Dynavax is paying $30 million upfront for global rights to Vaxart’s investigational oral COVID-19 vaccine, positioning the biotech to see phase 2b data before placing a bigger bet on the program.
The program made the headlines this year because of the U.S. government’s on-again, off-again support for the phase 2b trial. The U.S. Biomedical Advanced Research and Development Authority is funding the trial. In February, the U.S. Department of Health and Human Services told Vaxart to stop work on the study. While the stop work order was lifted in April, Vaxart was again told to down tools in August.
Dynavax has spotted an opportunity amid the upheaval, bagging rights to the oral COVID-19 vaccine for $25 million upfront and a $5 million investment in Vaxart. While the deal gives Dynavax global rights to the program, the structure effectively grants the biotech an option to further develop the asset. Once it sees phase 2b data, Dynavax can either scrap the deal or pay $50 million to take the vaccine forward.
William Blair analysts highlighted the deal structure in a note to investors. While “this surprising announcement has raised some questions from investors on appropriate capital allocation,” the analysts said “the $30 million upfront payment for the option gates the level of capital expenditures ahead of clear data showing benefits over mRNA-based vaccines.”
Vaxart has enrolled about 5,400 people in the trial and expects to have top-line data late next year. The data will show the relative efficacy of Vaxart's candidate compared to an injectable mRNA comparator for symptomatic disease prevention. Dynavax will commit to $195 million in regulatory milestones and $425 million in success-based sales payments if it decides to develop the vaccine candidate.
The 5,400 people enrolled in the trial is fewer than originally targeted, reflecting the withdrawal of U.S. government support. But Dynavax CEO Ryan Spencer told investors on an earnings call Wednesday that the trial is “adequately powered to demonstrate an improvement over the comparator mRNA vaccine.” Spencer sees a commercial opportunity for the vaccine despite the waning of the COVID-19 market.
“We do believe that an improved vaccine, both with delivery mechanisms but also with underlying efficacy, has the opportunity to help grow the market,” the CEO said. “There's lots of room for market growth in COVID compared to other vaccines like flu that are given annually.”
The deal is a lifeline for Vaxart, which previously warned investors that the $26.3 million it had at the end of June would only fund operations into the first quarter of 2026. Waves of layoffs have constrained the biotech’s ability to extend its runway by cutting costs. Vaxart reduced its head count by 10% in March and laid off 21% of its remaining staffers in May and June.
Asked in August about how he could extend the runway, Vaxart Chief Financial Officer Jeroen Grasman said that after two recent sets of layoffs, “the remaining resources are essential to complete our ongoing studies and prepare for the next steps in our COVID, norovirus or flu programs.” Arguing that companies cannot cut their way to success, Grasman said the company needed money to advance the programs.
Vaxart attempted a reverse stock split with a view to regaining its Nasdaq listing and strengthening its ability to raise cash. However, the company abandoned the plan in September. Relegated to the OTC market and with U.S. government support uncertain, Vaxart has identified Dynavax’s offer as the way to secure its near-term future.