Novavax (NVAX) has resolved a battle with global nonprofit vaccine alliance Gavi that could have resulted in a single hit of up to $700 million this year over undelivered COVID-19 vaccine doses during the pandemic, the company said Thursday.
The announcement boosted the company's stock by more than 15% in early trading Thursday, reaching a high of $5.30 early in the session. But Novavax's stock is down nearly 90% over the past five years as a result of its missed COVID efforts.
The resolution is a return of a portion of the original $700 million amount charged to Gavi during the pandemic in advance of what was expected to be a total order of $2 billion in COVID-19 doses during the pandemic.
Instead, Novavax will now repay $80 million per year until the end of 2028, for a total of up to $400 million. In addition, Novavax will get an annual vaccine credit in the same amount for Gavi to acquire doses of any vaccine for low- and lower-middle-income countries.
"Use of the annual vaccine credit for qualifying sales would reduce Novavax’s annual cash obligation. In addition to the annual obligation, Novavax will provide an additional vaccine credit of up to $225 million, should there be additional demand, which can be applied towards qualifying dose purchases of any of the company’s vaccines in such countries throughout the five-year term," Novavax said in a statement.
Novavax CEO John Jacobs told Yahoo Finance the news should bring relief as the company had maintained the liability on its balance sheet last year, which had worried investors.
"This agreement is a complete resolution of the outstanding financial matter," Jacobs said.
Both Novavax and Gavi have new leaders at the helm since the original agreement was penned in 2021, and both entities are looking to the future as a result.
Jacobs said that includes having brought down the company's expenses and a pathway to new revenues in two years.
"We have about two more seasons we're anticipating being a standalone COVID company," Jacobs said.
The company expects its combination COVID-flu vaccine to launch in 2026, which presents market opportunity in the US and abroad. In addition, a malaria vaccine created in part with a Novavax ingredient licensed to the Serum Institute of India — and recommended for use by the World Health Organization — is expected to be a steady revenue source for the company through royalties.
In order to set the company up to achieve this, there has been cost-cutting to refocus the company away from its pandemic failure in the past year, Jacobs said.
"We've reduced about a billion dollars out of our operating expenses," he said, noting that included a 30% reduction in head count from a year ago.
"We've cleaned up a lot of the one-time liabilities that were concerning, and rightfully so, to investors. We've made the company a lot more lean," he added.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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