Gaithersburg’s Novavax Terminates Supply Agreement With Manufacturing Partner; May Have to Pay as Much as $185 Million

Gaithersburg-based Novavax’s Covid-19 vaccine was approved a few months back, but is not receiving the demand the company expected, according to a report from FiercePharma. Due to the low demand for the vaccine, which has been approved for first and second doses, but not as a booster, Novavax is terminating its supply agreement with manufacturing partner Fujifilm Diosynth Biotechnologies. Novavax may have to pay early termination fees up to $185 million. According to BizJournals, “The Gaithersburg company said in a Securities and Exchange Commission filing Thursday that the contract, which dates to June 2020, was terminated on Sept. 30. Under an agreement struck in August 2021, Fujifilm was to continue manufacturing the antigen component of Novavax’s Covid-19 vaccine through 2025, according to SEC filings.”

The security filing can be seen here: “On September 30, 2022, Novavax, Inc. (the “Company”), FUJIFILM Diosynth Biotechnologies UK Limited (“FDBK”), FUJIFILM Diosynth Biotechnologies Texas, LLC (“FDBT”) and FUJIFILM Diosynth Biotechnologies USA, Inc. (“FDBU” and together with FDBK and FDBT, “Fujifilm”) entered into a Confidential Settlement Agreement and Release (the “Settlement Agreement”) regarding amounts due to Fujifilm in connection with the termination of manufacturing activity at FDBT under the Commercial Supply Agreement (the “CSA”) dated August 20, 2021 and Master Services Agreement dated June 30, 2020 and associated statements of work (the “MSA”) by and between the Company and Fujifilm.

Pursuant to the Settlement Agreement, the Company is responsible for payment of up to $185 million (the “Settlement Payment”) to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the CSA, of which (i) $47.8 million, constituting the initial reservation fee under the CSA, was credited against the Settlement Payment on September 30, 2022 and (ii) the remaining balance is to be paid in four equal quarterly installments of $34.3 million each beginning March 31, 2023. Under the Settlement Agreement, Fujifilm is required to use commercially reasonable efforts to mitigate the losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT under the CSA, and the final two quarterly installments will be mitigated by any replacement revenue achieved by Fujifilm between July 1, 2023 and December 31, 2023.”