Table of Contents | | | | | | | | |
Funding Partner | Amount | Additional Details |
CEPI | $399.5 million | •Entitled to received up to $399.5 million of funding to support the development of NVX-CoV2373 •To supply NVX-CoV2373 through the COVAX Facility |
U.S. Department of Defense (“DoD”) | $45.7 million | •Entitled to received up to $45.7 million of funding to support the development of NVX-CoV2373 •To manufacture and deliver up to 10 million doses of NVX-CoV2373 to the U.S. government •Contract term ended in December 2022 |
U.S. Government through USG Agreement | $1.8 billion | •Allotted $1.8 billion to support the development of NVX-CoV2373 •To manufacture and deliver up to 100 million doses of NVX-CoV2373 to the U.S. government |
Seasonal Influenza
NanoFluInfluenza Program (Older Adults)
Influenza is a world-wide infectious disease with serious illness generally occurring in more susceptible populations such as children under and older adults, but also occurring in the general population. According to a 20212022 Fortune Business Insights research report forecast of influenza vaccines, the market for seasonal influenza vaccines is expected to grow from approximately $6.6$7.54 billion in 20212022 to approximately $10.73$13.58 billion in 2028.
2029.
In September 2021,October 2022 at the World Vaccine Congress in Europe, we reviewed key findings from the Phase 3 stand-alone qNIV candidate, previously referred to as NanoFlu, which met its primary immunogenicity endpoints. The final analysis of the primary endpoint of our pivotal Phase 3 clinical trial for the NanoFlu Programthese results was previously published in September 2021, in The Lancet Infectious Diseases. We previously announced that the NanoFlu Program achieved the trial’s primary endpoints, demonstratingThe results demonstrated non-inferior immunogenicity to Fluzone® Quadrivalent against all four influenza virus strains included in the vaccine, while also showing both enhanced wild-type hemagglutination-inhibiting antibody responses against homologous strains (22-66% increased) and six heterologous A/H3N2 strains (34-46% increased) as compared to Fluzone® Quadrivalent. Additionally, the NanoFlu ProgramqNIV showed potent induction of polyfunctional antigen-specific CD4+ T-cells against A(H3N2) and B/Victoria strains, with a 126–189% increase in various post vaccination cell-mediated immunity markers as compared to Fluzone® Quadrivalent.
Combination Vaccines
Our NanoFluInfluenza Program team remains focused on advancing combination vaccine candidates. With the ongoing development of NanoFluInfluenza Program, NVX-CoV2373, and our RSV Program, a strong rationale exists for developing combination respiratory vaccines designed to protect susceptible populations against these diseases.
COVID / Influenza Combination Vaccine
Phase 2 Clinical Trial of COVID-19-Influenza Combination Vaccine
In December 2022, we initiated a Phase 2 trial for CIC, which includes study arms for our stand-alone updated qNIV vaccine candidate. The dose-confirming trial will be conducted in two parts and will seek to enroll approximately 2,300 adults aged 50 to 80 years in Australia and New Zealand. The trial is randomized, observer-blinded with primary and secondary objectives of the study to assess the safety, tolerability, and immune responses to various formulations of the CIC and influenza vaccine candidates. As of January 2023, we completed enrollment of 1,500 participants. The initial results are expected mid-year 2023 with data informing the second part of the trial and future clinical development for both influenza stand-alone and CIC candidates.
Phase 1/2 Clinical Trial of COVID-InfluenzaCOVID-19-Influenza Combination Vaccine
In October 2021,2022 at the World Vaccine Congress in Europe, we completed enrollment of ourannounced additional positive results from Phase 1/2 study in Australia,CIC trial, which we initiated in September 2021.combines NVX-CoV2373 and our updated qNIV candidate. The trial enrolled 642 healthy adults aged 50results demonstrated CIC’s ability to 70 years across 10 sitesgenerate immune responses, including both antibody and will evaluatepolyfunctional CD4+ T-cell (lymphocytes that help coordinate the safety, tolerability and immune response of a combination vaccine using NanoFlu Program and NVX-CoV2373, combined with our Matrix-M™ adjuvant. Participants have been either previously infected with the SARS-CoV-2 virus that causes COVID-19 or vaccinated through an authorized vaccine at least eight weeks prior to enrollment. All participants will be randomly assigned to cohorts to evaluate multiple formulations and will be administered doses on Day 0 and again at Day 56. Data from this Phase 1/2 trial are expected in the second quarter of 2022. Data from this Phase 1/2 trial are expected in April of 2022. We expect to initiate a Phase 2 clinical trial for the COVID-Influenza combination vaccine and NanoFlu Program as a standalone vaccine in the second half of 2022.
In May 2021, we announced data from a preclinical study of qNIV/CoV2373 to assess its immunogenicityresponse) responses against an evolving SARS-CoV-2 virus, along with homologous and protective efficacy in animal models. Preclinical data from this study showed that qNIV/CoV2373 induced functionalheterologous influenza strains. The CIC vaccine was well tolerated, and COVID-19 antibody responses, with hemagglutination inhibitionthe safety and ACE2 receptor-inhibiting titers that were comparable between immunizationtolerability profile was consistent with the combinationstand-alone NVX-CoV2373 prototype vaccine and with its respective component vaccines. qNIV/CoV2373 also induced elevated levels of SARS-CoV-2 anti-S IgG two weeks after the first immunization, which increased significantly after the second dose, with levels comparable to animals that received NVX-CoV2373 alone. Human ACE2 receptor inhibiting antibody levels responded similarly. qNIV/CoV2373 also induced antibodies against SARS-CoV-2 neutralizing epitopes that are common between the original COVID-19 strain and the Beta (B.1.351) variant strain. When challenged with SARS-CoV-2, examination of viral loadquadrivalent influenza vaccine candidate reference formulations in the upper and lower respiratory tract showed little or no virus was detected four days after infection in animals immunized with either qNIV/CoV2373 or with NVX-CoV2373 alone. Data from this study are available ahead of publication via the preprint server for biology on bioRxiv.trial.
Respiratory Syncytial Virus ("RSV"(“RSV”)
Currently, there is no approved RSV vaccine available to combat the estimated 64 million RSV infections and 160 thousand deaths that occur globally each year. Older adults (60 years and older) are at increased risk for RSV disease due in part to immunosenescence, the age-related decline in the human immune system. RSV infection can also lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma, and congestive heart failure.
RSV Program (Older Adults)
Previous clinical development through a Phase 2 clinical trial demonstrated that our RSV Program for older adults with either aluminum phosphate or our proprietary Matrix-MTM adjuvant increased the magnitude, duration, and quality of the immune response versus the non-adjuvanted RSV F Vaccine. We continue to assess the preclinical development opportunities for our updated RSV Programvaccine for older adults.
Malaria
Malaria is a life-threatening disease caused by a parasite that infects mosquitos subsequently transmitted to humans. According to the 20212022 WHO World Malaria Report, in 2020,2021, there waswere an estimated 241247 million malaria cases and 627619 thousand deaths worldwide in 2020.2021. We believe malaria has the potential to be preventable through the R21 vaccine candidate, which is being developed through several partner-led trials and is formulated with our Matrix-MTM adjuvant.
R21 - Malaria Vaccine
R21 is a malaria vaccine candidate created by the Jenner Institute, University of Oxford, and formulated with our Matrix-M™ adjuvant. The University of Oxford has granted SIIPL a license for R21. We expect to manufacture and supply the Matrix-M™ adjuvant component of R21 to SIIPL. SIIPL has committed to manufacture at least 200 million doses per year of R21 after licensure, if granted. Additionally, SIIPL has rights to use Matrix-M™ adjuvant in R21 in regions where the disease is endemic and will pay royalties to us on its market sales of the vaccine. We will have commercial rights to sell and distribute the SIIPL-manufactured R21 in certain countries, primarily in the travelers’ and military vaccine markets.
R21 Clinical Development
R21 is currently being evaluated in aan ongoing Phase 3 licensure trial initiated in May 2021. Databeing conducted by our partner, Jenner Institute, University of Oxford, for R21, a malaria candidate which is formulated using our Matrix-M™ adjuvant. In September 2022, positive results from this trial are expected in the second half of 2022. Previously, in April 2021, data from thean ongoing Phase 1/2b trial evaluating R21 wasstudy were published in The Lancet Infectious Diseases, demonstrating 77% reporting safety, immunogenicity, and efficacy whenresults at 12 months following administration of a booster vaccination in children aged 5 to 17 years in Nanoro, Burkina Faso. A total of 409 children received a booster dose of R21 formulated with 50 microgramsour Matrix-M™ adjuvant at 1 year following the primary three-dose regimen maintaining high efficacy against first and multiple episodes of Matrix-MTM adjuvant andclinical malaria, demonstrating 71% efficacy when formulated with 25 micrograms of Matrix-MTMMatrix-M™ adjuvant and 80% efficacy when formulated with 50 micrograms of Matrix-M™ adjuvant. Both adjuvant dose levels were well tolerated in young children, with no severe reactionsThe trial is continuing for a further 2 years to R21 reported.
Advance Purchase Agreements (“APA”)
We have entered into APAs (also referred to as “supply agreements” throughout this Annual Report on Form 10-K) with Gavi, the Vaccine Alliance (“Gavi”), the EC, and various countries globally. The APAs typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment. Such upfront payments generally become non-refundable upon our achievement of certain development milestones. We expect to sign additional APAs that are currently in active discussions and negotiations.
A summary of our APAs follows:
(1) The APA includes an option to order additional doses as may be required from time to time.
Under the terms of our APA with Gavi, 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. We expect to manufacture and distribute 350 million doses of NVX-CoV2373 to countries participating under the COVAX Facility. Under a separate purchase agreement with Gavi, SIIPL is expected to manufacture and deliver the balanceassess long-term follow-up of the 1.1 billion dosesparticipants and the value of NVX-CoV2373 for low- and middle-income countries participating in the COVAX Facility. We expect to deliver doses with antigen and Matrix-MTM adjuvant manufactured at facilities directly funded by the investments previously received from CEPI (the “CEPI Funding Agreement”). We expect to supply significant doses that Gavi would allocate to low-, middle-, and high-income countries, subject to certain limitations, utilizing a tiered pricing schedule and Gavi may prioritize such doses to low- and middle-income countries at lower prices. Additionally, we may provide additional doses of NVX-CoV2373, to the extent available from CEPI-funded manufacturing facilities, in the event that SIIPL cannot materially deliver expected vaccine doses to the COVAX Facility. Together with SIIPL, we expect to initiate delivery of doses following receipt of appropriate regulatory authorizations. Under the agreement, we received an upfront payment from Gavi of $350 million in 2021 and recorded a receivable as of December 31, 2021, for an additional payment of $350 million because we secured EUL for NVX-CoV2373 from the WHO in December 2021.further booster vaccinations.
Under the terms of our APA with the EC, acting on behalf of various E.U. member states, we are committed to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the EC to purchase an additional 100 million doses through 2023. We have received orders for 69 million doses under this agreement.
License and Collaboration
Our commitment to partnering globally in efforts to end the COVID-19 pandemic is demonstrated through our partnership with SIIPL to supply NVX-CoV2373 to India and low- and middle-income countries. In August 2020, we expanded upon our manufacturing and supply capabilities to include partnershipsWe have also partnered with both Takeda in Japan and SK bioscience in South Korea to expand our manufacturing and furthered these collaborations in February and December 2021. These additional partnerships will increase our production capacity and are expected to support a rapid roll-out of NVX-CoV2373 globally.supply capabilities.
| | | | | | | | |
Licensee | Marketed Under | Territories |
| | | | | | | | |
Serum Institute of India Private Limited | Covovax™ | •India •COVAX Facility •The Philippines •Indonesia •South Africa •Bangladesh |
Takeda Pharmaceutical Company Limited | Nuvaxovid™ | •Japan •South Korea |
SK bioscience Co., Ltd. | Nuvaxovid™ | •South Korea(1) |
(1) Geographies pending regulatory authorizations and not yet authorized under the brand name
(2) SK bioscience receivedalso has non-exclusive licenses in Thailand and VietnamVietnam.
A summary of our license and collaboration agreements follows:
SIIPL
In July 2020, we entered into a supply and license agreement with SIIPL, which was amended in September 2020 and amended and restated in July 2021, under which weWe previously granted exclusive and non-exclusive licenses to SIIPL under a supply and license agreement for the development, co-formulation, filling and finishing, registration, and commercialization of NVX-CoV2373. SIIPL agreed to purchase our Matrix-MTM adjuvant and we granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373. We will equally split the revenue from SIIPL's sale of NVX-CoV2373 in its licensed territory, net of agreed costs. We granted to SIIPL (i) an exclusive license in India during the agreement, and (ii) a non-exclusive license (a) during the “Pandemic Period” (as declared by the World Health Organization), in all countries other than specified countries designated by the World Bank as upper-middle or high-income countries, with respect to which we retains rights, and (b) after the Pandemic Period, in only those countries designated as low or middle-income by the World Bank. Following the Pandemic Period, we may notify SIIPL of any bona fide opportunities for us to license NVX-CoV2373 to a third party in such lowlow- and middle-income countries and SIIPL would have an opportunity to match or improve such third-party terms, failing which, we would have the discretion to remove one or more non-exclusive countries from SIIPL’s license. In October 2021, we entered intoWe also have a supply agreement and a contract development manufacturing agreement with SIIPL and Serum Life Sciences Limited (“SLS”) under which SIIPL and SLS will supply us with NVX-CoV2373 for commercialization and sale in certain territories.
territories, as well as a contract development manufacture agreement with SLS, under which SLS manufactures and supplies finished vaccine product to us using antigen drug substance and Matrix-M™ adjuvant supplied by us. In May and August 2022, we expanded our license and supply arrangements with SIIPL to include our proprietary COVID-19 variant antigen candidate(s), our quadrivalent influenza vaccine candidate, and our CIC vaccine candidate, so that SIIPL can manufacture and commercialize a vaccine targeting COVID-19 variants, including the Omicron subvariants, a quadrivalent influenza vaccine, and CIC vaccine, and supply such vaccines to us. In March 2020, we granted SIIPL a non-exclusive license for the use of Matrix-M™ adjuvant supplied by us to develop, manufacture, and commercialize R21, a malaria candidate developed by the Jenner Institute, University of Oxford.
Takeda
In February 2021, we finalizedWe have a collaboration and license agreement with Takeda under which we granted Takeda an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in Japan. Under the agreement, Takeda purchases Matrix-M™ adjuvant from us to manufacture doses of finished NVX-CoV2373 and we are entitled to receive payments from Takeda based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of NVX-CoV2373. In September 2021, Takeda finalized an agreement with MHLWthe Government of Japan’s Ministry of Health, Labour and Welfare ("MHLW") for the purchase of 150 million doses of NVX-CoV2373. The announcement followed an updateIn February 2023, MHLW cancelled the remainder of doses under its agreement with Takeda. As a result, it is uncertain whether we will receive future payments from MHLW on its ongoing efforts to secure coronavirus vaccine for the citizens of Japan. These efforts include vaccine procurement by Takeda pursuant tounder the terms and conditions of theour current collaboration and license agreement we entered into with Takeda in February 2021. Distribution of our vaccine in Japan by Takeda is expected to begin in 2022, pending regulatory approval. Takeda anticipates the capacity to manufacture 150 million doses of NVX-CoV2373 per year.
licensing agreement.
SK bioscience
In February 2021, we finalized an expandedWe have a collaboration and license agreement with SK bioscience to manufacture and commercialize NVX-CoV2373 for sale to the governmentgovernments of Korea. Concurrently,South Korea, Thailand, and Vietnam. SK bioscience finalized an advance purchase agreement with the Korean government to supply 40 million doses of NVX-CoV2373 to the Republic of Korea beginning in 2021. Our agreement is in addition to our existing manufacturing arrangement with SK bioscience entered into in August 2020. Under the collaboration agreement, SK bioscience was granted an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in the Republic of Korea. SK bioscience will paypays a tiered royalty in the low to middle double-digit range on the sale of NVX-CoV2373 in the Republic of Korea. In May 2021,range. Additionally, we enteredhave a non-binding
Memorandum of Understanding (“MOU”) with the Ministry of Health and Welfare of Korea and SK bioscience to explore further cooperation in the development and manufacturing of vaccines, including NVX-CoV2373 and to potentially explore the development of new vaccine productssupply arrangement with SK bioscience including COVID-19 variant vaccines and/or an influenza/COVID-19 combination vaccine. In December 2021, we amended the collaboration and license agreement to grant a non-exclusive license to cover Thailand and Vietnam, subject to a low to middle double-digit royalty, and forunder which SK biosciences to supplybioscience supplies the antigen component of NVX-CoV2373 to us for use in the final drug product globally, including product distributed by the COVAX Facility.Facility, which was established to allocate and distribute vaccines equitably to participating countries and
economies. In July 2022, we signed an additional agreement with SK bioscience for the technology transfer of our proprietary COVID-19 variant antigen materials so that SK bioscience can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants. We also have an agreement with SK bioscience, pursuant to which it supplies us with our COVID-19 vaccine in a prefilled syringe.
