Comments by Upside Research this morning:
link (scroll down to comments): http://seekingalpha.com/article/4005021-novav...s-part-1-2
Upside Research , Contributor
Comments (350) |Following |Send Message
Author’s reply » As I wrote several times, investing in general and investing in biotech in particular is a matter of probabilities. The wins are bigger and the losses are too. And as I said, nothing is guaranteed. If a probability is 96%, that means there's about a 1 in 25 chance of failure. If I'm told that it's going to snow one day per month in the winter, I'm not surprised if I wake up one day each month and find snow on the ground.
And I certainly would not attack a person who said he expected it to snow one day out of the next 25 days. I also encouraged people to assess the data and come up with their own probabilities based on the known data.
For people who are attacking Bret Jensen over his recommendation of NVAX, Bret too regularly points out that biotech is a matter of probabilities. Most of the biotech experts I follow agreed that this phase 3 had a much higher than normal probability of success. For some context about Novavax’s Phase 2 trial, normally Phase 2 trials have between 100 and 300 participants as described here http://tinyurl.com/jm7... and here http://tinyurl.com/zcb....
Novavax’s Phase 2 trial for the adult RSV vaccine had 1,600 participants.
http://tinyurl.com/hlb... That’s 8 times higher than the average Phase 2 trial, so the chances of the positive results being a fluke were far lower than normal. In a study of 200 people, the chances of fluky results is sizable. The chances of a fluke are very low when 1,600 people are involved.
In fact, as the links above note, Phase 3 trials usually range between 300 and 3,000 participants or between 500 and 2,000. The mid-points of those ranges are 1,650 and 1,250. So Novavax’s Phase 2 had as many participants as the average Phase 3 trial.
Also, Phase 2 trials are usually done at only 1 to 2 sites (such as a clinic or medical center) and Phase 3 trials are done at numerous sites. Novavax’s Phase 2 trial was done at 10 sites around the U.S. so it was also similar in that way to a Phase 3 trial.
I agree with RHMassing that $1.4 is an over-reaction, though my bet is it will take more than a day to reach $2.5 in part because people usually take 2-3 days (or more) to get over their initial emotions (I myself was licking my wounds Thursday night because my position took a hit also) and in part because it will take more than a day for fuller info to become known. I didn't have time to listen to the conf call until early this morning, and many people won't locate it and listen to it, and will take a few days for the valuable info in it to be well known.
I just increased my position this morning from 24,000 shares to 87,000 shares in part of the reasons I describe below. As part of the process of choosing what to do, I encourage people to listen to the conference call about the results that’s available at the front page of the company’s website - http://novavax.com.
They explain that the only known difference between Phase 2 and Phase 3 is that this year was a very low attack rate for RSV – the lowest ever on record – and that successful flu vaccines have also shown a lack of efficacy in seasons when the attack rate is low. Quote from the CEO on the conference call (note 201 refers to Phase 2 and 301 to Phase 3):
“The clear difference between 201 and 301 is the attack rate. The RSV attack rate in our study represents the lowest attack rate ever reported - by a lot. We had a bad RSV season - at least from a vaccine development point of view. Was it bad luck? Yes. Was it predictable? No. You’ve heard Greg lay out that a lower attack rate co-relates with lower efficacy, not only in our study, but in multiple reports of clinical trials with flu vaccines.”
They are going to run 1 or more additional Phase 3 trials for this older adult RSV vaccine in the near future, and if it is a normal attack rate season, it’s entirely possible the efficacy will occur and the vaccine will be approved. Quote from the CEO:
“We have a preponderance of data that tell a consistent story of the effectiveness of our vaccine. Over many years, we have consistently shown in well accepted animal models that our vaccine stimulates a robust immune response in every way that we could measure. Over the same many years, we have consistently shown in well accepted animal models that our vaccine protects these animals when vaccinated and then challenged with RSV. And in 9 clinical trials with pediatrics, women of child-bearing age, pregnant women, healthy adults and in the older adult population, we have consistently shown robust immune system responses by every measurement that we have. And finally, in 2 trials in the older adult population … we have shown that our vaccine provides protection from acute respiratory disease."
This is the only trial out of a large amount of trials that hasn’t shown efficacy and the only difference between this and all the others is that the RSV attack rate this year was far lower than normal. In reply to a question, they explain that they might be able to shape the next trial to overcome a low attack rate by picking areas of the country that aren’t likely to have low attack rates, or possibly in other ways.
They also said they might do 1 trial in which people get a booster shot the first year, as one of the newly released trials showed promising results for people who received a second shot. The story for the older adult RSV vaccine is far from over.
They also emphasize that the RSV vaccine for maternal immunization is a different product with a different mechanism than the older adult vaccine, so the maternal trial doesn’t relate to the older adult one. They also said that attack rates for infants are proven by researchers to be consistent and so the trial for the vaccine for children shouldn’t run into an issue with a low attack rate.
