Novavax shares more than double on Sanofi’s $1.4 billion investment for combo vaccine – Morningstar

By Louis Goss

Struggling Novavax struck a $1.4 billion deal with Sanofi on Friday to commercialize its existing COVID-19 vaccine and develop a combined jab to protect against both the coronavirus and influenza - causing its share price to more than double.

The agreement saw Novavax lift the going concern notice it issued in 2023, when the Gaithersburg, Maryland company warned that plunging COVID-19 vaccines sales could push it into bankruptcy.

Novavax (NVAX) shares surged 137% on the news, having lost 50% of their value in the 12 months prior to the announcement of the Sanofi deal. Shares of the French pharmaceutical group (FR:SAN) rose 1%, down 5% over the previous 12 months.

Under the deal, Sanofi agreed to pay $500 million upfront, alongside a further $700 million in launch, development and regulatory milestone payments, to sell Novavax's standalone COVID-19 vaccine worldwide, and develop and sell a new combined influenza/COVID vaccine.

Novavax will also be entitled to a further $200 million in additional launch and sales milestone payments, alongside mid-double digit royalties on vaccines developed by Sanofi using its Matrix-M adjuvant technology, which helps vaccines stimulate an immune response.

In a statement, Novavax CEO John C. Jacobs said the deal, which is worth more than double the value of Novavax's $628 million market cap, marks "the beginning of an exciting new chapter" for the biotech.

Novavax has seen its sales collapse over the previous two years, due to plummeting demand for its COVID-19 vaccines. In February 2023, the firm said it had "substantial doubt" about its ability to continue operating.

Analysts at Barclays, led by Emily Field, said Sanofi's interest in Novavax largely relates to the potential boost its COVID-19 vaccine could provide to sales of the French company's own flu vaccine, via creation of a combined jab.

"Given declining uptake of COVID vax timing raises some questions, but angle seems to be protecting incumbent flu business," the Barclays' analysts said.

Novavax, which was started in 1987, first gained regulatory approval for its non-mRNA COVID-19 vaccine in the U.S. in July 2022, almost two years after Pfizer (PFE) obtained approval for its own mRNA-based vaccine in December 2020 at the peak of the pandemic.

At the time, there were hopes the more conventional protein-based vaccine would help persuade vaccine skeptics to get their shots.

In April, activist hedge fund Shah Capital, which owns a 6.7% stake in Novavax, called for an "urgent shakeup" of Novavax's board over claims it had failed to highlight fears surrounding mRNA vaccines to boost sales of its non-mRNA alternative.

In a statement sent to MarketWatch, Shah Capital founder Himanshu H. Shah said: "The deal announced concurs with Shah Capital's prior comments on their superior respiratory vaccine technology platform as well as marketing failings. A step in the right direction for shareholders."

Even with Friday's gains, Novavax's $1.48 billion market cap remains well below its peak at $10.8 billion which it hit in 2021, according to the website CompaniesMarketCap.

-Louis Goss

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05-10-24 1021ET

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Novavax shares more than double on Sanofi's $1.4 billion investment for combo vaccine - Morningstar