Manufacturing and Supply
We are committed to discovering, developing, and commercializing innovative vaccines to prevent serious infectious diseases and are exploring a number of combination vaccine candidates, including a COVID-influenza combinationCIC vaccine, directly and by leveraging our strategic global partnerships. In 2021 and 2020, we established a global supply chain and worldwide partnerships to support the commercialization of NVX-CoV2373. The acquisition of Novavax CZ (formerly Praha Vaccines, a.s.) in the Czech Republic in May 2020 demonstrated the Company’s first major step toward building outIn 2022, we modified and continued to assess our manufacturing needs and our global manufacturing capabilities. Since May 2020, we have established partnerships worldwidefootprint consistent with our contractual obligations to amplifysupply, and solidify our global reach.
To date, we have increased our projected global manufacturing production rate of NVX-CoV2373 to be over two billion annualized doses when we are at full capacity. Of this anticipated capacity, approximately one billion doses will be manufactured by SIIPL.
demand for NVX-CoV2373.
A summary of our key manufacturing and supply arrangements follows:
Matrix-MTM Adjuvant
We manufacture our proprietary saponin-based Matrix-M™ adjuvant at our Novavax AB facility in Uppsala, Sweden.
In June 2020, we entered into We also have contract manufacturing arrangements with AGC Biologics and the Polypeptide Group to provide contract development and manufacturing services, supplying us with large-scale production of Matrix-M™ adjuvant.
Antigen Component of NVX-CoV2373
In October 2021, we entered intoWe manufacture the antigen component of NVX-CoV2373 at our Novavax CZ facility in the Czech Republic.
We have a supply agreement with SIIPL and SLS, an affiliate of SIIPL, for the manufacture of NVX-CoV2373.the antigen component of NVX-CoV2373 and the co-formulation, fill, and finishing of the finished vaccine product. In October 2021,May and August 2022, we also entered intoexpanded our license and supply arrangements with SIIPL to include our proprietary COVID-19 variant antigen candidate(s), our quadrivalent influenza vaccine candidate, and our CIC vaccine candidate, so that SIIPL can manufacture and commercialize a vaccine targeting COVID-19 variants, including the Omicron subvariants, a quadrivalent influenza vaccine, and CIC vaccine, and supply such vaccines to us.
Additionally, we have a manufacturing supply arrangement with SK bioscience under which SK bioscience supplies us with the antigen component of NVX-CoV2373 for use in the final drug product globally. In July 2022, we signed an additional agreement with SK bioscience for the technology transfer of our proprietary COVID-19 variant antigen materials so that SK bioscience can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants.
We have a partnership with FUJIFILM Diosynth Biotechnologies through an agreement for long-term commercial manufacturing of NVX-CoV2373, under which it manufactures the antigen component of NVX-CoV2373 at its Billingham, UK site.
We have an arrangement with the National Research Council of Canada (“NRCC”) for the ongoing technology transfer for the production of NVX-CoV2373 at the NRCC’s Biologics Manufacturing Centre. Engineering runs are currently underway at the facility and, once complete, process performance qualification and large-scale GMP production can begin.
Finished NVX-CoV2373
In addition to the supply agreement with SIIPL and SLS for the co-formulation, fill, and finishing of the finished vaccine product, we have a contract development manufacture agreement with SLS, wherepursuant to which SLS will manufacture and supply finished vaccine product to us using antigen drug substance and Matrix-M™ adjuvant supplied by us.
In October 2021, we entered into a contract manufacturing We currently depend exclusively on SIIPL and SLS for co-formulation, filling, and finishing NVX-CoV2373. We also have an agreement with Mabion S.A. (“Mabion”) for the large-scale manufacturing of NVX-CoV2373 through 2026. This agreement follows the successful completion of technology transferSK bioscience, pursuant to Mabion for antigen production of NVX-CoV2373. We are scaling up manufacturing of NVX-CoV2373 at Mabion’s Good Manufacturing Practice-certified facility located near Warsaw, Poland.
In August 2021, we extendedwhich it supplies us with our partnership with FUJIFILM Diosynth Biotechnologies through an agreement for long-term commercial manufacturing of NVX-CoV2373 through 2025. Under this agreement, FUJIFILM Diosynth Biotechnologies has continued to manufacture the antigen component of NVX-CoV2373 at its sitesCOVID-19 vaccine in Morrisville, North Carolina, College Station, Texas, and Billingham, UK. This development follows a previous manufacturing agreement with FUJIFILM Diosynth Biotechnologies, which we entered into in July 2020.
In June 2021, we announced the completion of construction of the National Research Council of Canada’s Biologics Manufacturing Centre and ongoing technology transfer for the production of NVX-CoV2373. Technology transfer to establish a step-by-step process of producing NVX-CoV2373 at the Biologics Manufacturing Centre began in April 2021 following a collaboration agreement entered into with the National Research Council of Canada in March 2021. These developments build upon a MOU entered into in February 2021 with the Canadian government to produce NVX-CoV2373 atprefilled syringe.
the Biologics Manufacturing Centre in Canada. Large-scale GMP production is expected to begin once the facility has received Health Canada approval.
Pursuant to our APA with Gavi, we have licensed our NVX-CoV2373 technology to SIIPL and are jointly committed with SIIPL to deliver the 1.1 billion doses to the COVAX Facility. We expect to supply doses to Gavi utilizing a tiered pricing schedule.
In July 2020, we announced a manufacturing agreement with FDB allowing for the large-scale contract production of NVX-CoV2373 in connection with our OWS Agreement, beginning at FDB’s North Carolina facility.
Competition in COVID-19, Influenza, and RSV
The vaccine market is intensely competitive, characterized by rapid technological progress. Our technology is based upon utilizing the baculovirus expression system in insect cells to make recombinant vaccines. Our Matrix-M™ adjuvant has demonstrated a potent and well-tolerated effect by stimulating the entry of antigen-presenting cells into the injection site and enhancing antigen presentation in local lymph nodes, boosting immune response. We believe this baculovirus expression system with our nanoparticle configuration formulated with our Matrix-M™ adjuvant offers many advantages such as enabling dose-sparing effects and refrigerator temperature storage when compared to other technologies creating a best-in-class vaccine, and is uniquely well-suitedwell suited for developing COVID-19, influenza, and RSV vaccines, as well as vaccines against a number of other infectious diseases.
A number of vaccine manufacturers, research institutions, and other organizations are developing a vaccine for SARS-CoV-2, the virus that causes COVID-19 disease.COVID-19. A variety of different vaccine technologies are being studied, including nucleic acid (RNA/DNA), viral vectors, live attenuated or inactivated, and protein-based vaccines. According to a coronavirus vaccine tracker published by The New York Times, updated as of February 23,August 31, 2022, there are 11533 vaccines approved for limited or full use and 123 vaccines in clinical trialstrials. Novavax is the first protein-based COVID-19 vaccine that received EUA by the FDA and 49 have reacheda CMA by EMA in the final stages of testing.European Union. As of January 2022,February 2023, Novavax is one of fivefour manufacturers that have a COVID-19 vaccine that has received Conditional Marketing AuthorizationEUA by the EMA in the European Union,FDA, with the other manufacturers being Pfizer, Moderna, and Johnson & Johnson and AstraZeneca.Johnson. As of January 2022,February 2023, Pfizer hasand Moderna have received BLA approval by the FDA in the U.S. for their monovalent COVID-19 vaccines and Moderna and Johnson & Johnson have each received EUA by the FDA in the U.SU.S. for their bivalent COVID-19 vaccines. As of January 2022, we submitted forNovavax and Johnson & Johnson have received EUA by the FDA in the U.S. for NVX-CoV2373, marking the first protein-based COVID-19 vaccine filing.their monovalent vaccines. Based on NVX-CoV2373’s high efficacy against both the original and variant strains and its well-tolerated profile demonstrated in clinical trials, including two pivotal Phase 3 trials in the U.K. and U.S., we believe our vaccine candidate will continue to play an important role in addressing this global public health crisis.
A number of companies are developing and selling vaccines for seasonal influenza employing both traditional (egg-based) and new vaccine technologies (cell-based). Many seasonal influenza vaccines are currently approved and marketed, and most of these are marketed by major pharmaceutical companies such as Sanofi, Pasteur, GSK, and Seqirus. Competition in the sale of seasonal influenza vaccines is intense. For the older adult segment Sanofi currently suppliesin the U.S., the CDC preferentially recommends Fluzone-HD® and Flublok® to the majority of older adults in the U.S.manufactured by Sanofi and Fluad® manufactured by Seqirus. Therefore, newly developed and approved products must be differentiated from existing vaccines in order to have commercial success. In order to show differentiation in the seasonal influenza market, a product may need to be more efficacious and/or be less expensive and quicker to manufacture, all while still showing a comparable or improved tolerability profile. Many of our competitors are working on new products and new generations of current products, some by adding an adjuvant that is used to increase the immunogenicity of that product, each of which is intended to be more efficacious than currently marketed products. Several competitors are working on developing seasonal influenza vaccines using different technologies than those in existing marketed vaccines, the most notable being mRNA.mRNA from companies including Sanofi, Moderna, and Pfizer. Despite the significant competition and advancing technologies, based on our completed Phase 3 and Phase 1/2 trial results, we believe that NanoFluour Influenza Program, our adjuvanted nanoparticle seasonal influenza product, could be as efficacious as, or more so than, current products or products being developed by our competitors.
Additionally, we believe that our platform is well suited for combination vaccines, for example influenza and COVID-19. Following our Phase 1/2 trial results, we are currently in a Phase 2 trial for our CIC and influenza standalone vaccine candidates to evaluate the safety and effectiveness (immunogenicity) of different formulations in adults aged 50 through 80. Other manufacturers, most notably Moderna and Pfizer, are in Phase 1/2 and Phase 1 clinical trials with COVID-19-influenza combination candidates.
There is currently no approved RSV vaccine for sale in the world; however, a number of vaccine manufacturers, academic institutions, and other organizations currently have, or have had, programs to develop such a vaccine. These groups are developing products to prevent disease caused by RSV using a variety of technology platforms, including viral vectors, nucleic acid (RNA/DNA)(“RNA/DNA”), live attenuated chimeric, antigens or monoclonal antibodies (“Mab”), and competitive recombinant technologies. We continue to believe that our updated RSV F Vaccine candidate, which is a recombinant prefusogenic F-protein nanoparticle, is likely to be as effective as other RSV vaccine candidates or other products in development by our competitors. At this time, there are a number of companies and other organizations with vaccine candidates in late-stage clinical trials. In older adults, GSK, Pfizer, and Moderna have announced data from their Phase 3 studies, with GSK and Pfizer completing regulatory submission to the FDA in the U.S. with Prescription Drug User Fee Act (“PDUFA”) dates in May 2023 and Moderna planning regulatory submission to the FDA in the first half of 2023. Janssen and Bavarian Nordic currently are in
Phase 3 trials. GSK andIn infants Pfizer both are inannounced Phase 3 trialsdata and completed regulatory submission to the FDA for infantstheir vaccine candidate via maternal immunization.immunization and have a PDUFA date in August 2023. Additionally, both thein infants, AstraZeneca / Sanofi partnered monoclonal antibody is approved in Europe and Merckhas a PDUFA date with the FDA in the U.S. in the third quarter of 2023, and Merck’s monoclonal antibody areis in Phase 3 trials in infants.
trials.
In general, competition among pharmaceutical products is based in part on product efficacy, safety, reliability, availability, price, and patent position. An important factor is the relative timing of the market introduction of our products and our competitors’ products. Accordingly, the speed with which we can develop products, complete the clinical trials and
approval processes, and supply commercial quantities of the products to the market is an important competitive factor. Our competitive position also may depend upon our ability to show differentiation with a product that is more efficacious and/or less expensive and quicker to manufacture. Other factors affecting our competitive position include our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes, and secure sufficient capital resources for the lengthy period between technological conception and commercial sale.
Patents and Proprietary Rights
We generally seek patent protection for our technology and product candidates in the U.S. and abroad. The patent position of biotechnology and pharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. Our success will depend, in part, on whether we can:
•obtain patents to protect our own technologies and product candidates;
•obtain licenses to use the technologies of third-parties, which may be protected by patents;
•protect our trade secrets and know-how; and
•operate without infringing the intellectual property and proprietary rights of others.
Patent Rights; Licenses.
We have intellectual property (patents, licenses, know-how) related to our vaccines, manufacturing processes, and other technologies. Currently, we have or have rights to over 550 U.S. and foreign patents and patent applications relating to vaccines and vaccine-related technologies.
Patents related to our Virus-Like Particle (“VLP”) program include U.S. Patent No. 7,763,450, which covers, in part, the use of influenza gene sequences for high-yield production of consistent influenza VLP vaccines to protect against current and future seasonal and pandemic strains of influenza viruses. Corresponding European patent, European Patent No. 1644037 also covers this technology. U.S. Patent Nos. 8,080,255, 8,551,756, 8,506,967 and 8,592,197 are directed to methods of producing VLPs and inducing substantial immunity to an influenza virus infection by administering VLPs comprising HA and NA proteins, and our M1 protein derived from the avian influenza strain, A/Indonesia/5/05. Certain claims also encompass similar methods and compositions where the M1 protein is from a different strain of influenza virus than the influenza HA protein and the influenza NA protein. Related patent protection in Europe is provided by European Patent No. 2343084, which covers, in part, vaccine compositions containing VLPs that contain M1, HA, and NA proteins. Our VLP patent portfolio contains many other patents, including U.S. Patent Nos. 8,951,537, 8,992,939, 9,144,607, 9,050,290, 9,180,180, 9,381,239, 9,464,276, 9,474,799, and other patents in multiple ex-U.S. jurisdictions.
We also have been issued patents directed to other core programs, including our RSV and influenza programs. Issued patents directed to various aspects of the RSV program include U.S. Patent Nos. 8,715,692, 9,675,685, 9,731,000, 9,717,786, 10,022,437, 10,426,829, and 10,426,829.11,253,585. Additional patents in the family include EP237009 in Europe, as well as others throughout the world. Patents related to our rabies program include 9,724,405 and 10,086,065 in the U.S., and EP2635257 and EP3246019 in Europe. Related patents have been issued in other world markets. Issued patents in our influenza nanoparticle program include US Patent No. 10,426,829.Nos. 11,364,294 and 11,278,612. In addition to our focus on vaccine programs, we also pursue patent protection for our Matrix Adjuvant program. Issued U.S. Patent Nos. 7,838,019, 9,205,147, 9,901,634, 8,821,881, and 10,729,764 provide examples of patents related to our Matrix Adjuvant program.
We pursue patents related to our COVID-19 vaccine program, including to NVX-CoV2373, our COVID-19 vaccine candidate. OurIssued U.S. Patent Nos. 10,953,089, 11,253,586, 11,541,112 provide examples of patents related to our COVID-19 program.
We also have four pending PCT applications includedirected to our COVID program (PCT/US2022/020974, PCT/US2021/015220US2022/080700, PCT/US2022/082331 and U.S. Serial No. 16,997,001, which the U.S Patent Office has allowed.PCT/US2022/027465) and two pending PCT applications directed to our malaria program (PCT/US2022/078665 and PCT/US2022/080334).
We continue to prepare, file, and prosecute patent applications to provide broad and strong protection of our proprietary rights, including next generation applications focused on our RSV Program, our influenza nanoparticle program, our COVID-19 program, and our adjuvant program.
The Federal Technology Transfer Act of 1986 and related statutory guidance encourages the dissemination of science and technology innovation. While our expired contract with the U.S. Department of Health and Human Services (“DHHS”), Biomedical Advanced Research and Development Authority (“HHS BARDA”) provided us with the right to retain ownership in our inventions that may have arisen during performance of that contract, with respect to certain other collaborative research efforts with the U.S. government, certain developments and results that may have commercial potential are to be freely published, not treated as confidential, and we may be required to negotiate a license to developments and results in order to commercialize products. There can be no assurance that we will be able to successfully obtain any such license at a reasonable cost, or that such development and results will not be made available to our competitors on an exclusive or non-exclusive basis.
Trade Secrets
We also rely significantly on trade secret protection and confidentiality agreements to protect our interests. It is our policy to require employees, consultants, contractors, manufacturers, collaborators, and other advisors to execute confidentiality agreements upon the commencement of employment, consulting, or collaborative relationships with us. We also require confidentiality agreements from any entity that is to receive confidential information from us. With respect to employees, consultants, and contractors, the agreements generally provide that all inventions made by the individual while rendering services to us shall be assigned to us as our property.
Government Regulations
The development, production, and marketing of biological products, which include the vaccine candidates being developed by Novavax or our collaborators, are subject to regulation for safety, efficacy, and quality by numerous governmental authorities in the U.S. and other countries. Although weWe focus on the U.S. regulatory process and the standards imposed by the FDA, the International Conference onCouncil for Harmonisation (“ICH”), and other agencies because we believe meeting U.S. and ICH standards generally allows us to also satisfy regulatory agenciesagencies’ standards in other countries where we intend to do business; however,business. However, we are mindful that expectations in some venues, notably in the European Union and the United Kingdom (in relation to Great Britain), differ to some degree and we take proactive steps to address such differences by maintaining regular filings and correspondence and attending regular meetings with many other non-U.S. regulatory agencies. In the U.S., the development, manufacturing, and marketing of human pharmaceuticals and vaccines are subject to extensive regulation under the Federal Food, Drug, and Cosmetic Act, and biological products are subject to regulation under provisions of that act and the Public Health Service Act. The FDA not only assesses the safety and efficacy of these products but it also regulates, among other things, the testing, manufacture, labeling, storage, record-keeping, advertising, and promotion of such products. The process of obtaining FDA licensure for a new vaccine is costly and time-consuming.
