Zacks Small Cap Research – EVAX: Initiating Coverage of Evaxion – Technologist

By Brad Sorensen, CFA

NASDAQ:EVAX

READ THE FULL EVAX RESEARCH REPORT

Investors have been rushing with enthusiasm toward the future potential of Artificial Intelligence (AI), with the company providing semiconductor chips for companies developing AI dominating attention. However, using AI for productive means is the end goal and there are still many questions revolving around those possibilities. That’s why we are happy to initiate coverage of Evaxion (NASDAQ:EVAX). Evaxion refers to itself as a “techbio” company and is using its proprietary AI-Immunology platform to use the power of artificial intelligence to “decode the human immune system and develop novel immunotherapies for cancer, bacterial diseases, and viral infections.” Although it doesn’t get as much attention, small and medium language artificial intelligence models, such as those developed by Evaxion, are often 90% cheaper to develop than the large language models getting the attention according to a recent Wall Street Journal article, but stand to have big immediate benefits, as we’ll see with Evaxion. But the company doesn’t stop there, with just using AI to better understand the human immune system but has developed a clinical-stage oncology pipeline of novel personalized vaccines and a preclinical infectious disease pipeline in bacterial and viral diseases. Evaxion is a company that can take the AI data generated directly to the testing environment, accelerating the drug discovery process and allowing treatments to get to customers sooner.

Evaxion is a company that is making AI useful in the current environment, something we are very excited about due to the potential it provides. The company notes that it has demonstrated that it can identify, through the company’s AI models, novel targets within days, rather than the traditional years it commonly takes with standard drug discovery methods. The use of AI also allows the company to decrease the risk of failure as the technology filters out those results that may result in low efficacy or unacceptable toxicity.

One of the major concerns investors have about clinical-stage companies is whether the company is going to have sufficient funding to get to the point of generating revenue. This is another thing that excited us about Evaxion—they aren’t trying to go it alone and hope that funding comes through and leaving the important potential treatments at risk. During 2023, the company’s strategy was changed, and management put a stronger focus on “value realization and execution”. As noted above, the core of the Evaxion strategy is the AI-Immunology platform, which the company has been continuously developing and improving over the past 15 years. This has provided Evaxion with a unique position within the AI-led target discovery arena as well as the design and development of vaccine candidates. We are also encouraged by the fund raise at the beginning of 2024, which brought in $15 million, and, almost as importantly to us, saw the capital arm of Merck participate and become the largest shareholder of EVAX. Seeing a major pharmaceutical company have the confidence in Evaxion to make such a commitment is a positive signal for the prospects of the company in our view.

According to management, the company’s strategy adjustment also means that Evaxion is shifting focus from larger-scale clinical development towards a stronger and earlier focus on partnerships based upon the AI-Immunology platform-such as the partnership the company currently has with Merck. Management believes the platform holds the potential for generating one new target every 24 hours, and notes that it is delivery modality agnostic and easily adaptable to partner needs. These factors should make Evaxion attractive to partnerships with pharma and we are pleased that pursuing those partnerships is now an integrated part of the Evaxion strategy.

At the heart of the shift in strategy towards a much stronger focus on partnering and reduced clinical trial activities is the fact that the move significantly reduces the company’s cash needs, both for the short- and the longer term. Company management notes the ambition for 2024 is to generate revenue equal to 2024 cash burn (excluding financing activities) of $14.0 million, although they point out that no assurances can be made that the company will generate such revenue, but we believe this move enables the company to greatly increase the odds of getting important treatments to patients that need them in a much more timely manner.

Evaxion is a company with a lot of irons in the fire, but we believe it’s important to remember that the company has been around since 2008, developing AI models long before it was the next big thing. Additionally, we agree with a recent Wall Street Journal article from July 8, 2024, that small and medium language models, that focus on specific tasks, such as those from Evaxion, are likely to be the most impactful AI models in the near term. Over the coming months, Evaxion is going to get more test results, announce more partnerships, advance the AI models as learning takes place and, we believe, receive more interest from major pharmaceutical companies—resulting in an opportunity for investors to take a look at EVAX at the start of what we believe is a major ramp-up period.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.