On Thursday, shares of Novavax saw a significant rise of over 20% following the announcement of an agreement to settle a contentious arbitration dispute with Gavi, the Vaccine Alliance, regarding a canceled Covid vaccine purchase agreement. This settlement potentially involves Novavax compensating up to $475 million, although the figure could decrease if Gavi opts to purchase additional vaccines from Novavax within the next five years.

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Settlement Details and Financial Implications

Despite the financial burden, the settlement is seen as a positive development for Novavax, alleviating one of the major uncertainties facing the company amidst global declining demand for Covid vaccines and its own financial challenges. Initially, Novavax and Gavi’s dispute stemmed from a terminated purchase agreement, with Gavi seeking a refund of $700 million in advance payments—a claim Novavax contested as nonrefundable.

As part of the resolution, Novavax has agreed to an initial payment of $75 million to Gavi, followed by deferred annual payments of $80 million through 2028, subject to quarterly installments. However, these payments may be offset by a unique “vaccine credit” provision, allowing Gavi to procure Novavax vaccines at a credited rate for lower-income countries.

Future Prospects and Industry Impact

This settlement opens avenues for Novavax to stabilize its business and continue its contributions to global health, especially in providing Covid-19 vaccines to vulnerable populations in lower-income countries. Gavi’s acceptance of this agreement underscores a continued partnership aimed at combating the pandemic worldwide.