Vaccine clinical development in most countries follows the same general regulatory pathway as drugs and other biologics. Before applying for FDA licensure to market any new vaccine candidate, we expect to first submit an investigational new drug application (“IND”) that explains to the FDA, among other things, the results of preclinical toxicology testing conducted in laboratory animals, the method of manufacture, quality control tests for release, the stability of the investigational product, and what we propose to doour proposed plans for human testing. At this stage, the FDA decides whether it is reasonably safe to move forward with testing the vaccine candidate in humans. We must then conduct Phase 1 clinical trials and larger-scale Phase 2 and 3 clinical trials that demonstrate the safety, immunogenicity, and efficacy of our vaccine candidate to the satisfaction of the FDA. Following successful completion of all three phases of clinical development, a BLA can be submitted to the FDA requesting licensure of the vaccine for marketing based on the vaccine’s safety and efficacy. Similar pathways exist in Europe and other geographies.
The FDA will only approve a BLA if the vaccine is demonstrated to be safe, pure, and potent. During the FDA’s review of a BLA, the proposed manufacturing facility undergoes a pre-approval inspection during which the FDA examines in detail the production of the vaccine, the manufacturing facility, and the quality documentation related to the vaccine. Vaccine licensure also requires the provision of adequate product labeling to allow health care providers to understand the vaccine’s proper use, including its potential benefits and risks, to communicate with patients and parents, and to safely deliver the vaccine to the public. Until a vaccine is given to the general population, all potential adverse events cannot be anticipated. Thus, the FDA typically requires Phase 4 post-marketing clinical trials for vaccines after licensure to continue gathering safety, and sometimes effectiveness/efficacy data in the indicated and additional populations.
The Commissioner of the FDA may, under delegated authority fromfollowing the issuance of an appropriate declaration by the Secretary of the DHHS, and under certain circumstances, issue an EUA that would permit the use of an unapproved medical product or unapproved use of an approved medical product to diagnose, treat, or prevent serious or life-threatening diseases or conditions when there are no adequate, approved, and available alternatives. When issuing an EUA, the FDA imposes conditions of authorization, with which the EUA holder must comply. Such conditions include, but may not be limited to, compliance with labeling, distribution of materials designed to ensure proper use, reporting obligations, and restrictions on advertising and promotion. The EUA is only effective for the duration of the public health emergency.declaration issued by the Secretary of the DHHS that EUAs are appropriate. The FDA may also revise or revoke the EUA sooner if the criteria for issuance are no longer met or other circumstances make a revision or revocation appropriate to protect the public health or safety. For example, an EUA may be revoked when the FDA determines that the underlying public health emergencythreat no longer exists or warrants such authorization, or for reasons such as significant adverse inspectional findings, reports of adverse events linked to or suspected of being caused by the EUA product, or newly emerging data that may demonstrate the product may not be effective. An EUA is separate from and not dependent on the issuance of a public health emergency (“PHE”) by the Secretary of the DHHS. Therefore, although the Biden Administration has announced that it intends for the COVID-19 PHE, first declared in February 2020, to expire on May 11, 2023, that expiration will not terminate EUAs issued by the FDA.
In order to ensure continuing safety, the FDA and most other non-U.S. based regulatory agencies continue to oversee the production of vaccines even after the vaccine and manufacturing processes are approved. For example, monitoring of the vaccine and of production activities, including periodic facility inspections, must continue as long as the manufacturer holds a license for the product. Manufacturers may also be required to submit the results of their own tests for
potency, safety, and purity for each vaccine lot, if requested by the relevant regulatory agency. They may also be required to submit samples of each vaccine lot to the agency for testing.
In addition to obtaining FDA licensure for each product, each domestic manufacturing establishment must be registered with the FDA, is subject to FDA inspection, and must comply with current Good Manufacturing Practices (“GMP”) regulations. To supply products for use either in the U.S. or outside the U.S., including clinical trials, U.S. and foreign manufacturing establishments, including third-party facilities, must comply with GMP regulations and are subject to periodic inspection by the FDA or by corresponding regulatory agencies in their home country.
The EU and the U.K. similarly provide a faster means to achieve approval by offering conditional marketing authorizations whichCMA to fulfil unmet medical needs. CMAs are granted with the proviso of obtaining additional comprehensive data to confirm the benefit/risk so that the marketing authorization will eventually become unconditional, but which allow authorizationunconditional. The benefit to be granted earlier albeit with a more limited setpublic health of clinical data.the immediate availability on the market of the medicinal product concerned should outweigh the risk inherent in the fact that additional data are still required.
The FDA has several programs designed to expedite the development and approval of drugs and biological products intended to treat serious or life-threatening diseases or conditions, including fast track designation, breakthrough therapy designation, priority review designation, and accelerated approval. First, the FDA may designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition and demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have more frequent interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before the application is complete. The FDA granted Fast Track Designation for NVX-CoV2373 in November 2020 and for NanoFlu, our recombinant quadrivalent seasonal influenza vaccine candidate, in January 2020.
Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The FDA may hold meetings with the sponsor throughout the development process;process, provide timely advice to the
product sponsor regarding development and approval;approval, involve more senior staff in the review process;process, assign a cross-disciplinary project lead for the review team;team, and take other steps to design the clinical trials in an efficient manner.
Third, the FDA may designate a product for priority review if it is a product that treats a serious disease or life-threatening condition and, if approved, would provide a significant improvement in safety or effectiveness over available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and, for a drug product (including a vaccine), to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
Fourth, a product may be eligible for accelerated approval, if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies. In addition, it must demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality or IMM(“IMM”) that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials to confirm efficacy using a clinically meaningful endpoint, thereby confirming efficacy observed pre-approval using a surrogate endpoint. In June 2019, we announced that the FDA acknowledged that the accelerated approval pathway is available for NanoFlu.
In addition to regulatory approvals that must be obtained in the U.S., an investigational product is also subject to regulatory approval in other countries in which it is intended to be marketed. No such product can be marketed in a country until the regulatory authorities of that country have approved an appropriate marketing application. FDA licensure does not guarantee approval by other regulatory authorities. In addition, in many countries, the government is involved in the pricing of the product. In such cases, the pricing review period often begins after market approval is granted.
We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other present and potential federal, state, or local regulations, including national and local regulations that govern our facility in Sweden. These and other laws govern our use, handling, and disposal of various biological and chemical substances used in, and waste generated by, our operations. Our research and development involves the controlled use of hazardous materials, chemicals, and viruses. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources. Additionally, for formulations containing controlled substances, we are subject to Drug Enforcement Act regulations.
In both domestic and foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payers. Third-party payers include government authorities or programs, private health insurers (including managed care plans), and other organizations. These third-party payers are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the product is approved by the FDA or similar regulatory authorities outside the United States. Our product candidates may not be considered cost-effective at certain prices. Adequate third-party reimbursement may not be available in certain markets to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Third-party payors may also control access to, or manage utilization of, our products with various utilization management techniques. Decreases in third-party reimbursement for our product candidates or a decision by a third-party payer to not cover our product candidates could reduce physician utilization of our products and have a material adverse effect on our sales, results of operations, and financial condition.
Within the U.S., if we obtain appropriate approval in the future to market any of our product candidates, those products could potentially be covered by various government health benefit programs as well as purchased by government agencies. The participation in such programs or the sale of products to such agencies is subject to regulation. In exchange for coverage, we may be obligated to provide rebates or offer discounts under government health programs or to government and private purchasers.
The U.S. and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, health care, including initiatives to reduce the cost of healthcare. For example, in March 2010, the U.S. Congress enacted the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (“Healthcare Reform Act”) which includes changes to the coverage and reimbursement of drug products under government health care programs. Under the Trump administration, there were several efforts to modify or repeal all or certain provisions of the Healthcare Reform Act, and some modifications were implemented. Adoption of price controls and cost-containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures could further limit our net revenue and results.
Other legislative changes have been proposed and adopted in the United States since the Healthcare Reform Act was enacted. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2030 due to subsequent legislative amendments contained in the Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the “CARES Act”.Act.” In November 2020, the Centers for Medicare and Medicaid Services (“CMS”) issued an interim final rule that seeks to lower prescription drug costs by paying no more for certain Medicare Part B drugs than the lowest price paid for such drugs in certain other countries (the "Most“Most Favored Nation Rule”). Under the rule, the lower payment rates for affected drugs would be phased in over a period of four years, beginning in 2021. The rule has been challenged by industry associations on a number of grounds. On December 28, 2020, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction in Biotechnology Innovation Organization v. Azar, No. 3:20-cv-08603, which preliminarily enjoins CMS from implementing the Most Favored Nation Rule. Given this preliminary injunction, the Most Favored Nation Rule was not implemented on January 1, 2021 and will not be implemented without further rule-making. However, this interim final rule or any similar type of reference pricing regulation could potentially harm our business if expanded to include our products.
Recently, there has been considerable public and government scrutiny in the U.S. of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals. There have also been several recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices or price increases. Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates if approved for sale. It is also possible that additional governmental action will be taken in response to the COVID-19 pandemic. We cannot predict the ultimate content, timing, or effect of any federal and state reform efforts. There is no assurance that federal or state health care reform will not adversely affect our future business and financial results.
Similarly, in many countries outside the U.S., pharmaceutical pricing is subject to regulatory control, particularly in countries where healthcare is provided mainly through government funding or government backed insurers. In such countries governmental organizations will generally determine firstly if a medicinal product might be reimbursed and secondly the maximum price payable.
Within the U.S., we may be subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws, for activities related to future sales of any of our product candidates that may in the future receive regulatory and marketing approval. Anti-kickback laws generally prohibit a pharmaceutical manufacturer from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase, prescription, or use of a particular drug. Although the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance, or court decisions that apply the laws to particular industry practices. There is therefore a possibility that our practices might be challenged under such anti-kickback laws. False claims laws, including the federal False Claims Act (“FCA”), prohibit anyone from knowingly and willingly presenting, or causing to be presented, any claims for payment for reimbursed drugs or services to third party payers (including Medicare and Medicaid) that are false or fraudulent. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal or civil sanctions, including fines and civil monetary penalties, and exclusion from federal health care programs (including Medicare and Medicaid). In the U.S., federal and state authorities are paying increased attention to enforcement of these laws within the pharmaceutical industry and private individuals have been active in alleging violations of the laws and bringing suits on behalf of the government under the FCA. If we were subject to allegations concerning, or were convicted of violating, these laws, our business could be harmed.
On November 20, 2020, the DHHS published a Final Rule entitled “Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection,” commonly referred to as the “Rebate Rule”,Rule,” which amends the federal Anti-Kickback Statute discount safe harbor by eliminating protection for price concessions, including rebates, that are offered by pharmaceutical manufacturers to plan sponsors, or pharmacy benefit
managers under contract with them, under the Medicare Part D program and Medicare Advantage Plans, unless the price reduction is one required by law. Effective January 1, 2022, in advance of the calendar year 2022 Part D plan year, safe harbor protection will be eliminated for manufacturer rebates paid directly (or indirectly through a pharmacy benefit manager) to Part D prescription drug plans and Medicare Advantage prescription drug plans. Effective December 30, 2020, the Rebate Rule established two new safe harbors. The first new safe harbor protects price reductions paid by manufacturers to prescription drug plans (including prescription drug plans offered by Medicare Advantage organizations) and Medicaid managed care organizations, which are fully reflected at the point-of-sale. The second new safe harbor protects fair-market-value service fees paid to pharmacy benefit managers by manufacturers. This new rule could result in a change in incentives for health plans and pharmacy benefit managers in negotiating rebates and discounts with manufactures for preferred formulary placement. At this time we cannot predict how these changes willmay impact our business and operations onceif our product candidatesproducts are commercialized.
commercialized in the U.S.
Within the European Union and the United Kingdom, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order, or use of medicinal products is prohibited. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of EU Member States and the United Kingdom, such as the U.K. Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.
We are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits any U.S. individual or business from paying, offering, authorizing payment of, or offering anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. Various laws, regulations, and executive orders also restrict the use and dissemination outside the U.S. or the sharing with certain non-U.S. nationals of information classified for national security purposes, as well as certain products and technical data relating to those products. As we expand our presence outside the U.S., it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside the United States, which could limit our growth potential and increase our development costs. We cannot guarantee that we, our employees, our consultants, or our third-party contractors are or will be in compliance with all federal, state, and foreign regulations regarding bribery and corruption. Moreover, our strategic collaborators and third-party contractors located outside the U.S. may have inadequate compliance programs or may fail to respect the laws and guidance of the territories in which they operate. The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission (“SEC”) also may suspend or bar issuers from trading securities on
U.S. exchanges for violations of the FCPA’s accounting provisions. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition, and results of operations.
The Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors,payors; knowingly and willfully embezzling or stealing from a healthcare benefit program,program; willfully obstructing a criminal investigation of a healthcare offense,offense; and knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their implementing regulations, impose requirements regarding the privacy and security of individually identifiable health information, including mandatory contractual terms, for covered entities, or certain healthcare providers, health plans, and healthcare clearinghouses, and their business associates that provide services to the covered entity that involve individually identifiable health information and their subcontractors that use, disclose, or otherwise process individually identifiable health information. HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA. While pharmaceutical
and biotechnology companies are typically not directly regulated by HIPAA, our business may be indirectly impacted by HIPAA in our interactions with providers, payors, and others that have HIPAA compliance obligations. We are also subject to state and foreign laws governing the privacy and security of health or personal information such as the European Union General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 (“CCPA”).
There has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Physician Payments Sunshine Act imposes annual reporting requirements on certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, for payments made by them to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers will also be required to report information related to payments and other transfers of value provided in the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives.
Within the European Union and the United Kingdom, payments made to physicians must be publicly disclosed. Moreover, agreements with physicians must in some countries be the subject of prior notification and approval by the physician’s employer, their competent professional organization, or the regulatory authorities of the individual country. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.
Laws and regulations have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers with marketed products. The laws and regulations generally limit financial interactions between manufacturers and health care providers and/or require disclosure to the government and public of such interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, any future activities (if we obtain approval and/or reimbursement from federal healthcare programs for our product candidates) could be subject to challenge.
Given the significant global impact of the COVID-19 pandemic, it is possible that one or more government entities may take actions, including the U.S. government under the Defense Production Act of 1950, as amended, which could directly or indirectly have the effect of diminishing some of our rights or opportunities with respect to NVX-CoV2373 and the economic value of a COVID-19 vaccine to us could be limited. In addition, during a global health crisis, such as the COVID-19 pandemic, where the spread of a disease needs to be controlled, closed or heavily regulated national borders will create challenges and potential delays in our development and production activities and may necessitate that we pursue strategies to develop and produce our vaccine candidates within self-contained national or international borders, at potentially much greater expense and with longer timeframes for public distribution.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize anycommercialization of our products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing, or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. In the United States, the Public
Readiness and Emergency Preparedness Act (the “PREP Act”), when applicable, provides immunity for manufacturers from all claims under state or federal law for "loss"“loss” arising out of the administration or use of a “covered countermeasure.” However, injured persons may still bring a suit for "willful misconduct"“willful misconduct” against the manufacturer under some circumstances. "Covered countermeasures"“Covered countermeasures” include security countermeasures and "qualified“qualified pandemic or epidemic products",products,” including products intended to diagnose or treat pandemic or epidemic disease, such as pandemic vaccines, as well as treatments intended to address conditions caused by such products. For these immunities to apply, the Secretary of DHHS must issueinvoke the PREP Act by issuing a declaration in cases ofthat a public health emergency or “credible risk” of a future public health emergency.emergency exists. On March 17, 2020, the Secretary of DHHS issued a declaration under the PREP Act and has issued subsequent amendments thereto since then to provide liability immunity for activities related to certain countermeasures against the ongoing COVID-19 pandemic. The current declaration will end on October 1, 2024, unless it is renewed. While we believe our products would be covered under the provisions of thecurrent PREP Act declaration, this cannot be assured.
Also, there can be no assurance that the Secretary of the HHS will make other declarations in the future that cover any of our other product candidates or that the U.S. Congress will not act in the future to reduce coverage under the PREP Act or to repeal it altogether. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
Human Capital
Employees
As of February 21, 2022,2023, we have 1,5411,992 full-time employees, of whom 198approximately 9% hold M.D. or Ph.D. degrees and 499 of whomapproximately 21% hold other advanced degrees. Of our total workforce, 1,088approximately 63% of employees are engaged primarily in research, development, and manufacturing activities and 453approximately 37% of employees are engaged primarily in executive, business development, commercial, finance and accounting, legal, and administrative functions. NoneExcept for certain employees located in Sweden, who are covered by collective agreements with trade unions pursuant to local law, none of our U.S. or Czech employees are represented by a labor unionsunion or covered byworks council and none of our employees have entered into a collective bargaining agreements; 135 of our 136 Swedish employees are covered by typical collective bargaining agreements.
agreement with us.
To nurture, grow, and treat our employees fairly is imbued inan integral part of our culture. We are proud to have been recognized in the 2021 Top Workplaces USA list based on employee surveys. We believe this award reflects our investment in an exceptional work culture.
