VBI Vaccines, Inc. – Ordinary Shares (NASDAQ:VBIV) has had a strong start to 2017, currently trading for a circa 22% premium on it’s December close price. For this young biotechnology company, however, things are really only just getting started. With a diverse pipeline of development stage assets, and a commercial product poised for expansion in to two of the largest global markets, VBI has a spate of near term catalysts that promise to inject some upside momentum into its market capitalization if they come out as favorable.
In anticipation of these catalysts hitting press, here’s a look at each one individually, and an analysis of why (and to what degree) we expect it to move the company’s share price.
For those new to VBI, let’s kick things off with a quick introduction to the company. We’ve already noted it’s a biotechnology entity, and its primary focus is in developing assets related to the vaccine space. Right now, its lead programs are a hepatitis B vaccine called Sci-B-Vac; a cytomegalovirus (CMV) vaccine called VBI-1501A; a glioblastoma multiforme (GBM) immuno-oncology candidate called VBI-1901; and a vaccine stability platform that promises has the potential to dramatically reduce the cost of vaccine transportation and storage. Secondary programs include vaccines in respiratory syncytial virus (RSV) and Zika, as well as an immuno-oncology asset targeting medulloblastoma.
We are going to go into a number of these assets in a little more detail shortly when we look at the catalysts.
Before doing so, however, a short note on institutional interest.
For a company of its size (a $150 million market capitalization as of end January 2017), VBI has attracted an unusually high caliber of institutional interest and big name backers. Through Opko Health Inc. (NASDAQ:OPK), billionaire biotechnology entrepreneur, and the focus of a feature in January’s print edition of Forbes Magazine, Dr. Philip Frost, owns 25% of the company. Joseph Edelmen, a recent addition to Institutional Investor’s Hedge Fund Rich List having earned $300 million during 2015, through his biotechnology fund Perceptive Advisors, owns 15.8% of VBI.
With that noted, let’s move on to the catalysts.
The first event of note is rooted in the CMV vaccine. VBI kicked off a phase I study investigating safety and efficacy of the vaccine in 128 patients in September 2016. The study spread sites across three locations in Canada, and aimed to determine the immunogenicity of the drug in question, the above mentioned VBI-1501A.
CMV is generally a silent virus, meaning that the majority of those infected don’t display any symptoms. In certain sub-populations of those infected, however, it can be very serious. The virus can cause serious disease in newborns when a mother is infected during pregnancy; what is known as congenital CMV infection. Each year, approximately 5,000 U.S. infants will develop permanent problems due to CMV, some of them severe, including deafness, blindness, and mental retardation. Economic costs associated with the infection total $2 billion annually in the US, and the virus affects more live births than both Down’s Syndrome and Fetal Alcohol Syndrome.
Right now, there’s no commercially available vaccine, and VBI is working to fill this large unmet need in the US. Interim data from the immunogenicity phase I study that the company initiated in December was initially reported to be scheduled for release during the first half of 2017. However, VBI now expects to report this data during the first quarter of the year. This represents the next catalyst for the company. Data from an animal study demonstrated efficacy of 95% 28 days post-second vaccination (the interim data will also report on post-second vaccination efficacy) so there’s a decent chance this catalyst should come out in favor of the company. If it does, it opens up the potential for a big name partnership on the vaccine.
The second catalyst we’re watching for relates to the hepatitis B vaccine, Sci-B-Vac.
This vaccine is currently available as a next generation hepatitis B vaccine in fifteen countries and currently has 50% market share in Israel, where approximately 500,000 patients have been dosed since the vaccine picked up regulatory approval in the region. It’s a third generation vaccine designed to build on both the safety and the immunogenicity of the currently available assets, and VBI has a strong bank of data that points to an improvement over current standard of care in both instances.
VBI generates revenues from the hepatitis B product right now, but the real potential is rooted in the US and European markets. Driven primarily by increasing immigration from medium and high-prevalence countries, growth in the hepatitis B therapeutics space will center in the US, Canada, the UK, France and Germany over the next half decade. Research puts the annual size of the market at $3.5 billion by 2021.
The company is looking to these regions, and especially the above mentioned US and European markets, to boost its top line going forward, and we should see VBI move a step closer to commercialization in these regions near term. Specifically, the company expects to kick off a phase III in Europe during the second quarter of this year, and this should be sufficient to underpin an application in both the US and Europe. Peak sales forecasts in these two regions come in at $200 million annually, so an approval in one or both will inject a considerable amount of upside momentum into VBI as and when they are announced.
These are just the primary, near term catalysts; those that we see as dictating sentiment (and in turn, valuation) between now and the second half of 2017. As the company’s remaining pipeline matures, we expect secondary catalysts to come in to play, and boost VBI outside of the CMV and hepatitis indications.
Looking finally at financials, VBI reported revenues of $300,000 during the third quarter of 2016 (the latest reported numbers) and just closed on a $23.6 million financing with the above discussed Perceptive Advisors. As such, while the company will likely need to raise cash at some point between now and its pipeline reaching full maturation, we don’t see it as a near term risk.
