Why the SciVac VBI Merger Makes a Lot of Sense

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Opko Health (NYSE:OPK) CEO Dr. Phillip Frost just cemented another merger involving another of his Israel-based companies. Back in 2013 it was his Prolor Biotech that merged into Opko. The current merger between one of his new projects, SciVac Therapeutics (OTCMKTS:SVACF) with VBI Vaccines (NASDAQ:VBIV) actually looks very similar in strategy.

VBI and SciVac have complementary technologies and their merging makes a lot of sense. SciVac up until now was a single product vaccine company. Its vaccine is Sci-B-Vac, a 3rd generation hepatitis B vaccine already approved in parts of Europe and already administered successfully to half a million patients. Sci-B-Vac is proven 98% effective overall, and 100% effective on newborns. Compared with the 90% effectiveness of GlaxoSmithKline’s (NASDAQ:GSK) Engerix B, which is the currently mass-administered HBV vaccine in the US, Sci-B-Vac is a much needed leap towards final eradication of the hepatitis B virus.

Clinical success and superiority of Sci-B-Vac notwithstanding, it still needs to be approved in the US, and from there to compete with Engerix-B as well. One product does not a successful company make, which is why the merger with VBI makes sense in context. VBI is an earlier stage vaccine company than SciVac, but with compelling vaccine technology that handily complements SciVac’s own.

VBI Pipeline

VBI’s pipeline is centered around two main vaccine platforms. The first is called eVLP, or enveloped virus-like particle. eVLP is not a vaccine itself, but a way of administering a vaccine so that the body recognizes it and produces an immune response without risk of infection. Currently, the three most popular methods of administration are attenuation, whole-kill, and sub-unit. Attenuation weakens a virus to the point it is no longer infective. Whole-kill kills the virus, and sub-unit presents only certain critical parts of the virus to the immune system.

eVLPs by contrast can be thought of as dummy viruses, shaped like the viruses they seek to build immunity against with matching antigens on its coat, but with no infective ability. Preclinical trials have been completed successfully using eVLPs as vaccination vehicles for cytomegalovirus, or CMV, a common virus that is the leading cause of delayed infant development. As of yet, there is no effective CMV vaccine because attenuation, whole-kill, and sub-unit presentation do not work with CMV. VBI has shown in preclinical trials that the eVLP approach can work with CMV and is proceeding to human trials shortly. If it can theoretically work with CMV, then it may work with other more serious viruses as well.

VBI is currently pursuing eVLP application with several as of yet undisclosed virus candidates.

Complementarity with SciVac

As for complementarity with SciVac, that can be seen in VBI’s second platform called LPV, or Liquid Particle Vaccine. LPV is a vaccine storage technology that enables vaccine to survive through temperature fluctuations for long periods of time. These vaccines would otherwise need to be transported and stored via cold chain, a time consuming and costly process that makes vaccines more expensive and less available where they are most needed due to logistical constraints. LPV has also successfully completed preclinical trials, demonstrating vaccine efficacy in mice with product stored for a year in temperatures ranging from 4o to 40oC, an environment which would normally render a vaccine ineffective. VLP can be used in existing vaccines as well as monoclonal antibodies. It works by suspending the active vaccine in a synthetic lipid cushion, preventing protein aggregation and stress on the active protein molecules of the vaccine.

For SciVac, this could mean a pathway towards successfully competing with Glaxo and Engerix B once Sci-B-Vac gains FDA approval. Successfully integrating LPV into Sci-B-Vac can potentially eliminate the need for cold chain transportation, giving it a competitive edge in both cost and ease of distribution.

Notable Additions to Staff and Board

In addition to Dr. Frost operating in the background and who through Opko will be the combined company’s largest shareholder, VBI-SciVac will be chaired by Dr. Steven Gillis, founder of Immunex which was acquired by Amgen (NASDAQ:AMGN) in 2002. Dr. Gillis is also on the board of bluebird bio (NASDAQ:BLUE) and Shire PLC (NASDAQ:SHPG).

CEO of the combined company will be Jeff Baxter, a former Senior Vice President of research and development at Glaxo, so he knows the hepatitis B vaccine competition very well.

Watch Opko

Opko’s new drug application for one of its lead candidates Rayaldee has already been filed with the FDA, and the company is preparing for a product launch in the next few months. Aside from the Frost connection and Opko being VBI-SciVac’s largest shareholder, SciVac’s Chairman Steven Rubin is also an Executive Vice President at Opko. Meaning, the companies are already merged by executive personnel if not legally, and Opko has a substantial vaccine pipeline of its own.

There has been no indication that further roll-up is Opko’s or Frost’s, or Rubin’s intention for that matter, but with these players such moves are quite possible. Depending on Opko’s position after the launch of Rayaldee, such a move would be more of a possibility if Rayaldee is a success for Frost’s main company.

In the meantime, the two catalysts to watch for VBI-SciVac will be start of a phase III Sci-B-Vac trial in the US, and the launch of a phase I trial for VBI’s CMV vaccine next quarter.

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