Novavax shares soar on license deal with Sanofi at lofty valuation

ovavax CEO 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

Novavax on Friday said it had struck a licensing deal worth at least $1.2 billion with Sanofi, opens new tab 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 drugmaker's stock more than doubled in morning trading to $10.20 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, its shares traded at about $332.

Sanofi will take a 4.9% stake in the U.S. drugmaker for $70 million. That values Novavax at about $1.4 billion, nearly double its market capitalization of about $628 million as of Thursday, but a far cry from its peak of $20 billion in 2021.

The deal also entitles Novavax to an upfront cash payment of $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 license 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 (PFE.N), opens new tab and Moderna (MRNA.O), opens new tab develop rivals, including combination vaccines to be used along with COVID-19 shots.

The French drugmaker made nearly $7.5 billion in sales from its vaccines last year. Novavax CEO 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.

Jacobs said the company would consider similar deals for its other experimental vaccines, which include a standalone influenza shot.

SHORT SELLERS FEEL PAIN

The cash infusion is likely to strengthen the balance sheet of the vaccine maker, whose shares lost more than 98% 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% 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 $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 shake-up of Novavax's board, said.
Separately, Novavax cut its 2024 sales forecast, excluding contributions from the Sanofi deal, to between $400 million and $600 million from $800 million to $1 billion previously.

It also reported a net loss that narrowed to $148 million in the first quarter from $294 million a year ago.