Both of those vaccines passed Phase 2 trials, which is the hardest stage to get through given that only 31% of phase 2 trials are successful. It's the hardest of the 3 stages. The average success rate of phase 3 trials is about 65% when cancer drugs are not included. If the # of participants is higher than normal, the chances of phase 3 success go higher. And likewise if the overall efficacy of a treatment is strong in phase 2, the probability of its phase 3 results being "good enough" to win approval are higher than normal because it means they have room to go down in efficacy and still be approved. Ditto if the safety levels are very high.
The largest ever study of clinical development success rates was published this year by the Biotechnology Innovation Organization (BIO) in partnership with Amplion and Biome... It analyzed 9,985 clinical and regulatory phase transitions at 1,103 companies. It found Phase 3 trials between 2006 and 2015 on average were successful 60% of the time. The study (and others before it) have found that cancer therapies have a much lower rate of success, so excluding those, the average rate is higher than 60%.
Phase 2 trials only have a 31% success rate, so the average success rate of Phase 3 is roughly double. Novavax has in the last year had three successful phase 2 trials, so the chances of one passing phase 3 are high. You can see the whole report here
http://tinyurl.com/jhg...
And a summary here - http://tinyurl.com/hmk...
There is still no other company that has produced any successful phase 2 trials for RSV, while they have three successful phase 2 trials for RSV, and are going to do phase 3 trials for all of them. This includes doing another phase 3 trial for the older adult vaccine so it can be tested in a relatively normal RSV season. The CEO said last night:
“From everything we know, we believe that we remain in the lead in the global pursuit of an RSV vaccine, and that we will have the first licensed product. To date, we are the only company to have demonstrated efficacy with an RSV vaccine with any population.”
They’re also working on a zika vaccine and flu vaccine. Here’s a list of their trials - http://tinyurl.com/hb4...
To have a market cap of $4 billion, pretty much all the company needs to do is have 1 product approved that sells about $800 million a year. If the maternal vaccine or children's vaccines are positive, it will be over $800 million in revenue. The market cap on that is an extremely large gain off the current market cap. If the older adult vaccine succeeds in the next phase 3 trial for it, sales will be far higher than $1 billion.
Of course people should do what they think best. I simply wanted to provide the info above for your consideration. There’s much more on the conference call, and there will be far more on the investor day in a couple of weeks.
link (scroll down to comments): http://seekingalpha.com/article/4005021-novav...s-part-1-2
Upside Research , Contributor
Comments (350) |Following |Send Message
Author’s reply » As I wrote several times, investing in general and investing in biotech in particular is a matter of probabilities. The wins are bigger and the losses are too. And as I said, nothing is guaranteed. If a probability is 96%, that means there's about a 1 in 25 chance of failure. If I'm told that it's going to snow one day per month in the winter, I'm not surprised if I wake up one day each month and find snow on the ground.
And I certainly would not attack a person who said he expected it to snow one day out of the next 25 days. I also encouraged people to assess the data and come up with their own probabilities based on the known data.
For people who are attacking Bret Jensen over his recommendation of NVAX, Bret too regularly points out that biotech is a matter of probabilities. Most of the biotech experts I follow agreed that this phase 3 had a much higher than normal probability of success. For some context about Novavax’s Phase 2 trial, normally Phase 2 trials have between 100 and 300 participants as described here http://tinyurl.com/jm7... and here http://tinyurl.com/zcb....
Novavax’s Phase 2 trial for the adult RSV vaccine had 1,600 participants.
http://tinyurl.com/hlb... That’s 8 times higher than the average Phase 2 trial, so the chances of the positive results being a fluke were far lower than normal. In a study of 200 people, the chances of fluky results is sizable. The chances of a fluke are very low when 1,600 people are involved.
In fact, as the links above note, Phase 3 trials usually range between 300 and 3,000 participants or between 500 and 2,000. The mid-points of those ranges are 1,650 and 1,250. So Novavax’s Phase 2 had as many participants as the average Phase 3 trial.
Also, Phase 2 trials are usually done at only 1 to 2 sites (such as a clinic or medical center) and Phase 3 trials are done at numerous sites. Novavax’s Phase 2 trial was done at 10 sites around the U.S. so it was also similar in that way to a Phase 3 trial.
I agree with RHMassing that $1.4 is an over-reaction, though my bet is it will take more than a day to reach $2.5 in part because people usually take 2-3 days (or more) to get over their initial emotions (I myself was licking my wounds Thursday night because my position took a hit also) and in part because it will take more than a day for fuller info to become known. I didn't have time to listen to the conf call until early this morning, and many people won't locate it and listen to it, and will take a few days for the valuable info in it to be well known.
