Kerrisdale Capital keeps its foot on Bavarian Nordic's throat with further discussion of short thesis

Kerrisdale Capital is maintaining the pressure on Bavarian Nordic (CPH:BAVA). Having precipitated a 13% drop in the stock of Bavarian Nordic in the 10 days since it unveiled its short thesis, the hedge fund is now holding a follow-up call to expand on its theory that the Danish drugmaker is a busted flush.

Bavarian Nordic CEO Paul Chaplin

Shares in Bavarian Nordic fell by another 2% on the day Kerrisdale unveiled the latest step in its strategy to undermine investor confidence in the company. The centerpiece of the argument put forward by Kerrisdale is Prostvac, the prostate cancer vaccine that landed Bavarian Nordic a big-ticket deal with Bristol-Myers Squibb ($BMY) earlier this year. As Kerrisdale sees it, the Bristol-Myers deal has given investors misplaced confidence in the likelihood of Phase III success for Prostvac, which it predicts will join the long list of cancer vaccine flops when it posts data.

Kerrisdale is set to expand its short thesis on the upcoming conference call by taking aim at the prospects of Bavarian Nordic's vaccines against Ebola and smallpox. The smallpox vaccine is the cornerstone of Bavarian Nordic's commercial operation today, while the Ebola asset contributed to its surging share price over the past year. Johnson & Johnson ($JNJ) struck a deal for the Ebola vaccine at the height of the recent outbreak, but with the virus fading away, for now, and Merck ($MRK) posting stellar data from a trial of its own asset, the prospects of the program are uncertain. 

The time-consuming nature of late-phase trials means the knockout blow Kerrisdale wants is unlikely to arrive until late next year at the earliest. Bavarian Nordic thinks it will take at least until then to complete the data set for its Phase III trial of Prostvac. In the interim, Kerrisdale is trying to chip away at the share price gains Bavarian Nordic has made in the wake of its alliance with immuno-oncology pioneer Bristol-Myers.

- read the release

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