NVAX – ISCONOVA DEAL SOUND STRATEGIC MOVE – BUY NVAX AHEAD OF CLOSING. Novavax announced today that as of yesterday (the initial Offer deadline), approximately 97.4% of the common stock and 100% of the warrants issued by Isconova (ISO, isconova), respectively, have been tendered. As a result, Novavax declares the Offer unconditional, will complete the purchase of ISO. Settlement is expected to begin on or before August 9. To gather the remaining 2.6% of ISO, Novavax is extending the acceptance period to August 20, 2013. Settlement for shares tendered during the extended acceptance period is expected to begin on or before August 27. The ISO acquisition is a sound yet inexpensive strategic move for NVAX. On June 4, NVAX agreed to acquire Swedish vaccine adjuvant supplier Isconova AB for $29.6M in a stock-for-stock transaction. As we have learned more about ISO, we view the deal as smart move for NVAX’s pandemic influenza and early-stage pipeline programs. Full ownership of a potent proprietary adjuvant allows the company to move more quickly in developing new vaccines. Moreover, management expects that it will also reduce the cost of vaccine production by approximately $1 per dose, versus paying a license fee for an adjuvant from a third party. The recently announced pre-clinical publication with the NVAX H7N9 pandemic flu vaccine utilized ISO’s Iscomatrix saponin-based adjuvant (100% protection vs. 0% placebo). ISO has a promising next-generation adjuvant for human vaccines, Matrix-M, in development with a range of pharmaceutical partners. In addition, ISO vaccine adjuvants are also partnered with major animal health manufacturers, such as Merck and Pfizer, proving NVAX an entry into the large and steady growing animal vaccine business. Isconova shareholders will receive 1.2388 shares of NVAX common stock for each share in Isconova for a total consideration of 15.7M shares or roughly $32 million at today’s prices (~10% dilution to NVAX shareholders). Despite the modest dilution, we believe investors will begin to appreciate the deal if they have not already – NVAX shares are up more than 15% since the announcement. (NVAX shares that are issued to an investor controlling 35% of Isconova will be locked up for 3 months.) In our view, the ISO deal fills a key strategic role in the NVAX long-term plan – control over novel, potent and proprietary animal and human adjuvants. Our most recent MTSL Issue #759 “Novavax vs. Medicago” details why we believe NVAX is vastly undervalued at current levels. If the ISO deal has pressured the shares of late, that offers yet another opportunity to initiate new positions and/or add to existing ones. We recommend NVAX at current levels and before the closing of the ISO deal.
Posted on: Wed, 31 Jul 2013 19:48:15 +0000
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