Dive Brief:
- Novavax will pay as much as $475 million to settle a dispute with Gavi, the Vaccine Alliance over an advance purchase agreement for COVID-19 vaccines.
- The Gaithersburg, Maryland-based biotech paid Gavi $75 million upfront and is on the hook for an additional $80 million a year for five years, according to the deal announced Thursday. Gavi can opt instead to receive as much as $80 million worth of vaccines each year and – if demand warrants – tap into an additional $225 million vaccine credit.
- The total value of the settlement could reach $700 million, equal to Gavi’s prepayments under the advance purchase agreement originally signed in May 2021. Novavax terminated the deal in late 2022, saying Gavi had failed to buy 350 million doses as required and the payments were nonrefundable. Gavi, in turn, accused Novavax of breaching the pact.
Dive Insight:
The deal offers an immediate cash infusion for Gavi, which is dedicated to bringing vaccines to lower-income countries. And it frees Novavax from a potentially devastating one-time payment that might have been ordered in arbitration. “The liability has been a black cloud over their balance sheet,” Jefferies analyst Roger Song said of Novavax in a note to investors.
Still, the payments may be a tall order for the company, which has been struggling after numerous delays bringing its COVID-19 vaccine to market. Novavax had originally planned to start supplying Gavi with vaccines in the third quarter of 2021, but didn’t win U.S. clearance until July 2022. By that time, demand had started drying up.
Last May, the company announced it would cut its workforce by 25% and reduce operational and research spending. Then in January, Novavax told investors it would lay off another 12% of its workers. Now, the company is focused on scaling up global demand for its COVID-19 booster shots, touting approvals in each country.
Under the terms of the deal with Gavi, Novavax will be able to set the price for vaccines under the settlement credits, though the company said the cost would be “consistent with its shared goal with Gavi to provide equitable access.” Novavax also gave Gavi a security interest in accounts receivable from the Serum Institute of India.