Medical syringes and the Novavax logo displayed within the background are seen on this illustration photo taken in Krakow, Poland, December 2, 2021.
Jakub Porzycki | NurPhoto | Getty’s paintings
Novavax has a transparent message for Wall Street: The cash-strapped Covid vaccine maker sees a path to survival.
Maryland-based Novavax said the identical thing last month when it presented its first-quarter financial results and disclosed a powerful deal with cost cutting together with a higher-than-expected 2023 revenue forecast of $1.4 billion to $1.6 billion. This report was in stark contrast to the previous quarter, when the biotech firm expressed doubts about its viability.
Novavax shares jumped about 30% on the news, but Wall Street hasn’t quite bought into the turnaround plan: The corporate’s share price continues to be down about 18% year-to-date after losing greater than 90% of its value in 2022.
Novavax’s market capitalization fell to around $700 million from around $1 billion six months ago and $3 billion a 12 months ago.
And staying afloat until 2023 and beyond may not be an easy task.
The 36-year-old company will proceed to depend on the protein-based Covid vaccine – its only commercially available product – for the majority of its revenue this 12 months.
Covid injection sales will depend heavily on Novavax’s ability to deliver an updated version of the vaccine in the autumn, when the U.S. government is predicted to shift vaccine distribution to the private sector. Even when Novavax meets that deadline, it can face stiff competition from mRNA rivals Pfizer AND Modern.
Wall Street can be waiting to see how Novavax executes its cost-cutting plan, and the way in a $700 million arbitration pending on the canceled contract for the acquisition of a vaccine.
The corporate may have to cope with these short-term challenges before it might probably deal with its own a promising vaccine pipelinewhich incorporates a mixture vaccine targeting Covid and flu, a standalone flu vaccine, and a latest high-dose Covid vaccine.
“The following six to nine months will be a very critical time for the corporate,” Cowen analyst Brendan Smith told CNBC.
Competing within the business market
Novavax, now run by a latest one John Jacobs CEOwas an early leader within the Covid vaccine race, but the corporate’s two-stage regimen gained approval within the US under emergency mode just last 12 months due to regulatory and manufacturing delays.
Now Novavax’s top priorities are producing an updated Covid shot by the autumn and gaining business market share after falling up to now behind Pfizer and Moderna. Some analysts imagine that the corporate has an actual likelihood of doing so, but note that competition with the 2 mRNA giants may remain a challenge.
“Given [Novavax’s] financially, they actually need to be able to deliver business sales this coming fall and winter,” said Smith. “This can make sure that they continue to be viable in future cycles as well.”
After the U.S. government’s supply of free Covid vaccines is exhausted, all three corporations will sell the updated vaccines directly to healthcare providers.
These shots will be geared toward a variant of the virus – chosen by a team of advisers from the Food and Drug Administration Thursday – this is predicted to be most pronounced this fall and winter.
Novavax is giving itself an “advantage” in developing this updated vaccine because the corporate’s protein vaccine takes longer to develop and produce – about three to six months in total – than its messenger RNA counterparts, it said Sylvia Taylorexecutive vice chairman of a pharmaceutical company.
Analysts estimate that it typically takes about six months to deliver a protein vaccine, and three months to produce an mRNA injection.
Novavax is working closely with global regulators on strain selection guidelines to start development as early as possible. Taylor added that Novavax is already developing shots targeting various strains, including an omicron sub-variant XBB.1.5dominant virus strain on the earth.
World Health Organization last month advisable that latest Covid shots goal XBB variants, which Taylor called “extremely encouraging” guidelines ahead of an FDA panel meeting.
FDA staff on Monday also advisable the identical strains ahead of the meeting.
Jefferies analyst Roger Song said he expects Novavax to be able to deliver an updated vaccine in the autumn if FDA advisers select a strain “from the present library” the corporate is evaluating. He noted that advisors are unlikely to select a very latest strain.
A healthcare employee prepares a dose of Novavax vaccine because the Netherlands Health Organization launches the Novavax vaccination program on March 21, 2022 in The Hague, Netherlands.
Patrick Van Katwijk | Getty’s paintings
One other advantage of Novavax may be using protein-based technology, a decades-old approach to fighting viruses utilized in routine vaccinations against hepatitis B and shingles.
The Novavax injection works otherwise than Pfizer and Moderna’s mRNA vaccines, but achieves the identical result: it teaches the body how to fight Covid.
