How VBI Vaccines, Inc. (NASDAQ:VBIV) And Dr. Phillip Frost Are Going After Zika


Dr. Phillip Frost is one of the most respected and well known entrepreneurs in biotech. He’s made billions of dollars founding, running and selling pharmaceutical companies, and he’s currently the CEO and Chairman of Opko Health Inc. (NASDAQ:OPK), the $6 billion diagnostics and pharmaceuticals behemoth.

He’s overseen the development of scores of succesful drugs and biologics throughout his career, and now he’s set his sights on the Zika virus. Zika is quickly becoming a real threat in the US, and its spread is proving difficult to control. There’s an indisputable need for a vaccine in the space, but as yet, no company has been able to develop one that it can prove works. This isn’t a reflection on the industry – the virus is a relatively new concern in this part of the world, and the development process takes time – but the sooner a company can bring a vaccine to market, the quicker this outbreak can be contained.

Dr. Frost is aiming to do so through one of his and Opko’s development stage interests, a Massachusetts based biotech called VBI Vaccines, Inc. – Ordinary Shares (NASDAQ:VBIV). VBI is currently working on the development and commercialization of a number of vaccines based on its proprietary eVLP technology, each of which has the potential to target a substantial market if it can pick up an registration authorization. It’s lead target is a vaccine for cytomegalovirus (CMV), which is the leading cause of birth defects in the US. It’s second is Zika.

For those not familiar with Zika, here’s a quick introduction.

The virus was first isolated back in 1947, but has primarily remained isolated to dense foliage, wet, tropical climates fort the past half century. It is spread by daytime active mosquitos, primarily the Ae. aegypti and Ae. Albopictus types of the Aedes species. In most people, it’s not a problem. Symptoms are mild (fever and headache most common) and it only lasts a few days. This is one of the primary reasons no one has as-yet developed a vaccine or a cure.

Recently, however, health authorities have identified and confirmed a link between the Zika virus in pregnant women and a condition called microcephaly in their newborn children; a condition that causes a newborn’s skull not to form fully. This leads to brain function issues, motor and ability issues, pain, and a number of other lifelong afflictions.

This link, the recognition that a mother could pass the virus to her fetus and that this could cause microcephaly in the newborn, sparked a global reaction. No longer is Zika a relatively symptomless virus, it’s now the cause of major lifelong birth defects.

It is now known that the virus can be transmitted not just through mosquito bites, but via the above discussed mother to child route, through sexual transmission, blood transfusion and laboratory exposure.

So what is Frost and VBI doing to fix the problem?

In 1980, the WHO declared smallpox eradicated. The eradication came through the distribution and administration of a smallpox vaccine on a global scale. VBI is attempting to create a vaccine that can do the same for Zika. Of course, there are a number of companies trying to do the same – there are some large financial incentives to do so.

VBI’s approach is unique, however, in two key elements, and these set it apart from its competitors.

The first is in composition. As mentioned earlier, the company is using a technology called the eVLP platform. The first unique element of the VBI candidate is rooted in this platform. It allows VBI to build a vaccine that has a lipid outer coating, and this lipid outer coating affords the expression of more than one antigen. Vaccines work by expressing antigens native to the viruses they represent, and the closer the vaccine gets to the antigenic makeup of the virus, the higher its immunogenicity. By proxy, the more antigens a vaccine can express, the higher the immunogenicity and the more effective the treatment.

The eVLP platform allows for vaccine creation that mimics the antigenic makeup of its associated virus to a very high degree of accuracy, and this should – in Zika – translate to a high immunogenic response.

The second advantage is rooted in transport and potency. VBI has developed a vaccine composition that allows for removal the vaccine from the cold chain. The cold chain is the framework in place that ensures vaccines maintain a steady temperature (between 2 and 8 degrees Celsius) at all points from creation to administration. If removed from this range for any length of time, the vaccines quickly degrade and become unusable and ineffective. VBI’s technology, if applied to its Zika candidate, will mean the vaccine can exit the cold chai and remain effective for (based on studies using comparable vaccines) up to eighteen months at room temperature.

The implications of this are clear – a much reduced cost of getting the vaccine to the patient (estimates are around 20% on average), the potential for far higher delivery batches rooted in the ability to store outside of refrigeration units and, the bottom line, a reduced cost to the patient. No other company is currently developing a Zika vaccine that has the potential to be exit the cold chain and remain potent. As things stand, therefore, VBI’s candidate will have a distinct price advantage over its competitors. Further, when delivering en masse to places such as those where Zika is most prevalent, the ability to store without refrigeration is a huge bonus.

There are a couple of ways to to gain exposure to the potential of VBI’s Zika vaccine candidate. The first is via a direct VBI purchase. This is the riskier of the two, given VBI’s current market capitalization and financial constraints. Having said this, the company has an approved hepatitis B vaccine already on sale in fifteen countries, and its GBM and CMV candidates amount to a relatively robust pipeline. It’s also got the backing of Frost and Teva, and a number of other renowned entities, most notably ARCH Venture Partners, of which biotech entrepreneur Steven Gillis, Ph.D. serves as Managing Director. The primary risk on this exposure is rooted in the potential for dilution as the company expands and issues to raise capital to fund growth. There’s plenty of promising catalysts to mitigate the value lost through dilution, of course, but it must be a consideration at this end of the biotech space.

The second is by way of an allocation to Opko. Opko holds a 12% stake in VBI, and so this type of exposure is very indirect, but given the past success of Opko, with Frost at the helm, it’s far less risky.