As the impact of the public health event subsides, global COVID vaccine sales have fallen off a cliff, and the COVID vaccine dividend has also declined significantly. The performance of the global vaccine sector in 2023 will continue the tragic downward trend in 2022.
Zhitong Financial APP observed that among the 12 listed companies in the A-share vaccine sector, 9 saw a decline in net profit; In the U.S. stock market, Moderna (MRNA. US) in 2023 decreased by 64.45% year-on-year, and BioNtech (BNTX. US) revenue fell 77.94% year-on-year in the same period, and Novavax (NVAX. US) revenue fell 50% year-over-year.
Judging from the industry trends at home and abroad, the new crown vaccine is obviously a "yellow flower of tomorrow", but what the market did not expect is that Sanofi (SNY. US) chose to spend $1.27 billion at this point in time to introduce the new crown vaccine Nuvaxovid from Novavax.
Regardless of the impact of the introduction of this product on Sanofi, it is definitely a "send-off" for Novavax, which is evident from its stock price. After the disclosure of this transaction, Novavax's share price, as a vaccine company that once fell into "operational difficulties" after the new crown vaccine fever subsided, closed up nearly 50% of the U.S. stock market on May 14, and has risen nearly 200% in the two trading days since last Friday.
It is not difficult to see that the market was surprised by Novavax's dramatic turning point and bought it with real money in the secondary market. But for Sanofi, which is moving against the trend, even under such market heat, the stock price rose by only 3.1% in the same period. The difference in share price increases between the two sides of the transaction is enough to reflect the warm and cold attitude of investors towards this transaction.
When Bloody Business Meets "Pie in the Sky"
According to the agreement, Sanofi will initially make an upfront payment of US$500 million to Novavax and make an equity investment of US$70 million, or 4.9%, in Novavax.
Then there are the agreements that reflect the purpose of Sanofi's cooperation: $350 million milestones for COVID-19 vaccines and $350 million milestones for COVID-influenza vaccines, for a total of $1.27 billion. In addition, Sanofi has received a non-exclusive license to the Matrix-M adjuvant, and Novavax will receive up to $200 million in milestone amounts, as well as a mid-single-digit share of sales.
Taking last year's Q1 earnings report as an example, Novavax had a net loss of $294 million in the Q1 quarter of 2023. The company's total revenue for the current period was only $81 million, compared with $704 million in the same period in 2022, a decrease of about 88%. In addition, Novavax held cash, cash equivalents and restricted cash totaling $637 million at the end of Q1 2023, down more than half from $1.3 billion at the end of 2022. In the midst of such dismal results, Novavax announced in its Q1 2023 earnings report that the company will lay off about 25% of its global workforce due to the shrinking COVID market.
According to its 2023 financial report disclosed on February 28 this year, Novavax's full-year revenue in 2023 will be $984 million, a year-on-year decrease of 50%. R&D expenses were $738 million and net loss was $545 million. As of December 31, 2023, the Company's cash, cash equivalents and restricted cash totaled $584 million.
It can be seen that Novavax has been in a state of bleeding operation in 2023, and in this context, Sanofi sent a large order of 1.27 billion US dollars, of which 500 million US dollars in the down payment and 70 million US dollars in equity investment were paid in the second quarter of this year, which is almost equivalent to "instant arrival", which is undoubtedly "pie in the sky".
In terms of the specific content of the agreement, Sanofi is obviously interested in Novavax's new crown assets, and in the total price of 350 million US dollars, it has determined specific milestone payment stages for a number of projects, including the approval of the supplementary marketing application for the US pre-filled needle, the transfer of marketing authorization for the US pre-filled needle, the transfer of marketing authorization for the EU pre-filled needle, the locking of the pediatric research database and the transfer of the production technology of the new crown vaccine, and set a separate milestone payment of 350 million US dollars for the subsequent development of the new crown drug combination product.
Is it strategic planning or rushing to the doctor?
At Vaccine Day in June last year, Sanofi set a revenue target for its vaccine segment to double sales of vaccine products to more than $10 billion by 2030.
However, its traditional vaccine products will decline to varying degrees in 2023. For example, influenza vaccine, polio/pertussis/Haemophilus influenzae type b polycombination vaccine and meningitis vaccine revenue of 2.669 billion euros, 2.165 billion euros and 1.17 billion euros, respectively, down 5.5%, 0.1% and 0.5% year-on-year.
The acquisition of Novavax's new crown assets may be aimed at opening up the situation in the flu-new crown vaccine market in the next stage, thereby reversing the decline of the overall vaccine sector.
Commenting on the deal with Novavax, Sanofi executives said that influenza and COVID-19 hospital admissions are now very close, and there is an opportunity to develop a non-mRNA influenza-COVID combination vaccine to provide patients with protection against two severe respiratory viruses. "We are excited about the prospect of combining Novavax's adjuvanted COVID vaccine with Sanofi's rich and differentiated influenza vaccine portfolio, which has shown good efficacy and tolerability, and has shown superior protection against influenza and its serious complications."
However, the market is confused by Sanofi's choice. Zhitong Financial APP has learned that at present, Novavax's new crown vaccine has been approved for marketing, and the follow-up pipeline is the new crown/influenza combination vaccine, and the progress is about to start phase 3 clinical trials. However, Sanofi did not choose Novavax's own influenza vaccine. Instead, they chose the route of combining the Novavax new crown vaccine with its influenza vaccine, and the intention of rushing to market and grab the market is very obvious.
Taking the United States as an example, the vaccination rate of adults over 18 years old has reached 17%, the flu vaccination rate has exceeded 40%, and the RSV vaccination rate for the elderly over 60 years old has exceeded 18%. If successful, the convenience of the joint seedlings will replace a large part of the market share of the single seedlings.
In terms of market competition, both Pfizer and Moderna have been ahead of Sanofi in the mRNA technology route. For example, in December last year, Pfizer and BioNTech registered a phase III clinical trial of a dual mRNA vaccine for COVID/influenza; Moderna's COVID-influenza vaccine mRNA-1083 is currently in Phase III clinical trials, with data released in 2024 and fast-track approval from the U.S. FDA as soon as May 2025.
However, Sanofi now has three mRNA vaccine candidates, and has not yet revealed which vaccine will be used in combination with Nuvaxovid's recombinant protein vaccine.
But that doesn't mean Sanofi's products won't be useful in the future. While there is fierce competition for the flu-COVID vaccine in the U.S., this does not seem to be the case in the Chinese market.
According to Zhitong Financial APP, at present, there are fewer varieties of domestic seedlings on the market, and the competition pattern is ideal. At present, the multi-vaccine varieties approved for marketing in mainland China (except for those in the immunization program vaccines such as diphtheria, tetanus, and mumps) include Sanofi Pasteur's diphtheria-IPV-Hib quintuple vaccine and Kangtai Bio's diphtheria-Hib quadruple vaccine, Zhifei Bio's AC-Hib triple vaccine is affected by re-registration, and there is no product on the market for the time being.
But for this untapped market, Wall Street doesn't seem to see Sanofi with the potential to monetize it in the short term. On May 14, after the stock price rose for six consecutive days, Sanofi's stock price closed down 1.41%, and it is still unknown whether it can take another step in the future.