Novavax Inc. NVAX-Q on Friday said it had struck a licensing deal worth at least US$1.2-billion with Sanofi SNY-Q for its COVID-19 vaccine in exchange for a stake that valued the U.S. biotech firm at double its current market capitalization.
The Maryland-based drug maker’s stock more than doubled in Friday trading to US$8.97 following the deal as the company also removed a warning notice from February last year that raised doubts about it being in business. At their peak in 2021, shares traded at about US$332.
Sanofi will take a 4.9-per-cent stake in the U.S. drug maker for US$70-million. That values Novavax at about US$1.4-billion, nearly double its market capitalization of about US$628-million as of Thursday, but a far cry from its peak of US$20-billion in 2021.
The deal also entitles Novavax to an upfront cash payment of US$500-million and future payments contingent on certain milestones, as well as royalties.
Sanofi, one of the world’s largest vaccine makers, will gain a licence to co-sell Novavax’s vaccine in most countries and use the COVID shot along with its own flu vaccines to develop a combination shot.
“A company like Sanofi, that has pioneered protein recombinant-based vaccines for decades, validating and actually needing what Novavax has as their next pipeline innovation engine is very powerful,” said B. Riley Securities analyst Mayank Mamtani.
For Sanofi, the agreement could help bolster its flu vaccine franchise as companies such as Pfizer and Moderna develop rivals, including combination vaccines to be used along with COVID-19 shots.
The French drug maker made nearly US$7.5-billion in sales from its vaccines last year.
Novavax chief executive officer John Jacobs said during a call with analysts that the company expected the deal with Sanofi to be worth further billions of dollars in the future.
“The majority of what we see as the future value of this deal comes from the anticipated royalties that will be ongoing from Sanofi’s ability to sell our COVID vaccine and their own combination vaccine or vaccines,” he said.
Mr. Jacobs said the company would consider similar deals for its other experimental vaccines, which include a stand-alone influenza shot.
The cash infusion is likely to strengthen the balance sheet of the vaccine maker, whose shares lost more than 98 per cent of their value since the early days of pandemic as it struggled to get its vaccine to the market in a timely manner.
Novavax has become a target for both short sellers who bet that the value of the stock will fall, and an activist shareholder pushing for changes.
About 35.5 per cent of Novavax’s publicly available shares are shorted. Friday’s rise is squeezing out short sellers, who are buying back stock to exit their position.
The bearish investors had lost roughly US$255-million on paper, according to analytics firm S3 partners.
The deal is “a step in the right direction for shareholders,” hedge fund Shah Capital, which has been pushing for a shakeup of Novavax’s board, said.
Separately, Novavax cut its 2024 sales forecast, excluding contributions from the Sanofi deal, to between US$400-million and US$600-million from US$800-million to US$1-billion previously.
It also reported a net loss that narrowed to US$148-million in the first quarter from US$294-million a year ago.