Novavax Soars on Sanofi Deal, But Q1 Earnings Disappoint

The vaccine maker Novavax watched its stock spike on Friday after the company announced a major deal with the French pharma giant Sanofi worth $1.2 billion. Under the agreement, Sanofi will license Novavax’s vaccine technology, co-develop new products with the Baltimore-based firm, and likely a financial lifeline to a vaccine maker that has floundered to produce a winning shot in the pandemic.

Sanofi Invests in Novavax Technology

As part of the licensing agreement, Sanofi will get access to Novavax’s COVID-19 vaccine technology and the companies will work together on future vaccines. They will also develop a combination of COVID-19 and flu vaccines to avoid people having to get multiple shots.

In exchange for this guaranteed income, Sanofi will pay Novavax $500 million upfront, with up to an additional $700 million anyone’s guess based on achieving interim development and regulatory milestones. Enabled by this money, Novavax has removed from its 10-Q the ‘going concern’ warning it added when it became apparent that people would develop COVID immunity after being infected and thus that demand for the vaccine could wane.

The agreement also gives Sanofi a small share of Novavax equity (less than 5 percent) and royalties on sales of the COVID-19 vaccine and a combination shot that prevents flu and COVID-19.

Novavax Q1 Results Fall Short

And although the Sanofi deal was the boost the company needed, Novavax’s earnings report for the first quarter – released the exact same day – underwhelmed Wall Street, reporting revenue of $93.9 million, short of the anticipated $101.3 million, along with a bigger-than-expected loss for the latest quarter, $147.6 million (versus the projection: a loss of $127.4 million).

For a company that missed its targets so badly, there were some positive signs: revenue for the quarter increased fractionally from the same quarter in 2023, and its net loss was cut almost in half from the first quarter in 2023.

Novavax Adjusts Revenue Projections and Announces Cost-Cutting Measures

The American company Novavax scaled back its forecasts for full-year revenue to $400 million to $600 million, after demand for the COVID-19 vaccine waned. It had previously expected $800 million to $1 billion.

Still, the Sanofi deal is a shot in the arm. Adding the Sanofi payments of $570 million anticipated this year increases Novavax’s projected total revenue to between $970 million and $1.17 billion this year.

As it looks to cut costs to overcome financial difficulties, Novavax plans to make reductions in combined RD plus advertising and administrative (SG A) expenses below $500 million by the end of fiscal year 2025. That is huge! Current projections have those expenditures between $700 million and $750 million for the fiscal year 2024.

The Sanofi deal holds out a critical prospect for Novavax, giving the company cash, a bigger market and a seat at the table with a bigger player. But the firm also has to contend with its bottom line, as well as a rapidly evolving vaccine marketplace.