French drugmaker Valneva’s shares plunged after it said  the UK government was cancelling a vaccine supply contract, dealing a blow to its experimental Covid-19 shot.

The company said on Monday the UK found Valneva had breached its obligations under the agreement, an allegation it contested without specifying the problem. In 2020, the country agreed to buy 100-million doses from Valneva. The stock fell as much as 45% in Paris trading. 

Valneva’s stock had almost quadrupled in the past year on optimism its shot would complement existing vaccines with a different approach. The product, which is up against AstraZeneca’s in clinical tests, is an inactivated vaccine — an old-school method also used for polio and hepatitis inoculations. Because it targets the whole virus rather than just the spike protein, some scientists expect it could potentially stand up better to variants.

“We continue to see significant value in Valneva’s Covid-19 vaccine, but its route to market is now far less clear,” said Max Herrmann, an analyst at Stifel. 

Valneva’s shot is on track for initial approval later in 2021. Besides the vaccine order, the UK government has invested in a manufacturing site in Scotland. 

“The news comes as a real surprise since the UK helped Valneva to fund development of the vaccine candidate as well as the manufacturing site extension,” Jean-Jacques le Fur, an analyst at Bryan Garnier, wrote in a note. 

Valneva didn’t answer a call and didn’t immediately respond to an e-mail seeking comment. In the statement, the company said it had “worked tirelessly, and to its best efforts” to meet the agreement and that it will increase its efforts to find other potential customers.

Prime Minister Boris Johnson’s spokesperson, Max Blain, declined to comment on why the contract has been cancelled, telling reporters in London that he’s “restricted” in what he can say because the matter is commercial. He said it wouldn’t affect on the UK’s vaccine supply because the shot has not yet had regulatory approval and hasn’t been factored into the country’s ongoing plans.

Ripple effect

It’s unclear how the decision will affect a product that was being tested, produced and reviewed largely in the UK. 

“This is clearly a blow,” Olivier Nataf, the head of AstraZeneca in France, said on BFM radio. “It’s important to have a new vaccine, a new technology that would complement the others.”  

AstraZeneca, based in Cambridge, Britain, has also experienced difficult interactions with governments in France and other EU countries, where its vaccine has taken a back seat to messenger RNA rivals despite evidence that side effects are rare and that it protects effectively against Covid-19.

Valneva’s vaccine works by taking a sample of the disease that has been killed and using it to stimulate an immune response without creating infection. The shot could protect against variants that might compromise vaccines focused on the virus’s spike protein, making it the perfect booster.

The discord also affects Dynavax Technologies, a US firm that supplies Valneva with a vaccine adjuvant. Dynavax shares slumped before US exchanges opened as the company said Valneva doesn’t have an obligation to pay the final portion of an outstanding purchase order if the UK government reduces or terminates its contract with the drugmaker. For now, the order has not been cancelled. 

Bloomberg News. More stories like this are available on bloomberg.com


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