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Written by Mike Havrilla. Novavax (NASDAQ:NVAX) is a vaccine developer based upon its virus-like particle (VLP) technology platform that utilizes insect cells rather than chicken eggs or mammalian cells. NVAX has two potential upside catalysts before year-end, including expected Phase 2 results for a flu vaccine study in Mexico and a possible government contract award for pandemic flu preparedness / manufacturing.

VLPs are genetically engineered to resemble live viruses, but do not have ability to replicate and the Company’s products in development include vaccines against pandemic influenza (including H5N1 and H1N1 pandemic strains), seasonal influenza, Respiratory Syncytial Virus (RSV) and Varicella Zoster Virus (shingles virus).

Advantages of the VLP technology platform include the ability to construct a manufacturing facility at one-fourth the cost in one-half the time compared to egg-based vaccine production facilities, which average over $150 million for a 100 million dose egg-based facility, $600 million for a 50 million dose mammalian cell culture facility, and 4-5 years before launching into commercial production. NVAX projects that a VLP vaccine plant (75-100 million dose capacity) could be built in 24 months for $35-40 million.

Other advantages of the VLP manufacturing process include the ability to create an H5N1 influenza vaccine within 12 weeks of knowing the genetic sequence of a target flu strain without the need of live viruses or vaccine adjuvants (added to some vaccines to increase the body’s immune response). In December 2007, NVAX partnered with GE Healthcare (NYSE:GE) to co-market a pandemic flu vaccine production solution that can be quickly scaled up on demand.

NVAX reported positive safety data and immune responses on all 1,000 subjects in the first part of a Phase 2 study (ClinicalTrials.gov ID NCT01072799) of its 2009 H1N1 VLP flu vaccine while the second stage of this study is ongoing with 3,500 additional subjects (safety portion) and results expected by year-end 2010 to support the potential registration of this flu vaccine in Mexico.

Some examples of acquisitions in the vaccine space [click here for HavRx Vaccines Index] include Pfizer (PFE) / Wyeth deal (vaccines cited as key factor in this deal), AstraZeneca (NYSE:AZN) MedImmune, Novartis (NYSE:NVS) / Chiron, and most recently Johnson & Johnson (NYSE:JNJ) / Crucell (NASDAQ:CRXL)…the following is a link to an article that I published on Seeking Alpha in January 2009 identifying CRXL as a likely acquisition candidate in the vaccine space => Crucell: Great Chance of a Buyout

In September 2009, NVAX submitted proposal in response to US RFP solicitation number HHS BARDA-09-32 for the advanced development of recombinant influenza vaccines in a US based manufacturing facility >> Health / Human Services (HHS) determined the BARDA proposal to provide recombinant influenza vaccines and manufacturing capabilities for pandemic preparedness is in the competitive range for award of an advanced development contract with an award possible this year (no definitive deadline exists) in a projected range of $25-100 million.

On 10/13/10, SIGA Technologies (NASDAQ:SIGA) announced the award of a contract to deliver 1.7 million courses of its smallpox antiviral for the Strategic National Stockpile, with a base contract value of $500 million. On 7/20/10, AVI BioPharma (NASDAQ:AVII) announced that it was awarded a new contract for up to $291 million total with the U.S. Department of Defense Chemical and Biological Defense Program for the advanced development of its hemorrhagic fever virus therapeutic candidates.

In April 2010, NVAX reported Phase 2 results in older adults (60 / older) from a dose-ranging study comparing its trivalent seasonal influenza VLP vaccine with a commercially available inactivated trivalent influenza vaccine (TIV) >> results indicated that NVAX vaccine was both safe and immunogenic against the 2009-2010 seasonal influenza virus strains in older adults. A confirmatory Phase 2b study is expected to begin next year to evaluate the Company’s VLP seasonal flu vaccine in older adults.

