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Novavax Is Missing Out on a Big Deal

By Brian Orelli, PhD and Keith Speights - Apr 17, 2021 at 9:26AM

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The European Union could bolster the biotech's coronavirus revenue.

Novavax (NVAX 11.12%) hasn't set up a supply agreement for its coronavirus vaccine with the EU. In this video from Motley Fool Live, recorded on March 29, Fool.com contributors Brian Orelli and Keith Speights discuss what might be taking so long and why this is truly a bid deal for Novavax.

Brian Orelli: Moving on to Novavax, according to Reuters, the company is having some issues sourcing raw materials for its COVID-19 vaccine, which is causing it to delay setting up supply agreements with the European Union. There's potentially 200 million doses on the line. Is this a big deal for Novavax?

Keith Speights: Yeah, from a financial standpoint. It's literally a big deal for Novavax. So far the company has secured supply agreements that total around 300 million doses. If they got this European Union agreement for 200 million doses, that would boost their total commitment by 67%, by two-thirds. It would be worth several billion dollars to the company obviously, depending on what price tag they finally would agree on. So this is a big deal for Novavax from a financial standpoint in terms of just securing this agreement with European Union.

But I don't think it's anything to worry about for investors, though. Because I think the main thing for investors to focus on with this Reuters report is that Novavax seems to be slowing down the process of signing the agreement to some degree because of some raw material concerns, but it looks like both sides really want this deal to happen. I think it's just a matter of timing here.

You and I have talked about some of these raw material shortage issues in the past. It's not really a surprise that Novavax could be running into some of these issues. I think in early March, you and I discussed the CEO of the Serum Institute of India warning that US export restrictions on raw materials for vaccines could negatively impact Novavax particularly, he singled out Novavax. This is not a surprise whatsoever.

But I think it would be a more serious issue if Novavax was maybe running into issues with its core components of its vaccine if it had shortages of let's say, its Matrix-M adjuvant or things like that. I think if these raw material shortages relate to the core components of Novavax's vaccine, I think that might be a bigger concern.

This is speculation here just reading between the lines a little bit, it seems to be more of an issue about some other types of raw materials such as the filler, stoppers, vials, that type of thing. I would think Novavax is going to have an easier path to ultimately resolving those issues than it would if it were say, something with its components of its vaccine. I don't think this is going to be a big deal over the long run, but obviously, I think investors really want Novavax to get this deal in hand because it's going to be quite lucrative for the company regardless of what the final price tag is.

Orelli: It seems to me that, reading between the lines, there may be some back and forth on the price that the EU wants to pay and that Novavax wants to charge and maybe all this reporting to the press as not unnamed sources. That sort of thing is basically the two sides just vying against each other to try to get one to eventually reach an agreement on a price.

Speights: That could very well be the case Brian or it could be the facts are that Novavax has some concerns about being able to meet the commitment levels until it knows it can get his hands on the raw materials and it wants to make sure that it has secured those raw materials before it commits to providing 200 million doses. Who knows? But I do think we'll see a deal finalized at some point within the next month or so. I would think.

Orelli: Yeah. The approval is going to come pretty soon here.

Speights: Right.

Orelli: Better sooner than later.

Speights: Yeah, like I said, both sides want this to happen. So I think it will happen.

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