When the novel coronavirus first disrupted American society, one of the obvious money moves (from a speculator’s perspective) was to dive into biotechnology and pharmaceutical firms. Later, the White House justified this gamble through the launch of Operation Warp Speed, an unprecedented initiative to support and accelerate vaccine research in the hopes of a viable solution.
Based on the principle of low-hanging fruit, several biotechs/pharmas saw their market valuation increase dramatically. But as we headed closer toward a contentious election, the realities of the vaccine race became clear. Clinical trials along with peer review revealed some core strengths along with many weaknesses. Some companies may soon be out of the running, leaving few credible competitors.
Among small-capitalization companies in the Covid-19 race, Tonix Pharmaceuticals (NASDAQ:TNXP) may be worth consideration with what I would term “dumb money.” Currently, TNXP stock is trading hands for less than a buck, which immediately tells you something about this opportunity’s risk profile. Certainly, it’s not a wager for the weak of heart.
Nevertheless, the science and the context of Tonix suggests the possibility that TNXP could skyrocket dramatically. First, let’s review the backdrop of the Covid vaccine battle.
Multiple Propositions, No Real Winners
Though this pandemic is unquestionably a human tragedy, it is also in a cynically brutal way an opportunity. Perhaps most notably, Novavax (NASDAQ:NVAX) was struggling to gain traction before the pandemic and it was only the coronavirus that saved them from ignominy. That’s not my opinion but rather the analysis of the New York Times, which stated as follows:
It was a dramatic turnaround for a little-known company that, just one year earlier, had been on the verge of collapse. One of its leading vaccine candidates — to prevent a deadly virus in infants — had failed for the second time in three years. The company’s stock was trading so low that it risked being removed from the Nasdaq. Looking for cash, it sold its manufacturing facilities. Word spread around the small world of Maryland biotech that Novavax might be closing soon.
Based on data from Google Finance, the year-to-date performance of NVAX stock at the time of this writing is 2,377%, a blistering run to say the least. At the same time, Novavax shares are down nearly 38% from the closing peak of this year.
Why the shift in sentiment? Novavax utilizes a vaccine process called subunits, which injects protein fragments (subunits) of the novel coronavirus (SARS-CoV-2) into the patient. From there, the body’s cells take the genetic information of the fragments and initiates a process to produce antibodies, which are Y-shaped proteins that bind to antigens, preventing their replication.
So far, so good. Better yet, subunit vaccines have a history of success. According to the Washington Post, the hepatitis B vaccine was developed using a subunit platform. However, a study conducted by the New England Journal of Medicine indicated that for Novavax’s Covid vaccine to be effective, it requires both an adjuvant and a second dose.
From a convenience standpoint, the latter is problematic. As well, the logistics in terms of distribution, storage (remember, many vaccines have to be frozen, which can impact certain markets’ healthcare infrastructure) and ultimately, scheduling the patient in time for the second dose creates multivariate challenges.
Unfortunately, even nucleic-acid vaccines, such as those forwarded by Moderna (NASDAQ:MRNA), may have storage requirement challenges. According to FiercePharma.com, the company “is pursuing stability data showing its vaccine, mRNA-1273, can be stored at -4° Fahrenheit…” If so, that would represent a huge advantage over its competitors. Still, the vaccine battle has turned into a show-me proposition, thus leaving much room for skepticism.
In addition, Moderna didn’t do itself any favors when it announced that its vaccine won’t be ready until at least spring of next year. And that’s a bummer because one of the theoretical advantages of Moderna’s messenger-RNA based vaccine type is the rapid ability to scale up production.
And that puts Johnson & Johnson (NYSE:JNJ) possibly into the lead. According to the Times, J&J’s vaccine does not need to be frozen and may require just one shot instead of two. In that one sentence, the healthcare giant’s candidate is already superior to Novavax’s offering.
Except that there’s one little problem: J&J’s claims have not been peer-reviewed. Under closer examination, we may find setbacks with its proposed solution. Further, the non-peer-reviewed study regarding this vaccine candidate’s safety and immunogenicity suggests that younger participants may have greater side effect risks.
Plus, if it turns out that J&J will also require two doses, that will really hamper the company’s profile in the markets. But in this convoluted mess, though, Tonix Pharmaceuticals may provide a compelling way forward in process and profitability.
Slipping in Through the Backdoor
As you know, one of the key components of any successful vaccine candidate is speed. That was really the whole point about the White House initiating Operation Warp Speed. Notice they used the term “warp,” not “snail” or “U.S. Postal Service.”
By now, it’s clear, apparently even to President Trump, that a vaccine won’t be available until after the election. Perhaps – though I must stress this is speculation – this played a role in Trump pushing the experimental antibody cocktail developed by Regeneron Pharmaceuticals (NASDAQ:REGN).
Whatever the case, the vaccine timeline for every contender has stalled out. And that really benefits TNXP stock due to its underlying vaccine process, which is one of the slowest. Here’s an explanation from Tonix’s website:
TNX-1800 (live modified horsepox virus vaccine) is being developed by Tonix Pharmaceuticals in a strategic collaboration with Southern Research to support the development of a vaccine to protect against the new coronavirus disease, COVID-19. TNX-1800 is based on Tonix’s proprietary horsepox vaccine platform.
Scientifically, the company’s horsepox-based vaccine is similar in principle to Johnson & Johnson’s adenovirus-vector-based vaccine. Essentially, Tonix will utilize the horsepox as a vector (carrier) of genetic material into a patient’s body. From there, the ultimate aim is to leverage the vector “to protect against other infectious agents.” In this case, the infectious agent is SARS-CoV-2.
Now, the encouraging part is that the Times indicated that J&J’s vaccine could be effective enough for a one-dose regimen. Therefore, the viral-vector platform to promote high immunogenicity doesn’t seem to be under dispute. This dynamic would suggest that the pivotal factor to move forward with J&J or another solution is the occurrence and frequency of side effects.
As I stated earlier, it’s possible that J&J’s candidate isn’t that conducive for younger patients. If so, that would be a setback considering that younger demographics are likely to crowd together – schools, sporting and live events, etc. Where Tonix could achieve separation is by combining strong immunogenicity with tolerability.
And that’s exactly why Tonix is still technically in the running. Allegedly, the horsepox vector is superior to the adenovirus vector. If that turns out to be the case, TNXP stock could very well end up slipping in through the backdoor and taking victory.
Tonix Is Not the Ultimate Tonic But It Doesn’t Need to Be
Despite the promising narrative above, Tonix Pharmaceuticals’ solution isn’t without its own challenges. First, the company is still mired in the preclinical stage. At this point in the game, with several pharmas in Phase 3 trials, this is a huge disadvantage.
Second, the storage requirements regarding Tonix’s viral-vector candidate is not clear. It’s possible based on the scientific literature that its vaccine will require some level of modest freezing. As mentioned above, that would hamper the overall practicality of this platform.
Finally, if Tonix enters clinical trials and its vaccine candidate is proven to be no more effective than other vaccines, TNXP stock could tumble. Of course, this is the risk for any Covid-19 vaccine.
However, what makes Tonix compelling is beyond the coronavirus, the company offers a potential national security play via its development of a smallpox preventing vaccine “for widespread immunization and national stockpile.”
Unfortunately, the technology to develop synthesized horsepox vectors strongly suggests that it can be used for nefarious reasons, particularly in the development of smallpox as a possible bioweapon. Thus, we need infrastructure that can respond to such threats and Tonix could be one of them.
As I have consistently stated above, TNXP stock is very risky. However, there’s enough science here to justify a gamble, provided you understand the context.
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