B. Riley Securities analyst Mayank Mamtani said that Novavax could leverage the unique benefits of the corporate’s protein platform as a part of its business marketing efforts.
“They’ve a theoretically compelling message that claims, let’s try something latest,” Mamtani told CNBC. “Let’s try a latest vaccine that won’t make you miss work in some cases due to chills, fever or other unwanted side effects you may have from mRNA.”
Novavax clinical trial data suggest so less likely to experience unwanted side effects compared to Pfizer and Moderna injections. The information also shows that it has a similarly high success rate – about 90% – like its mRNA rivals.
Smith noted, nonetheless, that the corporate may have to compete with the “massive brand recognition” of Pfizer and Moderna, which have dominated the US Covid vaccine market for the reason that FDA approved their injections for emergency use in late 2020.
These vaccines have received full FDA approval while Novavax has not.
The US has administered over 360 million vaccines and boosters from Pfizer and over 230 million from Moderna, according to data Centers for Disease Control and Prevention. Novavax’s late entry into the sport led to much lower interest: the US administered nearly 90,000 injections from the corporate.
Novavax may even have to compete during a time of “record low public interest” in getting Covid booster shots, Smith added.
According to the CDC only about 17% of the US population received bivalent omicron boosters from Pfizer and Moderna, which can be found from September.
“There are still many headwinds against which we operate [Novavax,]Smith said, adding that cost-cutting efforts could potentially make it harder for the corporate to compete within the business Covid vaccine market this fall.
Novavax is withdrawing expenses at the identical time it needs to increase its business sales team, making the timing “unlucky in a much wider context,” he said.
Cost cutting plan
Novavax is working to drastically reduce costs, with plans to cut roughly 25% of its global workforce. The corporate just did lower than 2,000 employees from the tip of February.
The drug manufacturer may even consolidate its facilities and infrastructure. These activities are geared toward reducing the corporate’s research and development expenses in 2023 and selling, general and administrative costs, which in total amounted to approx. $1.7 billion last 12 months.
Novavax expects the cost-cutting plan to reduce that number by about 20% to 25% this 12 months and by 40% to 50% by 2024.
Song Jefferies said he was most focused on the 2024 cost reduction goal, but noted the corporate had to be careful so long as it selected to cut costs.
“I hope they’ll cut a little bit faster and greater,” Song told CNBC. “But additionally they don’t desire to overdo what they need to cut and compromise their capabilities.”
But Taylor stressed that the plan will help Novavax refocus on its top priority: delivering an updated vaccine in the approaching months.
“We feel we’re in a superb place to act with a relentless deal with our priorities and act in a more efficient way to achieve our goal of constructing our vaccine available for the season,” she said. CNBC.
Gavi Arbitration
And the approaching cost is a $700 million pending arbitration Gavinon-governmental global vaccine organization.
Novavax last 12 months terminated the Covid injection purchase contract with Geneva-based Gavi, citing Gavi’s failure to win 350 million doses of vaccines agreed to purchase in May 2021 on behalf of COVAX Facility – a global agenda which goals to distribute Covid vaccines more equitably in lower-income countries.
As a part of the cope with Gavi, Novavax said it received non-refundable advances of nearly $700 million.
Gavi is now trying to get well these prepayments. The organization argued in Reuters interview last 12 months that Novavax breached the contract and failed to supply vaccines to COVAX from the locations laid out in the contract.
An elderly woman receives a dose of Covid-19 vaccine at a clinic on December 12, 2022 in Hohhot, Inner Mongolia Autonomous Region, China.
Ding Genhou | Visual Chinese group | Getty Images
Song called the Gavi arbitration the most important uncertainty around Novavax. He said the corporate “might be in trouble” if it has to pay back the whole $700 million to Gavi this 12 months.
Nevertheless, he said there was a superb likelihood Novavax and Gavi would settle arbitration after a compromise. This might mean Novavax repaying lower than the complete amount or establishing a repayment plan through 2024, Song added.
Cowen’s Smith said, “If there’s one thing the market doesn’t like, it’s uncertainty.”
“We do not understand how the arbitration will go or when it can happen, so I proceed to categorize this because the essential overhang for the motion,” added Smith.
Taylor of Novavax declined to comment on the state of the pending arbitration, but said, “We feel pretty comfortable with our position.”
“We’ll discover soon enough what happens to that,” she added.