Activist hedge fund seeks big shake-up at Novavax

Shah Capital has fired a broadside at the management team of Novavax, seeking a change in leadership at the vaccine company and the appointment of two handpicked directors to the board.

In an open letter, the hedge fund accuses Novavax’s leadership of squandering its “many significant competitive advantages and sizeable market opportunity” due to “self-inflicted problems” under the current team led by chief executive John Jacobs.

The bid by Shah Capital – which owns 6.7% of Novavax and is one of its top five shareholders – comes as the company has seen its share price come under massive pressure since the midst of the COVID-19 pandemic, when its shares were trading above $290 and it had a valuation of more than $40 billion.

Now, its shares are trading a little over $4 with a valuation of $600 million, and Shah Capital says that is a consequence of “reactive leadership and outdated and old-fashioned marketing,” particularly with regard to its COVID-19 vaccine Nuvaxovid/Covovax.

The hedge fund says Novavax should be targeting its vaccine at the over-60s age bracket using a direct-to-consumer (DTC) strategy that highlights it is based on traditional protein-based vaccination technology, tapping into a group that may be nervous about getting vaccinated with mRNA jabs from Pfizer/BioNTech and Moderna.

Novavax’s sales of only around 200,000 vaccines in the autumn 2023 season was not due to a lack of demand, but a result of poor marketing, along with rollout issues and delays, it contends, claiming that Novavax could capture 50% of the US market this year with a different approach.

The company is not making enough of its Matrix-M vaccine adjuvant technology, which has inactive programmes in areas including influenza and respiratory syncytial virus (RSV) that should be restarted with the help of external funding, calling its partnership strategy “non-existent”, according to the letter.

Shah Capital’s nominations for the board are Suresh Katta, founder of clinical analytics company Saama, and Venkat Peri, chief executive of artificial intelligence and computational sciences specialist Quantiva Health.

“We are confident that the appointment of these two highly experienced individuals to the board will be a crucial first step to moving beyond what has been an ineffective and old-fashioned strategic approach in favour of one that can finally begin maximising value for Novavax’s shareholders,” says Shah Capital.

Novavax achieved revenues of $1 billion last year, including $291 million in the fourth quarter, and is looking ahead to phase 3 results for a combination COVID-19/flu combination vaccine in the second half of this year, with a launch slated for 2026. It is expecting revenues of $800 million to $1 billion this year.

The company offered this statement to pharmaphorum: “The board of directors and management team of Novavax are committed to creating long-term value for stakeholders and improving global public health by advancing protein-based vaccines with our Matrix-M adjuvant. We are confident that the actions we are taking are the right ones to drive long-term sustainable growth and create value for all our stakeholders. We welcome the perspectives of our shareholders and value their input on our strategy.”