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Novavax stock doubles after Sanofi deal marks ‘new chapter’ for company

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Novavax stock (NVAX) skyrocketed on Friday, gaining as much as 120% on the news French drug and vaccine giant Sanofi (SNY) would invest $1.2 billion in a deal for Novavax’s COVID-19 vaccine and take a minority stake in the struggling biotech company.

The deal gave Novavax a much-needed cash boost as the company had flagged after a pandemic-era surge.

“This is a new chapter in the history of our company,” Novavax CEO John Jacobs told Yahoo Finance in an interview Friday.

Novavax struggled after its COVID-19 vaccine was delayed by manufacturing issues early in development, which resulted in the company missing out on the multibillion-dollar pandemic boom that Pfizer/BioNTech (PFE/BNTX) and Moderna (MRNA) enjoyed.

While Novavax’s vaccine did finally reach the market in mid-2022 targeting the booster market, it continued to struggle with $1.7 billion in liabilities of promised COVID doses globally weighing on its books.

The news, which overshadowed Novavax’s first quarter earnings release on Friday, has turned the company around from near failure.

“This company was likely headed for real trouble, and we put a going concern on the company my second month on the job,” Jacobs said.

Jacobs took the helm from longtime CEO Stanley Erck in January 2023. In the 15 months since, he has decreased the company’s liabilities to $1.7 billion, compared to a previous $2.5 billion, and reduced expenses from manufacturing and R&D.

“[This] in and of itself doesn’t save Novavax, but what it does … is now put us toward a future of growth back on our biotech strength, back on a platform-based growth strategy that allows us to drive growth,” Jacobs said.

The deal with Sanofi includes a $500 million up-front payment to Novavax and up to $700 million as certain milestones are met for COVID-19 vaccine co-commercialization, the development of a combination COVID-flu vaccine, and royalties. Sanofi is licensing the technology for the combination COVID-flu vaccine, which is separate from the one currently in Novavax’s pipeline.

In addition to that $1.2 billion, Sanofi is committing up to $200 million for each new vaccine it develops using Novavax’s 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 that, Sanofi is acquiring a minority stake through a $70 million equity investment.

Novavax logo and COVID-19 virus images photographed off Apple devices. (STRF/STAR MAX/IPx) (STRF/STAR MAX/IPx)

The investment from Sanofi, a small fraction of the company’s $46.2 billion annual revenue in 2023, is not so significant.

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 revenues last year.

Novavax and Sanofi have similar platforms for their vaccines using 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 older adults, accounts for $2.8 billion of Sanofi’s annual $8 billion vaccine portfolio.

Amid the vaccine race early in the pandemic, the scientific community was eager to see these types of vaccines reach the finish line.

“As we headed into December 2020, it was obvious that the first two vaccines we were to consider were mRNA vaccines, where we had no experience with that technology,” said Dr. Paul Offit, director of the vaccine education center and a pediatrician at the Children’s Hospital of Philadelphia.

“Novavax, on the other hand, was a tried-and-true technology,” Offit, who also served as a member on the advisory committee for the Centers for Disease Control and Prevention (CDC), told Yahoo Finance.

Like Novavax, Sanofi similarly missed the pandemic market after its vaccine candidate, in partnership with GSK (GSK), was delayed during clinical trials. The duo was also late to the market with the vaccine in 2022 in Europe and targeted the booster market.

When asked if Sanofi had previously approached Novavax for partnership, CEO Jacobs said he couldn’t comment.

“I’m actually not sure if that ever occurred before my time,” Jacobs said. “I have to believe that over time Novavax might have had conversations with other companies, but until these barriers [liabilities] were removed … I don’t think we were a very attractive target for significant business development because there was so much uncertainty.”

He added that if there were ever a discussion in the future of a sale or acquisition, the board “would always consider appropriately for our shareholders the right path to value.”

Novavax beat on earnings per share, at $1.08 versus consensus estimates of $1.05, but it missed on revenues, reporting $98.3 million compared to Wall Street expectations of more than $101 million.

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.

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