The Center for Disease Control and Prevention (CDC) has indicated that currently approved seasonal influenza vaccines have shown to be only 30% to 70% effective in preventing hospitalization for pneumonia and influenza in older adults >> NVAX believes its trivalent seasonal influenza VLP vaccine has the potential to address this unmet medical need 

NVAX ended 6/30/10 with $26.7 million in cash / investments and received net proceeds of $13.5 million from the sale of its common stock at an average price of $2.24 per share for the period of 6/30/10 through 8/5/10 (with 25 million shares authorized for sale as part of a market issuance sales agreement). The Company has 107 million shares of common stock outstanding as of 7/31/10 and is scheduled to report 3Q10 financial results on 11/5/10.

Based upon the range of consensus analyst stock price targets (six analysts, $4-11 range, $6 average price target) and the one-year stock chart (range $1.92-4.10, average approx. $2.50), my short-term (three-month) price target for NVAX is $3-4 based upon achieving positive results in the ongoing Phase 2 study in Mexico with additional upside possible ($4-6) based upon the potential award of a HHS / BARDA contract for domestic flu vaccine manufacturing / pandemic preparedness at or near the upper projected range of $100 million.

Disclosure: Long NVAX

Written by Mike Havrilla. Amarin Corp. (NASDAQ:AMRN) is developing AMR101 (Ethyl-EPA) as a prescription-grade omega-3 fatty acid with the same active component as EPADEL, which has been marketed over 10 years by Mochida Pharma (MCPMF.PK) (TYO:4534) in Japan with annual sales of approximately US$370 million.

Other comments made during the presentation today highlighted that LOVAZA currently has an annual sales run rate of over $1 billion in the US and $400 million outside the US (i.e. the current monthly sales rate * 12 months = annual run rate of sales vs. trailing 12-month sales figures). Also, AMRN plans to pursue a multi-supplier strategy for AMR101 vs. Glaxo, which utilizes a single supplier for LOVAZA. With regard to patent / intellectual property (IP), AMRN expects at least 7.5-8 years of US marketing exclusivity (which is calculated from the time of FDA approval) based on its status as a New Chemical Entity (NCE) in this country, despite the long history of use in Japan.

AMR101 is prescription grade, ultra-pure (>96%) ethyl ester of an omega-3 fatty acid known as eicosapentaenoic acid (ethyl-EPA) that has been studied in more than 1,000 patients as part of double-blind, placebo-controlled studies that include over 100 patients studied for over 1 year. In addition, Ethyl-EPA is differentiated from Glaxo’s (NYSE:GSK) $1 billion dollar product LOVAZA (omega-3-acid ethyl esters) in the key areas outlined below.

- no fishy smell / taste or GI side effects such as “fish burps” => potential for better patient compliance along with expected dosing of just two capsules per day vs. four capsules per day for LOVAZA

- lacks Ethyl-DHA omega-3 fatty acid component, which raises bad cholesterol (LDL) levels => LOVAZA (465mg Ethyl-EPA + 375mg Ethyl-DHA + 160mg addt’l fatty acids / esters) vs. AMR101 (> 960mg Ethyl-EPA + addt’l fatty acids approx. 30mg)

- potential to address a much larger patient population compared to LOVAZA, which is approved only for patients with triglyceride levels greater than 500 mg/dL => an estimated 3.8 million US adults over age 20 with TG levels greater than 500 vs. an estimated 36 million people w/ TG levels of 200-499 (ANCHOR study, potential indication for Ethyl-EPA)

On 8/10/10, AMRN reported that the MARINE study (very high TGs > 500) was fully enrolled (229 pts) with top-line results expected in approx. 6 months (mid-February 2011 estimate) while the ANCHOR study (high TGs 200-500 plus on statins w/ two or more lipid disorders) is estimated to complete patient enrollment by early 2011 with results to be reported later in 2011.

In addition, a five-year cardiovascular events outcome study conducted in Japan in over 18,000 patients receiving statins for elevated cholesterol demonstrated that EPADEL treatment added to statins vs. statins alone resulted in a statistically and clinically significant 19% reduction in cumulative cardiovascular events (e.g. heart attacks) over a five-year period. AMRN plans to conduct a Phase 3b outcomes study (which would be funded by a partner and is not required for a NDA filing) as a continuation of the ANCHOR study in patients on statin therapy with mixed dyslipidemia (i.e. two or more lipid disorders such as elevated LDL and TGs). If successful, the outcomes study would allow for an expanded label for AMR101 and larger commercial opportunity.

