The claimants alleged that the company made a number of misleading statements, hiding essential information from investors.

During the pandemic, Novavax – a biotechnology company that focuses on the discovery, development, and commercialization of vaccines to prevent serious infectious diseases – developed its version of the COVID-19 vaccine.

On 4 June 2020, Novavax stipulated an agreement with the United States Department of Defense ("DOD"), on the basis of which it received $60 million in funding. Per the terms, Novavax was obligated to set up extensive production facilities within the United States for a key component of the Novavax Vaccine. Additionally, the contract stipulated that upon obtaining approval for the Novavax Vaccine from the United States Food and Drug Administration ("FDA"), Novavax was mandated to supply 10 million doses to the DOD by December 2020. During the development period, Novavax encountered persistent challenges in manufacturing and production, comprising: (1) recurrent contamination incidents at its Texas and North Carolina Facilities; (2) inability to meet FDA standards for the purity and potency levels of the Novavax Vaccine; (3) unsuccessful attempts to effectively expand the production scale of the Novavax Vaccine; and (4) disruptions in supply chains. These issues led to recurrent postponements in Novavax's submission.

A number of persons and entities who or which, during the period of development of the vaccine purchased the publicly traded common stock of Novavax filed suit against the company and certain members of the Company’s senior management, alleging that defendants had breached the Security Exchange Act, which requires that companies disclose to potential investors a range of essential information. They alleged that Novavax was perfectly aware of the above-cited manufacturing obstacles relating to contamination, purity and potency levels, scaling, and the supply chain; nonetheless, it made a number of misleading statements or omissions of material fact relating to these problems that violated the Exchange Act.

On 4 December 2023, the parties of the dispute have reached a friendly settlement of the case. The company agreed to pay $47 million into a settlement fund, which the Company expects will be funded by the Company’s directors and by officers’ liability insurance with the intention of disbursing the amount to members of the putative settlement class. The Proposed Settlement encompasses standard releases from all involved parties, along with a disclaimer of liability from the company and its senior management. It will have to be approved by the US District Court for the District of Maryland.

Reference: S v. Novavax, Inc. et Al, US District Court for the District of Maryland.

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