Activist investor Shah Capital, which owns 6.7% of Novavax's stock, has claimed that the vaccine developer has been “historically mismanaged” as the firm tries to install new members onto the biotech's board.
Shah Capital said that for more than a year it has tried to address “self-inflicted problems which have undermined the success and sustainability of the company,” according to an April 15 public letter. The investor also claimed that Novavax’s board has been unresponsive to those efforts.
The firm also argued that Novavax’s stock is “now trading at a near record low.” The biotech's shares are currently trading at $4.22 on Monday morning, above the $3.50 mark they sunk to in February, but far below the $200 plus realms the stock was floating in at the height of the pandemic.
The investor has nominated Suresh Katta, founder and CEO of clinical analytics company Saama, and Venkat Peri, CEO of healthcare company Quantiva Health, as two new independent directors.
“Together these two individuals have the pragmatic knowhow and technology experience to help the board address many of the key issues we have identified as value destroyers for Novavax,” the Shah letter reads. Those “value destroyers” include “colossal marketing failures, a non-existent partnership strategy, no clear understanding of technology, questionable regulatory management, and ongoing operating losses and inefficiencies.”
“Together these have contributed to a market capitalization to 2024 expected sales ratio of only 1X, compared to the 10X valuation possessed by its peer Moderna,” the letter continues, referencing the mRNA giant that became a household name a few years ago due to its COVID-19 shot, dubbed Spikevax.
Shah pressed Novavax to immediately adopt a more dynamic marketing and sales strategy that target key COVID-19 segments, such as direct-to-patient outreach for Americans over the age of 60. The investor also urged the infectious disease company to turn its Matrix-M adjuvant franchise’s inactive pipeline candidates—including flu, RSV and H5N1 candidates—into active opportunities through external capital prospects. Adjuvants are ingredients in a vaccine that are designed to boost the immune system’s response to the shot and subsequently provide better disease protection.
The “extremely bright future” of Novavax’s Matrix-M portfolio is supported by the untapped market opportunity of Americans who are averse to mRNA vaccines, according to Shah Capital.
“It is unfathomable that given the sheer size of Novavax’s unique market opportunity that the present team was only able to achieve ~200,000 jabs nationwide in Fall 2023 season,” the letter jabs at Novavax. “This failure was not due to lack of demand, but instead was a function of marketing missteps, rollout issues and delays that simply would not happen with a sharper more focused team.”
The investor said it believes Novavax could share more than half of the COVID-19 market this fall “if they play their cards right,” according to the April 15 release.
For its part, Novavax appears to agree with Shah Capital’s belief in the potential of the Matrix-M portfolio, even if the biotech is sticking to its strategy.
“The board of directors and management team of Novavax are committed to creating long-term value for stakeholders and improving global public health by advancing protein-based vaccines with our Matrix-M adjuvant,” a Novavax spokesperson told Fierce Biotech in an emailed statement April 15.
“We are confident that the actions we are taking are the right ones to drive long-term sustainable growth and create value for all our stakeholders. We welcome the perspectives of our shareholders and value their input on our strategy.”
The Shah Capital letter comes after a year of plummeting COVID-19 vaccine demand, a trend that prompted Novavax to implement cost cuts, manufacturing modifications and a 30% workforce reduction.
Overall, the vaccine maker reduced its full-year 2023 operating expenses by $1.1 billion, or 41%, compared to 2022, according to an annual earnings release shared in February. Through the aggressive cost-cutting measures, Novavax exceeded the goal for its previously stated savings plan by $150 million.