Novavax Wins Flu Vaccine Deal in Spain; Shares Surge

By Jonathan Starkey
Washington Post Staff Writer
Wednesday, July 1, 2009

Shares of the Rockville-based vaccine maker Novavax surged more than 30 percent yesterday on news that the Spanish government plans to use its technology to protect people from the flu.

Through a Spanish Ministry of Health program, Novavax will receive at least $35 million to develop pandemic and seasonal flu vaccines and seek regulatory approval in Europe, said Novavax chief executive Rahul Singhvi. The company is already testing a seasonal flu vaccine on people to determine dosage, and a swine flu vaccine will be in human trials by later this year, Singhvi said.

The company will develop the vaccines with the Spanish drugmaker Rovi Pharmaceuticals, which would have exclusive rights to sell them in Spain and Portugal. Terms of the agreement are still being negotiated.

Novavax will collect royalties on Rovi's sales of the products.

"The real value is in the development dollars that are going to be coming available," Singhvi said. He said the deal gives the company a clear path toward marketing its products. "For a biotech company, that's truly transformational."

Novavax said Rovi will buy $3 million worth of its stock at $2.74 a share. Novavax shares closed up 78 cents yesterday, at $3.28.

The agreement was good news for Novavax, which posted an $8.3 million loss in the first quarter as revenue fell 95 percent. The company said in May that it had enough capital to carry out its business plan for 12 months.

"It alleviates the need to raise 40 to 50 million dollars on their own," Elemer Piros, an analyst at Rodman & Renshaw, said of the deal.

Unusually, analysts said, Novavax will retain rights to market the vaccines in countries other than Spain and Portugal, including the United States. Normally under such deals, the pharmaceutical company would seek worldwide rights.

"Normally, you would get a greater upfront payment, and then the company that conducts the trials will basically have full rights and just give a royalty," said Brian Abrahams, an analyst at Oppenheimer who follows Novavax.

The companies hope to seek European approval in 2012.

"The Spanish government thinks that in the future, whether we're dealing with seasonal flu, bird flu, swine flu, they will protect their people based on Novavax technology," Piros said.

Traditionally, to create flu vaccines, drugmakers grow live virus strains in chicken eggs, which act as incubators. The virus is later killed and bottled into a vaccine.

Novavax uses particles that mimic the virus but lack the genetic material. After identifying a pandemic strain, the technology allows Novavax to produce a vaccine in half the time it takes to make an egg-based vaccine.

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