Shah Capital, the second-largest shareholder in Novavax with a 7.2% stake, has called on the biotech company's board to pursue a sale, citing persistent underperformance and marketing failures that have plagued its COVID-19 vaccine rollout for three consecutive years.
In a letter shared exclusively with Reuters, the activist investor argued that Novavax's vaccine platform capabilities would have "far greater potential in the hands of a large capable pharma entity." The hedge fund's founder and chief investment officer, Himanshu Shah, believes the company could achieve a valuation of "at least $5 billion" based on the commercial potential of its vaccines, significantly higher than its current market valuation of approximately $1.35 billion.
Marketing Missteps Drive Poor Performance
The criticism centers on what Shah Capital describes as "a litany of missteps" that have severely limited the commercial success of Nuvaxovid, Novavax's protein-based COVID-19 vaccine. Despite being positioned as a scientifically superior alternative to mRNA vaccines, the shot captured only 2% of market share in the most recent season.
"The problem has been the sales," Shah told Reuters, highlighting the stark disparity in vaccine distribution. As of October 2, 2024, Novavax had distributed approximately 7,000 shots of Nuvaxovid, while mRNA competitors Pfizer and Moderna had rolled out nearly 6 million doses combined.
The investor attributes this poor performance to critical marketing missteps, missed FDA approval timelines, and quality issues that resulted in inadequate shelf-life for the 2024 COVID-19 season. Shah Capital finds it "unfathomable why Nuvaxovid's market share once again is non-existent given the scientific superiority and positive regulatory tailwinds."
Regulatory Environment Creates Opportunity
The activist investor points to changing regulatory attitudes toward mRNA vaccines as a missed opportunity for Novavax. Under HHS Secretary Robert F. Kennedy Jr., a long-time vaccine skeptic who has raised concerns about mRNA vaccine efficacy, the regulatory system has been moving to discourage the use of mRNA-based COVID-19 shots.
Shah Capital notes that multiple states, including Florida, Texas, Minnesota, Idaho, Iowa, Montana, South Carolina, Tennessee, and Kentucky, are becoming increasingly averse to mRNA vaccines, with some attempting to ban them altogether. The investor finds it "inconceivable" that management has failed to gain meaningful market share given the tens of millions of senior citizens, high-risk, and immunocompromised individuals in these nine states alone.
Novavax's protein-based vaccine received FDA approval in May 2024, but its use was limited to older adults and at-risk individuals over age 12, potentially constraining its market reach.
Potential Acquisition Targets
Shah identified several major pharmaceutical companies as potential buyers for Novavax, including Sanofi, Merck, GSK, and AstraZeneca, though he noted that he has not been in direct contact with any of these drugmakers. The investor believes these larger entities would be better positioned to capitalize on Novavax's vaccine platform and overcome the marketing and distribution challenges that have hampered the company's performance.
History of Activist Pressure
This marks Shah Capital's second major attempt to drive change at Novavax. Last year, the fund withdrew a campaign against the re-election of three directors after the company struck a licensing deal with Sanofi. However, the latest letter represents an escalation in rhetoric, with the investor now calling for an outright sale rather than governance changes.
The activist investor has previously criticized Novavax for being held back by "an overly conservative board and management that clings to failed strategies" and has advocated for the company to target its vaccine at the over-60s age bracket using a direct-to-consumer strategy.
Novavax had not responded to Shah Capital's latest allegations at the time of reporting.
