. That suggests that we will likely see some move to balance potential outcomes, which should be to the upside, provided the broad market doesn’t continue to get in the way.

The Big Picture

Novavax, Inc. (NASDAQ:NVAX) bills itself as a clinical-stage biotechnology company that focuses on the discovery, development, and commercialization of recombinant nanoparticle vaccines and adjuvants.

Its lead adjuvant is Matrix-M that is used to enable a vaccine to enhance the amplitude of the immune response and qualitatively change it, enhance its specificity to provide protection against related microorganisms, as well as allows immunization with much lower doses of antigen.

The company develops respiratory syncytial (RSV) virus fusion protein nanoparticle vaccine candidate for infants via maternal immunization in Phase III clinical trial; older adults in Phase II clinical trial; and children six months to five years of age in Phase I clinical trial.

Novavax, Inc. also develops NanoFlu vaccine, which is in Phase I/II clinical trial for treating seasonal influenza in older adults; and Ebola virus glycoprotein vaccine that is in Phase I clinical trial. Its preclinical programs include Zika virus; combination respiratory vaccine candidate to protect against RSV and seasonal influenza, as well as other infectious disease vaccine candidates.

Novavax, Inc. was founded in 1987 and is headquartered in Gaithersburg, Maryland.

Novavax, Inc. (NASDAQ:NVAX) generated sales of $7.7M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -28.2% on the top line.

In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($144.7M against $46.7M).

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