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1. Stock Pick for 2014
Initiating Coverage
Novavax Inc.
The next Biopharma M&A target?
INVESTMENT THESIS
On September 30 the biggest Pharmaceutical
Manufacturer in the world, Johnson and
Johnson (Ticker: JNJ) acquired Alios Biopharma
(a private company and a competitor of
Novavax) for US $1.7 Billion. Johnson and
Johnson bought Alios mainly for its RSV drug
potential. Alios is still in very early preclinical
stage studies while Novavax is already in Phase
2 Clinical Studies. Novavax is made up of the
Medimmune Biologics researchers. Just like
Novavax it had a value of about $1Billion.
Medimmune developed Synagis (RSV treatment)
and was acquired AstraZeneca for 15.6 Billion in
2007. Synagis, like Alios, treats but is not a
vaccine for RSV. NVAX of course has a platform
for vaccine production, including RSV. In light of
this someone will be knocking on the door if not
already. Question is who and at what premium.
Recommendation: BUY (Growth)
Symbol/Exchange: NVAX/NASDQ
Sector: Biopharmaceuticals
All dollar values in US$ unless otherwise noted.
Current price: $4.05
One-year Target: $7.50
52week Range: $2.68 - $6.95
Market Cap: $978.32M
___________________________________________
About Novavax Inc.
Novavax, Inc. (Nasdaq: NVAX) is a clinical-stage
biophar maceutical company creating
recombinant protein nanoparticle vaccines to
address a broad range of infectious diseases.
The company is developing a portfolio of
vaccine candidates targeting seasonal and
pandemic influenza (H5N1), a vaccine designed
to protect children and the elderly against
respiratory syncytial virus (RSV), rabies and other
candidates. In addition, the company is
developing its vaccine candidates for worldwide
commercialization including: a joint venture in
India with Cadila Pharmaceuticals; a licensing
arrangement with LG Life Sciences in Korea; a
collaboration with PATH for the development of
an RSV vaccine for the protection of infants
through maternal immunization; an advanced
seasonal and pandemic influenza vaccine
development contract with the U.S. Department
of Health and Human Services Office of
Our SMALL CAP pick for 2014
Novavax Inc.
www.frasermackieltd.com
October 2014

2. B i o m e d i c a l A d v a n c e d R e s e a rc h a n d
Development Authority (BARDA); and a research
collaboration with the U.S. Department of
Homeland Security to develop a virus-like
particle (VLP) vaccine countermeasure to protect
the United States from foot-and-mouth disease.
Source: Novax Inc. Website
VALUATION
We are initiating coverage on Novavax with a
target price of $7.50 per share and a BUY
(Growth) recommendation. Our valuation is
based on a 1.0x multiple on conservative net
asset value of Novavax current and future
product portfolio.
Analyst Reported Projection
Yahoo Finance upgraded their one-year target
price on September 20, 2014 to $10.58. That is
over 200% higher than recent trading prices.
With sales growth outpacing expense growth,
NVAX was able to report a reduced net loss of
just $12.2 million, or $0.08 per share, compared
to a loss of $22.5 million, or $0.15 in the prior-
year period. Despite using $25.5 million in cash
during the quarter, it still ended with cash, cash
equivalents, and investments totaling $208.8
million.
Source: Novavax Audited Statements
LATEST QUARTERLY FINANCIAL HIGHLIGHTS
• Total company net revenues of $8.3 million
(increase of 134%)
• Net loss of $0.08 per share as compared to net
loss of $0.15 per share last year.
• Cash, cash equivalents, and restricted
investments of $208.8 million as of June 4,
2014.
Novavax Inc. recently exercised its option on its
contract with U.S. Department of Health and
Human Services, Biomedical Advanced Research
and Development Authority (BARDA), which will
give it access to US $179 million in additional
funding for its research.
“Progress in the second quarter maintained the
momentum built in both the first quarter of the
year and in 2013. We continue to make progress
in our RSV and influenza vaccine development
programs,” said Stanley C. Erck, President and
CEO of Novavax. “The second half of 2014 will
be the most productive period in the company’s
history. We plan to initiate 4 clinical studies
before the end of 2014; RSV maternal
immunization, pediatric and elderly, as well as a
seasonal influenza clinical trial. We also plan to
initiate a combination RSV/seasonal influenza
clinical trial in early 2015. In addition, we plan to
present pre-clinical and clinical data at several
important medical meetings later this year.”
Source: NOVAX Inc. Audit Statements
www.frasermackieltd.com

3. RECENT M&A ACTIVITY IN THE SECTOR
On April 28, 2014 the board of directors of AZN
rejected Pfizer’s $106 billion takeover bid just
hours after it was levelled, describing it as
inadequate.
Pfizer was offering 50GBP($84.47) a share. The
offer was a 7.3 increase on a previous bid of
$100 billion.
On September 20, 2014, Johnson and Johnson
acquired Alios Biopharma for $1.7 billion.
Johnson and Johnson could have been looking
at Novavax and Alchion as well. This will
definitely cause Johnson and Johnson’s
competitors to look at bringing on board there
own RSV medications into their pipeline.
Longtime Ernst & Young biotech analyst Glen
Giovannetti thinks it's likely that a Big Pharma
company or two in search of added product
revenue will go on the hunt for Smaller Biotechs.
And as for a merger of Big Pharma equals: "I
wouldn't rule out that there couldn't be another
mega-deal.
Regardless he Giovannetti believes, “$1 billion
to $20 billion buyouts represent the industry's
sweet spot now, and those deals are likely to go
for higher premiums with more companies
elbowing their way to the auction block.”
Source: Ernst And Young Life Science Report
NOVAX Inc and Ebola
Novavax is definitely late to the game of Ebola,
but that doesn't mean they won't join it, and we
are sure they are working feverishly at it right
now. The reason is because there is too much
money being thrown to anyone who has an
Ebola preclinical program, and willing to go into
Phase I trial. Novavax has the right people, and
all the capacity it needs to meet this challenge
head on.
Ebola is not a simple virus that you can just whip
up a vaccine for. Ebola, effectively hides the
surface proteins of the infected cells, and
basically the infected cells are masked to the
immune system. Ebola does this by sterical
hindrance, or as Novavax stated in their analyst
meeting slides when they mention "epitope
subversion" for Ebola. This reminds us of the
RSV Site II, the question for Novavax; is how to
expose this for Ebola. The current Zaire strain
may be the most difficult to treat as well because
its ability to mask itself. As you can see, it is not
simple. But if anyone can do this, it'll be the
team in Novavax because of their VLP platform.
And if they can have something that works, and
do an animal study, the rest is the easy part since
they have the bioreactors and capacity built for
pandemic response.
Any achievement, even a small one, could have
a major impact on the price of Novavax Stock
regardless of any take over talk.
www.frasermackieltd.com