I just increased my position this morning from 24,000 shares to 87,000 shares in part of the reasons I describe below. As part of the process of choosing what to do, I encourage people to listen to the conference call about the results that’s available at the front page of the company’s website - http://novavax.com.
They explain that the only known difference between Phase 2 and Phase 3 is that this year was a very low attack rate for RSV – the lowest ever on record – and that successful flu vaccines have also shown a lack of efficacy in seasons when the attack rate is low. Quote from the CEO on the conference call (note 201 refers to Phase 2 and 301 to Phase 3):
“The clear difference between 201 and 301 is the attack rate. The RSV attack rate in our study represents the lowest attack rate ever reported - by a lot. We had a bad RSV season - at least from a vaccine development point of view. Was it bad luck? Yes. Was it predictable? No. You’ve heard Greg lay out that a lower attack rate co-relates with lower efficacy, not only in our study, but in multiple reports of clinical trials with flu vaccines.”
They are going to run 1 or more additional Phase 3 trials for this older adult RSV vaccine in the near future, and if it is a normal attack rate season, it’s entirely possible the efficacy will occur and the vaccine will be approved. Quote from the CEO:
“We have a preponderance of data that tell a consistent story of the effectiveness of our vaccine. Over many years, we have consistently shown in well accepted animal models that our vaccine stimulates a robust immune response in every way that we could measure. Over the same many years, we have consistently shown in well accepted animal models that our vaccine protects these animals when vaccinated and then challenged with RSV. And in 9 clinical trials with pediatrics, women of child-bearing age, pregnant women, healthy adults and in the older adult population, we have consistently shown robust immune system responses by every measurement that we have. And finally, in 2 trials in the older adult population … we have shown that our vaccine provides protection from acute respiratory disease."
This is the only trial out of a large amount of trials that hasn’t shown efficacy and the only difference between this and all the others is that the RSV attack rate this year was far lower than normal. In reply to a question, they explain that they might be able to shape the next trial to overcome a low attack rate by picking areas of the country that aren’t likely to have low attack rates, or possibly in other ways.
They also said they might do 1 trial in which people get a booster shot the first year, as one of the newly released trials showed promising results for people who received a second shot. The story for the older adult RSV vaccine is far from over.
They also emphasize that the RSV vaccine for maternal immunization is a different product with a different mechanism than the older adult vaccine, so the maternal trial doesn’t relate to the older adult one. They also said that attack rates for infants are proven by researchers to be consistent and so the trial for the vaccine for children shouldn’t run into an issue with a low attack rate.
Both of those vaccines passed Phase 2 trials, which is the hardest stage to get through given that only 31% of phase 2 trials are successful. It's the hardest of the 3 stages. The average success rate of phase 3 trials is about 65% when cancer drugs are not included. If the # of participants is higher than normal, the chances of phase 3 success go higher. And likewise if the overall efficacy of a treatment is strong in phase 2, the probability of its phase 3 results being "good enough" to win approval are higher than normal because it means they have room to go down in efficacy and still be approved. Ditto if the safety levels are very high.
The largest ever study of clinical development success rates was published this year by the Biotechnology Innovation Organization (BIO) in partnership with Amplion and Biome... It analyzed 9,985 clinical and regulatory phase transitions at 1,103 companies. It found Phase 3 trials between 2006 and 2015 on average were successful 60% of the time. The study (and others before it) have found that cancer therapies have a much lower rate of success, so excluding those, the average rate is higher than 60%.
Phase 2 trials only have a 31% success rate, so the average success rate of Phase 3 is roughly double. Novavax has in the last year had three successful phase 2 trials, so the chances of one passing phase 3 are high. You can see the whole report here
http://tinyurl.com/jhg...
And a summary here - http://tinyurl.com/hmk...
There is still no other company that has produced any successful phase 2 trials for RSV, while they have three successful phase 2 trials for RSV, and are going to do phase 3 trials for all of them. This includes doing another phase 3 trial for the older adult vaccine so it can be tested in a relatively normal RSV season. The CEO said last night:
“From everything we know, we believe that we remain in the lead in the global pursuit of an RSV vaccine, and that we will have the first licensed product. To date, we are the only company to have demonstrated efficacy with an RSV vaccine with any population.”
They’re also working on a zika vaccine and flu vaccine. Here’s a list of their trials - http://tinyurl.com/hb4...
To have a market cap of $4 billion, pretty much all the company needs to do is have 1 product approved that sells about $800 million a year. If the maternal vaccine or children's vaccines are positive, it will be over $800 million in revenue. The market cap on that is an extremely large gain off the current market cap. If the older adult vaccine succeeds in the next phase 3 trial for it, sales will be far higher than $1 billion.
Of course people should do what they think best. I simply wanted to provide the info above for your consideration. There’s much more on the conference call, and there will be far more on the investor day in a couple of weeks.
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