As the impact of the public health incident subsided, global COVID-19 vaccine sales declined sharply, and COVID-19 vaccine dividends also declined sharply. The results of the global vaccine sector in 2023 continued the sharp decline in 2022.

The Zhitong Finance App observed that of the 12 listed companies in the A-share vaccine sector, 9 experienced a decline in net profit; while in the US stock market, Moderna (MRNA.US), one of the top three mRNA vaccine giants, fell 64.45% year on year in 2023, BioNTech (BNTX.US) revenue fell 77.94% year on year during the same period, and Novavax (NVAX.US) revenue fell 50% year on year.

Judging from industry trends at home and abroad, the COVID-19 vaccine is clearly already “tomorrow's future,” but what the market did not expect was that Sanofi (SNY.US), which only revealed a restructured vaccine business in April of this year and laid off employees, chose to spend 1.27 billion US dollars on a high-profile introduction of the COVID-19 vaccine Nuvaxovid from Novavax at this point in time.

Moreover, regardless of the impact of introducing this product on Sanofi, it is definitely a “blessing in disguise” for Novavax, which is clearly reflected in its stock price. After the disclosure of this transaction, as a vaccine company that once fell into “business difficulties” after the COVID-19 vaccine popularity subsided, Novavax's stock price rose nearly 50% as of May 14, with a cumulative increase of nearly 200% over the two trading days since last Friday.

It's easy to see that the market was surprised by Novavax's dramatic turning point and bought it with real money in the secondary market to be optimistic. However, for Sanofi, which is moving against the trend, the share price increase was only 3.1% during the same period, even driven by such market popularity. The difference in share price increases between the parties to the transaction is sufficient to reflect the investors' warm and warm attitude towards this transaction.

When Bloody Business Meets “Pies Fall from the Sky”

According to the agreement, in this partnership, Sanofi will first pay an advance payment of 500 million US dollars to Novavax, and at the same time make an equity investment of 70 million US dollars in Novavax, accounting for 4.9% of the shares.

Then there was an agreement reflecting the purpose of Sanofi's cooperation: the COVID-19 vaccine set a milestone amount of 350 million US dollars, the COVID-influenza combination vaccine set a milestone amount of 350 million US dollars, and the total amount of the agreement was 1.27 billion US dollars. Additionally, Sanofi has obtained a non-exclusive license for Matrix-M adjuvants, and Novavax will receive a milestone amount of up to $200 million, as well as a mid-single digit sales share.

Taking last year's Q1 earnings report as an example, Novavax had a net loss of US$294 million in the Q1 quarter of 2023. The company's total revenue for the period was only US$81 million, down about 88% from US$704 million in the same period in 2022. Additionally, as of the end of the 2023Q1 quarter, Novavax held a total of US$637 million in cash, cash equivalents and restricted cash, a sharp drop of more than half compared to US$1.3 billion at the end of 2022. Amidst such dismal results, Novavax announced in its 2023 Q1 earnings report that due to the shrinking COVID-19 market, the company will lay off about 25% of its global workforce.

According to its 2023 financial report disclosed on February 28 this year, Novavax's revenue for the full year of 2023 was US$984 million, down 50% from the previous year. R&D expenses were US$738 million, and net losses amounted to US$545 million. As of December 31, 2023, the company's cash, cash equivalents, and restricted cash totaled US$584 million.

As can be seen, Novavax has been in a bloody state of operation in 2023. Against this background, Sanofi sent a large order of 1.27 billion US dollars, and the down payment of 500 million US dollars and the equity investment of 70 million US dollars were paid in the second quarter of this year, which is almost equivalent to “instant payment”, which is undoubtedly a “pie falling from the sky.”

Judging from the details of the agreement, it is clearly Novavax's COVID-19 assets. Out of a total price of 350 million US dollars, it has determined specific milestone payment stages for various projects including the approval of the US prefilled vaccine supplementary marketing application, the transfer of marketing license for pre-filled injections in the EU, the locking of pediatric research databases, and the transfer of COVID-19 vaccine production technology, and has set a separate milestone payment of 350 million US dollars for subsequent COVID-19 drug combination product development.

