​VBI Vaccines, Inc. (VBIV) is One of the Most Interesting Companies in Biotech Right Now

Samuel Rae  |

VBI Vaccines, Inc. (VBIV) just kicked off a phase I trial for its cytomegalovirus (CMV) vaccine candidate. It's the second of two potentially game changing therapies on which the company is working, and marks the start of what could be a big twelve months for VBI. Arguably far more importantly, it marks the start of a drive to eliminate the number one cause of birth defects in the US.

Here's a look at the company, its science and its prospects.

Let's focus on the pipeline first. VBI has developed a type of vaccine technology called an enveloped virus like particle (EVLP), which is a type of delivery system that closely mimics the natural transport of viruses. It's a commonly known fact in the vaccine/biotech space that the closer a vaccine can get to real life viral delivery, the more effective it is. For reasons we'll discuss in a little more detail shortly, VBI's EVLP is far closer to natural viral delivery than the current generation, and in turn, has the potential to be far more effective. So far, the company has applied this EVLP technology to two target indications – hepatitis B and the above mentioned cytomegalovirus.

The hepatitis indication is already well established, and has a raft of data supporting its safety and efficacy derived from trials involving more than 4,500 patients globally. It's also already used as a standard of care in Israel, and has been used in more than 300,000 patients. VBI expects to kick off discussions with the EMA and the FDA during the second half of this year, and could start its campaign to unseat the current standard of care (SOC) in the space (currently, Merck & Co., Inc. (MRK)'s Recombivax). What makes it better than Recombivax? Recombivax is part of the second generation of HBV vaccines. These vaccines express an antigen (or at least a mimicked version of it) called S-protein. They also require a next generation adjuvant, which boosts production costs. Sci-B-Vac, which is VBI's EVLP HBV vaccine, expresses three mimicked antigens – S-Protein, Pre S-1 and Pre S-2. We don't really need to go into each of these individually, but essentially the higher the number of mimicked antigens, the more effective the vaccination.

The data backs up this statement, with improved efficacy illustrated in many different subpopulations of the already established data. Young adults demonstrated a 100% SPR post third injection. Patients with end stage renal disease, for which the current go-to option is a doubling of the standard Recombivax dose and repeated administration and only achieves a circa 56% SPR, showed an 86% SPR after three standard doses of Sci-B-Vac. Low and non responders (generally those aged over 50) hit 49% SPR after two doses of SOC, and 82% after two doses of Sci-B-Vac. The list goes on.

Moving on to CMV, this one's potentially just as disruptive, but for a different reason. CMV is a high prevalence virus in the US, and accounts for a huge number of birth defects and ongoing issues in children every year. Despite this, most parents haven’t heard of it. The reason they haven’t heard of it is because there's nothing a physician can currently prescribe to parents and pregnant women who are concerned about the virus. There's nothing they can recommend other than staying away from potential carriers (other pregnant women, newborn babies etc.), and so it doesn’t get much attention.

VBI's VBI-1501A vaccine is a preclinical candidate that the company is hoping can become an SOC vaccine for the virus, and essentially create a market for itself. Preclinical data established efficacy in rabbits, and as mentioned in the introduction to this piece, the company just kicked of a phase I. As usual for a phase I, the primary endpoint of this trial is safety and tolerability related, but secondary endpoints will look at clinical impact. It's these secondary endpoints that should make for interesting reading come interim data release (set for the first half of next year) and, beyond that, topline. Oftentimes, with these early safety trials, it can be difficult to establish any proof of concept because there's no active control arm data available. This one is different, however, because VBI only needs to compare its results to data from patients who already have a natural immunity to CMV. This difference should make POC easier to establish when the data comes in.

Infectious diseases aside, the company has established two oncology targets – GBM and breast cancer – that could benefit from its EVLP delivery CMV vaccine. Over the last few years, data has built towards establishing a link between some solid tumor cancers and CMV expression. It's now believed that more than 95% of GBM (a type of brain cancer) patients express CMV, and that this expression plays a key role in the growth and replication of cancerous cells. The theory here is that by using a CMV vaccine, a physician can get a patient's immune system to target the GBM cells that express CMV. This is preclinical in both the brain cancer and the breast cancer indications, but it’s a potential new wave of cancer therapy, and will likely play an increasingly important role for VBI as we head into the latter half of the decade.

That's the drug side of the company's portfolio covered, but there's a whole other element of its operations that factor into its valuation – vaccine transportation. Currently, vaccines need to travel from one place to another (and be stored) under stable temperature conditions. Specifically, between 0-4 Celsius. The framework that underlies this transport and storage is known as the cold chain. VBI has developed a technology that enhances the thermostability of vaccines, and as such, allows them to retain efficacy even when removed from the cold chain. Why is this important? Because the cold chain accounts for nearly 20% of the costs associated with vaccines. By removing them from the cold chain, VBI's technology essentially wipes this cost, with obvious implications not just for developing markets (where a cold chain is difficult to establish) but also mature markets that are looking to cut costs. This technology currently serves as the basis of two partnerships between VBI and big pharma, specifically Sanofi SA (ADR) (SNY) and GlaxoSmithKline plc (ADR) (GSK). These are the two biggest vaccine franchises in the world.

Institutional investors are recognizing the potential. Dr. Philip Frost and Opko Health Inc. (OPK) took a 12% position as part of an at market PIPE offering in June. Clarus, Arch and Perceptive each have a position, and representatives from each (as well as from Opko hold a board seat at VBI – something not often seen in development stage biotech. Noteworthy is the position held by Steven Gillis – he's the managing director at Arch and has a rich biotech resume. Highlights include the founding of Corixa, which sold to GlaxoSmithKline in 2005, and of Immunex Corp, which Amgen, Inc. (AMGN) acquired in 2002.

There are risks, of course. Its CMV candidate is preclinical, and is yet to generate any proof of concept data in human trials. There's a chance the efficacy could fail to translate from rabbits to humans. The same applies to the oncology candidates, to an even higher degree. The impact of CMV vaccine treatment in solid tumors (as mentioned) is in its infancy, and only relies on half a decade of data. These need to be considered alongside, and balanced against, any potential upside.

The takeaway here is that VBI has a host of future revenue drivers in its pipeline, each of which has the potential to disrupt (or in the case of VBI-1501A, create) an industry. It's got some big pharma partnerships in thermostability that serve as non dilutive revenue generators, and should help to capitalize the development of its pipeline going forward. It's got some big name institutional investors, and a management team that includes some of the leading vaccine and oncology scientists in the world. It's currently under the radar, despite some of the leading biotech funds already taking positions, and given its potential, looks undervalued.

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