Sanofi and Novavax Announce $1.27 Billion Collaboration for Commercialization of COVID-19 Vaccine and Development of Novel Flu-COVID Combination Vaccine

On May 10, Sanofi and Novavax announced that they had reached a co-exclusive licensing agreement to jointly commercialize the COVID-19 vaccine and develop a novel influenza-COVID-19 combination vaccine.

Under the agreement, Sanofi will pay a $500 million upfront payment and make a $70 million equity investment in Novavax, acquiring a 4.9% stake. The COVID-19 vaccine has a $350 million milestone payment, and the combined COVID-19 and flu vaccine also has a $350 million milestone payment, bringing the total agreement value to $1.27 billion. Additionally, Sanofi has obtained a non-exclusive license for the Matrix-M adjuvant, with Novavax eligible to receive up to $200 million in milestone payments, along with mid-single-digit royalties on sales.

Novavax's stock price plummeted at the peak of the COVID-19 pandemic but surged nearly 140% during pre-market trading on Friday, bringing Novavax's market value to approximately $1.4 billion, doubling its market cap of about $628 million as of Thursday.

As a long-established biopharmaceutical company, Novavax, founded in 1987, is dedicated to the discovery, development, and commercialization of recombinant protein vaccines and adjuvants.

However, so far, Novavax has only one product approved for marketing, which is the COVID-19 vaccine Nuvaxovid (NVX-CoV2373). This product uses a traditional vaccine preparation method based on insect protein expression and combines the target design of S-2P (two proline substitutions) with Novavax's patented Matrix-M adjuvant. Previously, the phase III clinical trial of the COVID-19 vaccine NVX-CoV2373 showed that the overall efficacy rate of the vaccine was 90.4%, demonstrating 100% efficacy in preventing moderate and severe diseases.

Before the development of the COVID-19 vaccine, Novavax had not yet had a product approved for marketing and had been on the brink of bankruptcy several times.

In September 2016, Novavax's core pipeline RSV F vaccine for respiratory syncytial virus (RSV) in the elderly encountered a major failure in Phase III clinical trials, failing to meet both primary and secondary clinical endpoints. This led to Novavax undergoing restructuring, cutting 30% of its workforce, and significantly reducing capital expenditures, causing the company’s stock price to plummet by 83%.

In 2019, after the maternal immunization vaccine ResVax against respiratory syncytial virus failed in its Phase III clinical trial, Novavax's stock price plummeted nearly 90% overnight, with its market value dropping to less than $300 million at one point.

The outbreak of the COVID-19 pandemic gave Novavax an opportunity to rise again. In early 2020, Novavax announced its investment in the development of a COVID-19 vaccine using recombinant protein technology and subsequently received $1.6 billion in grant support. In 2021, Novavax's vaccine underwent Phase III clinical trials in multiple countries and was tested during periods when different variants were prevalent. However, it wasn't until July 2022, after a lengthy approval process, that NVX-CoV2373 received Emergency Use Authorization from the U.S. FDA, becoming the fourth COVID-19 vaccine available in the U.S. market.

After Novavax achieved success in the development of its COVID-19 vaccine, the company's stock price and market value saw a significant increase. At that time, Novavax committed to providing 110 million doses to the United States and a total of 1.1 billion doses of NVX-CoV2373 to developing countries to support global vaccine distribution. Novavax's revenue guidance for 2022 was $4 billion to $5 billion, with the NVX-CoV2373 vaccine expected to generate approximately $5 billion in sales for the company.

But the reality is that, despite the excellent performance of Novavax's NVX-CoV2373 vaccine in Phase III clinical trials in the United States and Mexico, it faces fierce competition from vaccines developed by companies such as Pfizer/BioNTech, Moderna, and Johnson & Johnson.

Due to significantly lagging behind competitors, Novavax failed to meet its expected sales. At the beginning of 2023, after releasing its 2022 financial report, Novavax pointed out that it is currently in a cash-depletion crisis as the company’s previous sales of its COVID-19 vaccine did not meet expectations. Novavax stated that there are doubts about whether the company can survive through the next year.

"Uncertainty" became the keyword in Novavax's Q4 2022 earnings call. Although cash flow projections at the time suggested Novavax had enough resources to last through 2023, the company clearly lacked confidence in its future development, as it provided no revenue guidance for 2023. Consequently, Novavax's after-hours stock price plummeted by 25%, trading at $6.82 per share—a disappointing figure compared to its peak of $315.9 in 2021. Since then, Novavax has fallen into a quagmire, unable to recover.

However, Novavax has always been vigorous and resilient. This collaboration with Sanofi is akin to a rescue, once again giving Novavax the hope of rebirth. In February 2023, Novavax issued its first "going concern" warning due to doubts about its ability to continue operations. Novavax CEO John Jacobs told CNBC that the partnership with Sanofi would allow Novavax to lift its "going concern" warning. "This truly helps our business. It keeps us well-capitalized, able to continue operations, and provides an opportunity to shift our strategy more towards what the company does best — creating value for all our stakeholders, including shareholders."

Despite signing a vaccine cooperation agreement in the early stages of the COVID-19 pandemic, Sanofi ultimately played a relatively minor role. Its COVID-19 vaccine developed in collaboration with GSK was not approved in Europe until the end of 2022 and has never been authorized in the United States.

In August 2021, Sanofi acquired the biotechnology company Translate Bio for $3.2 billion, hoping to advance a complete R&D pipeline for mRNA therapies. At the time, Sanofi's CEO Paul Hudson also seriously stated that he intended to directly participate in the future competition for mRNA vaccines. He further hoped that through collaboration with Translate Bio, the potential of mRNA could be unlocked in other strategic areas beyond vaccines, such as immunology, oncology, and rare diseases.

However, shortly after acquiring its partner Translate Bio, Sanofi abandoned the development of mRNA vaccines.

Despite this, Sanofi still hopes to make up for its vaccine business. The existing vaccine technology acquired through the purchase of Translate Bio has given Sanofi "the largest vaccine development toolbox in the industry," which includes a set of flu vaccines made using inactivated and recombinant technologies. Therefore, the achievement of this cooperation will be combined with Novavax's Covid vaccine.

From Sanofi's perspective, Jean-Francois Toussaint, Sanofi’s global head of vaccine R&D, emphasized the value of a single dose targeting both COVID-19 and influenza. Currently, Sanofi has three candidate mRNA vaccines in clinical trials targeting RSV, influenza, and a combination of the two. Toussaint stated: "Given that hospitalization rates for flu and COVID-19 are now closely linked, we have an opportunity to develop a non-mRNA flu-COVID-19 combination vaccine, offering patients enhanced convenience and protection against two serious respiratory viruses."

Currently, two of Sanofi's quadrivalent influenza vaccines have been launched, but it has not yet disclosed which vaccine will be combined with Novavax's recombinant protein vaccine or any timeline related to the development. It is reported that Sanofi is expected to conduct Phase I/II clinical studies on the combination vaccine before Phase III clinical trials to obtain safety and immunogenicity data, with clinical endpoints yet to be determined.

For Novavax, the company reported revenue of $984 million in 2023, and this collaboration allows it to refocus on R&D and pipeline expansion. According to the earnings update released on Friday, Novavax had $496 million in cash, cash equivalents, and restricted cash as of the end of the first quarter of 2024.