Novavax, a prominent Covid vaccine manufacturer, has announced that it will settle a bitter arbitration dispute with Gavi, a global vaccine organization. The dispute arose over a canceled Covid vaccine purchase agreement, and Novavax could potentially pay up to $475 million to Gavi as part of the settlement. However, the total amount may be less if Gavi decides to order more shots from Novavax in the next five years.
This settlement comes as a relief for Novavax, as it eliminates one of the biggest uncertainties surrounding the company. In recent years, Novavax has faced significant challenges, including a decline in demand for Covid products and doubts about its ability to remain in business. These challenges have had a negative impact on the company’s stock price, with shares falling more than 50% in 2023 and a further 17% in 2024.
The dispute between Novavax and Gavi began in 2022 when Novavax terminated a purchase agreement with the Geneva-based organization. The company cited Gavi’s failure to procure the agreed-upon 350 million vaccine doses on behalf of the COVAX Facility, a program aimed at distributing vaccines more equitably in lower-income countries. Gavi sought a refund for the $700 million it had already paid in advance for Novavax’s shots, but Novavax argued that these payments were non-refundable.
Under the terms of the settlement, Novavax has made an initial payment of $75 million to Gavi and will make deferred payments of $80 million each year until the end of 2028. These annual payments will be due in quarterly installments. However, Novavax’s payments can be offset by an annual $80 million “vaccine credit” option. This means that if Gavi decides to order shots worth $50 million from Novavax in a given year, the company would only have to pay $30 million to Gavi.
In addition to the payments, Novavax is also offering a vaccine credit of up to $225 million that Gavi can use to order additional vaccine doses throughout the five-year settlement window. This provision is in place to accommodate any additional demand that may arise.
The terms of the settlement are seen as positive for Novavax’s business. Analysts had expressed concerns that if the arbitration forced Novavax to pay the full $700 million to Gavi in 2023, it could have severe implications for the company. However, this settlement provides some stability and allows Novavax to focus on its core goals, including providing access to Covid-19 vaccines for vulnerable populations in lower-income countries.
Gavi CEO David Marlow expressed his satisfaction with the agreement, stating that it allows Gavi to maintain its programmatic goals and ensure access to vaccines for those who need them the most.
Overall, the resolution of the dispute between Novavax and Gavi marks a significant step forward for the company. With the uncertainty surrounding the arbitration now eliminated, Novavax can concentrate on regaining its footing in the Covid vaccine market and continuing its efforts to provide equitable access to vaccines worldwide.
