Novavax to settle dispute over canceled Covid vaccine purchase agreement

A health worker prepares a dose of the Novavax vaccine as the Dutch Health Service Organization starts with the Novavax vaccination program on March 21, 2022 in The Hague, Netherlands.

Patrick Van Katwijk | Getty Images

Novavax on Thursday said it will settle a bitter arbitration dispute with Gavi, a nongovernmental global vaccine organization, over a canceled Covid vaccine purchase agreement. 

Novavax could pay up to $475 million to the organization, but the total amount may be less if Gavi decides to order more shots from the cash-strapped company over the next five years.

Still, the settlement eliminates what some analysts considered one of the biggest uncertainties around the Covid shot maker, which is cutting costs amid doubts about its ability to remain in business and plummeting demand for Covid products worldwide.

Shares of Novavax fell more than 50% last year and are down 17% in 2024, putting the company’s market value at roughly $470 million. 

In 2022, Novavax terminated a purchase agreement with Geneva-based Gavi. The company cited Gavi’s failure to procure the 350 million vaccine doses it agreed to buy in May 2021 on behalf of the COVAX Facility, a global program that aims to distribute Covid vaccines more equitably in lower-income countries.   

Gavi sought a refund for the $700 million it spent on advance payments for Novavax’s shots. Novavax has said those payments were nonrefundable. 

Under the settlement, Novavax has paid an initial $75 million to Gavi and will make deferred payments of $80 million each year through Dec. 31, 2028. Those annual payments would be due in quarterly installments. 

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But Novavax’s payments could be offset by an annual $80 million “vaccine credit” option under the settlement, which Gavi can use to order any of the company’s Gavi-funded shots for low and lower-middle income countries.

For example, if Gavi decides to order $50 million worth of shots from Novavax in 2025, the company would only have to pay the organization $30 million that year. 

Novavax said it 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 “should there be additional demand.” 

The terms of the settlement could bode well for Novavax’s business. Analysts had previously told CNBC that Novavax could “be in trouble” if the arbitration forced it to pay the full $700 million to Gavi in 2023. 

“Gavi welcomes this agreement, which allows us to maintain focus on our core programmatic goals, including providing access to COVID-19 vaccines for vulnerable people in lower income countries,” Gavi CEO David Marlow said in a release Thursday. 

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