(Reuters) -Hedge fund Shah Capital said on Monday it would withdraw its campaign against the re-election of three directors on Novavax's board, after the COVID-19 vaccine maker struck a licensing deal with Sanofi.

Under a deal signed on May 10, the French drugmaker will take a 4.9% stake in Novavax for $70 million at a lofty valuation.

It includes an upfront cash payment of $500 million and future payments contingent on certain milestones as well as royalties.

Novavax, which struggled to get its protein-based vaccine to the market in a timely manner, also removed a warning notice from February last year that raised doubts about it being in business after the deal.

Shah Capital had also opposed proposals related to executive compensation.

The fund, which owns an about 7.8% stake in Novavax, reiterated that the Sanofi agreement was a "long-awaited step in the right direction".

Novavax said that it was "fully focused" on driving long-term value for all of its shareholders.

"We appreciate that Shah Capital is ending its campaign, which is the right decision for shareholders and the company," it said in a statement.

Still, Shah Capital said on Monday it continued to believe Novavax would benefit from the addition of a stockholder representative on its board.

"We will continue to closely monitor the company ... as we believe significant additional value remains to be unlocked at Novavax," it said.

Shares of the Maryland-based biotech rose about 1% to $13.1 in premarket trading and have nearly tripled so far this year.

Short interest of the stock stood at 32% of publicly available shares as of April 30, according to LSEG data.

(Reporting by Bhanvi Satija in Bengaluru; Editing by Shilpi Majumdar and Sriraj Kalluvila)