Employee Safety and Benefits
Well-Being
Employee safety is our highest priority. As we moved through the pandemic in 2021,2022, we continued to encourage employees who were able to work from home to do so. We have continued to follow all CDC guidelines related to COVID-19 safety. In addition, we implemented our Ways of Working guidelines, which allow employees the flexibility to work remotely either full time or in a Covidhybrid manner to provide employees with continued flexibility based on business needs. We provide employees with updated information on COVID-19 through our COVID-19 Resources page on our intranet, whichintranet. This resource provides employees with information on Covid-19COVID-19 safety, both inside and outside of the workplace. Resources on this site include our Covid-19COVID-19 Protocols and Guide, our policies on face coverings and social distancing, a list of infection control measures, and mental wellness support resources. We implemented temperature screenings for everyone who enters our facilities and require visitors to complete a health assessment before entering.
Our 700 Quince Orchard office space located in Gaithersburg, Maryland is on track to receivereceived WELL Platinum certification.certification in 2022. WELL is the leading tool for advancing health and well-being in buildings globally. As one of 35 WELL certified buildings in North America, this building will meet rigorous standards for materials selection, indoor air quality, and acoustics. In addition, our operations and policies contribute to earning high marks in all of the 10 WELL Concepts: Air, Water, Nourishment, Light, Movement, Thermal Comfort, Sound, Materials, Mind, and Community.
Compensation and Benefits; Health and Wellness
Our total rewards package is designed to attract, engage, motivate, and retain top talent. We strive to provide compensation, benefits, and services that help meet the varying needs of our employees. Our generous total rewards package includes competitive market pay and comprehensive benefits, that are among the best in our industry, including insurance to protect and maintain health,health; income protection through our short- and long-term disability programs,programs; adoption assistance and paid parental leave programs,programs; and services to assist in balancing work and personal life, such as backup child, adult, and elder care, and financial wellbeingwell-being programs, including monthly financial wellness seminars, one-on-one financial planning sessions, and debt and credit management support.
Our wellness initiatives include a monthly newsletter, which highlights organizations and partners, tools, and resources intended to help our employees lead healthier and happier lives. We offer several digital apps that allow our employees to connect to an online licensed therapist or to access activities that are designed to reduce stress and anxiety and
increase mindfulness and emotional well-being. We have a robust employee assistance program for employees to access support for a variety of life events.
To assist employees with work/life balance, we provide employees withoffer a concierge service to assistthat helps employees with managing various personal tasks including but not limited to:
•finding and booking auto services;
•sourcing pet sitters and boarders;
•researching online and in-person tutors;
•suggesting community events;
•providing vacation ideas;
•finding and booking home cleaners, plumbers, HVAC, and
landscaping services;
•finding and booking yoga, personal training sessions, and spin classes;
•suggesting nutritional meals and recipes; and
•researching day care center availability and ratings.
In addition, we offer every employee the benefit of equity ownership in the companyCompany through equity grants andor participation in our employee stock purchase plan. We believe that equity compensation has been, and will continue to be, a critical component of our compensation package because it develops a culture of ownership among our employees and aligns their interests with the interests of our stockholders.
Recruitment, Development, and Training
The attraction, development, and retention of employees is a critical success factor for our success. We utilize a variety of recruitment vehicles to source top talent, including strategic partnerships with search firms, leveraging social media channels, and a robust employee referral program.
In 2022, we held an Early Career Summit to engage, retain, and develop over 150 employees and college interns. The Summit provided a forum for this group to network, build relationships, and learn from Novavax leaders and one another.
To support the growth and advancement of our employees, we offer tuition and continuing education reimbursement, and an array of training and professional development opportunities, including on-the-spot coaching with executive coaches and access to the LinkedIn Learning library of over 16,000 on-demand video tutorials that address skills, knowledge, and behaviors related to business, leadership, technology, and innovation. In the last 12 months, videos were viewed and completed over 25,00050,000 times by our employees. In addition, approximately 200 employees have participated in spot coaching. We provide an Executive Development Program for employees identified as having high potential and for employees who have been identified as potential successors to leadership positions. Our Executive Development Program includes executive coaching engagements and leadership development programs designed to strengthen our leadership bench and accelerate and prepare our top talent for future growth. The 2023 Executive Development Program includes a diverse and global group of 34 employees. Professional development learning series are available to all employees and focus on self-awareness, collaboration, hybrid working, leadership, and business acumen.
Internal Communications
We employ a variety of tools to facilitate open and direct communication, including global forums with executives, employee surveys, and engagement through forums and committees. Our executive leadership team continues to recognizerecognizes the importance of increased employee engagement.
engagement to the success of each individual’s career and to our success as a whole.
Diversity, Equity, and Inclusion
Our culture of diversity, equity, and inclusion (“DEI”) enableshelps us to create, develop, and fully leverage the strengths of our workforce to meet our growth objectives. We recently completed an evidence-based analysis of our current DEI state, resulting in a multi-year road maproadmap and strategy that will enable our mission, our people, and our best work. It is designed around three pillars:
•Embed DEI into our people decisions and processes.
•Enable our employees, who we refer to drive diversityas our SuperNovas, to live our values and inclusion by developingthrive in a culture of inclusion.
•Equip our leaders and SuperNovas with the understanding, capability, education, tools, and resources on DEI.
We started implementing our roadmap in 2022 and are making progress. We hired a DEI and Employee Engagement Manager who will facilitate and help focus our actions to build an inclusive leaders, enablingworkforce. We began acknowledging global DEI-related observances and we are investing in training to build an inclusive culture and building diverse teams.develop our leaders to access different perspectives when generating ideas and decision making. The firstsecond annual Novavax Women’s Leadership Forum was successfully
launchedheld and resulted in building networks, developing skills, sharing voices and ideas, and becoming agents of positive change.change for nearly 300 Novavax women. In 2022, we also made progress in increasing representation for women and minorities at the Executive level. We are focused on growingcommenced and maintainingcompleted the reviews of three people processes, namely, Talent Acquisition, Promotion, and Performance Management. We also have intentionally incorporated DEI principles into our diverse workforce and weNovavax Leadership Model. We believe our multi-year DEI strategy and roadmap will enable us to continuously improve and excel.
Environmental, Social, and Governance
In 2022,addition to the DEI and human capital initiatives described above, we have several other Environmental, Social, and Governance (“ESG”) related initiatives that are underway. These initiatives are centered around four focus areas including environmental sustainability, innovating for vaccine access and improving global health, empowering our employees, and governing responsibility. We believe that our multi-stakeholder approach through these focus areas is critical to our long-term success and enhances value for our shareholders Examples of initiatives supportive of these focus areas include the following:
Environmental Sustainability
•Resource management and greenhouse gas (“GHG”) reduction strategy with tracking and reporting GHG emissions
•Procurement approach that incorporates sustainability metrics into vendor evaluation rubrics
•Lease of approximately 170,000 square foot property in Gaithersburg, Maryland at 700 Quince Orchard Road that is designed with carbon-conscious initiatives in place such as a net zero parking structure
•Conserving water and monitoring energy use across multi-use leased and owned facilities
•Award of WELL certifications at multiple leased facilities
•Sustainable saponin sourcing with our partner Desert King, who is the key supplier of the Quillaja saponaria (Soapbark) tree found native to central Chile, used to produce our Matrix-M™ adjuvant
Innovating for Vaccine Access and Improving Global Health
•R21 malaria vaccine candidate, developed by the Jenner Institute, University of Oxford, and formulated with our Matrix-M™ adjuvant
•Vaccine access through community partnerships such as collaboration with representatives from Hip Hop Public Health, Anthem, and the CDC Foundation to host a discussion entitled “The Last Mile: Coming Together to Make Vaccines Make a Difference” at Aspen Ideas: Health
•Advocacy efforts to build a bureau of third-party organizations who are registered with the CDC to provide public commentary on behalf on Novavax, including National Health Council, Vaccinate your Families, and National Black Nurses Association
•Efforts focused on clinical trial diversity
Empowering our Employees
•Introduced an employee donation matching program to elevate Novavax’ charitable contributions, collaborated with local community groups (Montgomery Country Community College, Fairfax Country SkillSource Center), and supported local non-profits
•Introduced a program to help build community and establish corporate values, and provide tuition and education reimbursement, access to professional coaching, and Executive Development programming for high-potential employees
Governing Responsibly
•In 2021, we hired a DEIHead of Global Quality Assurance and Employee Engagement Manager focusedQuality Control to focus on actionsbuilding quality control and functions of global technical quality, clinical quality, control systems, and compliance operations
•Policy to comply with all government and regulatory agency requirements and industry standards with good laboratory practices (“GLP”), current good manufacturing practices (“cGMP”), and good distribution practices (“GDP”)
•Hired a Chief Compliance Officer and published “The NovaCode,” a robust handbook of written standards and business ethics policies
•Global hotline for reporting compliance concerns with established internal investigating protocols
•Establishment of a Strategic Compliance Governance Committee to help our partners comply with U.S. regulations
•Company-wide business ethics training, guidance, and raw materials review
•Standard operating procedures drafted to guide decision-making
•Robust cybersecurity standards, meeting elevated government contracting requirements
•Hired a Chief Safety Officer to build an inclusive workforce,out a robust epidemiology benefit / risk group to better understand safety profiles of different vaccines
•Ongoing employee training for updated Safety Policy and we are investing in training to develop our leaders to access different perspectives when generating ideas and decision making.Standards
Availability of Information
Our website address is www.novavax.com.www.novavax.com. We make available, free of charge and through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after filed with or furnished to the SEC. The SEC maintains an Internet site that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.www.sec.gov.
We use our website (www.novavax.com) as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation Fair Disclosure promulgated by the SEC. These disclosures are included on our website (www.novavax.com) in the “Investors” or “News” sections. Accordingly, investors should monitor these portions of our website (www.novavax.com), in addition to following our press releases, SEC filings, and public conference calls and webcasts.
Also available on our website is information relating to corporate governance at Novavax and our Board of Directors, including our Code of Conduct. We intend to disclose on our website any future amendments to and waivers from this code that apply to our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and Controller, and persons performing similar functions, as promptly as practicable, as may be required under applicable SEC and Nasdaq rules.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on the investor relations section of our website. Additionally, we provide notifications of news or announcements regarding press and earnings releases as part of the investor relations section of our website. The contents of our website are not part of this Annual Report on Form 10-K, or any other report we file with, or furnish to, the SEC.
Item 1A. RISK FACTORS
You should carefully consider the following risk factors in evaluating our business. A number of risks could cause our actual results to differ materially from those that are indicated by forward-looking statements. Some risks relate principally to our business and the industry in which we operate. Others relate principally to the securities market and ownership of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties of which we are unaware, or that we currently deem immaterial, also may become important factors that affect us. Any of the following risks could result in material adverse impacts on our business, financial condition, or results of operations. You also should consider the other information included in this Annual Report on Form 10-K as well as our other filings with the SEC.
Summary of Risk Factors
Our business is subject to numerous risks. The following is a summary of the principal risk factors described in this section:
•We have a history of losses and our future profitability is uncertain.
•We will continue to require significant funding to maintain our current level of operations and fund the further development of our vaccine candidates.
•Because our vaccine product development efforts depend on new and rapidly evolving technologies, our efforts may not succeed.
•The regulatory and commercial success of our COVID-19 vaccine candidate, NVX-CoV2373, remains uncertain. While we have received provisional registration, conditional marketing authorization, or emergency use authorization for NVX-CoV2373 in a number of jurisdictions, we may be unable to obtain full regulatory approvals in the United StatesU.S. or in any other jurisdictionjurisdictions or produce a successful vaccine in a timely manner, if at all.
•The emergence and transmissibility of variants of the SARS-CoV-2 virus, and the demand for bivalent vaccines, may affect market acceptance or sales of NVX-CoV2373, and our strategy to develop versions of our COVID-19 vaccine to protect against certain variants may not be successful.
•We are a biotechnology company and face significant risk in developing, manufacturing, and commercializing our products.
•Because we depend on third parties to conduct some of our laboratory testing and clinical trials, and a significant amount of our vaccine manufacturing and distribution, we may encounter delays in or lose some control over our efforts to develop and supply products.
•We are highly dependent on the commercial success of NVX-CoV2373, and even though we have received provisional registration, conditional marketing authorization, or emergency use authorization in certain jurisdictions for NVX-CoV2373, and even if we have products licensed in additional markets, our vaccine products may not be initially or ever profitable.
•The COVID-19 pandemic and associated governmental public health policies continue to evolve, which may have unpredictable effects on the prospects for commercial success of NVX-CoV2373.
•Many of our competitors have significantly greater resources and experience, which may negatively impact our commercial opportunities and those of our current and future licensees.
•There is significant competition in the development of a vaccine against COVID-19, influenza, and RSV and we may never see returns on the significant resources we are devoting to our vaccine candidates.
•We may not succeed in obtaining thefull FDA licensure or foreign regulatory approvals necessary to sell our vaccine candidates.
•Our products might fail to meet their primary endpoints in clinical trials, meaning that we will not have the clinical data required to support full regulatory obligations.approvals.
•The regulatory pathway for NVX-CoV2373 is continually evolving, and may result in unexpected or unforeseen challenges.
•We have conducted, are conducting, and plan to conduct in the future, a number of clinical trials for NVX-CoV2373 at sites outside the United StatesU.S. and the FDA may not accept data from trials conducted in such locations.
•The later discovery of previously unknown problems with a product, manufacturer, or facility may result in restrictions, including withdrawal of a vaccine that had previously received regulatory approval in certain jurisdictions from the market.
•Our success depends on our ability to maintain the proprietary nature of our technology.
•Our business may be adversely affected if we do not successfully execute our business development initiatives.
•Given our current cash position and cash flow forecast, and significant uncertainties related to 2023 revenue, funding from the U.S. government, and our pending arbitration with Gavi, substantial doubt exists regarding our ability to continue as a going concern through one year from the date that the financial statements included in this Annual Report were issued.
•Servicing our 3.75%5.00% convertible senior unsecured notes due 2023 (the “Notes”)2027 requires a significant amount of cash, and we may not have sufficient cash flow resources to pay our debt.
•Because our stock price has been and will likely continue to be highly volatile, the market price of our common stock may be lower or more volatile than expected.
•Litigation or regulatory investigations could have a material adverse impact on our results of operation and financial condition.
•We or the third parties upon whom we depend may be adversely affected by natural or man-made disasters or public health emergencies, such as the COVID-19 pandemic.
Risks Related to Our Financial Condition and Capital Requirements
We have a history of losses and our future profitability is uncertain.
Our expenses have exceeded our revenue since our formation in 1987, and our accumulated deficit at December 31, 20212022 was $3.6$4.3 billion. Our revenue and expenses fluctuate significantly from period to period. For most of our history our expenses have exceeded our revenue, which may occur during most periods in the foreseeable future. Our net losses for the last three fiscal years were $0.7 billion in 2022, $1.7 billion in 2021, $418.3 millionand $0.4 billion in 2020, and $132.7 million in 2019.2020.
Historically, our losses have resulted predominantly from research and development expenses for our vaccine candidates, manufacturing-related expenses, expenses associated with efforts to obtain regulatory approvals, costs related to protection of our intellectual property, and other general and administrative operating expenses, a significant portion of which have been noncash. Our expenses have exceeded our revenue since inception, and we believe our expenses will fluctuate over time, and may substantially increase in some years, as a result of continuing efforts to develop, test, manufacture, and make regulatory filings for our vaccine candidates, and if ourcommercialize NVX-CoV2373 and any other product candidates are approved, commercialization efforts.that receive requisite regulatory approvals.
As of the end of fiscal year 2021,2022, our investment in the development and manufacture of NVX-CoV2373 has been substantial, and we expect such levels of investment to continue for the rest of 20222023 and beyond, although the precise magnitude of our total investment will depend on the duration of the COVID-19 pandemic, the competitive landscape, the timing and results of our applications for regulatory approvals, the availability of funding, and whether and what booster shot protocols are recommended by governments, regulatory authorities, and healthcare providers. If we are unable to timely
commercialize a vaccine against COVID-19 in sufficient jurisdictions, we likely would never recoup our investments. We expect to continue to incur significant operating expenses and anticipate significant losses over time as we seek to:
•conduct additional clinical trials and continue to seek regulatory approvals for NVX-CoV2373 and other potential vaccine candidates;
•conduct preclinical studies for other potential vaccine candidates;
•expand our global manufacturing and distribution capacity;capacity, and commercialize NVX-CoV2373; and
•maintain, expand and protect our intellectual property portfolio.
As a result, we expect our cumulative operating losses to increase until such time, if ever, that product sales, licensing fees, royalties, milestones, contract research and other sources generate sufficient revenue to fully fund our operations. We may never achieve profitability and may not sustain profitability, if achieved.
We will continue to require significant funding to maintain our current level of operations and fund the further development of our vaccine candidates.
We do not currently generate sufficient revenue from product sales, licensing fees, royalties, milestones, contract research or other sources to fully fund our operations. We, therefore, will use our cash resources, and expect to require additional funds, to maintain our operations, continue our research and development programs, commence futureadvance preclinical studies and clinical trials, seek regulatory approvals and manufacture and market NVX-CoV2373 and any productsother product candidates that are approved for commercialization.
