Opko Health, Inc.. is Buying Vbi Vaccines Inc. (NASDAQ:VBIV) Shares
In a just published Form 13, filed with the US Securities and Exchange Commission (SEC), Vbi Vaccines Inc. (NASDAQ:VBIV) reported that Opko Health, Inc. has picked up 6,023,014 of common stock as of 2017-03-31.
The acquisition brings the aggregate amount owned by Opko Health, Inc. to a total of 6,023,014 representing a 15.0% stake in the company.
For those not familiar with the company, VBI Vaccines Inc. (Nasdaq: VBIV) is a commercial-stage biopharmaceutical company developing a next generation of vaccines to address unmet needs in infectious disease and immuno-oncology. VBI’s first marketed product is Sci-B-Vac™, a hepatitis B (“HBV”) vaccine that mimics all three viral surface antigens of the hepatitis B virus; Sci-B-Vacis approved for use in Israel and 14 other countries. VBI’s eVLP Platform technology allows for the development of enveloped (“e”) virus-like particle (“VLP”) vaccines that closely mimic the target virus to elicit a potent immune response. VBI is advancing a pipeline of eVLP vaccines, with lead programs in cytomegalovirus (“CMV”) and glioblastoma multiforme (“GBM”). VBI is also advancing its LPV™ Thermostability Platform, a proprietary formulation and process that allows vaccines and biologics to preserve stability, potency, and safety. VBI is headquartered in Cambridge, MA with research operations in Ottawa, Canada and research and manufacturing facilities in Rehovot, Israel.
A glance at Vbi Vaccines Inc. (NASDAQ:VBIV)’s key stats reveals a current market capitalization of 217.34 Million based on 40.02 Million shares outstanding and a price at last close of $5.49 per share.
Looking at insider activity, there are a few transactions worth noting.
Specifically, on 2016-12-06, Perceptive picked up 3,383,955 at a purchase price of $3.05. This brings their total holding to 6,245,725 as of the date of the filing.
On the sell side, the most recent transaction saw Mcchesney unload 1,500 shares at a sale price of $1.59. This brings their total holding to 0.
It’s possible to gauge a company’s potential by tracking the activity of its major holders, as well as checking in on insider activity such as those transactions listed above. We’ll be keeping an eye on Vbi Vaccines Inc. (NASDAQ:VBIV) as things move forward to see if its progress aligns with these transactions.
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Why VBI Vaccines, Inc. – Ordinary Shares (NASDAQ:VBIV)’s Cold Chain Efforts Could Be A Game Changer In The Vaccination Space
According to the World Health Organization (WHO), the first decade of this century was the most productive in the history of vaccine development. The decade saw the introduction of vaccinations for rotavirus diarrhoea, types of meningitis and pneumonia, and for human papillomavirus (HPV) infections that cause cervical cancer. These are life saving vaccines, and there are more on the way. There are more than 80 vaccines in the late stages of global development, with close to 40% of these targeting life threatening diseases such as malaria and dengue fever.
Not surprisingly, in line with this expanded portfolio, revenues generated by the industry have increased dramatically. In 2005, global vaccine market revenues were $10 billion. During 2015, this had risen to $41 billion. UNICEF estimate that just over 80% of the world’s children now have access to immunization. To put this another way, coverage is now a far smaller problem than it was just a decade ago.
There are fresh problems, however, and as coverage has increased, and in line with coverage, demand, the primary issue now is the distribution network that underpins the coverage.
Specifically, a concept called the cold chain.
The majority of commonly recommended vaccines require storage temperatures of 35°F-46°F (2°C-8°C) and must not be exposed to freezing temperatures. Some of the more modern vaccines, namely varicella vaccine live attenuated influenza vaccine (LAIV), need to be stored at a continuously frozen state. These costs of the cold chain extend to both the developing world, and developed economies such as the US and Europe. In the developed world, the infrastructure exists to maintain the cold chain, but it’s expensive. In the developing world, the cold chain necessitates a tiered structure, through which a central unit will distribute to regional healthcare entities, in an attempt to minimize the required stock holding of the vaccines regionally (because it’s expensive to refrigerate things in regional African centers, for example).
Bottom line, the cold chain adds a premium to the price of vaccines, which someone must bear. In many instances, it’s the drug makers. In some, it’s the network operators. Estimates as to the scale of this cost vary, with the high end suggesting an 80% premium and the low end a 20% premium.
