Early in the pandemic, Novavax made a fast start in the race to develop a COVID-19 vaccine. But the Maryland-based company quickly fell behind as it hit manufacturing challenges and clinical trial delays.
While its protein-based shot eventually won regulatory clearance, the OK came more than a year and a half after rival vaccines. Sales have been slow since, even despite a pitch that it’s easier to distribute and has a competitive safety profile.
Shares have lost nearly all their value from pandemic highs, inviting outside pressure over the company’s direction.
Shah Capital, which owns 7.5% of Novavax’s common stock, published a letter last month calling for a leadership “shakeup” at the company. The investor pointed to what it described as “colossal market failures, a non-existent partnership strategy, no clear understanding of technology, questionable regulatory management and ongoing operating losses and inefficiencies.”
Shah has pitched two candidates for the company’s board and, on Monday, urged shareholders to vote against Novavax’s slate of director nominees at an upcoming annual meeting on June 13.
It's not the first time the investor has criticized the company’s performance. “We wrote our first letter in 2023 because they were spending money like drunken sailors,” Himanshu Shah, Shah’s founder, president and chief investment officer, said in an interview. “So we asked them to be more efficient with how they’re spending their money.”
Although COVID infection patterns are now closer to those for the flu, Novavax hasn’t capitalized on the push for yearly boosters, Shah said. In particular, he noted how Novavax hasn’t gotten traction at retail pharmacies, where more than 95% of Americans received seasonal shots last year.
“The company has really mucked up the marketing,” Shah said. “People don’t even know they exist.”
The long-term play
Novavax has pitched its vaccine, called Nuvaxovid, as an alternative for people hesitant about the messenger RNA technology used in Pfizer’s and Moderna’s COVID shots. The company has also highlighted how Nuvaxovid is easier to distribute in hard-to-reach places of the world.
Those advantages haven’t yielded market gains, however. Early last year, Novavax CEO John Jacobs described the “uncertainty” surrounding the company’s future on an earnings call, triggering concerns it could face bankruptcy. To stay afloat, the company laid off 30% of its workforce and cut $500 million from R&D and other operating expenses. It recently reached a settlement with the vaccine group Gavi to clear what one analyst called a “black cloud” over the company’s balance sheet.
Once again, Novavax is betting its future on the potential of its “Matrix-M” vaccine platform, which uses an adjuvant derived from Chilean soapbark trees, as it studies a combination COVID and flu vaccine that it hopes could arrive on the market in 2026.
“They’ve done a phenomenal job getting through the woods,” Mayank Mamtani, managing director and group head of healthcare at B. Riley Securities, said. “They are doing everything you’d expect a company to do when the market comes for you, like COVID did, and then dissipates quickly.”
Although Shah’s recent letter “add[ed] to the pressure” Novavax is already under, Mamtani said it didn’t raise new complaints. Still, he called Shah’s concerns “reasonable” and noted it’s a reminder Novavax needs to move “faster” to reassure investors and employees.
“Novavax is going back to its roots — focusing on its platform and developing a COVID/flu combo, which I think will be interesting and hopefully on time,” Mamtani said.
The company’s only other candidate, a malaria vaccine developed by University of Oxford and Serum Institute of India using Novavax’s Matrix-M platform, posted positive Phase 3 results earlier this year and has been recommended by the World Health Organization.
Otherwise, the company has no other publicly disclosed R&D programs, which Shah has criticized. He argues Novavax should expand its research into other infectious diseases.
But Mamtani cautioned that vaccine development is a “multi-year effort” and that even if Novavax pursues an ideal target like RSV, it could face challenges.
“RSV is logical, but it’s also a competitive space now. So they have to pick their battles with trials and clinical development,” Mamtani said.
A takeover target?
In an emailed statement, Novavax said the company is confident that advancing protein-based vaccines with its platform will be the right move to “drive long-term sustainable growth.”
While Shah said he’s optimistic about the promise of Novavax’s platform and estimated it’s “worth serious money,” he also believes the technology would be “in better hands” with a more established vaccine player.
“The science is great. It works,” Shah said. “[But] maybe someone like Sanofi or Pfizer should just buy this company.”
With interest in COVID-related vaccine development dwindling, Mamtani said Novavax likely won’t be that attractive of takeover target. Instead, a new partnership might be more likely.
“Novavax is here to stay, but it’s going to be a painful journey to raise capital again and again,” he said. “It would be nice to have a partner to take some of the costs.”
In its last earnings call, Novavax forecast revenue would be flat this year, compared to 2023. The company also plans to switch from offering its COVID vaccine in a five-dose vial to a prefilled syringe.
Mamtani maintains that, despite its many struggles, Novavax still has an opportunity. “There is a business here that should be profitable,” he said. “Long term, this is absolutely an important company with the platform they have and the products they’re developing. You need more than mRNA.”