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Novavax settles dispute with international vaccine group Gavi

By Michael Erman

Feb 22 (Reuters) - Novavax said on Thursday it has agreed to pay back international vaccine group Gavi at least $475 million in cash or vaccines by the end of 2028, settling a dispute over canceled orders that had created financial uncertainty for the U.S. maker of COVID-19 shots.

Gavi, an alliance that co-finances vaccine purchases with low-income countries, paid Novavax $700 million over 2021 and 2022 for up to 350 million doses of its COVID vaccine.

Novavax, which launched its vaccine after several competitors due to manufacturing and regulatory delays, did not deliver any doses before the contract's deadline at the end of 2022.

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The settlement "really clears the deck of the most significant single uncertainty and liability that we had on our books," Novavax Chief Executive John Jacobs said in an interview.

"Removing it absolutely gives us more flexibility and it makes us more attractive as a future business partner to do deals," he added.

Last year, Novavax raised doubts about its ability to remain in business, and said pending arbitration with Gavi was one of the main overhangs on the company. The vaccine alliance had filed a demand for arbitration with the International Court of Arbitration, a hearing that had been scheduled for later this year.

Under terms of the settlement, Novavax has made an initial payment of $75 million to Gavi and will pay another $80 million a year in quarterly installments through 2028. That amount could be reduced if Gavi chooses to receive vaccines instead.

If demand for vaccines exceeds $80 million a year, Novavax will provide an additional vaccine credit of up to $225 million through the five-year term of the settlement.

Jacobs said the structure of the settlement eliminates the potential risk of a large one-time payment this year and will allow Novavax to manage its cash and cash flow. He said the present value of the settlement is estimated to be between $300 and $400 million.

Shares of Novavax closed at $3.98 on Wednesday. They are down close to 60% over the past year.

(Reporting by Michael Erman Editing by Bill Berkrot)