Novavax failed to capitalize on fears surrounding mRNA vaccines, activist investor says

By Louis Goss

Hedge fund Shah Capital on Monday called for an "urgent shake up" at the board of Novavax over claims its management has failed to capitalize on safety concerns surrounding mRNA vaccines to boost sales of its own non-mRNA COVID-19 vaccine.

In a letter seen by MarketWatch, the activist fund blamed the sharp drop in Novavax's sales on the U.S. vaccine-maker's management, as it called for an overhaul of the company's marketing strategy to target people who do not want to take mRNA vaccines.

MarketWatch has reached out to Novavax for comment.

Shah Capital said Novavax had failed to highlight seven scientific papers showing potential risks surrounding mRNA vaccines, as the fund which owns a 6.7% stake in Novavax accused the company of pursuing "traditional and outdated" marketing strategies.

The activist fund said Novavax (NVAX) now has the potential to boost sales to the around 100 million U.S. citizens who are averse to taking mRNA vaccines, by directly marketing its COVID vaccines to patients who live in Southern states in the U.S. and who are over 60.

"While there continues to be an elevated level of debate as to the root cause of these adverse mRNA reactions, a sizeable portion of our population has become afraid and is unfortunately making the decision to forego receiving a Covid vaccine," Shah Capital said.

Novavax first gained approval for its COVID-19 vaccine in the U.S. in July 2022, almost two years after Pfizer gained approval for its own mRNA vaccine in December 2020 at the peak of the pandemic.

Shah Capital, which was started by Himanshu H. Shah in 2005, blamed Novavax's "timid leadership" for a long-term decline in its share price, which has fallen 55% in the past 12 months, as it said the company's underperformance compared to rivals is "self-inflicted."

The hedge fund said Novavax had failed to properly manage its relationship with the U.S. Food and Drug Administration (FDA) and lagged in adopting new technologies, including artificial intelligence.

In calling for an overhaul, Shah Capital said Suresh Katta, founder and CEO of AI analytics firm Saama Technologies, and Venkat Peri, CEO of healthcare analytics firm Quantiva Health, should be given seats on Novavax's board to boost its use of technology.

-Louis Goss

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04-15-24 0639ET

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