By Sneha S K and Sriparna Roy

(Reuters) -Shah Capital, Novavax's second-largest shareholder, is pressing the biotech's board to pursue strategic changes,​ including a potential sale, and warned it could launch a proxy fight if no progress ‌is made in the next four months.

In a second letter to Novavax's board in less than a month, shared exclusively with ‌Reuters on Wednesday, Shah Capital said it has become "increasingly disenchanted" with the company's weak COVID-19 vaccine sales.

"If I don't see changes happening, and if the company doesn't follow through in the next four months, then I think that is definitely a potential for a proxy fight," hedge ⁠fund founder Himanshu Shah said in an ‌interview.

The fund said it still believes in Novavax's science and has increased its stake to about 8.3%, up from 7.2% in October.

However, ‍it said it remains "at a complete loss" over the disappointing sales of Novavax's protein-based COVID-19 vaccine and is frustrated by its negligible market share.

DISCONNECT BETWEEN POTENTIAL AND EXECUTION

This marks another push from the activist investor for change ​after it withdrew a campaign against three board directors last year, following Novavax's licensing deal with Sanofi.

"‌It is reasonable to question whether Novavax and its partner are exhibiting a profound lack of competence or intentionally underperforming," the letter said.

Novavax's vaccine sold about 120,000 doses as of October 31, during the 2025-26 season that started in August, versus 14.5 million doses sold in the same period by two competitors, leaving Novavax's market share at about 0.8%, the letter said.

"Despite strong ⁠underlying science and evident market need, the disconnect between ​potential and execution is striking," the hedge fund said in ​its letter.

Earlier this month, Novavax pushed back its profitability target by a year to 2028.

Novavax has a high cost base, needs to be operationally profitable next year and ‍should run more comprehensive trials,⁠ Shah said.

Shah values the company at $5 billion to $10 billion. Novavax's market capitalization is about $1.21 billion, according to LSEG data.

The fund urged the board to immediately form a ⁠committee to evaluate a sale and hire a qualified investment bank.

Shah has previously named Sanofi, Merck, GSK and AstraZeneca as ‌potential buyers, but said he has not contacted them.

(Reporting by Sneha S K ‌and Sriparna Roy in Bengaluru; Editing by Tasim Zahid)