Novavax Starts A New Chapter, Turning The Page On Financial Uncertainty

(RTTNews) - Just when the Covid-vaccine maker Novavax Inc.'s (NVAX) future as a going concern seemed uncertain, a remarkable turnaround has unfolded, thanks to the license deal with Sanofi (SNY).

The deal signed with Sanofi on May 10, 2024, relates to Covid-19 vaccine and Covid/Influenza combination vaccine candidate, representing a potential multi-billion-dollar revenue opportunity for Novavax.

Novavax's Covid-19 vaccine is authorized in select geographies under trade names Novavax Covid-19 Vaccine, Adjuvanted; Covovax; and Nuvaxovid, authorized in the U.S under trade name, Novavax Covid-19 Vaccine, Adjuvanted, and authorized in the EU under the trade name Nuvaxovid XBB.1.5. The company's Covid-19-Influenza Combination (CIC) vaccine candidate demonstrated robust immune response in a phase II trial, according to results reported last May.

Let's delve into the key terms of the Sanofi deal:

-- Sanofi secures a co-exclusive license to jointly market Novavax's current standalone Covid-19 vaccine worldwide, with a few exceptions say, countries with existing advance purchase agreements, and India, Japan, and South Korea, where Novavax has partnership deals already in place.

-- Additionally, Sanofi gains a sole license to utilize Novavax's adjuvanted Covid-19 vaccine alongside its flu vaccines. Novavax maintains ownership of its Covid-19 Influenza Combination vaccine candidate.

-- Sanofi also acquires a non-exclusive license to deploy Novavax's adjuvanted Covid-19 vaccine with non-flu vaccines. Furthermore, Sanofi is solely responsible for the development and commercialization of any novel flu- Covid-19 combination vaccine containing a Sanofi flu vaccine.

-- Moreover, Sanofi also gains a non-exclusive license to use Novavax's Matrix-M adjuvant in vaccine products.

-- Outside of the collaboration, each party may develop and commercialize their own Covid-19-Influenza combination vaccines and adjuvanted products at their own cost.

How much is the deal worth for Novavax?

Novavax is set to receive an initial payment of $500 million, with the potential for up to $700 million in further payments tied to developmental, regulatory, and launch milestones, equating to approximately $1.2 billion.

Beginning in 2025, Sanofi will book the sales of Novavax's adjuvanted Covid-19 vaccine and assist with specific research and development, regulatory, and commercial costs.

Novavax will be entitled to tiered double-digit percentage royalties on the sales of both Covid-19 vaccines and Covid-19-Influenza Combination vaccines by Sanofi.

Novavax stands to gain extra milestone opportunities worth up to $200 million tied to launches and sales, along with mid-single digit royalties for every additional vaccine product developed by Sanofi using Novavax's Matrix-M adjuvant technology under a non-exclusive license.

Additionally, as part of the agreement, Sanofi will make an equity investment of approximately $70 million for a minority equity investment (less than 5%) in Novavax.

What Led Novavax Report Going Concern Matters in 2023?

In February 2023, the company faced significant uncertainties about its future viability. Substantial doubt was raised regarding its ability to continue as a going concern, largely stemming from uncertainties surrounding future revenue streams. One major concern was the uncertainty around delivering an updated Covid-19 vaccine that aligned with public health recommendations, especially with the continual emergence of new virus variants.

Moreover, the company was notified that funding from the U.S. government, which had been a crucial support, would not be extended beyond December 2023, thereby jeopardising a portion of the remaining $460 million of funding.

Additionally, Novavax was dealing with a pending arbitration with Gavi, the Vaccine Alliance, related to its 2021 Advance Purchase Agreement for its Covid-19 vaccine prototype.

Stability Regained - Going Concern Notice Removed

The May 10, 2024, agreement with Sanofi that yielded cash proceeds of $568.8 million to Novavax in the second quarter of 2024, has notably alleviated significant concerns about the company's ability to continuing as a going concern.

The company's updated COVID-19 vaccine for the 2023-2024 vaccination season was granted emergency use authorization by the FDA and approval by the European Commission as recently as October 2023.

The arbitration with Gavi was settled in February of 2024. As part of the settlement, Novavax made an initial payment of $75 million to Gavi and committed to making deferred payments of $80 million annually until December 31, 2028, totaling up to $400 million.

Q1 Scorecard

For the first quarter ended March 31, 2024, the company reported a narrower loss of $148 million or $1.05 per share as total revenue climbed to $94 million. This compares with a net loss of $294 million or $3.41 per share and total revenue of $81 million in the first quarter of 2023.

The total revenue is comprised of product sales, grants, and royalties, among others.

Total expenses have declined by 39% to $239 million in the first quarter of 2024, from $394 million in the year-ago quarter.

Becoming Leaner and Agile

In a bid to become nimbler and more efficient, the company is targeting to trim FY 2024 R&D and SG&A expenses to a range of $700 million to $750 million, a sharp drop from last year's $1.2 billion.

Looking further ahead, the company is planning to slash R&D and SG&A expenses to below $500 million in 2025.

Anticipated Milestones

A phase IIIa study of Covid-Influenza-combination (CIC) and stand-alone-influenza vaccines in adults aged 60 and above is on track to be initiated in the second half of 2024.

Topline data from this trial is expected to be available in the second quarter of 2025.

During the first quarter of 2024, the company completed the submission of its License Application for its prototype COVID-19 vaccine (Novavax Covid-19 Vaccine, Adjuvanted) with the U.S. FDA. (Please note that the vaccine has not been approved by FDA but was authorized for emergency use in the U.S. by the FDA in Oct.2023).

Revenue Outlook

For full year 2024, Novavax expects combined revenue & Sanofi agreement payment to range between $970 million and $1,170 million. This includes a forecasted total revenue between $400 million and $600 million, along with an initial payment from the Sanofi agreement totaling approximately $570 million.

In comparison, the company's total revenue for full year of 2023 amounted to $984 million.

Stock Performance

Novavax's story resonates as a picture of fluctuating fortunes, from boom to bust and back again.

In 2019, the stock's value hovered modestly around $4 to $5. However, the onset of the pandemic in 2020 heralded a transformative chapter, with the stock gradually gaining momentum, and soaring to an unprecedented high of over $330 in February 2021, only to retreat to $143 by the end of that year.

The subsequent year, i.e., 2022, brought further challenges, marked by a steady decline in stock value. By December 2022, the stock had plummeted to a mere $10. Regrettably, 2023 offered little respite, as the stock continued its downward trajectory, dwindling to $4 by December.

Now that the company's financial uncertainty has been eased and the stage is set for a stronger U.S. commercial performance in 2024 and beyond, it would be prudent to maintain a vigilant watch on this stock.

NVAX touched a new 52-week high of $11 on May 10, 2024, before closing the day at $8.88, up 98.66%.