Novavax to settle Gavi arbitration over canceled Covid shot purchase

Shares of Novavax jumped about 20% on Thursday after the corporate said it’s going to settle a bitter arbitration dispute with Gavi, a nongovernmental global vaccine organization, over a canceled Covid vaccine purchase agreement. 

Novavax could pay as much as $475 million to the organization, but the full amount could also be less if Gavi decides to order more shots from the cash-strapped company over the following five years.

Still, the settlement eliminates what some analysts considered one among the most important uncertainties across the Covid shot maker, which is cutting costs amid doubts about its ability to stay in business and plummeting demand for Covid products worldwide.

In 2022, Novavax terminated a purchase order agreement with Geneva-based Gavi. The corporate cited Gavi’s failure to obtain the 350 million vaccine doses it agreed to purchase in May 2021 on behalf of the COVAX Facility, a worldwide program that goals to distribute Covid vaccines more equitably in lower-income countries.   

Gavi sought a refund for the $700 million it spent on advance payments for Novavax’s shots. Novavax has said those payments were nonrefundable. 

Under the settlement, Novavax has paid an initial $75 million to Gavi and can make deferred payments of $80 million annually through Dec. 31, 2028. Those annual payments can be due in quarterly installments. 

But Novavax’s payments might be offset by an annual $80 million “vaccine credit” option under the settlement, which Gavi can use to order any of the corporate’s Gavi-funded shots for low and lower-middle income countries.

For instance, if Gavi decides to order $50 million value of shots from Novavax in 2025, the corporate would only need to pay the organization $30 million that 12 months. 

Novavax said it’s also offering a vaccine credit of as much as $225 million that Gavi can use to order additional vaccine doses throughout the five-year settlement window “should there be additional demand.” 

The terms of the settlement could bode well for Novavax’s business. Analysts had previously told CNBC that Novavax could “be in trouble” if the arbitration forced it to pay the complete $700 million to Gavi in 2023. 

“Gavi welcomes this agreement, which allows us to keep up concentrate on our core programmatic goals, including providing access to COVID-19 vaccines for vulnerable people in lower income countries,” Gavi CEO David Marlow said in a release Thursday. 

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