- The Washington Times - Tuesday, December 10, 2002

Novavax Inc. saw little fluctuation in its stock price this week, despite news of a federal grand jury investigation into embezzlement charges of two former employees believed to have stolen $450,000 from the biotechnology company that specializes in women's health drugs.
Stock prices for the Columbia, Md., company closed yesterday at $3.77 on the Nasdaq Stock Market, down two cents from $3.75 a week before the news.
Mitchell Kelly, Novavax president and chief executive officer, first learned of the purported embezzling in September and notified the Securities and Exchange Commission by mid-October.
Mr. Kelly said the two non-executive employees were appropriating company funds into private bank accounts by paying fake vendor invoices sent to the company.
But the upset has created a little ripple in the stock market, Mr. Kelly said, adding investors are more concerned about the company's focus to get approval from the Food and Drug Administration for its estrogen hormone replacement, Estrasorb.
"Because the embezzlement was done by non-executives in the past and was discovered quickly, it hasn't brought substantial consequence to the company," Mr. Kelly said.
"Investors are more concerned about how our product, Estrasorb, is progressing to get FDA approval and put onto pharmacy shelves in the near future."
While the purportedly embezzled funds did not alter third-quarter earnings significantly, Mr. Kelly said the company hoped to recover at least half of the $450,000 through Novavax's insurance company.
"We want to make up the money we lost to help out our revenues, which had a shortfall in the last quarter," he said.
The company more than doubled losses for the quarter ended Sept. 30 to $6.7 million (27 cents per share) from a loss of $2.5 million (11 cents) a year earlier.
Mr. Kelly said the losses surged from declining sales of the company's prenatal vitamin line to generic competitors.
"We are planning on launching two new prenatal drugs to combat those generic drug companies," he said.
Revenues fell by half to $2.47 million from $5.04 million last year.
Novavax also more than doubled its research and development expenses, to $3.7 million from $1.8 million, primarily to get Estrasorb approved by July and in the prescription-drug market by September.
Ken Trbovich, analyst with CE Utenberg Towbin, said in a report that the company was taking a "high risk" by focusing its efforts on Estrasorb, prompting him to rate the stock as a high risk in the short term.
Mr. Trbovich added that a potential FDA approval "is no guarantee of commercial viability or success."
"While prescription data may provide a reasonable indication of a product's acceptance, the data may not provide a reasonable indication of revenue performance," he said.
A failure to get the FDA approval could hinder the company's other drugs using the same technology, Mr. Trbovich said.
But Mr. Kelly said the company was confident of procuring FDA approval and successfully marketing the drug that helps women suffering menopausal symptoms.
Novavax also plans to seek government support on developing an inactive-smallpox vaccine, Mr. Kelly said.
"We are confident that Estrasorb will be approved, as will other drugs using similar technology," Mr. Kelly said.

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