The U.K. terminates its COVID vaccine contract with Valneva—wiping out almost half its market cap

The U.K. government said it had terminated the contract because Valneva was in breach of its obligations under the deal—a claim Valneva “strenuously” denies. The deal was worth up to €1.4 billion ($1.65 billion) with the vaccine set to be manufactured in Scotland. Deliveries were expected to start in 2022.

Shares in Valneva fell more than 40% in early Paris trading, hitting a low of €11 before recouping some of the losses.

The Valneva vaccine differentiates itself from the vaccines currently on the market by stimulating a reaction to the inactivated whole COVID-19 virus, rather than just targeting the spike protein, a process that some scientists say should offer protection against more variants. 

This old-school vaccine design of taking a killed sample of the disease and using it to stimulate an immune response means the Valneva shot could complement existing vaccines and be used as a booster shot—an attractive feature that has helped Valvena quadruple its stock price over the past year.

It is not clear what pushed the U.K. government to serve a notice of termination, but in previous warnings, Valneva warned of a “substantial risk” to exporting the vaccine between the EU and the U.K. owing to supply chain issues.

The vaccine is currently still in late-stage trials with the results expected in the fourth quarter of this year. The laboratory noted at the end of August that based on Phase I and Phase II trials, it hoped to have a vaccine that is more than 80% effective. U.K. approval is slated for late next year.

“Valneva has worked tirelessly, and to its best efforts, on the collaboration with HMG including investing significant resources and effort to respond to HMG’s requests for variant-derived vaccines,” the company said in a statement.

Back in April, talks between Valneva and the European Commission also broke down because, the EU executive said, the company failed to meet “a certain set of conditions.” Valneva’s prioritization of the U.K.’s order was reportedly a factor.

There was a subsequent resurrection of the talks in late June, suggesting the EU no longer saw this as an obstacle, but Valneva never secured an EU purchase agreement. It has been negotiating vaccine contracts on a country-by-country basis.