Novavax Inc. shares surged after the company signed a US$1.2 billion licensing agreement with Sanofi that includes commercializing a combined Covid-19 and flu shot. 

Novavax will receive $500 million in upfront payments as well as $700 million if all development, regulatory and launch milestones are met, according to a statement Friday. Novavax, which will receive tiered royalties on any vaccine sales, said Sanofi is also taking a minority equity stake of about five per cent in the U.S. company. 

Novavax shares surged as much as 217 per cent in premarket trading before paring those gains to about 130 per cent. If the jumps holds through Friday’s trading session it will be the stock’s biggest one-day increase on record.

The pact links two big players in the vaccine world that both missed out on the rush to develop and commercialize Covid shots quickly during the pandemic. Amid various setbacks, Sanofi and Novavax ceded tens of billions of dollars in sales to nimbler messenger-RNA developers including the Pfizer-BioNTech alliance and Moderna Inc. 

Now, Sanofi will have the rights to drive sales of Novavax’s Covid-19 shot worldwide from next year, except for in India, Japan and South Korea, where Novavax already has advance purchasing agreements. The French drugmaker also has the sole license to use Novavax’s protein-based Covid shot in combination with its flu shot, which it said will offer patients “enhanced convenience and protection against two serious respiratory viruses.” 

Sanofi will also have a non-exclusive license to use Novavax’s Matrix-M adjuvant in other vaccine products. Novavax will still have the right to develop its own combined Covid-flu vaccine at its own cost. 

Shares of Sanofi rose slightly in early trading in Paris. The stock was down about five per cent in the past 12 months through Thursday’s close. 

The deal is a boost for Novavax which is in the midst of restructuring its business after a difficult 2023 when it had to issue a going concern warning about its ability to continue operating. Novavax reported a first-quarter net loss of $148 million, compared with a $294 million loss a year earlier. 

At first glance the deal seems surprising for Sanofi but it’s likely a strategic move, said Mila Bankovskaia, a Bloomberg Intelligence analyst. 

“Moderna and Pfizer are both assessing mRNA-based combination vaccines, and though Sanofi believes its non mRNA-based flu product won’t be improved, the potential to offer a non-mRNA-based combination as an alternative looks a sensible move,” she said.