To date, we have financed our operations primarily through the sale of equity and debt securities, government funding and grant agreements, and additionalfunding may not be availablesupply agreements (also sometimes referred to us on favorable terms, or at all.as advance purchase agreements) for NVX-CoV2373. Although we have entered into supply agreements for NVX-CoV2373 that include prepayments from the purchasers, until we can generate sufficient product revenue in amounts sufficientfrom such agreements to fully fund our operations, which we may never do, we expect to finance our cash needs through a combination of additional public or private equity or debt financings, as well as existing cash, potential collaborations, strategic alliances and marketing, distribution or licensing arrangements, funding from governmental and non-governmental funding entities, and potentially other sources. While we may continue to apply for contracts or grants from academic institutions, non-profit organizations and governmental entities, we may not be successful. Adequate additional funding may not be available to us on acceptablefavorable terms, ifor at all. Furthermore, negative interpretations of clinical trial data or setbacks, or perceived setbacks, with respect to manufacturing ability and/or capacity or regulatory filing timelines for NVX-CoV2373 or our other vaccine candidates, as well as the competitive landscape posed by other COVID-19 vaccines, may impair our ability to raise additional financing on favorable terms, or at all. Additionally, under certain of the supply agreements, for NVX-CoV2373 may be terminated by the counterparty if we do not timely achieve requisite regulatory approvalmilestones for NVX-CoV2373 in the relevant jurisdictions, underobtain supportive recommendations from governmental advisory committees, and/or achieve product volume or delivery timing obligations, purchasers may seek to terminate such agreements, reduce their purchase commitments, require us to refund all or some prepayments we have received, or renegotiate such agreements. If we cannot raise the additional funds required for our anticipated operations, we may be required to delay significantly, reduce the scope of or eliminate one or more of our research or development programs, downsize our organization, or seek alternative measures to avoid insolvency, including arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies or vaccine candidates. If we raise additional funds through future offerings of shares of our common stock or other securities, such offerings would cause dilution of current stockholders’ percentage ownership in the Company, which could be substantial. Future offerings also could have a material and adverse effect on the price of our common stock.
Economic and political uncertainty may adversely affect our access to capital, cost of capital and ability to execute our business plan as scheduled.
Generally, worldwide economic conditions remain uncertain, particularly due to the COVID-19 pandemic.pandemic, the impact of increased interest rates, and inflation. In addition, our operations and performance may be affected by political or civil unrest or military action, including the ongoing conflict between Russia and Ukraine. Access to capital markets is
critical to our ability to operate. Traditionally, biotechnology companies have funded their research and development expenditures by raising capital in the equity markets. Declines and uncertainties in these markets in the past have severely restricted raising new capital and have affected companies’ ability to continue to expand or fund existing development, manufacturing, regulatory and commercialization efforts. We require significant capital for our current and expected operations. The general economic and capital market conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected. In addition, if we are unable to access the capital markets on favorable terms, our ability to execute our business plan as contemplated would be compromised. Moreover, we rely and intend to rely on third parties, including clinical research organizations, contract manufacturing organizations and other important vendors and consultants. Global economic conditions may result in a disruption or delay in the performance of our third-party contractors and suppliers. If such third parties are unable to adequately satisfy their contractual commitments to us in a timely manner, our business could be adversely affected.
Our existing funding and supply agreements do not assure success of our vaccine candidates or that we will be able to fully fund our vaccine candidates.
The OWS Agreement,Our funding agreements with the DoD AgreementU.S. government (“USG”) and the CEPI funding agreement each reimburse a portion of the expenses associated with the development and commercialization of NVX-CoV2373. To the extent funding commitments in such agreements are conditioned on our meeting certain milestones or conditions, including regulatory approval in applicable jurisdictions, we may not ultimately receive the full amount of committed funds and could be exposed to urgent need formay require additional funding to support our NVX-CoV2373 development manufacturing and distribution activities.commercialization activities, and we may be unable to timely obtain additional funding. For example, in
July 2021, in connection with the OWS Agreement,funding from the USG haspartnership formerly known as Operation Warp Speed, the USG instructed us to prioritize alignment with the FDA on our analytic methods before conducting additional U.S. manufacturing, and furtherthe USG indicated that the USG willit would not fund additional U.S. manufacturing until such agreement has been made.alignment was reached, which did not occur until June 2022. In February 2023, in connection with the execution of Modification 17 to the USG Agreement, the U.S. government indicated to us that the award may not be extended past its current period of performance. If the USG Agreement is not amended, as we had previously expected, then we may not receive all of the remaining $416 million in funding we had previously anticipated pursuant to the USG Agreement. The OWSUSG Agreement also includes provisions giving the USG termination rights based on a determination that the funded project will not produce beneficial results commensurate with the expenditure of resources and that termination would be in the USG’s interest. Such a determination would result in the loss of funding under that agreement and could result in other actions by the U.S. government.USG. The CEPI funding agreement, meanwhile, provides CEPI certain “march-in” rights in the event of certain breaches of that agreement. We may be unable to timely obtain additional government or private funding, if at all. Additionally, we have entered into, and plan to continue entering into, supply agreements (also sometimes referred to as advance purchase agreements) for NVX-CoV2373 that include prepayments from the purchasers. Certainpurchasers to help fund our development and manufacture of the vaccine. Under certain supply agreements, may be terminated by the counterparty if we do not timely achieve requisite regulatory approvalmilestones for NVX-CoV2373 in the relevant jurisdictions, under such agreements. In the event we are unable to successfully develop and commercialize NVX-CoV2373 obtain supportive recommendations from governmental advisory committees, and/or fail to meet certain regulatory milestones orachieve product volume or delivery timing obligations, under our supplypurchasers may seek to terminate such agreements, we may be requiredreduce their purchase commitments, require us to refund significant portionsall or some prepayments we have received, or renegotiate such agreements, each of the prepayments, which could have a material and adverse effect on our financial condition. Our inabilityIn July 2022, following a delay in obtaining regulatory approval in the United Kingdom, for example, we entered into the Amended and Restated UK Supply Agreement, which amended and restated in its entirety the Original UK Supply Agreement, which reduced the volume of vaccine doses that the Authority is committed to succeedpurchase as compared to the Original UK Supply Agreement. As of November 30, 2022, the United Kingdom’s Joint Committee on Vaccination and Immunisation had not yet made a supportive recommendation with key clinical or development activities could jeopardize our abilityrespect to obtain licensureNVX-CoV2373, triggering, under the terms of the Amended and Restated UK Supply Agreement, a further reduction of the volume of vaccine doses that the Authority is committed to purchase, as well as an obligation of the Company to repay $112.5 million of an upfront payment previously received from the FDAAuthority. Additionally, following our notice to Gavi of termination of the Gavi APA, Gavi responded by providing us with its own purported termination of the Gavi APA, claiming that we are obligated to refund $697.4 million in advance payments previously received from Gavi. On January 31, 2023, Novavax received a Request for Arbitration from Gavi in respect of the dispute. Arbitration is inherently uncertain, and, while we believe that we are entitled to retain the advance payments received from Gavi, it is possible that we could be required to refund all or other regulatory authorities to sell NVX-CoV2373.a portion of the advance payments from Gavi. As a result, our existing funding and supply agreements do not assure success of our vaccine candidates and may be insufficient to fully fund the development and commercialization of our commercial launch.vaccine candidates.
Risks Related to Product Development and Commercialization
Because our vaccine product development efforts depend on new and rapidly evolving technologies, our efforts may not succeed.
Our vaccine development efforts depend on new, rapidly evolving technologies and on the marketability and profitability of our products. Our development efforts and, if those are successful, commercialization of NVX-CoV2373 and our other vaccines could fail for a variety of reasons, including if:
•our recombinant nanoparticle vaccine technologies, any or all of the products based on such technologies or our proprietary manufacturing process prove ineffective or unsafe;
•new strains of COVID-19 evolve, with respect to which NVX-CoV2373 proves less effective;
•we or our third-party manufacturer facilities fail to reproducibly scale-up and maintain manufacturing with sufficiently high yields at reasonable cost and on projected timelines, or such manufacturing fails to generate product that consistently satisfies purity, potency, quality, stability, and shelf-life standards necessary for obtaining regulatory approvals or achieving commercial viability;
•the products are difficult to manufacture on a large-scale or uneconomical to market;market or manufacture;
•some or all of the products that we or our third-party partners have manufactured may be determined to be unsalable based on criteria imposed by regulators as they complete regulatory approvals;
•our in-house or third-party manufacturing facilities fail regulatory inspections;
•proprietary rights of third-parties prevent us or our collaborators from exploiting technologies, and manufacturing or marketing products; or
•third-party competitors achieve and maintain greater market share due to earlier approvals or superior marketing capabilities.
The regulatory and commercial success of our COVID-19 vaccine candidate, NVX-CoV2373, remains uncertain. While we have received provisional registration, conditional marketing authorization or emergency use authorization for NVX-CoV2373 in a number of jurisdictions, we may be unable to obtain any otherfull regulatory approvals in the United StatesU.S. or other jurisdictions or produce a successful vaccine in a timely manner, if at all.
In response to the outbreak of COVID-19, we are pursuing the development and manufacture of our vaccine candidate, NVX-CoV2373. Even though we have reported positive data from Phase 1, 2 and 3 clinical trials, and we and our partners have
received provisional registration, conditional marketing authorization, or emergency use authorization from the World Health Organization and in the U.S., Canada, Australia, New Zealand, the European Union (“E.U.”), the United Kingdom, India, Indonesia, the Philippines, and Singapore, as well as full approval in South Korea, such results may not be sufficient to support regulatory submissions, authorizations and approvals, accelerated or otherwise, in any other relevant jurisdictions on our projected timelines, if at all.
Additionally, even though NVX-CoV2373 has received regulatory approvalauthorizations in certain jurisdictions and may receive further regulatory approval in others, successful commercialization depends on our ability to effectively scale up and maintain manufacturing capabilities at our own locations and those of our manufacturing partners and contractors. In May 2020, we acquired Novavax CZ (formerly Praha Vaccines, a.s.) including its vaccine manufacturing facility in Bohumil, Czech Republic and approximately 150 of its employees.employees but we have yet to produce commercial batches or receive regulatory approval at this site. We also are actively entering into agreements with third parties to manufacture the antigen component of NVAX-CoV2373NVX-CoV2373 and our proprietary Matrix-M™ adjuvant, as well as to distribute NVX-CoV2373. Because of contractual restraints and the limited number of third-party manufacturers with the relevant expertise, required regulatory approvals and facilities to manufacture NVX-CoV2373 and its components at commercial scale, replacement of a
manufacturer may be expensive and time-consuming and may cause interruptions in production. Manufacturing of NVX-CoV2373 and its components involves a complicated process that will require significant investments of time and financial resources to implement, and our efforts to establish and maintain manufacturing capabilities may not meet expectations as to timing, scale-up, reproducibility, yields, purity, cost, potency or quality. Shortages of raw materials and supplies also negatively impact our manufacturing efforts. We may not be able to timely and effectively produce or receive regulatory approvals for NVX-CoV2373 in adequate quantities to address global demand.
We have not previously had alimited experience with the commercial launch of any vaccine product,products, and doing so in a pandemic environment with an urgent, critical global need creates additional challenges. In addition to scaling up our manufacturing capabilities, we need to develop global distribution channels and form partnerships with third parties worldwide, as well as hire, train and integrate additional management, administrative and sales and marketing personnel. Rapid and significant growth may strain our administrative and operational infrastructure, imposing significant additional responsibilities on our organization, and our efforts to establish and maintain these capabilities may not meet expectations as to timing, scale-up, reproducibility, yields, purity, cost, potency or quality. If we fail to successfully manage our growth and the increased complexity of our operations, our business, financial position, results of operations and prospects may be materially and adversely affected.
The emergence and transmissibility of variants of the SARS-CoV-2 virus, and the demand for bivalent vaccines, may affect market acceptance or sales of NVX-CoV2373, and our strategy to develop versions of our COVID-19 vaccine to protect against certain variants may not be successful.
Our prototype COVID-19 vaccine, NVX-CoV2373, was a monovalent vaccine developed based upon the genetic sequence of the SARS-CoV-2 virus that was first discovered in December 2019. As the SARS-CoV-2 virus continues to evolve, new strains of the virus, or those that are already in circulation, may prove more transmissible or cause more severe forms of COVID-19 disease than the predominant strains to date. For example, the Omicron and Delta variants have been observed to be more transmissible, or contagious, than previous variants.
NVX-CoV2373 may not be as effective in protecting against these or other future variant strains. Additionally, we expect the demand for bivalent vaccines to continue to increase, which may negatively impact the demand, particularly in the U.S., for NVX-CoV2373 and would likely require significant expenditures by the Company to successfully market a bivalent formulation, particularly in the U.S. NVX-CoV2373 may fail to achieve market acceptance or significant sales, despite gaining regulatory approval, provisional registration, conditional marketing authorization or emergency use authorization in a number of jurisdictions, including emergency use authorization the U.S., as demand for variant-specific or bivalent vaccines increases. We have several variant-specific vaccine candidates in development, including for Omicron subvariants, and bivalent formulations with NVX-CoV2373, and may develop others in the future. However, if these efforts are unsuccessful, these candidates do not receive regulatory approvals expeditiously, we are slower to develop variant-specific or bivalent vaccines than competitors, these vaccine candidates prove less effective than competitors’ vaccines, or we are unable to successfully manufacture, distribute or market such vaccine candidates once approved, these shortcomings may lead to reputational harm, loss of market share, and adverse financial results.
Our 2023 revenue depends on our ability to successfully develop, manufacture, distribute, or market an updated monovalent or bivalent formulation of a vaccine candidate for COVID-19 for the fall 2023 COVID vaccine season, which is inherently uncertain and subject to a number of risks, including regulatory approval. We experienced delays in early 2023 in manufacturing our BA.5 clinical trial materials, which has the potential to delay regulatory approval from the FDA for our vaccine candidate for the fall 2023 COVID vaccine season. In addition, in January 2023, the U.S. Vaccines and Related Biologics Products Advisory Committee (“VRBPAC”) announced its intent to provide the industry with its strain protocol guidance in the second quarter of 2023 for the fall 2023 COVID vaccine season. To meet potential demand for fall 2023, we intend to begin manufacturing an updated COVID-19 variant strain-containing formulation prior to the availability of strain protocol guidance. If we begin manufacturing a formulation that is not consistent with the strain protocol guidance, we will not be able to deliver the appropriate vaccine to our customers in sufficient quantities for the fall 2023 COVID vaccine season and we will have incurred significant costs for a formulation that we will be unable to sell.
Further, counterparties to certain of our existing supply agreements may request variant-specific vaccines in place of NVX-CoV2373 and, depending on when we are able to offer variant-specific vaccines, if at all, such counterparties may seek to delay, reduce or otherwise renegotiate their purchase commitments, which may adversely impact our ability to realize the full financial benefit of such supply agreements. In addition, we may expend significant resources adapting NVX-CoV2373
or conducting clinical trials to protect against variants of the SARS-CoV-2 virus, but a market for this adapted vaccine may not develop and demand may not align with our projections or cost expenditures.
We are a biotechnology company and face significant risk in developing, manufacturing and commercializing our products.
We focus our research and development activities on vaccines, an area in which we believe we have particular strengths and a technology that appears promising. The outcome of any research and development program is highly uncertain. Only a small fraction of biopharmaceutical development programs ultimately result in commercial products or even product candidates and a number of events could delay our development efforts and negatively impact our ability to make regulatory submissions or obtain regulatory approval for, and to manufacture, market and sell, NVX-CoV2373 or any other vaccine on our projected timelines, if at all. Vaccine candidates that initially appear promising often fail to yield successful products, and we may not ultimately be able to demonstrate the safety, potency, purity, stability and efficacy necessary to obtain or maintain regulatory authorization to market our product candidates. In many cases, preclinical studies or clinical trials will show that a product candidate is not efficacious or that it raises safety concerns or has other side effects that outweigh its intended benefit. Success in preclinical or early clinical trials may not translate into success in large-scale clinical trials. Further, success in clinical trials often leads to increased investment, accelerating cumulative losses. Even if clinical trial results appear positive, regulatory approval may not be obtained if the FDA, or a foreign equivalent, does not agree with our interpretation of the results, and we may face challenges when scaling-up the production process to commercial levels. Even after a product is approved and launched, general usage or post-marketing clinical trials may identify safety or other previously unknown problems with the product, or manufacturing issues may emerge, either of which may result in regulatory approvals being suspended, limited to narrow the scope of the approval, or revoked, which may otherwise prevent successful commercialization. Intense competition in the vaccine industry could also limit the successful commercialization of any products for which we receive commercial approval.
We will require approval from the FDA of any name we intend to use for our products regardless of whether we have secured a trademark registration from the USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. The FDA may object to any product name we submit if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product names, we may be required to adopt an alternative name for our proposed products. If we adopt an alternative name, we would lose the benefit of any existing trademark applications for such developmental candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a
successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our products, if approved.
Because we depend on third parties to conduct some of our laboratory testing and clinical trials, and a significant amount of our vaccine manufacturing and distribution, we may encounter delays in or lose some control over our efforts to develop and supply products.
