((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Stock Price Update) by Patrick Wingrove and Bhanvi Satija
Novavax NVAX.O said Friday it has entered into a licensing deal worth at least $1.2 billion with Sanofi SASY.PA for its COVID-19 vaccine in exchange for a stake that values the U.S. biotech company at double its current market capitalization.
Shares of the Maryland-based drugmaker more than doubled on Friday to $8.97 following the deal, with the company also removing a warning notice from February last year () which raised doubts about its ability to continue its activities. At their peak in 2021, shares traded at around $332.
Sanofi will take a 4.9% stake in the US drugmaker for $70 million. That values Novavax at about $1.4 billion, nearly double its market cap, which stood at about $628 million as of Thursday, but a far cry from its 2021 high of $20 billion.
The agreement also gives Novavax the right 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 obtain a license to co-sell Novavax’s vaccine in most countries and to use the COVID vaccine with its own flu vaccines to develop a vaccine combination.
“A company like Sanofi, a pioneer in recombinant protein vaccines for decades, that validates and needs what Novavax has as the next innovation driver in its pipeline, is very powerful,” said Mayank Mamtani, an analyst at B.Riley Securities.
For Sanofi, the deal could help strengthen its flu vaccine franchise as companies such as Pfizer PFE.N and Moderna MRNA.O develop rivals, including combination shots for use with COVID-19 vaccines.
Last year, the French drugmaker made nearly $7.5 billion in sales from its vaccines.
Novavax Chief Executive John Jacobs said in a conference call with analysts that the company expects the Sanofi deal to result in billions of additional dollars in the future.
“The majority of what we view as the future value of this deal comes from the anticipated royalties that will arise from Sanofi’s ability to sell our COVID vaccine and their own combination vaccine(s),” did he declare.
Mr. Jacobs said the company would consider similar deals for its other experimental vaccines, including a standalone flu vaccine.
SHORT SELLERS FEEL THE PAIN
The cash injection is expected to strengthen the balance sheet of the vaccine maker, whose shares have lost more than 98% of their value since the early days of the pandemic, due to its difficulties in bringing its vaccines to market on time. .
Novavax has become a target for short sellers who are betting on a decline in the stock’s value and for an activist shareholder who is demanding changes.
About 35.5% of Novavax’s public shares are sold short. Friday’s rise had the effect of crowding out short sellers, who bought back shares to exit their positions.
Bearish investors lost about $255 million on paper, according to analytics firm S3 partners.
The deal is “a step in the right direction for shareholders,” said hedge fund Shah Capital, which has lobbied for a shake-up of Novavax’s board.
Separately, Novavax reduced its sales forecast for 2024, 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.