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dcsilver (< 20)

High Risk – High Reward: NVAX vs. EXEL



October 06, 2011 – Comments (0) | RELATED TICKERS: NVAX , EXEL

High Risk – High Reward: NVAX vs. EXEL

For background you can see my previous posts on both NVAX and EXEL.  This is more of an update.

Novavax (NVAX) had a big run in late August despite the broader market sell-off.  The stock fell from $1.80 to about $1.20 before climbing back to $2.00 at the end of the month.  Unfortunately for me, I bought in around $2.50 awhile back.  I double downed around $1.30 for an average price of about $1.60.  So I’m believing what NVAX is selling.  Recently the company offered “significant” news:

 Results from its Phase I/IIa clinical study of the company's H5N1 influenza virus-like particle (VLP) vaccine candidate that was conducted in 2008 was released and according to the report in the current issue of Journal of Virology, the Novavax Inc (NASDAQ:NVAX) vaccine targeted against a highly pathogenic avian H5N1 influenza virus was: 1) well-tolerated, 2) produced no vaccine-related serious adverse events and 3) induced neutralizing antibodies that were cross-reactive with different avian A/H5N1 influenza viruses.

Personally, I have doubts about Phase I/II clinical trial results, but when you invest in baby biotech (is a company really still a baby when it has been around for twenty years?) you take what you can get.  I believe there was some profit taking when the stock rebounded but that is typical.  The stock is currently trading around $1.50 with only a 6.25% short/float ratio.

Yesterday NVAX announced a small government contract that it has been awarded a $1.3 million contract from the U.S. Department of Homeland Security to develop a virus-like particle vaccine countermeasure to protect the United States from foot-and-mouth disease, a highly contagious viral disease of livestock and a potential threat to U.S.  Nothing earth shattering, just another nice feather in the cap.

Between the two government contracts and continued development of a unique technology, I believe the company has a successful future.  I’m putting my money where my mouth is.  Risk level at $1.50 long-term I put at a 5 out of 10.

EXELIXIS (EXEL) is on a crazy topsy-turvy ride at the moment.  Shares have been all over the map recently.  The data from a clinical trial is due any day now.  The Fool recently wrote:

Exelixis earlier this summer postponed the results of a trial testing cabozantinib in medullary thyroid cancer patients for three months, but earlier this month it extended the timeline again until some day in the fourth quarter. Although that decision might have some observers thinking that it may want to put off bad news as long as possible, it could be just as certain that the company wants to have all its ducks in a row for the positive data it's going to reveal. 

This stock is as risky as they come.  Although the company is hoping to open up the cabozantinib potential by expanding into prostate-cancer, that would be wrecked if the medullary thyroid cancer trial fails.  EXEL is the definition of potential cancer-buster that lead people to invest in biotech.  When the results are announced in the next few days or weeks, this stock either goes down to $2.00 a share or hits $15.  This is why most people trade on the rumor and sell before the news.  You can ride this stock all the way up or all the way down.

I still hold a significant position, but if the stock spikes soon, I might pull out.  Not sure what my risk threshold is at the moment. Risk level at $5.60 long-term I put at a 9 out of 10.

As I have mentioned above, I own both stocks.  Therefore I’m betting on at least one of these stocks being a potential multi-bagger.  That’s hard to do in the biotech world when the results come out.  Best of luck…

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