Penny stocks are notoriously volatile. This is particularly true for investors considering taking a long position in a biopharmaceutical company like VBI Vaccines (NASDAQ:VBIV).
Like any biopharmaceutical company, the success or failure of VBIV stock comes down to its pipeline. Large companies such as GlaxoSmithKline (NYSE:GSK) have multiple drugs in the market and others in development. For VBIV, there are some drugs in development. But any short-term catalyst revolves around Sci-B-Vac, its next-generation hepatitis B vaccine.
Sci-B-Vac is currently available in 11 countries. However, the company is looking to get the vaccine approved for use in the U.S., Canada and Europe. For an investor to take a long position in VBIV stock, they must believe that approval of the vaccine is likely.
After a setback in 2019, approval of Sci-B-Vac is looking better. And that should be a catalyst for VBIV stock, particularly in the latter half of 2020.
The Devil Is in the Details
The story of VBI Vaccines in 2019 shows why investing in these stocks is not without risk. In June, the company completed what appeared to be a successful Phase 3 trial for Sci-B-Vac. The vaccine achieved all its primary endpoints. And it proved to be superior to its primary competitor, Engerix-B, the current standard of care from GlaxoSmithKline, at every point in the trial. This was still the case when tests of the vaccines included variables that made candidates the most vulnerable to Hepatitis B infection.
However, the trial showed that Sci-B-Vac taken in two doses was not as effective as Engerix-B taken in three doses. The problem for VBIV was that it wants to market Sci-B-Vac as a two-dose vaccine. This would allow it to effectively compete with its peer Heplisav-B from Dynavax (NASDAQ:DVAX).
Just that fast, VBIV stock, which was trading above $2 per share early in 2019, plunged 66% to close below $1. The stock attempted to recover, but a poor earnings report gave investors little reason for optimism. The price could not rise above the $1 level. On Aug. 14, VBIV received a notification letter from NASDAQ that the company’s stock was in danger of being delisted.
A Second Trial Provided Better Results
But a recent second Phase 3 trial may have just changed that outlook. On Jan. 9, VBIV stock climbed 17% on news that Sci-B-Vac had seroprotection rates of 99.3% after three doses and 90.4% after two doses. This compared favorably to Engerix-B which achieved rates of 94.8% and 51.6% respectively.
Better still, the vaccine was well tolerated by the 2,838 adults between 18 and 45 who took part in the study. And the vaccine would require no additional safety risks or safety signals. The stock, which was already climbing potentially due to insider buying, surged close to the $2 mark before falling to its current level.
With successful completion of the Phase 3 program, VBIV can proceed with moving the vaccine towards approval in the U.S., Europe and Canada. In a press release to announce the successful trial, VBI Vaccines President and CEO Jeff Baxter said the following:
We are thrilled with the results of the CONSTANT study, which once again demonstrate Sci-B-Vac® is a safe and highly-potent option for vaccination against hepatitis B, and which now enable us to finalize our regulatory package as we work towards submissions in the U.S., Europe, and Canada starting in the second half of 2020.
Should Investors Jump on VBIS Stock Now?
Investors expect VBI Vaccines to report earnings on Feb. 24, 2020. Analysts expectations are for the company to deliver earnings per share (EPS) of a loss of 6 cents. The company is not yet profitable, and analysts are not forecasting positive earnings until the fourth quarter. However, with the successful trial behind it, the stock appears to have upside momentum.
The three analysts who rate the stock give it an average 12-month price target of $4.33. VBIV stock is not without risk. This is evident by the profit taking that appears to have taken place after the stock’s recent jump. However, the stock appears to be setting up nicely for investors looking to take a long position.
As of this writing, Chris Markoch did not have a position in any of the aforementioned securities.
