Montgomery County Has Showered Millions of Taxpayer Dollars on Novavax, Company Recently Warned “Substantial Doubt Exists Regarding Our Ability to Continue as a Going Concern”
Last week was a volatile one for Gaithersburg, Maryland-based Novavax, as it saw its stock price decline sharply on the back of a form 10-K filing where the firm added a “going concern” disclosure. The stock was crushed on the back of the news, declining some 25%+ before recovering a bit intra-day and in the days afterwards.
Below is a screenshot showing the stock’s performance over the last month, courtesy of SeekingAlpha.com:
This is a far cry from the $290/share peak it reached at the height of COVID.
Novavax, which makes the Nuvaxovid vaccine used to treat Covid-19, posted huge sales gains for the past three years during the height of the pandemic. But the company is now facing serious financial challenges — and has even warned it may not be able to survive.
It should be noted that Novavax isn’t in immediate danger of being overwhelmed with debt or needing to cease operations, but the company’s CFO, James Kelly, noted in the Q4 2022 Earnings Conference Call that:
While our current business plan and cash flow forecast estimate that we have sufficient capital available to fund our operations for the next 12 months, we recognize that this plan is subject to significant uncertainty related primarily to future revenue, funding from the U.S. government and our pending arbitration with Gavi.
Novavax actually has a founding history outside of Montgomery County:
Novavax AB (formerly Isconova) has its origin at the Swedish University of Agricultural Science (SLU) in Uppsala, where the ISCOM technology was invented by Professor Bror Morein and further developed by him and his and co-workers in the mid 1980s. More than 450 scientific publications from all around the world have since established a wide variety of attributes related to adjuvants based on ISCOM technology, especially their immunological properties.
In 2011, the firm moved its HQ from Rockville to a bigger space in Gaithersburg. It appears such a move happened organically, and with little or no taxpayer money being spent. The company simply wanted more space to manufacture a product to satisfy a “$180 million HHS contract to develop seasonal and pandemic flu vaccines.”
In June, 2016 then-governor Larry Hogan and Montgomery County Executive Isiah Leggett touted millions in state “loans” (if the loan goes awry or doesn’t get repaid, it’s just the people of MD’s money that was spent, no biggie) and tax-payer grants. The City of Gaithersburg also got in on the action:
Montgomery County has approved a conditional grant of up to $2.5 million and the company is eligible for the county’s New Jobs Tax Credit. In addition, the City of Gaithersburg has approved up to a $50,000 grant from its Economic Development Toolbox program. The company is also eligible for a number of state tax credits and programs.
Then, in July of last year (see resolution below), the County Council endorsed $4 million in “conditional loans” to the corporation via the State of Maryland’s MEDAAF (aka the state taxpayer). This was on top of the $1 million in taxpayer dollars the Montgomery County Economic Development Fund disbursed to Novavax via two tranches of ‘conditional’ grants.
We wish Novavax and all Montgomery County-based businesses, of all sizes, much success and prosperity. But does County government need to consistently throw millions of the people’s money at very risky enterprises, particularly in the “life sciences” / biotechnology industry? What prior experience do members of the County Council have in allocating essentially venture capital to start-up businesses? These millions of dollars could be going to new road or school construction, or be returned to their rightful owners – the hard-working taxpayers of Montgomery County.
The biotechnology industry is cutting-edge but also extremely risky — it is probably the most volatile industry in the world in terms of stock price movements. Large sums of investor money are lost in these kinds of companies in a matter of hours, days, weeks. I once saw 70%+ of a very small investment (thank goodness) wiped out in a day when a biotechnology company disclosed poor results in a Phase-II clinical test on a drug candidate for scleroderma.
From a Politico article in October 2021, a full year before Montgomery County’s Council decided to “vote” to signal approval on more state taxpayer dollars being shoveled to Novavax:
Novavax — which has never produced a vaccine before — declined to answer specific questions about its product’s purity levels and whether it had been successful in addressing its longstanding manufacturing issues.
