GSK
CVAC
British pharmaceutical giant GSK (LSE: GSK) strategically moved on Wednesday by acquiring CureVac's (NASDAQ: CVAC) share of their joint influenza and COVID-19 vaccine development. This acquisition enhances GSK's expertise in messenger RNA (mRNA) technology and gives CureVac a much-needed financial boost. As part of the deal, GSK will now control CureVac's forefront experimental vaccines addressing a variety of infections, such as seasonal and bird flu. The financial terms include an upfront payment of 400 million euros ($430 million) with potential earn-outs of up to 1.05 billion euros contingent on specific achievements.
The announcement immediately positively impacted CureVac's stock, which surged by 24% to hit a three-week high. For CureVac, the influx of funds translates to an extended financial runway, now projected to last until 2028, a significant extension from its previously estimated end-of-2024 timeline. Unfortunately, the deal also means a 30% workforce reduction at CureVac as the company focuses on mRNA-based cancer therapies and other nascent projects.
Originally linked through a partnership formed in 2020 amid the COVID-19 pandemic, GSK and CureVac have been collaborating to pioneer mRNA vaccines targeting infectious diseases. This recent agreement underscores GSK CEO Emma Walmsley's strategic emphasis on vaccines and infectious diseases, aimed at offsetting anticipated patent expirations and decreasing revenues from currently top-grossing drugs over the coming years.
In a bid to recover from an inability to successfully develop an mRNA-based COVID-19 vaccine during the pandemic, CureVac announced in April that it would cut 150 jobs from its over 1,000-strong workforce. The fresh job cuts, reducing the workforce by another 30%, include the previously announced layoffs.
With GSK spearheading the advancement of phase II trials for flu and COVID-19 vaccines and a phase I trial for an avian flu vaccine, the company is firmly positioning itself as a leader in vaccine innovation. Notably, this licensing agreement does not influence GSK's 7% equity stake in CureVac.
This acquisition presents an intriguing development for stock traders. GSK's commitment to bolstering its mRNA technology could provide long-term growth potential, while CureVac's narrowed focus on cancer therapies offers a specialized investment opportunity in the biotech sector.
