May 20 (Reuters) - Hedge fund Shah Capital said on Monday that it was withdrawing its campaign against the re-election of three directors on Novavax's board, days after the COVID-19 vaccine maker struck a licensing deal with French drugmaker Sanofi.

Shah Capital, which owns an about 7.8% stake in Novavax, said that the agreement with Sanofi was a "long-awaited step in the right direction".

Under the deal, the French drugmaker plans to take a 4.9% stake in Novavax for $70 million. It also entitles Novavax to an upfront cash payment of $500 million and future payments contingent on certain milestones as well as royalties.

Earlier this month, the hedge fund had urged shareholders of the Maryland-based biotech to vote against the re-election of three directors and opposed proposals related to executive compensation.

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

Novavax did not immediately respond to a Reuters request for comment. (Reporting by Bhanvi Satija in Bengaluru; Editing by Shilpi Majumdar)