If a company can find a way to allow for the breaking of the cold chain, and remove the necessity for the vaccines being stored and transported to do so within a low temperature range, there’s a massive global market for its technology.
One company has spent the last five years doing just that, and it’s put together a batch of data that suggests it has succeeded.
The company is VBI Vaccines, Inc. – Ordinary Shares (NASDAQ:VBIV).
VBI is a vaccine developer that formed by way of a merger early in 2016 between a company called SciVac, and a company called VBI Vaccines. The two merged, combined operations, and moved forward as VBI under the ticker VBIV. SciVac brought into the merger its hepatitis B vaccine, Sci-B-Vac, which is a standard of care hepatitis vaccine in Israel (where it is administered to almost every child as standard of care) and 14 other countries across Europe, Africa and South America. The vaccine is in the late stages of the development process required for a US approval, and there’s a large market on offer if the FDA follows in the footsteps of the Israeli health authorities and accepts the vaccine for commercialization.
That’s not the focus of this discussion, however.
VBI brought with it two technologies – one, a platform that develops a third generation of vaccines, which are designed to mimic viruses as closely as possible and, in doing so, have a far higher immunogenicity than the current generation. This platform is called the eVLP platform, and VBI is currently working on a cytomegalovirus vaccine, and a brain cancer vaccine (designed as an immunotherapy tool) under the framework of this technology. Again, however, that’s not the focus of this discussion.
The focus is the second technology brought to the table – a technology called the LPV Thermostability Platform, or LPV TP. The processes that underpin the platform are not public, which isn’t surprising gibing the game changing nature of the technology involved. However, from the available literature, it’s possible to deduce that by using a combination of synthetic lipids (MPG, DCP, and Cholesterol) in proprietary ratios, the platform reduces moisture content during what are called lyophilization cycles. These cycles are a sort of freeze drying process, and normally aren’t that effective with vaccines. Include the proprietary mix of lipids, however, and VBI has proven its able to reduce moisture ingress in the vaccines. A reduced moisture ingress removes the necessity for refrigeration or freezing, and – by proxy – remove the need for a cold chain.
This isn’t just conceptual stuff, either.
VBI has data in hand that proved the commercial MMR vaccine potent at 8 weeks, kept at body temperature. It has the same data for a Herceptin like vaccine. With the common influenza virus, its LPV TP extended potency to 12 months at a little over body temperature. Rabies vaccine, which is essentially useless within hours of being removed from the cold chain, held its potency for 18 months at body temperature once it had been exposed to the LPV TP.
It’s hard to underestimate the importance of these numbers. The company could (using the numbers referenced above) save big pharma anywhere between 20% and 80% on its vaccine costs, some of which will pass to consumer, of course, but a large portion of which could be cost savings for the big pharma entities in question.
These companies are recognizing this, and VBI is drawing some big name partners on the back of the platform’s potential.
In April 2016, the company entered into a research collaboration with Sanofi SA (ADR) (NYSE:SNY), under which Sanofi will use the LPV TP to attempt to produce a version of one of its vaccines. A couple of months earlier, in February 2016, VBI struck the same deal with GlaxoSmithKline plc (ADR) (NYSE:GSK).
If these deals produce what both companies hope they will – a vaccine that can be removed from the cold chain – it’s going to open the floodgates for a host of expanded big names to secure exclusive rights to VBI’s technology in various vaccine applications.
Right now, VBI has a market capitalization of circa $200 million. It won’t take many of these sort of exclusive rights deals to inject a comparable amount of cash into its balance sheet. In this regard alone, the company looks undervalued.
And as mentioned earlier, this is just half of the story, if that. The company has announced numerous developments relating to its vaccine platform during the first quarter of 2017, with steps forward in GBM, CMV and RSV each serving as catalyst year to date. Further, smart money is recognizing the potential, and VBI has picked up a raft of household name biotech funds’ support.
Bottom line, with the cold chain operations potentially set to change the vaccine landscape, and the company’s pipeline advancing treatments in billion dollar indications, supported by some of the biggest funds in the sector, it’s difficult to see this one staying at its current valuation for much longer.
Here Are The Next Major Catalysts To Watch From VBI Vaccines, Inc. – Ordinary Shares (NASDAQ:VBIV)
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.