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Shah Capital Pushes Novavax for Board Revamp, New Sales Plan

Hedge Fund Shah Capital, owning 6.7% of Novavax, demands board changes and strategic sales pivot as stock falls 99%.

By Alex P. Chase

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4/15, 00:15 EDT
Moderna, Inc.
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Key Takeaway

  • Shah Capital, owning 6.7% of Novavax, demands board changes and a sales strategy pivot amid the company's 99% stock decline.
  • Proposed strategic shift targets older demographics with Novavax's protein-based vaccine, contrasting with mRNA vaccine concerns.
  • Despite a $300 million marketing spend, Novavax faces financial woes with only $25 million in US sales and initiates a $1.1 billion cost-cutting plan.

Shareholder Activism Emerges

A significant shareholder of Novavax, Shah Capital, has initiated a call for substantial changes within the company, highlighting the urgency for a board reshuffle and a strategic pivot in sales. The hedge fund, owning 6.7% of Novavax, expressed concerns over the company's performance and direction in a letter to the board. This move comes as Novavax's stock value plummeted by 99% from its peak during the pandemic, with its market value dwindling to $600 million from over $40 billion. Shah Capital's critique points to "self-inflicted" failures attributed to "reactive leadership and outdated marketing strategies," emphasizing the need for an "urgent shake-up."

Strategic Shifts Proposed

In the letter, Shah Capital outlined a two-pronged strategy aimed at revitalizing Novavax's fortunes. Firstly, it suggested the appointment of two new independent directors, Suresh Katta and Venkat Peri, to bring fresh perspectives and expertise to the board. Secondly, the hedge fund advocated for a reorientation of Novavax's sales strategy towards older demographics wary of mRNA vaccine side effects, leveraging the company's protein-based Covid-19 vaccine. This strategic shift is proposed against the backdrop of declining demand for Covid-19 vaccines and Novavax's late market entry, which significantly impacted its competitive stance and financial performance.

Financial and Operational Challenges

Novavax has faced a series of financial and operational hurdles, including a late market entry for its Covid-19 vaccine and a significant reduction in demand as governments pulled back from procurement deals. Despite a $300 million investment in sales and marketing, the company only generated approximately $25 million in net commercial US sales during the winter season. Shah Capital also highlighted the disparity in market valuation between Novavax and its competitors, such as Moderna, underscoring a lack of investor confidence and the impact of dilutive share issuance. In response to these challenges, Novavax has embarked on a $1.1 billion cost-cutting initiative, including workforce reductions, to avert bankruptcy.

Street Views

  • Himanshu Shah, Shah Capital (Bearish on Novavax's current strategy and board effectiveness):

    "Novavax’s failure to compete for market share among Covid-19 jabs as the disease has become endemic was 'self-inflicted' and resulted from 'reactive leadership and outdated and old-fashioned marketing'. Therefore, we are calling for an urgent shake up of the board."