Novavax swings to profit as it preps new COVID jab launch

Just a few months after suggesting it may not survive to the end of 2023, Novavax has posted improved finances and a second-quarter profit, as it readies the launch of an updated COVID-19 vaccine in time for the autumn.

In an update to investors, chief executive John Jacobs said that the new version of its Nuvaxovid vaccine targeting the Omicron XBB.1.5 variant of COVID-19 has been filed in the US, with other regulatory applications coming soon, for what looks likely to be the only non-mRNA, protein-based option available to patients.

The FDA has selected XBB.1.5 as the monovalent strain of choice for the 2023-2024 COVID season.

The positive assessment came as Novavax recorded sales of $424 million in the second quarter from prior vaccine purchase agreements, accompanied by a surprise net profit of $58 million. Sales will be minimal in the third quarter, however, according to Jacobs, so all eyes will be on the FDA's verdict on the new shot and its subsequent rollout in the fourth quarter.

The profit provides a welcome top-up to Novavax's cash and receivables of around $900 million as of the end of June, as it tries to bring forwards other pipeline candidates – including seasonal influenza, combination influenza, and COVID shots – and develop partnerships for its Matrix-M vaccine adjuvant, already being used in a new malaria vaccine.

Its key pipeline candidate is the combination vaccine, said Jacob, as Novavax is now "keenly aware" that is the direction of travel in the category. Rivals like Moderna and BioNTech are already working on shots that combine COVID-19 with flu and other common respiratory pathogens, and Novavax said it expects to take its dual product into phase 2b next year.

The improved outlook for the company follows a somewhat less optimistic view of Novavax's state in its first-quarter update, when Jacobs was just a few months into the job, but the CEO said that, despite a major cost-cutting drive, the company still has a long way to go.

"While we are all excited about the progress we've achieved year-to-date […] I want to be clear that there is still significant execution risk for our business ahead of us," he told investors, adding that success will depend in part on "the emerging opportunity for COVID vaccination around the globe, as the pandemic enters an endemic phase."

The company's internal analyses predict that the US demand for COVID vaccines this autumn will range from 80 million to 100 million doses.

Meanwhile, Novavax also announced a new deal with South Korean drugmaker SK Bioscience, extending a previous contract that gave the latter rights to make and sell Nuvaxovid in its home market, as well as in some other countries in Southeast Asia.

Under the terms, SK is buying $85 million in Novavax stock, with a $65 million cash payment going in the other direction. One key consequence of the agreement – which switches the relationship from a contract manufacturer arrangement to a strategic business partnership – is that it removes $195 million in liabilities from Novavax's balance sheet, said Jacobs.