Amarin is fully funded through a potential NDA filing in 2012 with partnership discussions ongoing (14 confidential disclosure agreements or CDAs currently pending) and likely to be completed after both of the pivotal trial results are announced and prior to FDA approval. It is important to note that both of the pivotal Phase 3 studies (MARINE / ANCHOR) are being conducted under SPA agreements with the FDA without the need for Phase 2 studies for patients with elevated TGs, supported by over 10 years of use in Japan and previous studies conducted by Amarin for a variety of neurological conditions that provided proof-of-concept data for lowering TGs – the previous testing by AMRN is also important with regard to the completed preclinical / toxicology data that has already been generated.

Looking at the financials, Amarin is fully funded through a potential NDA filing and ended 2Q10 on 6/30/10 with $37.6 million in cash, no debt, and approximately 100 million shares of common stock outstanding. On a fully diluted basis, Amarin has about 149 million shares of common stock, which includes 8.8 million options outstanding with an average exercise price of $2.44 and 40.2 million warrants outstanding at an average exercise price of $1.76.

Top shareholders of AMRN include Abingworth (17%), Sofinnova (17%, including 3.4M shares purchased at approx. $2.85 in August 2010), and OrbiMed (10%) with the first two venture capital firms participating in re-capitalization of the Company last year. Below are the key takeaways supporting a bullish outlook for AMRN…

- an under the radar opportunity with little research analyst coverage and largely unknown by Wall Street

- targeting an enormous market opportunity that encompasses cardiovascular disease and the evolving recognition of the need to treat triglycerides, which has the potential to become a multi-billion market opportunity similar in scope and size to statin drugs such as the world’s top selling drug Lipitor that is about to face generic competition

- many potential big pharma suitors, including obvious names such as Glaxo, given the potential threat to their billion dollar drug LOVAZA (which is being heavily marketed including television commercials), which is currently the only FDA-approved prescription omega-3 fatty acid product and Pfizer (NYSE:PFE), which will soon face generic competition for Lipitor and may look for another potential blockbuster drug in the area of cardiovascular disease

- the Company’s Chairman, Joseph Zakrzewski, joined the Board in 2010 and previously served as COO of Reliant Pharma, which successfully developed LOVAZA and was purchased by Glaxo for $1.7 billion in November 2007

- pivotal Phase 3 program expected to conclude by mid-2011 to support planned NDA filing by 2012, including initial Phase 3 MARINE study results in early 2011

The 52-week stock price range for AMRN is $0.93-3.45 and the six consensus analyst price target estimates include a range of $2.60-7.00 with an average price target of $5 per share. The pivotal study data is the major downside risk at this point and while it seems unlikely to fail vs. placebo in both studies; the data will be compared to LOVAZA published results so ideally want to see better results for Ethyl-EPA, primarily observing no treatment-related increase in bad cholesterol (LDL) at a cut-off range of +6% as agreed upon with FDA in the SPA for the ANCHOR study.

My short-term (3-6 month) price target for AMRN is $5-6 per share with $10-12 possible longer term (9-12+ months) based on achieving successful results (i.e. not only meeting primary endpoints vs. placebo in study, but improving upon LOVAZA – especially in terms of not raising bad cholesterol levels as efficacy in lowering triglycerides should be comparable) in both pivotal studies to support broader label compared to LOVAZA and potential for fully diluted (150 million shares) valuations of $1.5-2 billion based on Glaxo’s acquisition of Reliant Pharma and the current global sales of LOVAZA ($1 billion).

Other bullish factors for AMRN include less likelihood of a sell on the news reaction with positive MARINE study results because the pivotal ANCHOR study data will follow later in 2011 (which has the potential to support larger patient population) and the ongoing potential for a partnership or acquisition if the pivotal trials are successful. I am expecting both pivotal studies will be successful since AMR101 is a prescription grade omega-3 fatty acid with a well defined mode of action and the lack of a DHA fatty acid component should translate into a improved product compared to LOVAZA with the potential to address a much larger patient population without increasing bad cholesterol levels (LDL neutral).

Disclosure: Long AMRN