Activist investor urges changes to Novavax board

Shah Capital has stepped up its campaign for change at vaccine producer Novavax, lobbying against the re-election of three directors and executive pay packages in a letter to fellow stockholders.

The hedge fund says it wants to send a “strong and clear message” to the board at Novavax, reiterating the claim – first made a few weeks ago – that the company is “being hindered by an overly conservative board and management that clings to failed strategies.”

It adds that it has lost faith that the current directors of the company are able to adapt to market pressures and has filed a proxy statement to block the re-election of all three directors who are up for re-election at Novavax’s annual general meeting, scheduled for 13th June; namely, Richard Douglas, Margaret McGlynn, and David Mott.

Shah Capital is among the top three investors in Novavax, with a 7.5% stake that has swelled from 6.7% when it first launched its campaign against the company’s leadership last month. It had vowed to put forward its own candidates to join the board, but was unable to fulfil the criteria to do so in time, according to a Reuters report.

Its criticism comes as Novavax has struggled to make headway with its protein-based COVID-19 vaccine Nuvaxovid/Covovax, which was delayed on its way to market and missed out on the bonanza that drove multibillion-dollar sales of mRNA shots from Pfizer/BioNTech and Moderna.

With a steep decline in the COVID-19 vaccine market following the end of the pandemic, Shah Capital has said Novavax should now 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.

It also claims that Novavax 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.

“We strongly believe in the value of Novavax’s deep [intellectual property] portfolio and Matrix-M adjuvant platform and that there is a vast and currently untapped market for non-mRNA protein vaccines,” says the new letter.

“We have offered several suggestions to the board aimed at addressing Novavax’s apparently self-inflicted problems, which we believe have significantly undermined its growth and success,” it continues. “The board regrettably has been unresponsive to our suggestions.”

It is also urging shareholders to vote against the “generous” compensation packages for its executive management, led by chief executive John Jacobs and the company directors, pointing to a massive reduction in the value of the company in the last couple of years, and is calling for “efficient and effective spending” to achieve operational profitability.

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 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.

Founder Himanshu Shah told Reuters that the company may be better off if taken over by a larger pharma group.

Novavax sent us the following statement to respond to Shah’s letter:

“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 have the potential to drive long-term sustainable growth and create value. We welcome the perspectives of our shareholders and value their input on our strategy.

“We believe we have the right board in place to oversee Novavax’s strategy and the management team’s execution on our priorities. Our directors have extensive and deep subject matter expertise in our sector and in specialised fields most relevant to Novavax. To ensure the appropriate expertise is represented, board assessments and refreshment occur regularly, evidenced by the addition of five new, highly qualified independent directors since 2020.”