Novavax’s new chief executive urged governments to honor Covid-19 vaccine procurement commitments as the once high-flying US biotech struggles to stay afloat amid a collapse in demand for punches.
John Jacobs told the Financial Times there is no guarantee that governments will meet all of their current commitments with the company, which include $2.1 billion in advanced purchase agreements signed with the US biotech group extending through 2025.
We had to invest billions. . . Jacobs, who replaced Stan Erk as CEO of Novavax last January, said introducing a vaccine helped stem the tide of a global pandemic that was killing millions of people.
Then all of a sudden say, “Well, you spent all your money, you committed to protecting our citizens. Now we don’t think we need it much. Sorry, you’re out of luck. Maybe it’s not good for long-term relationships and that sort of thing and to benefit public health,” he said.
Novavax is one of the few vaccine makers, along with BioNTech/Pfizer and Moderna, approved to supply Covid jabs in the US, EU and other Western countries. All providers are facing a sharp drop in sales due to weak demand, which is contributing to a supply glut that has left billions of vaccine doses unused.
That prompted governments to renegotiate multi-billion dollar supply contracts with manufacturers, a move analysts warned could add pressure on cash-strapped Novavax.
“The drive to renegotiate agreements is not unique to Novafax, but it is under greater pressure because of its difficult financial situation,” said Brendan Smith, an analyst at Cowen, an investment bank.
Novavax said in December it would pay the UK government $112.5 million after its decision not to exercise an option in its contract to purchase additional vaccine doses. The company is also facing a $700 million arbitration process linked to the cancellation of a vaccine contract with Gavi, an international body that provides vaccines to poor countries.
Novavax’s market capitalization soared to more than $20 billion when it developed Nuvaxovid, a Covid shot made using a conventional protein-based vaccine process rather than the messenger RNA technology used by BioNTech/Pfizer and Moderna. But the valuation of the 36-year-old company has since fallen below $1 billion, due to delays in launching the vaccine, intense competition from competitors, and weak demand for Covid jabs.
Novavax warned in February that there was “significant uncertainty” about its future, and Jacobs recently outlined plans to cut costs by up to 50 percent and reduce the company’s 2,000-strong workforce by a quarter.
Novavax’s cash reserves fell to $637 million on March 31, down from $1.3 billion at the end of December. Current liabilities are approximately $2 billion, which includes the Gavi arbitration process.
Jacobs said he was prioritizing cutting costs, developing and launching an updated version of the vaccine in time for the fall vaccination season and meeting revenue guidance of between $1.4 billion and $1.6 billion in 2023.
He said most partners are moving to protect long-term relationships with the biotech industry knowing the next pandemic could be “just around the corner.”
Jacobs said Novavax expects to deliver the $800 million in advanced purchase agreements with the European Union, Australia, Canada and New Zealand, which are due to be delivered this year. He added that the company is negotiating with some customers about amending the 2024 and 2025 purchase agreements, which could lead to changes in delivery schedules and, in some cases, speed up payments made to Novavax.
Roger Song, an analyst at Jefferies, said any renegotiation states seek over current vaccine supply gluts poses a risk to Novavax. But it could also provide some benefit in the near term in terms of cash flow, citing a $100 million payment made this quarter related to a renegotiated purchase agreement.
“Countries can renegotiate, but they may need to pay part of their contracts to compensate Novavax,” Song said.
The European Union is renegotiating the vaccine contract with BioNTech/Pfizer, which has raised concerns among rivals that it could drive them out of the lucrative market. Details of a draft deal published by the Financial Times suggest BioNTech/Pfizer could supply up to 70 million doses annually through 2026, leaving little room for Novavax, Moderna or Sanofi.
Jacobs said policymakers have a strong desire to preserve diversity in the Covid jab market by ensuring there is an alternative to mRNA jabs offered by BioNTech/Pfizer and Moderna. He said Novavax has been working closely with regulators to ensure market access, so it can update its vaccine to target new Covid strains in time for the fall.
“Imagine if we got the pathogen where that would be [mRNA] Somehow the product doesn’t work as well as we expect it to. And you don’t have the variety, tools, even scale enough to support people in countries that don’t have the money that we’re fortunate enough to have in the United States and Western Europe,” he said.
Jacobs said he has no regrets about joining Novavax at a time when it was struggling. “It seemed to me like a great opportunity to make a turnaround.”
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