We are highly dependent on third-party organizations to conduct some of our laboratory testing and clinical trials and a significant amount of our vaccine manufacturing activities and distribution. If we are unable to obtain any necessary services on acceptable terms, we may not complete our product development or commercialization efforts in a timely manner. We may lose control over these activities or become too dependent upon these parties. These third parties may not complete testing, manufacturing or distribution activities on schedule, or in satisfaction of regulatory or commercial requirements. In particular, we currently depend exclusively on SIIPL and SLS for co-formulation, filling, and finishing NVX-CoV2373. If SLS is unable to provide sufficient co-formulation, fill, and finish services to us, fails to meet regulatory requirements, or otherwise defaults on its obligations to us, we may not be able to obtain alternative co-formulation, fill, and finish services from other providers on acceptable terms in a timely manner or at all, which could prevent or delay delivery of customer orders, or otherwise negatively affect our business. Certain of our facilities are also contracted for defined time frames and through association with OWSUSG and CEPI, and we may not be able to access those facilities for sufficient periods of time to provide adequate supply.
We are responsible for confirming that each of our clinical trials is conducted in accordance with its general investigational plan and protocol. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, safety and welfare of clinical trial
participants are adequately protected. The FDA and foreign regulatory agencies also require us to comply with good manufacturing practices. Our reliance on third parties does not relieve us of these responsibilities and requirements. These third parties may not successfully carry out their contractual duties or regulatory obligations. Furthermore, if a third-party manufacturer is producing materials or products for themselves or other companies, that manufacturer is exposed to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may generally affect the regulatory status of the third-party manufacturer’s facility, which could impact its ability to produce our materials and products. Any of our third-party service providers may need to be replaced, the quality or accuracy of the data they obtain may be compromised, the services provided to us may be delayed, or the product they manufacture may be contaminated and unusable due to the failure to adhere to our clinical and manufacturing protocols, regulatory requirements or for other reasons. In any such event, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval of, or successfully commercially manufacture on a timely basis, our vaccine candidates.
The results from the Prepare trial, including that ResVax failed to meet the primary endpoint of the trial, will likely create challenges, some of which may be significant, around further development of that vaccine.
While the Prepare results suggest that ResVax, the project name for the RSV vaccine candidate, is safe and is likely efficacious in more serious manifestations of RSV disease, the trial failed to achieve its primary clinical endpoint. Not achieving the primary clinical endpoint has been viewed negatively by our investors. Although the failure to achieve the primary endpoint in the trial is not evidence that the vaccine is ineffective, it means that regulatory agencies like the FDA and EMAEuropean Medicines Agency (“EMA”) are likely to require additional clinical trial data prior to licensure. This development may be viewed negatively by our potential collaborators and partners, which may make the ongoingfuture development of ResVax, and anyour other RSV F Vaccine candidates, more challenging.
We may have product liability exposure.
The administration of drugs or vaccines to humans, whether in clinical trials or after marketing approval, can result in product liability claims. We maintain product liability insurance coverage for our current clinical programs, including our NVX-CoV2373 trials, and we have expanded our insurance coverage to include the salefor commercialization of commercial products.NVX-CoV2373. However, we may not be able to obtain additional insurance coverage or maintain insurance coverage on commercially reasonable terms, at a reasonable cost or in sufficient amounts to protect us against losses due to liability. Furthermore, such insurance coverage and our resources may not be sufficient to satisfy all liabilities that result from product liability claims. A successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable terms, if at all. Even if a claim is not successful, defending such a claim would be time- consuming and expensive, may damage our reputation in the marketplace and would likely divert management’s attention.
In addition, because we are developing NVX-CoV2373 in response to the outbreak of COVID-19, a global pandemic, we have received provisional registration, conditional marketing authorization or emergency use authorization from the World Health Organization and in the U.S., Canada, Australia, New Zealand, the E.U., the United Kingdom, India, Indonesia, the Philippines, and Singapore, as well as full authorization in South Korea, and we may have a widely used vaccine as an investigational vaccine or a product authorized for temporary or emergency use prior to our receipt of marketing approval in
other jurisdictions as well. Unexpected safety issues in these circumstances could lead to product liability claims and our existing insurance may not be adequate for such claims.
Regardless of merit or eventual outcome, liability claims may result in:
•decreased demand for our products;
•withdrawal of regulatory authorizations and approvals;
•voluntary or mandatory recalls of our products;
•necessity for additional nonclinical or clinical studies, changes in labeling, or changes to manufacturing processes, specifications and/or facilities;
•impairment of our business reputation and negative media attention;
•withdrawal of clinical trial participants;
•costs of related litigation;
•substantial monetary awards to participants or other claimants;
•loss of revenue; and
•inability to commercialize our vaccine candidates.
In the United States,U.S., the PREP Act, when applicable, provides immunity for manufacturers from all claims under state or federal law for “loss” arising out of the administration or use of a “covered countermeasure.” However, injured persons may still bring a suit for “willful misconduct” against the manufacturer under some circumstances. “Covered countermeasures” include security countermeasures and “qualified pandemic or epidemic products”, including products intended to diagnose or treat pandemic or epidemic disease, such as pandemic vaccines, as well as treatments intended to address conditions caused by such products. For these immunities to apply, the Secretary of DHHS must issueinvoke the PREP Act by issuing a declaration in cases ofthat a public health emergency or “credible risk” of a future public health emergency.emergency exists. Such a PREP Act declaration is separate from other declarations such as a PHE or EUA declaration and, among other things, defines the scope and duration of the PREP Act immunities. On March 17, 2020, the Secretary of DHHS issued a declaration under the PREP Act and has issued subsequent amendments thereto to provide liability immunity for activities related to certain countermeasures against the ongoing COVID-19 pandemic. The current declaration will end on October 1, 2024, unless it is renewed. While we believe our products would beare covered under the provisions of thecurrent PREP Act declaration, this cannot be assured. Also, the Secretary of the HHS may not make other declarations in the future that cover any of our other product candidates, and the U.S. Congress may reduce coverage under the PREP Act or repeal it altogether. Product liability lawsuits may result in substantial liabilities and may require us to limit commercialization of our product candidates.
If we are unable to effectively manufacture our vaccines in sufficient quantities, at sufficient yields or are unable to obtain regulatory approvals for a manufacturing facility for our vaccines, we may experience delays or an adverse impact on product development, clinical trials, regulatory approvalapprovals and commercial distribution.
We are continuing to pursue the manufacture, distribution and clinical testing of NVX-CoV2373, which is currently our only commercial product and source of product revenues. Completion of our clinical trials and commercialization of NVX-CoV2373 and our other vaccine candidates requirerequires access to, or development of, facilities to effectively manufacture NVX-CoV2373 and our other vaccine candidates at sufficient yields and at commercial-scale. We have limited experience manufacturing any of our vaccine candidates in the volumes necessary to support commercial sales. While we have recently increased our projected global manufacturing capacity for NVX-CoV2373, our efforts to establish and maintain manufacturing capabilities may not meet expectations as to timing, scale-up, reproducibility, yields, purity, cost, potency or quality. For example, we experienced delays in early 2023 in manufacturing our BA.5 clinical trial materials, which has the potential to delay regulatory approval from the FDA for our vaccine candidate for the fall 2023 COVID vaccine season. We are highly dependent on third-party organizations to conduct a significant amount of our vaccine manufacturing activities. We do not have sufficient internal manufacturing infrastructure to support global commercialization of NVX-CoV2373 and we have entered into third-party agreements for the components, as well as for commercial fill-finish manufacturing, for NVX-CoV2373. The antigen component of NVX-CoV2373 is currently being manufactured at Novavax CZ, as well as numerous partnered manufacturing sites, including FUJIFILM in the United States, SIIPL in India and SK bioscience in Korea, and Takedathe Matrix-MTM adjuvant component of NVX-CoV2373 is currently being manufactured at Novavax AB, as well as other partnered manufacturing sites, including AGC Biologics in Japan, among others.Europe. Challenges in manufacturing either the antigen component or the adjuvant, or issues in later manufacturing stages, could compromise production of NVX-CoV2373.Additionally, we currently depend exclusively on SIIPL and SLS for co-formulation, filling, and finishing NVX-CoV2373 and the loss of this supplier could prevent or delay the delivery of customer orders.
Additionally, to ensure adequate inventory supply and manage our operations, we forecast anticipated manufacturing requirements and customer demand to predict inventory needs and place orders with our third-party
manufacturers based on such predictions. Our ability to accurately forecast demand for NVX-CoV2373 could be negatively affected by many factors, including challenges in managing our commercial strategy, unanticipated changes in general market conditions or regulatory matters, and market demand for variant-specific COVID-19 vaccines, among others. If we underestimate our third-party manufacturing requirements, we may not be able to timely meet obligations under our customer supply agreements. Conversely, if we overestimate our third-party manufacturing requirements, we may end up with inventory levels in excess of customer demand that result in a portion of our inventory becoming obsolete or expiring, as well as inventory write-downs or write-offs, or we may need to cancel previously forecasted batches of product from our third-party manufacturers, which may result in material cancellation fees. In September 2022, for example, we entered into a Confidential Settlement Agreement and Release with FUJIFILM under which we are responsible for up to $185 million to FUJIFILM in connection with the termination of manufacturing activity. Additionally, in December 2022, we agreed to approximately $95 million in fees owed to AGC Biologics in connection with the cancellation of batches in 2022. If we are unable to accurately forecast demand for NVX-CoV2373 and the required services from third-party manufacturers, our results of operations could be materially harmed.
Manufacturing NVX-CoV2373 and our other vaccine candidates involves a complicated process with which we have limited experience. We are highly dependent on third-party organizations to conduct a significant amount of our vaccine manufacturing activities. If
we and our third-party manufacturing organizationsmanufacturers are unable to manufacture NVX-CoV2373 and our other vaccine candidates in clinical quantities or, if and when necessary, in commercial quantities and at sufficient yields and at required specifications, then clinical trials and commercialization will be delayed, and we will need to identify and reach supply arrangements with additional third parties. Third-party manufacturers also must receive FDA or equivalent foreign regulatory body approval before they can produce clinical material or commercial product.product which could cause delays and alter our production schedule. Our vaccines are in competition with other products for access to these third-party facilities and may be subject to delays in manufacture if third parties prioritize other products. We may not be able to enter into any necessary additional third-party manufacturing arrangements on acceptable terms, or on a timely basis. In addition, we have to enter into technical transfer agreements and share our know-how with the third-party manufacturers, which can be time-consuming and may result in delays.
Because of contractual restraints and the limited number of third-party manufacturers with the expertise, required regulatory approvals and facilities to manufacture our bulk vaccines at commercial-scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions in the production of our vaccine.vaccine and negatively impact our ability to timely meet obligations under our customer supply agreements. We and our third-party manufacturers may also encounter production challenges related to:
•costs, scale up, and yields;
•shortages of raw materials and supplies;
•shipment delays or other supply chain disruptions
•quality control and assurance;
•contamination, lot consistency, potency, and purity;
•shortages of qualified personnel and other capacity constraints;
•compliance with strictly enforced and evolving federal, state and foreign regulations that vary in each country where products might be sold including nationalization or other territory restrictions placed on our owned and third-party manufacturing sites; and
•capital funding.
Delays or interruptions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We must identify vaccines for development with our technologies and establish successful third-party relationships.
The near and long-term viability of our vaccine candidates depend in part on our ability to successfully establish new strategic collaborations with pharmaceutical and biotechnology companies, non-profit organizations and government agencies. Establishing strategic collaborations and obtaining government funding is difficult and time-consuming. Potential collaborators may reject collaborations based upon their assessment of our financial, regulatory or intellectual property position or based on their internal pipelines; government agencies may reject contract or grant applications based on their assessment of public need, the public interest, our products’ ability to address these areas, or other reasons beyond our expectations or control. Collaborators also may seek to modify or terminate relationships. Past success in establishing strategic collaborations with pharmaceutical and biotechnology companies, non-profit organizations and government agencies in the past is no guarantee of future success in entering into new relationships or in performing under existing relationships. If we fail to establish a sufficient number of collaborations or government relationships on acceptable terms, or fail to perform under collaborations or relationships to the satisfaction of counter-parties, we may not be able to commercialize our vaccine candidates or generate sufficient revenue to fund further research and development efforts.
The collaborations we have established or may establish may not result in the successful development or commercialization of any vaccine candidates for several reasons, including the fact that:
•we may not have the ability to control the activities of our partners and cannot provide assurance that they will fulfill their obligations to us, including with respect to the license, development and commercialization of vaccine candidates, in a timely manner or at all;
•such partners may not devote sufficient resources to our vaccine candidates or properly maintain or defend our intellectual property rights;
•our partners could independently develop, or develop with third parties, products that compete directly or indirectly with our vaccine candidates if such partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
•any failure on the part of our partners to perform or satisfy their obligations to us could lead to delays in the development or commercialization of our vaccine candidates and affect our ability to realize product revenue; and
•disagreements, including disputes over the ownership of technology developed with such collaborators, could result in litigation, which would be time consuming and expensive, and may delay or terminate research and development efforts, regulatory approvals and commercialization activities.
If we or our collaborators fail to maintain our existing agreements or in the event we fail to establish agreements as necessary, we could be required to undertake research, development, manufacturing and commercialization activities solely at our own expense. These activities would significantly increase our capital requirements and, given our lack of sales, marketing and distribution capabilities, significantly delay the commercialization of our vaccine candidates.
EvenWe are highly dependent on the commercial success of NVX-CoV2373, and even though we have received provisional registration, conditional marketing authorization or emergency use authorization in certain jurisdictions for NVX-CoV2373, and even if we have products licensed in additional markets, our vaccine products may not be initially or ever profitable.
We are highly dependent on the commercial success of NVX-CoV2373, which is currently our only commercial product and source of product revenues. Whether we make a profit from the sale of our vaccine products is dependent on a number of variables, including the costs we incur manufacturing, testing and releasing, packaging and shipping such vaccine product. Additionally, the CEPI funding agreement necessitates that we allocate a certain number of doses of NVX-CoV2373 to certain middle and lower income countries, and the Grant Agreement with BMGFthe Bill and Melinda Gates Foundation necessitates that we commit to a specific amount of sales in certain specified middle and lower income countries, which may
impact negatively our ability to generate profit. We cannot predict when, if at all, our approved vaccine products will be profitable to the Company.Company, and, ultimately, we may never generate sufficient revenues from our products to reach or maintain profitability or sustain our anticipated levels of operations.
Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face uncertainty with respect to pricing, third-party reimbursement and healthcare reform, all of which could be subject to change and could adversely affect any commercial success of our vaccine candidates.
Our ability to collect revenue from the commercial sale of our vaccines may depend on our ability, and that of any current or potential future collaboration partners or customers, to obtain and if obtained, maintain adequate levels of approval, coverage and reimbursement for such products from third-party payers such as:
•government health administration authorities such as the Advisory Committee for Immunization Practices of the Centers for Disease Control and Prevention;
•private health insurers;
•managed care organizations;
•pharmacy benefit management companies; and
•other healthcare related organizations.
Third-party payers are increasingly challenging the prices charged for medical products and may deny coverage or offer inadequate levels of reimbursement if they determine that a prescribed product has not received appropriate clearances from the FDA, or foreign equivalent, or other government regulators; is not used in accordance with cost-effective treatment methods as determined by the third-party payer; or is experimental, unnecessary or inappropriate. Prices could also be driven down by managed care organizations that control or significantly influence utilization of healthcare products.
In both the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the health care system in ways that could affect our ability to sell vaccines and could adversely affect the prices that we receive for our vaccine candidates, if approved. Some of these proposed and implemented reforms could result in reduced pharmaceutical pricing or reimbursement rates for medical products, and while we have no current vaccines available for commercial sale other than subject to provisional registration, conditional marketing authorization or emergency use authorization in certain foreign jurisdictions, the impact of such reform could nevertheless adversely affect our business strategy, operations and financial results. For example, the Affordable Care Act (“ACA”) contained several cost containment measures that could adversely affect our future revenue, including, for example, increased drug rebates under Medicaid for brand name prescription drugs, extension of Medicaid rebates to Medicaid managed care organizations, and extension of so-called 340B discounted pricing on pharmaceuticals sold to certain healthcare providers. Additional provisions of the healthcare reform laws that may negatively affect our future revenue and prospects for profitability include the assessment of an annual fee based on our proportionate share of sales of brand name prescription drugs to certain government programs, including Medicare and Medicaid. The ACA also established a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable branded on drugs (including vaccines) to eligible beneficiaries during their coverage gap period (the so-called “donut hole”), as condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D. Other aspects of healthcare reform, such as expanded government enforcement authority and heightened standards that could increase compliance-related costs, could also affect our business.
Further, we face uncertainties because of occasional political, legislative, and administrative efforts to substantially modify or invalidate some or all of the provisions of the ACA. For example, in 2017, the Trump administration withheld the cost-sharing subsidies paid to ACA health insurance exchange plans serving low-income enrollees. The Tax Cut and Jobs Act (“TCJA”) was also enacted at the end of 2017 and included provisions that affected healthcare insurance coverage and payment, such as the elimination of the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019 (the so-called “individual mandate”).
