Novavax stock jumps on Sanofi Covid vaccine deal

Shares of Novavax closed nearly 50% higher on Monday as Wall Street cheered the corporate’s recent multibillion-dollar take care of French drugmaker Sanofi that sparked a dramatic turnaround for the struggling vaccine maker.

Novavax’s stock almost doubled on Friday after it announced the licensing agreement with Sanofi. Novavax on Friday said the deal allows the corporate to remove its “going concern” warning, which it first issued in February 2023 on account of major doubts about its ability to remain afloat.

“It really does help our business. It keeps us well capitalized, it takes the going concern off, it gives us the prospect to pivot our strategy more toward what we’re best at — to bring additional value to all of our stakeholders, including our shareholders,” Novavax CEO John Jacobs told CNBC in an interview. 

Under the agreement, Sanofi will take a lower than 5% stake in Novavax. The deal also entitles Novavax to an upfront money payment of $500 million and future payments contingent on certain milestones, in addition to royalties. 

Sanofi, one in all the world’s largest vaccine makers, will co-market Novavax’s Covid vaccine in most countries starting in 2025. The deal also allows Sanofi to make use of Novavax’s Covid shot and flagship vaccine technology, Matrix-M adjuvant, to develop recent vaccine products. The shots include combination jabs targeting Covid and the flu. 

In a note Sunday, Jefferies analyst Roger Song said the deal will provide significant capital to Novavax and support the corporate’s growth. 

“Economically, the deal is extremely lucrative and impactful,” Song wrote. 

He said the upfront payment helps remove investor worry about Novavax’s going concern warning, and that milestone payments are “significant and comparatively near-term” for the corporate since they aren’t tied to sales. Meanwhile, royalties will provide a gentle revenue stream annually, Song said. 

He added that the deal “validates” the corporate’s protein-based vaccine platform. 

Novavax’s shot is the primary Covid vaccine to make use of protein technology, a decades-old method for fighting viruses utilized in routine shots against Hepatitis B and shingles. Health officials view the vaccine as a priceless alternative for individuals who don’t want to take messenger RNA jabs from Pfizer and Moderna.

In a note on Sunday, Leerink Partners analyst David Risinger said he’s interested to see how effective Sanofi is at raising consumer awareness about how the negative effects of Novavax’s Covid vaccine are easier for patients to tolerate in comparison with competing shots from Pfizer and Moderna.

Risinger noted that consumer hesitancy around Covid boosters has are available part from fears concerning the fatigue and discomfort related to Pfizer’s and Moderna’s shots. 

The firm expects Sanofi “to drive greater industrial success of [Novavax’s] vaccine starting in 2025, on account of its industrial scale and contracting abilities, nevertheless it is difficult to predict the magnitude of impact,” Risinger wrote. 

He added that there might be “further upside” for Sanofi and Novavax in the event that they develop a mixture Covid and flu vaccine that has benefits over the mRNA combo shots being developed by Pfizer and Moderna.