As most analysts warn of a broad stock market correction this year, several innovative biopharmaceutical companies are now benefiting from an increasing number of drug approvals, new product launches and promising pipelines.
One promising small-cap biotech play is VBI Vaccines (VBIV). Based in Cambridge, Massachusetts, VBI Vaccines develops vaccines to address unmet needs in infectious diseases, in large underserved markets around the world. The company also has research labs in Canada and research and manufacturing facilities in Israel.
VBI is developing an enveloped viruslike particle (eVLP) platform for the bioengineering of immunological vaccines that imitate viruses, to trigger durable immune responses.
Biotech is bouncing back from its doldrums of 2016, and it’s now outpacing the wider indices. The benchmark iShares NASDAQ Biotechnology Index ETF (IBB, Financial) is up 21% year to date, compared to about 9.7% for the Standard & Poor's 500. VBI shares year to date have soared nearly 40%. The stock has further upward trajectory in store.
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VBI also is developing a proprietary Lipid Particle Vaccine technology, a formulation that allows the stabilization of vaccines through freeze drying.
VBI’s lead product is Sci-B-Vac, a “third-generation” hepatitis B vaccine for adults, children and newborn infants. To date, more than 300,000 infants and adults have been vaccinated with Sci-B-Vac around the world.
In addition, VBI is developing a vaccine program, which is in Phase I clinical trials, for the prevention of human cytomegalovirus (CMV) infection. CMV is a leading cause of prenatal developmental delays. The company also is developing vaccines for common adult and pediatric brain tumors.
Development has accelerated in recent weeks for VBI’s Sci-B-Vac program, which the company is targeting for commercialization in the U.S., European and Canadian markets.
Sci-B-Vac is designed to outperform the efficacy of available HBV vaccine alternatives, such as GlaxoSmithKline’s (GSK, Financial) Engerix-B.
Engerix-B and those like it are “second-generation” vaccines that use an antigen to trick the body’s immune system into thinking it’s the HBV virus, which in turn triggers a defensive response. Hence the term “immunology” for such drugs because they use the immune system to fight invading diseases.
Sci-B-Vac, on the other hand, is a third-generation immunological treatment that deploys more than one antigen, for a faster immune response of greater potency, which would be particularly valuable for immunocompromised patients, elderly patients and chronic HBV patients who have proven unresponsive to conventional treatments.
Over the past several months, VBI has amassed safety and efficacy data that underscore the power of its three-antigen combination and designed a plan, called a protocol, that it wants to submit (along with supportive data) to the relevant authorities in the U.S., Europe and Canada, as part of a pretrial application (called an Investigational New Drug Application in the U.S, and a Clinical Trial Application in Europe and Canada).
This protocol must be approved by the respective agencies before VBI can launch human clinical trials with Sci-B-Vac. If the aforementioned agencies approve the protocol applications, VBI can conduct the crucial phase III trial. All three agencies recently expressed to VBI a willingness to accept protocol submissions, the most recent being the U.S. FDA as reported on June 19.
The positive feedback from these three agencies paves the way for Sci-B-Vac’s possible success and with it, future earnings momentum for VBI.
VBI reported a first-quarter fiscal 2017 loss of 22 cents per share, but losses should diminish as the company speeds-up development of its drug pipeline, especially for Sci-B-Vac. Meanwhile, the company is in fighting shape for the long battle.
VBI sports a healthy mid-cap valuation of $173.4 million, year-over-year revenue growth of $164.60%, and relatively low debt of $12.24 million. The company’s total debt-to-equity ratio is only 0.02, low by any industry standard but especially when compared to 0.80 for biotech as a whole.
Another appealing quality of VBI is its suitability for a buyout from one of the Big Pharma players. The biotech industry is awash in free cash flow and on the cusp of greater consolidation in 2017, as high-priced branded drugs lose patent protection and the pressure on margins prompts companies to forge economies of scale through mergers and acquisitions.
Also keep in mind, the FDA under the pro-business Trump administration is likely to seek paths to faster drug approval times, always an industry tailwind.
Disclosure: I hold none of the stocks mentioned in this article.
