Tenn. firm invests $16.6 million in Novavax

SJ Strategic Investments increases stake to 19.4%

February 19, 2003|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Novavax Inc., a Columbia company that makes women's health products and drugs to fight infectious diseases, said yesterday that a Tennessee investment firm had invested $16.6 million through a private stock purchase.

Bristol Tenn.-based SJ Strategic Investments LLC bought 4.75 million shares of Novavax at $3.50 a share. That investment, along with previous stock purchases in the open market, brings the firm's total ownership in Novavax to 19.4 percent. Under the terms of the deal, SJ Strategic Investments can increase its ownership position to 25 percent.

Denis M. O'Donnell, Novavax's chairman, said yesterday that he was excited that John M. Gregory, managing director of SJ Strategic Investments, has chosen to invest in Novavax. Gregory is a founder and former chairman and chief executive of King Pharmaceuticals Inc., a publicly traded pharmaceuticals company that had $1.18 billion in sales last year.

"He's very well thought of in this industry, and we couldn't be any happier that he's decided to make this investment in Novavax," O'Donnell said.

Novavax develops and commercializes products such as prescription prenatal vitamins and estrogen replacements.

The company has a new product, Estrasorb, which is under review by the Food and Drug Administration for a second time. The company pulled its first application in April after the FDA said it would not approve the product without more information.

That announcement came amid news that a nationwide study questioned the merits of some types of hormone replacement therapy, linking long-term use with ovarian cancer, among other things.

Estrasorb is estrogen lotion. Rather than using a pill or a patch, women would use this hormone replacement therapy by rubbing the lotion on their thighs once a day. Novavax executives have said that Estrasorb is different from other hormone replacement therapies in part because it is designed for short-term use and is absorbed in lower doses through the skin with a cream.

Clinical trails for Estrasorb ended in the first quarter of 2001. The company is expecting a decision from the FDA by early July.

"We enthusiastically believe in the commercial potential of our new and exciting lead product candidate, Estrasorb, as well as our currently marketed products, other product candidates in various stages of development, and overall strategic direction. We heartily welcome John Gregory's vote of confidence," Novavax's interim president and CEO, Mitchell J. Kelly, said in a statement released yesterday.

"This significant capital infusion provides us with the necessary financial resources to launch Estrasorb, if approved by the FDA later this year, as well as to continue to pursue our other promising corporate initiatives."

Gregory said he believes Novavax is undervalued, and he expects the company's Estrasorb product to be very successful.

"I think this is a nice alternative that is going to do very well, maybe even better than Novavax was expecting," he said.

Novavax has a co-marketing agreement with King Pharmaceuticals that is separate from the funding deal announced yesterday. Through the co-marking agreement, King has put $48 million into Novavax for Estrasorb and other products, O'Donnell said.

King Pharmaceuticals will market Estrasorb outside of the United States, and Novavax and King Pharmaceuticals will both market the product in the U.S., assuming FDA approval, O'Donnell said. While Novavax hasn't given any guidance in terms of potential sales, King Pharmaceuticals has projected that it could be a $250 million to $300 million product in the United States.

Shares of Novavax have fallen from their Oct. 2001 high of $14.95, but they are still more than double the 52-week low of $1.59. The shares gained 11 cents yesterday to close at $3.96 on the Nasdaq stock market.

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