Exploring the Key Risks Facing Novavax
Beyond multiple risks that affect a majority of clinical stage biopharmaceutical companies, Novavax (NVAX) also faces certain company-specific risks.
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At the end of September 2017, Novavax (NVAX) had ~$173.0 million in cash and cash equivalents compared with ~$236.0 million at the end of September 2016. In 1Q16, the company raised $325.0 million through the issuance of convertible notes. These notes bear an interest rate of 3.75%, mature in February 2023, and are convertible into ~47.7 million shares of Novavax.
The company’s long-term debt as a percentage of total capital stands at 130.0%. When compared with its peers, this is a significantly higher level of debt. For its peers GlaxoSmithKline (GSK), AstraZeneca (AZN), and Sanofi (SNY), this measure stands at 60.0%, 51.0%, and 20.0%, respectively.
To effectively carry out clinical trials, these companies require significant level of resources. To date, Novavax’s peers have been in a better position to raise the required capital.
Novavax (NVAX) raised $46.0 million through the sale of common stock during the nine months ended September 2017. It raised an additional $3.4 million through the sale of 3.4 million shares through November 2017. The company is authorized to raise an additional $23.5 million.
The average number of shares outstanding has increased from approximately 131.7 million in 2012 to 270.8 million in 2016. This trend resulted in existing shareholders seeing the company’s stock price falling from $12.00 in August 2015 to $1.45 on November 22, 2017. Novavax’s current stock price is approaching the delisting trigger price of $1.00.
With significant resources at company’s disposal devoted to R&D, a failure during clinical trials can affect the company’s financial position along with its stock price.
In September 2016, Novavax announced that its RSV vaccine candidate Phase 3 study in adults failed to meet its endpoints. This resulted in the stock price falling from the $7.00 range in August 2016 to $1.29 on September 16, 2016.
Novavax makes up about 0.01% of the iShares Russell 2000 Growth ETF’s (IWO) total portfolio holdings.