More recently, the Biden administration, throughThrough the American Rescue Plan Act of 2021, the Biden Administration increased subsidies for coverage purchased through ACA health insurance exchanges and extended eligibility for subsidies to higher income levels. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, and oral arguments were heard on November 10, 2020. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Separately, President Biden issued an Executive Order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The Executive Order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. On April 5, 2022, the Biden administration issued an Executive Order directing agencies “with responsibilities related to Americans’ access to health coverage” to “review agency actions to identify ways to continue to expand the availability of affordable health coverage.” It is also unclear how these and other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA, will impact our business.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and, due to subsequent legislative amendments, will stay in effect through 2030 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially adversely affect customer demand and affordability for our products and, accordingly, the results of our financial operations. Additionally, the pharmaceutical industry has also been the subject of significant publicity in recent years regarding the pricing of pharmaceutical products, including publicity and pressure resulting from prices charged by pharmaceutical companies for new products as well as price increases by pharmaceutical companies on older products that some people have deemed excessive. As a result, pharmaceutical product prices have been the focus of increased scrutiny by the U.S. government,USG, including certain state attorneys general, members of congress, presidential candidates and the United States Department of Justice. If reforms in the health care industry make reimbursement for our potential products less likely, the market for our potential products will be reduced, and we could lose potential sources of revenue. The existence or threat of cost control measures could cause our corporate collaborators to be less willing or able to pursue research and development programs related to our vaccine candidates. Further, it is also possible
that additional governmental action is taken in response to the COVID-19 pandemic. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.
Even if we receive regulatory approvals for our vaccine candidates, including NVX-CoV2373, coverage and reimbursement may be subject to unique and changing regulatory policies. For example, under the ACA preventive care mandate, non-grandfathered group health plans and health insurance coverage offered in the individual or group market typically have at least one year before they must provide first-dollar coverage for a newly issued preventive care requirement or guideline. However, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), non-grandfathered group health plans and health insurance coverage offered in the individual or group market must cover any qualifying coronavirus preventive service 15 business days after the United States Preventive Services Task Force, or Advisory Committee on Immunization Practices (ACIP)(“ACIP”) designates such service as preventive. Further, third-party reimbursement for providers administering COVID-19 vaccines may affect market acceptance of NVX-CoV2373, if we receive regulatory approval. Currently, the CARES Act and its implementing regulations state that (i) providers that participate in the U.S. Centers for Disease Control and Prevention’s COVID-19 Vaccination Program must administer a COVID-19 immunization regardless of an individual’s ability to pay or health insurance coverage status, (ii) providers may not seek any reimbursement, including through balance billing, from an immunization recipient, (iii) coverage is required, without cost-sharing, for the administration of the immunization even if a third party, such as the federal government, pays for the cost of the immunization, and (iv) for the duration of the COVID-19 public health emergency (the “PHE”), private health insurance plans must cover COVID-19 immunizations and their administration even when provided by out-of-network providers for the duration
providers. Even if we receive regulatory approvals for NVX-CoV2373, there is no guarantee that all payors will provide coverage and reimbursement for our product after the termination of the public health emergency,PHE, planned for May 11, 2023, nor can we guarantee that even if coverage is provided, the reimbursement amount will be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. We cannot predict continued prevalence of COVID-19, whether herd immunity will be achieved (which would affect the need for future administration of COVID-19 vaccines), or whether NVX-CoV2373 will be effective against continuing mutations or variants of the SARS-CoV-2 virus.
Since the beginning of the COVID-19 pandemic, the U.S. federal government has been the predominant purchaser of COVID-19 vaccines, making it possible for population-wide access to vaccinations. This population-wide access may change as the pandemic moves past the crisis phase, the PHE expires, and the market transitions to a third‐party reimbursement model. This transition to a more traditional third‐party reimbursement model is not tied to the ending of the PHE and in part reflects the fact that the U.S. federal government has not received additional funds from Congress to continue to purchase more vaccines. As federal funding declines for COVID-19 vaccines, the USG will most likely transition to standard commercial purchasing through different health care system channels, including commercial insurers and pharmacy benefit managers, and consequently shift the cost of COVID-19 vaccines to insurers and patients (in the form of premiums and out-of-network costs). With respect to the government health care programs and commercial insurance, there may no longer be blanket coverage of COVID-19 vaccines without, in certain instances, accompanying conditions of reimbursement, such as the institution of prior authorization protocols. Medicare (including traditional Medicare and Medicare Advantage) will continue to pay for vaccinations in full; starting January 1, 2023, all Medicare Part D plans are required to cover all adult vaccines recommended by the ACIP, with no cost-sharing, even if the beneficiary is in the deductible phase of the benefit. Provisions in the ARPA and IRA require Medicaid (specifically, with respect to enrollees who receive coverage under traditional Medicaid and all Medicaid medically needy enrollees in specified states) and CHIP programs to cover all ACIP‐recommended vaccines, including COVID‐19 vaccines/boosters with no cost sharing even when the emergency declarations expire and there is no longer any supply of federally purchased vaccines. Under the ACA, people enrolled in non‐grandfathered plans (i.e., the vast majority of people with private insurance) will continue to pay nothing for
ACIP‐recommended COVID‐19 vaccines and associated appointments, so long as the enrollee receives this care from an in‐network provider. Even if consumers are guaranteed free access or protected against some costs, they could face access challenges to our product if sufficient amounts of our product are not available compared to that of our competitors or not procured by pharmacies or other providers.
We have limited marketing capabilities, and if we are unable to enter into collaborations with marketing partners or develop our own sales and marketing capability, we may not be successful in commercializing any approved products.
Although we have initiated preliminary activities in anticipation of commercialization of our vaccine candidates,NVX-CoV2373, we currently have limited dedicated sales, marketing or distribution capabilities. As a result, we depend on collaborations with third parties that have established distribution systems and sales forces, including our collaboration with SIIPL, among others. To the extent that we enter into co-promotion or other licensing arrangements, our revenue will depend upon the efforts of third parties, over which we may have little or no control. If we are unable to reach and maintain agreements with one or more pharmaceutical companies or collaborators, we may be required to market our products directly. Developing a marketing and sales force is expensive and time-consuming and could delay a product launch. We may not be able to attract and retain qualified sales personnel or otherwise develop this capability.
Our vaccine candidates may never achieve market acceptance even if we obtain full regulatory approvals.
Even if we receive full regulatory approvals for the commercial sale of our vaccine candidates, the commercial success of these vaccine candidates will depend on, among other things, their acceptance by physicians, patients and third-party payers, such as health insurance companies and other members of the medical community, as a vaccine and cost-effective alternative to competing products. If our vaccine candidates fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business. Market acceptance of, and demand for, any product that we may develop and commercialize will depend on many factors, including:
•our ability to provide acceptable evidence of safety and efficacy (including against emerging COVID-19 variants);
•the prevalence and severity of adverse side effects;
•whether our vaccines are differentiated from other vaccines;
•availability, relative cost and relative efficacy of alternative and competing treatments;
•the effectiveness of our marketing and distribution strategy;
•publicity concerning our products or competing products and treatments; and
•our ability to obtain sufficient third party insurance coverage or reimbursement.
If our vaccine candidates do not become widely accepted by physicians, patients, third-party payers and other members of the medical community as well as the relevant public health authorities responsible for scheduling immunizations, our business, financial condition and results of operations could be materially and adversely affected.
We may not be able to secure sufficient supplies of a key component of our adjuvant technology.
Because an important component of our adjuvant technology is extracted from a species of soap-bark tree (Quillaja saponaria) grown in Chile, we need long term access to quillaja extract with a consistent and sufficiently high quality. We need a secure supply of raw material, as well as back-up suppliers, or our adjuvant products may be delayed and we may not be able to meet our obligations under our various collaboration and supply agreements.
Current or future regional relationships may hinder our ability to engage in larger transactions.
We have entered into regional collaborations to develop, manufacture and distribute our vaccine candidates in certain parts of the world, and we anticipate entering into additional regional collaborations. Our relationships with SIIPL, Takeda, and SK bioscience and BMGF are examples of these regional relationships. These relationships often involve the licensing of our technology to our partner or entering into a distribution agreement, frequently on an exclusive basis. Generally, exclusive agreements are restricted to certain territories. Because we have entered into exclusive license and distribution agreements, larger companies may not be interested, or able, to enter into collaborations with us on a worldwide-scale. Also, these regional relationships may make us an unattractive target for an acquisition.
Our product candidates are sensitive to shipping and storage conditions, which could subject our vaccine candidates to risk of loss or damage.
Our vaccine candidates are sensitive to storage and handling conditions. Loss in vaccine candidates could occur if the product or product intermediates are not stored or handled properly. It is possible that our vaccine candidates could be lost due to expiration prior to use. If we do not effectively maintain our supply logistics, then we may experience an unusual number of returned or out of date products. Failure to effectively maintain our supply logistics, by us or third parties, could lead to additional manufacturing costs and delays in our ability to supply required quantities for clinical trials or otherwise.
Our vaccine candidates could become subject to a product recall which could harm our reputation, business, and financial results.
The FDA and similar foreign governmental authorities have the authority to require the recall of certain vaccine candidates. Manufacturers may, under their own initiative, recall a product if any material deficiency in a product is found. A government-mandated or voluntary recall by us or our strategic collaborators could occur as a result of manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our vaccine candidates would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. A recall announcement could harm our reputation with customers and negatively affect our sales, if any.
Risks Related to Our Industry and Competition
Many of our competitors have significantly greater resources and experience, which may negatively impact our commercial opportunities and those of our current and future licensees.
The biotechnology and pharmaceutical industries are subject to intense competition and rapid and significant technological change. We have many potential competitors, including major pharmaceutical companies, specialized biotechnology firms, academic institutions, government agencies and private and public research institutions. Many of our competitors have significantly greater financial and technical resources, experience and expertise in:
•research and development;
•preclinical testing;
•designing and implementing clinical trials;
•regulatory processes and approvals;
•production and manufacturing; and
•sales and marketing of approved products.
Principal competitive factors in our industry include:
•the quality and breadth of an organization’s technology;
•management of the organization and the execution of the organization’s strategy;
•the skill and experience of an organization’s employees and its ability to recruit and retain skilled and experienced employees;
•an organization’s intellectual property portfolio;
•the range of capabilities, from target identification and validation to drug discovery and development to manufacturing and marketing; and
•the availability of substantial capital resources to fund discovery, development and commercialization activities.
Large and established companies, such as Merck & Co., Inc., GlaxoSmithKline plc, CSL Ltd., Sanofi Pasteur, SA, Pfizer Inc., Johnson & Johnson, AstraZeneca, and Moderna, among others, compete in the vaccine market. In particular, these companies have greater experience and expertise in securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products.
Regardless of the disease, smaller or early-stage companies and research institutions also may prove to be significant competitors, particularly through collaborative arrangements with large and established pharmaceutical companies. As these companies develop their technologies, they may develop proprietary positions, which may prevent or limit our product development and commercialization efforts. We will also face competition from these parties in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and participant registration for clinical trials and in acquiring and in-licensing technologies and products complementary to our programs or potentially advantageous to our business. If any of our competitors succeed in obtaining approval from the FDA or other regulatory authorities for their products sooner than we do or for products that are more effective or less costly than ours, our commercial opportunity could be significantly reduced.
In order to effectively compete, we will have to make substantial investments in development, testing, manufacturing and sales and marketing or partner with one or more established companies. We may not be successful in
gaining significant market share for any vaccine. Our technologies and vaccines also may be rendered obsolete or non-competitive as a result of products introduced by our competitors to the marketplace more rapidly and at a lower cost.
There is significant competition in the development of a vaccine against COVID-19, influenza, and RSV and we may never see returns on the significant resources we are devoting to our vaccine candidates.
We may be unable to produce a successfulOur COVID-19 vaccine has moved rapidly through the regulatory review and authorization processes in the U.S. and other jurisdictions. The speed at which COVID-19 vaccines and therapeutics are being created and tested is atypical, and evolving or changing plans or priorities within the FDA or other regulatory authorities, including changes based on new knowledge of COVID-19 and how the disease, and new variants of the virus, affect the human body, may significantly affect our ability to establish a competitive market share for our vaccine before the COVID-19 outbreak is contained or significantly diminished.vaccine. A large number of vaccine manufacturers, academic institutions and other organizations have developed COVID-19 vaccines or are developing COVID-19 vaccine candidates. In particular, Moderna, and Pfizer/BioNTech have received full regulatory approvals for their COVID-19 vaccines and, along with Johnson & Johnson have received emergency use authorizations for their COVID-19 vaccines in the U.S. and other countries, and manycountries. Many other companies, including AstraZeneca, Sinovac Biotech, Sinopharm, and InovioSinopharm are in various stages of developing and obtaining marketing authorization for COVID-19 vaccine candidates. All of these companies have obtained the relevant Emergency Use Licenses (“EULs”) from the World Health Organization for their respective vaccines to be supplied to the countries or international coalition partners, including the relevant United Nations agencies, which rely upon the World Health Organization’s EULs to support the local immunization programs. Despite funding provided to us to date, many of our competitors pursuing vaccine candidates have significantly greater product candidate development, manufacturing and marketing resources than we do. Larger
pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products and may have the resources to heavily invest to accelerate discovery and development of their vaccine candidates. The success of our COVID-19 vaccine will depend, in part, on its relative safety, efficacy (including against emerging variant strains), side effect profile, convenience, and cost. COVID-19 vaccines approved prior to our vaccine satisfy a portion of the demand for initial vaccinations, and we no longer have access to that opportunity. In addition, COVID-19 vaccines approved prior to our vaccine may develop broad market acceptance that we are challenged to overcome. For example, in the U.S., the FDA granted a Biologics License Application (“BLA”) in August 2021 to the Pfizer/BioNTech vaccine as a two-dose primary series for the prevention of COVID-19 in individuals 12 years of age and older, and in January 2022 to the Moderna vaccine as a two-dose primary series for the prevention of COVID-19 in individuals 18 years of age and older. The FDA amended the Pfizer-BioNTech EUAemergency use authorization on September 22, 2021, and the Moderna EUAemergency use authorization and Johnson & Johnson EUAemergency use authorization on October 20, 2021, to authorize the use of a single booster dose for certain populations after completion of primary vaccination with any FDA-authorized or approved COVID-19 vaccine. The FDA then amended both of thesethe Pfizer-BioNTech EUAemergency use authorization and the Moderna EUAemergency use authorization again on November 19, 2021, to authorize the use of such a single booster dose for all patients 18 years and older. On December 9, 2021, theThe FDA has since amended only the Pfizer-BioNTech EUAemergency use authorization to authorize the use of the single booster dose for all patients 16individuals 5 years and older. On January 3, 2022,older and the FDA further amended the Pfizer-BioNTech EUA againModerna emergency use authorization to authorize the use of the single booster dose for all patients 12individuals 6 years and older and thirdfor individuals 6 months to 5 years who have received the primary Moderna vaccine series. The FDA has also approved Gilead’s Veklury (remdesivir) for treatment of COVID-19 in both adult and pediatric dosespopulations, as well as Eli Lilly’s Olumiant (baricitinib) and Genentech’s Actemra (tocilizumab) for 5–11-year-old solid organ transplant patients or patients with a similar leveltreatment of immunocompromise.COVID-19 in certain hospitalized adults. Furthermore, if any competitors are successful in producing a more efficacious vaccine or other treatment for COVID-19 (including against emerging variant strains), or if any competitors are able to manufacture and distribute any such vaccines or treatments with greater efficiency there may be a diversion of potential governmental and other funding away from us and toward such other parties.
We are allocating significant financial and personnel resources to the development and commercialization of NVX-CoV2373, which may cause delays in or otherwise negatively impact our other development programs. Our business could be negatively impacted by our allocation of significant resources to combating a global health threat that is unpredictable or against which our vaccine if commercialized, may ultimately prove unsuccessful or unprofitable.
Many seasonal influenza vaccines are currently approved and marketed. Competition in the sale of these seasonal influenza vaccines is intense. Therefore, newly developed and approved products must be differentiated from existing vaccines in order to have commercial success. In order to show differentiation in the seasonal influenza market, a product may need to be more efficacious, particularly in older adults, and/or be less expensive or quicker to manufacture. Many competitors are working on new products and new generations of current products, intended to be more efficacious than those currently marketed. Our nanoparticle seasonal influenza vaccine candidate may not prove to be more efficacious than current
products or products under development by our competitors. Further, our in-house or third-party manufacturing arrangements may not provide enough savings of time or money to provide the required differentiation for commercial success.
We are also aware that there are multiple companies with active RSV vaccine programs at various stages of development. Thus, while there is no RSV vaccine currently on the market, there is likely to be significant and consistent competition as these active programs mature. Different RSV vaccines may work better for different segments of the population, so it may be difficult for a single RSV vaccine manufacturer to provide vaccines that are marketable to multiple population segments. Geographic markets are also likely to vary significantly, which may make it difficult to market a single RSV vaccine worldwide. Even if a manufacturer brings an RSV vaccine to license, it is likely that competitors will continue to work on new products that could be more efficacious and/or less expensive. Our RSV vaccine candidate may not be as far along in development as other active RSV vaccine programs about which we are not aware, nor as efficacious as products under development by competing companies. Even if our RSV vaccine candidate is developed in the future and receives regulatory approval, it may not achieve significant sales if other, more effective vaccines under development by our competitors are also approved.
Risks Related to Regulatory and Compliance Matters
We may not succeed in obtaining thefull FDA licensure or foreign regulatory approvals necessary to sell our vaccine candidates.
