Novavax Surge Over 130% On $1.4 Bln Covid Shot Deal with Sanofi

BATS:NVAX   Novavax, Inc.
Novavax shares ( NVAX ) surged over 130% after a $1.4 billion deal with Sanofi was announced to commercialize its Covid vaccine and develop a new combination shot for protecting against the flu and Covid. The biotech firm announced a licensing agreement with Sanofi to sell Novavax’s Covid vaccine worldwide, with Sanofi paying Novavax $500 million upfront and future payments up to $700 million based on other milestones, in addition to royalties.

Sanofi will receive a sole license to develop and commercialize a combination flu and Covid vaccine containing Novavax’s Covid shot and Sanofi’s flu shot. Novavax ( NVAX ) is also entitled to launch and sales milestones of up to $200 million for any vaccine developed by Sanofi as part of the deal. The company expects to launch a late-stage trial of its own combination vaccine targeting Covid and the flu and a stand-alone flu shot later this year.

The licensing agreement will likely lift Novavax’s “going concern” warning issued last year, after the company said “substantial doubt exists” to continue operating. A significant uptick for Novavax ( NVAX ) shares follows yearslong financial woes for the biotech firm. The company cut its 2024 sales forecast in its first-quarter review, decreasing projections from between $800 million and $1 billion to $400 million to $600 million. Novavax ( NVAX ) also reported a first-quarter net loss of $148 million, compared with a net loss of $294 million during the same period last year.

As part of the deal, Sanofi is also taking a less than 5% equity stake in Novavax, and Novavax ( NVAX ) will receive royalty payments for future sales of its COVID-19 vaccine and the future combination COVID-19 and flu vaccine. The deal will allow Novavax to lift its “going concern” warning, which was issued in early 2023 over concerns that it may not be able to financially survive as demand for COVID-19 vaccines waned.

Alongside the Sanofi deal, Novavax ( NVAX ) also reported first-quarter results that missed analyst estimates. Novavax ( NVAX ) reported revenue for the first quarter of $93.9 million, shy of the $101.3 million analysts expected, and posted a loss of $147.6 million, or $1.05 per share, wider than the loss of $127.4 million, or 90 cents per share, that analysts projected.

For the full fiscal year, Novavax ( NVAX ) lowered its projected revenue to $400 million to $600 million, down from the previous range of $800 million to $1 billion. However, the estimated $570 million the company expects to receive from Sanofi this year pushed its combined revenue and payments projections higher, to $970 million to $1.17 billion.

Technical Outlook
Novavax ( NVAX ) is up 98% as of the time of writing, trading above the 200-day Moving Average (MA). The stock has a Relative Strength Index (RSI) of 86.66 which is clearly in an overbought territory. The daily price charts depict an upside or upward gap that occurred as a result of the impending deal.

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