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Novavax shares double after agreement with Sanofi marks ‘new chapter’ for company
Novavax Stock (NVAX) soared on Friday, gaining as much as 120% on news from French drug and vaccine giant Sanofi (SNY) would invest $1.2 billion in Novavax COVID-19 vaccine deal and take a minority stake in the struggling biotechnology company.
The deal gave Novavax a much-needed cash boost as the company had weakened after a pandemic-era surge.
“This is a new chapter in our company’s history,” Novavax CEO John Jacobs told Yahoo Finance in an interview on Friday.
Novavax ran into difficulties after its COVID-19 vaccine was delayed by manufacturing issues early in development, resulting in the company losing out on the multibillion-dollar pandemic boom that Pfizer/BioNTech (PFE/BNTX) and Modern (mRNA) liked.
Although Novavax’s vaccine finally hit the market in mid-2022 targeting the booster marketcontinued to struggle with $1.7 billion in liabilities from promised doses against COVID weighing down its books globally.
The news, which overshadowed Novavax Q1 Earnings Release on Fridaymade the company come out of near failure.
“This company was probably headed for real trouble, and we put an ongoing concern on the company in my second month on the job,” Jacobs said.
Jacobs took over the reins from longtime CEO Stanley Erck in January 2023. Over the next 15 months, he reduced the company’s liabilities to $1.7 billion, compared with $2.5 billion previously, and reduced manufacturing and R&D expenses.
“[This] alone doesn’t save Novavax, but what it does… now moves us toward a future of growth supported by our biotechnology strength, back to a platform-based growth strategy that allows us to drive growth,” said Jacobs .
The agreement with Sanofi includes an upfront payment of $500 million to Novavax and up to $700 million as certain milestones are reached for the co-commercialization of the COVID-19 vaccine, the development of a combination COVID flu vaccine and royalties. Sanofi is licensing the technology for the combined COVID-flu vaccine, which is separate from the one currently in development by Novavax.
In addition to this $1.2 billion, Sanofi is committing up to $200 million for each new vaccine it develops using Novavax technology. That represents a multibillion-dollar future for the company, Novavax CFO Jim Kelly said on the company’s earnings call Friday.
On top of all this, Sanofi is acquiring a minority stake through a $70 million equity investment.
Novavax logo and images of the COVID-19 virus photographed on Apple devices. (STRF/STAR MAX/IPx) (STRF/STAR MAX/IPx)
A platform match
Sanofi’s investment, a small fraction of the company’s $46.2 billion annual revenue in 2023, is not that significant.
The story continues
But Sanofi is one of the world’s largest vaccine makers and has a robust flu portfolio that accounted for $2.8 billion of its total $8 billion in vaccine revenue last year.
Novavax and Sanofi have similar platforms for their vaccines that use recombinant protein, a well-known formula that provides long-term protection. The platform is used in Sanofi’s flu vaccine, Flublok, which along with its Fluzone for seniors, represents $2.8 billion of Sanofi’s $8 billion annual vaccine portfolio.
In the midst of the vaccine race at the beginning of the pandemic, the scientific community was eager to see these types of vaccines reach the finish line.
“As we moved into December 2020, it was obvious that the first two vaccines we should consider were mRNA vaccines, where we had no experience with this technology,” said Dr. Paul Offit, director of the vaccine education center and pediatrician from the Children’s Hospital of Philadelphia.
“Novavax, on the other hand, was a tried and true technology,” Offit, who also served as a member of the Centers for Disease Control and Prevention (CDC) advisory committee, told Yahoo Finance.
Like Novavax, Sanofi also lost the pandemic market after its vaccine candidate, in partnership with GSK (GSK), was delayed during clinical trials. The duo also arrived late to the market with the vaccine in 2022 in Europe and targeted the reinforcement market.
When asked whether Sanofi had already approached Novavax for partnership, CEO Jacobs said he could not comment.
“I’m actually not sure it was before my time,” Jacobs said. “I have to believe that over time Novavax may have talked to other companies, but until these barriers [liabilities] were removed… I don’t think we were a very attractive target for significant commercial development because there was a lot of uncertainty.”
He added that if there were ever a discussion in the future about a sale or acquisition, the board would “always consider appropriately for our shareholders the right path to value.”
Novavax beat earnings per share of $1.08 versus consensus estimates of $1.05, but missed revenue, reporting $98.3 million compared to Wall Street expectations of more than $101 millions.
Anjalee Khemlani is a senior healthcare reporter for Yahoo Finance, covering all things pharmaceutical, insurance, assisted living, digital health, PBMs, and healthcare politics and policy. Follow Anjalee on all social media platforms @AnjKhem.
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