Is it a strategic plan or a sudden medical treatment?

On “Vaccine Day” in June last year, Sanofi's revenue target for its vaccine sector was to double sales of vaccine products by 2030 to exceed 10 billion US dollars.

However, its traditional vaccine products all declined to varying degrees in 2023. For example, the influenza vaccine, the polio/haemophilus influenzae type b polyvaccine, and the meningitis vaccine generated 2,669 billion euros, 2,165 billion euros, and 1.17 billion euros, respectively, a year-on-year decrease of 5.5%, 0.1%, and 0.5%.

The acquisition of Novavax's COVID-19 assets may be aimed at opening up the next phase in the influenza-COVID-19 vaccine market, thereby reversing the decline in the overall vaccine sector.

Regarding this deal with Novavax, Sanofi executives said that admission rates for influenza and COVID-19 are now very close, and there is an opportunity to develop a non-mRNA influenza-COVID-19 combination vaccine to provide patients with protection against two severe respiratory viruses. “We are excited about the prospects of combining Novavax's adjuvant COVID-19 vaccine with Sanofi's rich differentiated influenza vaccine portfolio, which has shown good efficacy and tolerability, and has shown excellent protection against influenza and its serious complications.”

However, the market was baffled by Sanofi's choices. The Zhitong Finance App learned that at present, Novavax's COVID-19 vaccine has been approved for marketing. The follow-up pipeline is the COVID/influenza combination vaccine, and phase 3 clinical trials are about to begin. However, Sanofi did not choose Novavax's own influenza COVID-19 combination vaccine. Instead, they chose the route of combining the Novavax COVID-19 vaccine with its influenza vaccine. The intention to rush to market and seize the market is very obvious.

According to the Zhitong Finance App, there is still huge clinical demand for COVID-19, influenza, and RSV. Taking the US as an example, the COVID-19 vaccination rate for adults aged 18 and over has reached 17%, the influenza vaccination rate is over 40%, and the RSV vaccination rate for people aged 60 and over is over 18%. If joint seedlings succeed, their convenience will replace a large part of the market share of single seedlings.

In terms of market competition, both Pfizer and Modena are already ahead of Sanofi on the mRNA technology route. For example, in December of last year, Pfizer and BioNTech registered a phase III clinical trial of the COVID/influenza double mRNA vaccine; while Modena's COVID-influenza combination vaccine mRNA-1083 is currently in phase III clinical trials and is expected to release data in 2024 and obtain fast-track approval from the US FDA as soon as May 2025.

Seeing that the mRNA route is lagging behind its competitors, Sanofi wants to overtake the recombinant protein vaccine route. However, Sanofi currently has three candidate mRNA vaccines, and it has not been revealed which vaccine will be used in combination with Nuvaxovid's recombinant protein vaccine. Judging from the progress, it may even lag behind Novavax's own influenza-COVID-19 vaccine. It is very difficult to compete with Pfizer and Modena in the US market.

But that doesn't mean that Sanofi products are useless in the future. Although competition for the influenza-COVID-19 combination vaccine is fierce in the US market, this does not seem to be the case in the Chinese market.

According to the Zhitong Finance App, there are currently few varieties marketed domestically, and the competitive pattern is ideal. Currently, the multiplex vaccine varieties approved for marketing in China (with the exception of immunization planning vaccines such as mumps and measles) include Sanofi Pasteur's Baibai-IPV-Hib quintuplex vaccine and Kangtai Biotech's Baibai-HiB quadruple vaccine. Zhifei Biotech's AC-HiB triple vaccine has been affected by re-registration. There are no products on the market. At present, the competitive pattern of the multi-vaccine category is ideal, and there are no influenza-COVID-19 vaccines that have achieved in-depth layout, and the long-term development trend is relatively good.

But for this untapped market, Wall Street doesn't seem to think Sanofi has the potential to monetize it in a short time. On May 14, after six consecutive increases in stock prices, Sanofi's stock price closed down 1.41%. Whether it will be able to go one step further is unknown.