On the heels of a turbulent 2023 in which Novavax’s very existence was at stake, the beleaguered vaccine maker has new reason to be optimistic about the future.
Novavax has reached a settlement with Gavi, the Vaccine Alliance (Gavi), ending arbitration tied to a 2021 advance purchase agreement (APA) around its prototype COVID-19 vaccine NVX-CoV2373.
The terms of the deal are meant to allow both parties to continue their immunization missions unimpeded, including by working together in the future, Novavax said in a Thursday press release.
As for Novavax’s end of the bargain, the company has already made an initial payment of $75 million to Gavi and will ultimately hand over up to $400 million in installments of $80 million each year through Dec. 31, 2028.
Novavax also has the option to offset or reduce its payment amount courtesy of an $80 million “annual vaccine credit,” which could be used for sales of “any” of the company’s Gavi-funded vaccines for low- and lower-middle income countries.
Payment aside, Novavax is offering an additional vaccine credit worth upward of $225 million—should there be additional demand—which Gavi can use to purchase doses of Novavax shots throughout the five-year settlement term.
“Novavax is pleased to have reached this agreement with Gavi as it gives us the ability to continue to work together toward our shared mission of ensuring equitable access to safe and effective vaccines,” the company’s CEO, John Jacobs, said in a statement. He added that the company is looking forward to a “long-term relationship with Gavi” to continue selling its protein-based COVID shot.
Had Novavax lost the arbitration rather than settling, the company might have had to return nearly $700 million received for vaccine doses before Gavi canceled its contract.
Gavi had originally signed on to acquire 350 million Novavax doses, according to the terms of an APA from May 5, 2021, but as of Nov. 18, 2022, Novavax had only received orders for approximately 2 million doses, the company explained in its 2022 annual report. Given the circumstances under which the APA was terminated, Gavi believed it was entitled to a refund for the doses it chose not to buy. Gavi filed a demand for arbitration in early 2023.
The arbitration, alongside U.S. government funding and future revenues, were primary going concerns for Novavax last year, the company’s then-CFO John Trizzino said on an analyst call in March. At the time, Trizzino said the company had enough capital on hand to survive for the next 12 months, though the plan was “subject to significant uncertainty.” In an accompanying earnings presentation, Novavax said there was “[s]ubstantial doubt” regarding its ability to make it through the year.
Nevertheless, things started to look up for Novavax last summer. In August, South Korean manufacturer SK Bioscience acquired a 7% stake in Novavax, paying $85 million for 6.5 million shares.
Under the terms of the deal, SK scored commercial rights to Novavax’s updated COVID shot in Korea through February 2029, plus nonexclusive rights in Thailand and Vietnam until June 2028. Novavax received a $4 million milestone payment, plus the promise of royalties on future product sales. The agreement also settled $195 million in manufacturing liabilities Novavax owed to SK.
Following lackluster performance in the wake of the COVID shot's July 2022 approval, contracts and manufacturing accords have been a persistent point of contention for Novavax. Over the past few months, resolutions to those deals have gone both ways for the company.
Last July, for instance, Canada canceled some COVID-19 vaccine deliveries from Novavax but agreed to pay the company $349.6 million to fully compensate for the unused doses.
In October 2022, however, Novavax put the kibosh on a production agreement with Fujifilm Diosynth Biotechnologies and settled with the CDMO for up to $185 million to resolve the situation.