The development, manufacture and marketing of our pharmaceutical and biological products are subject to government regulation by the U.S. FDA and regulatory authorities in other jurisdictions, including the European Medicines Agency (EMA),EMA, the Czech Republic’s State Institute for Drug Control (SUKL) with respect to our manufacturing facility in the Czech Republic and the Swedish Medical Products Agency (Läkemedelsverket, LV) with respect to our adjuvant product being developed in Sweden, as well as other country authorities into which active pharmaceutical ingredients and excipients are imported and/or manufactured by us or our sub-contracted manufacturers. In the U.S. and most foreign countries, we must complete rigorous preclinical testing and extensive clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product. Additionally, we must demonstrate that our manufacturing facilities, processes and controls are adequate with respect to such product to assure safety, purity and potency and comply with applicable good manufacturing practice requirements. None of our vaccine candidates has yet gained full regulatory approval in the U.S., although NVX-CoV2373 has received provisional registration, conditional marketing authorization or emergency
use authorization in certain other jurisdictions.the U.S., Canada, Australia, New Zealand, the E.U., the United Kingdom, India, Indonesia, the Philippines, and Singapore, and South Korea as well as EUL from the World Health Organization. We also have vaccine candidates in clinical trials and preclinical laboratory or animal studies.
Our products might fail to meet their primary endpoints in clinical trials, meaning that we will not have the clinical data required to support regulatory obligations.approvals.
The steps generally required by the FDA before our proposed investigational products may be marketed in the U.S. include:
•performance of preclinical (animal and laboratory) tests;
•submission to the FDA of an IND, which must become effective before clinical trials may commence;
•performance of adequate and well controlled clinical trials to establish the safety and efficacy of the investigational product in the intended target population;
•performance of a consistent and reproducible manufacturing process at commercial scale capable of passing FDA inspection;
•submission to the FDA of a BLA or a NDA; and
•FDA approval of the BLA or NDA before any commercial sale or shipment of the product.
Clinical trials that we undertake in other countries will be subject to similar or equivalent processes and requirements, In Europe, as well as an authorization for the trial itself, it is necessary to obtain the consent of a local ethics committee for each trial site and to provide for publication specific information about the trial and its outcome. If endpoints are not met, this information will be made publicly available and could be damaging to the reputation of the Company.
These processes are expensive and can take many years to complete, and we may not be able to demonstrate the safety, purity, potency and efficacy of our vaccine candidates to the satisfaction of regulatory authorities. The start of clinical trials can be delayed or take longer than anticipated for many and varied reasons, many of which are out of our control. Safety concerns may emerge that could lengthen the ongoing clinical trials or require additional clinical trials to be conducted. Promising results in early clinical trials may not be replicated in subsequent clinical trials. Regulatory authorities may also require additional testing, and we may be required to demonstrate that our proposed products represent an improved form of treatment over existing therapies, which we may be unable to do without conducting further clinical trials. Moreover, if a regulatory authority grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect to its distribution. Expanded or additional indications for approved products may not be approved, which could limit our revenue. Foreign regulatory authorities may apply similar limitations or may refuse to grant any approval. Consequently, even if we believe that preclinical and clinical data are sufficient to support regulatory approval for our vaccine candidates, the FDA and foreign regulatory authorities ultimately may not grant approval for commercial sale in their applicable jurisdiction, or may impose regulatory requirements that make further pursuit of approval uneconomical in one or more jurisdictions. If our vaccine candidates are not approved, our ability to generate revenue will be limited, and our business will be adversely affected.
We may fail to obtain regulatory approval for our products on a timely basis or comply with our continuing regulatory obligations after approval is obtained.
Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities, loss of any potential marketing advantage of being early to market and increased clinical trial costs. For example, certain of our APAs and supply agreements may be terminated by the counterparty if we do not timely achieve requisite regulatory approval for NVX-CoV2373 in the relevant jurisdictions under such agreements. The speed with which we begin and complete the preclinical studies necessary to begin clinical trials, the clinical trials themselves and our applications for marketing approval will depend on several factors, including the following:
•our ability to scale-up and maintain manufacturing capability that reproducibly generates consistent yields of product with required purity, potency and quality; that such scale-up occurs on a timely basis; and that we have access to sufficient quantities of materials for use in necessary preclinical studies and clinical trials;
•regulatory authority review and approval of proposed clinical trial protocols;
•approval of clinical trials protocols and informed consent forms by institutional review boards responsible for overseeing the ethical conduct of the trial;
•the rate of participant enrollment and retention, which is a function of many factors, including the size of the participant population, the proximity of participants to clinical sites, the eligibility criteria for the clinical trial and the nature of the protocol;
•unfavorable test results or side effects experienced by clinical trial participants;
•analysis of data obtained from preclinical and clinical activities, which are susceptible to varying interpretations and which interpretations could delay, limit, result in the suspension or termination of, or prevent further conduct of clinical studies or regulatory approval;
•the availability of skilled and experienced staff to conduct and monitor clinical trials and to prepare the appropriate regulatory applications; and
•changes in the policies of regulatory authorities for drug or vaccine approval during the period of product development.
We have somewhat limited experience in conducting and managing the preclinical studies and clinical trials necessary to obtain regulatory marketing approvals. We may not be permitted to continue or commence additional clinical trials. We also face the risk that the results of our clinical trials may be inconsistent with the results obtained in preclinical studies or clinical trials of similar products or that the results obtained in later phases of clinical trials may be inconsistent with those obtained in earlier phases. A number of companies in the biotechnology and product development industry have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in early animal and human testing.
Regulatory agencies may require us or our collaborators to delay, restrict or discontinue clinical trials on various grounds, including a finding that the participants are being exposed to an unacceptable health risk. In addition, we or our collaborators may be unable to submit applications to regulatory agencies within the time frame we currently expect. Once submitted, applications must be approved by various regulatory agencies before we or our collaborators can commercialize the product described in the application. All statutes and regulations governing the conduct of clinical trials are subject to change in the future, which could affect the cost of such clinical trials. Any unanticipated costs or delays in our clinical trials or regulatory submissions could delay our ability to generate revenue and harm our financial condition and results of operations.
Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our products internationally.
We intend to have our vaccine candidates marketed outside the U.S. In furtherance of this objective, we have entered into supply agreements with various foreign governments and international distribution agreements with commercial entities. In order to market our products in the European Union, United Kingdom, India, Asia and many other non-U.S. jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing and data review. The time required to obtain foreign regulatory approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. Additionally, regulatory authorities outside the United StatesU.S. might not accept data from trials conducted in other countries. Although NVX-CoV2373 has received provisional registration, conditional marketing authorization or emergency use authorization in a number of jurisdictions, we may not obtain regulatory approvals in other relevant jurisdictions on a timely basis, if at all. Approval by one regulatory agency does not ensure approval by regulatory agencies in other jurisdictions. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions, including approval by the FDA. The failure to obtain regulatory approval in foreign jurisdictions could harm our business.
The regulatory pathway for NVX-CoV2373 is continually evolving and may result in unexpected or unforeseen challenges.
The regulatory pathway for NVX-CoV2373 is evolving and failure by us to comply with any laws, rules and standards, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including penalties, fines and delays in vaccine licensure. Efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention to regulatory compliance activities. For example, the rules, regulations and standards governing OWSthe USG Agreement are uncertain and may evolve as the program progresses. Such rules or standards may adversely affect our plans to develop NVX-CoV2373 and failure by us to comply with any laws, rules or standards, some of which may not exist yet or may change, could result in a range of adverse consequences, such as penalties, fines or failure to receive funding.
The speed at which multiple stakeholders are moving to create, test and approve vaccines for COVID-19 is highly unusual and may increase the risks associated with traditional vaccine development, which typically takes between eight and ten years. Given this accelerated timeline, we and regulators, such as the FDA, the EMA, and the MHRAUK’s Medicines and Healthcare Products Regulatory Agency (“MHRA”) may make decisions more rapidly than is typical. Evolving or changing plans or priorities at the FDA or other regulatory bodies to whom we wish to apply for authorization, including based on new knowledge of COVID-19 and how the disease affects the human body, and new variants of the virus, may significantly affect
the regulatory pathway for NVX-CoV2373. Results from clinical testing may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects. In addition, the FDA’s or other regulatory authorities’ analysis of clinical data may differ from our interpretation, or regulators’ requirements and expectations for vaccine authorization or approval may change over time, with the result that the FDA or other regulators may require that we conduct additional clinical trials or non-clinical studies. The evolving regulatory pathway may impede the development, commercialization and/or licensure of NVX-CoV2373.
In addition, because the path to licensure of any vaccine against COVID-19 is unclear, we may have a widely used vaccine in circulation in certain countries as an investigational vaccine or a product authorized for temporary or emergency use prior to our receipt of full marketing approval. Unexpected safety issues in these circumstances could lead to significant reputational damage for Novavax and our technology platform going forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional financial resources. For example, although we currently operate under an emergency use authorization provided by the FDA for NVX-CoV2373, the FDA may revoke such authorization if it determines that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long such authorization will remain in place. Such revocation could adversely impact our business in a variety of ways.
We have conducted, continue to conduct and plan to conduct in the future, a number of clinical trials for NVX-CoV2373 at sites outside the United StatesU.S. and the FDA may not accept data from trials conducted in such locations.
We have and are currently conducting several clinical trials of NVX-CoV2373 at sites outside the U.S., including a Phase 3 trial partially in Mexico, a Phase 3 trial in the U.K., a Phase 2b trial in South Africa, a Phase 1/2 trial partially in Australia, a Phase 2/3 trial in India, and a Phase 1/2 trial in Japan. Although the FDA may accept data from clinical trials conducted outside the U.S., acceptance of these data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and be performed by qualified investigators in accordance with ethical principles. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. Other regulatory authorities impose equivalent requirements for their countries. In addition, while these clinical trials are subject to the applicable local laws, where the data is to be used to support our U.S. NDA,BLA, FDA acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and regulations. If the FDA does not accept the data from any trial that we conduct outside the U.S., it could result in delay pending completion of our trials conducted in the U.S. or result in the need for additional trials, which would be costly and time-consuming and could delay or permanently halt our development and commercialization of NVX-CoV2373.
The later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions, including withdrawal of a vaccine that had previously received regulatory approval in certain jurisdictions from the market.
Even after a product gains regulatory approval, the product and the manufacturer of the product will be subject to continuing regulatory review, including adverse event reporting requirements and prohibitions against promoting products for unapproved uses. Failure to comply with any post-approval requirements can, among other things, result in warning letters, product seizures, recalls, substantial fines, injunctions, suspensions or revocations of marketing authorizations or licenses, operating restrictions and criminal prosecutions. Any such enforcement actions, any unanticipated changes in existing regulatory requirements or the adoption of new requirements, or any safety issues that arise with any approved products,
could adversely affect our ability to market products and generate revenue and thus adversely affect our ability to continue our business.
We also may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknown problems with the product or its manufacture are subsequently discovered. We cannot provide assurance that newly discovered or developed safety issues will not arise following regulatory approval. With the use of any vaccine by a wide patient population, serious adverse events may occur from time to time that did not arise in the clinical trials of the product or that initially appeared to be unrelated to the vaccine itself and only with the collection of subsequent information were found to be causally related to the product. Any such safety issues could cause us to suspend or cease marketing of our approved products, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenue and our financial condition.
Our ability to produce a successful vaccine may be curtailed by one or more government actions or interventions, which may be more likely during a global health crisis such as COVID-19.
Given the significant global impact of the COVID-19 pandemic, it is possible that one or more government entities may take actions, including under the U.S. governmentUSG under the Defense Production Act of 1950, as amended, that directly or indirectly have the effect of diminishing some of our rights or opportunities with respect to NVX-CoV2373, and the economic value of a COVID-19 vaccine to us could be limited. In addition, during a global health crisis, such as the COVID-19 pandemic, where the spread of a disease needs to be controlled, closed or heavily regulated national borders create challenges and delays in our development, production and distribution activities and may necessitate that we pursue strategies to develop, produce and distribute our vaccine candidates within self-contained national or international borders or with additional safety measures or checks in place, at potentially much greater expense and with longer timeframes for public distribution.
Inadequate funding for the FDA, the SEC and other regulatory authorities could hinder their ability to hire and retain key leadership and other personnel, or otherwise perform their normal functions on which the operation of our business may rely, which could negatively impact our ability to develop or commercialize new products or services, access capital markets, or otherwise operate our business.
The ability of the FDA and other regulatory authorities to review and approve new product applications is affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. For example, average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. governmentUSG has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough employees and stop or slow the pace of critical activities. Equally, the move of the EMA to the Netherlands from London caused a significant loss of experienced staff and the UK’s MHRA’s loss of funding from the E.U. has caused a loss of funding and consequently of staff. If a prolonged government shutdown or slowdown of the relevant regulatory authority occurs, it could significantly impact the ability of that Authority to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Fast Track Designation by the FDA, the issue of conditional marketing authorizations by the EMA or MHRA, or other regulatory acceleration options may not actually lead to a faster development or regulatory review or approval process and does not assure approval.
If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address an unmet medical need for this condition, the drug sponsor may apply for FDA Fast Track Designation or similar fast track processes with other regulatory agencies, such asagencies. In the EU and the UK, rolling review procedure was relied upon for conditional marketing authorizations from the EMA or MHRA.to be granted. However, Fast Track Designation or conditional authorizations do not ensure that the drug sponsor will receive marketing approval or that approval will be granted within any particular timeframe. The FDA granted Fast Track Designation for NVX-CoV2373 in November 2020 and for NanoFlu, our recombinant quadrivalent seasonal influenza vaccine candidate, in January 2020. We may also seek Fast Track Designation for more of our other vaccine candidates. If we do seek Fast Track Designation for our other vaccine candidates, we may not receive it, and even if we receive Fast Track
Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track Designation alone does not guarantee qualification for the FDA’s priority review procedures.
Obtaining a Fast Track Designation does not change the standards for product approval, but may expedite the development or approval process. Even though the FDA has granted such designation for NVX-CoV2373 and NanoFlu, it may not actually result in faster clinical development or regulatory review or approval. Furthermore, such a designation does not increase the likelihood that NVX-CoV2373 or NanoFlu will receive marketing approval in the U.S.
Because we are subject to environmental, health and safety laws, we may be unable to conduct our business in the most advantageous manner.
We are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, emissions and wastewater discharges, and the use and disposal of hazardous or potentially hazardous substances used in connection with our research, including infectious disease agents. We also cannot accurately predict the extent of regulations that might result from any future legislative or administrative action. Any of these laws or regulations could cause us to incur additional expense or restrict our operations.
Our facilities in Maryland are subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various hazardous compounds used in connection with our research and development activities. In the U.S., these laws include the Occupational Safety and Health Act, the Toxic Test Substances Control Act and the Resource Conservation and Recovery Act. Similar national and local regulations govern our facilities in Sweden and the Czech Republic. We cannot eliminate the risk of accidental contamination or discharge or injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to civil damages in the event of an improper or unauthorized release of, or exposure of individuals to, these hazardous materials. In addition, claimants may sue us for injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts.
Although we have general liability insurance, these policies contain exclusions from insurance against claims arising from pollution from chemicals or pollution from conditions arising from our operations. Our collaborators are working with these types of hazardous materials in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury we or our collaborators cause to persons or property by exposure to, or release of, any hazardous materials. However, we believe that we are currently in compliance with all material applicable environmental and occupational health and safety regulations.
For our product candidates, we will be subject to additional healthcare laws and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.
Within the U.S. (and within foreign countries), if we obtain full approval for any of our product candidates and begin commercializing them, our operations may be directly, or indirectly through our arrangements with third-party payors and customers, subject to additional healthcare regulation and enforcement by the federal and state governments (or the regulatory bodies or governments of foreign countries), which may constrain the business or financial arrangements and relationships through which we sell, market and distribute our products. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. The applicable U.S. federal and state healthcare laws and regulations (which may be comparable to foreign laws existing in foreign countries) that may affect our ability to operate include:
•the Federal Food, Drug and Cosmetic Act, which among other things, strictly regulates drug product marketing and promotion and prohibits manufacturers from marketing such products for unapproved uses;
•the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving or providing remuneration, directly or indirectly, to induce the referral for an item or service or
the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
•federal false claims laws, including the False Claims Act (“FCA”),FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent;
•manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims; the FCA also permits a private individual acting as whistleblower to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery;
•federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs;
•the federal Physician Payment Sunshine Act and its implementing regulations, which require manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the DHHS information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; effective January 1, 2022, these reporting obligations extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners; similar reporting requirements have also been enacted on the state level in the United States,U.S., and an increasing number of countries worldwide either have adopted or are considering similar laws requiring disclosure of interactions with health care professionals;
•the federal law known as HIPAA, which, in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
•federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;
•state law equivalents of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state gift ban and transparency laws, many of which state laws differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts; and
•state laws restricting interactions with healthcare providers and other members of the healthcare community or requiring pharmaceutical manufacturers to implement certain compliance standards.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to, on a corporate or individual basis, penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and even imprisonment, any of which could materially adversely affect our ability to operate our business and our financial results. In addition, the cost of implementing sufficient systems, controls, and processes to ensure compliance with all of the aforementioned laws could be significant. Any action for violation of these laws, even if successfully defended, could cause us to incur significant legal expenses and divert management’s attention from the operation of the company’s business. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.
It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights those actions, our business may be impaired.
We are also subject to anti-bribery and anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (FCPA),FCPA, the UK Bribery Act, and other similar worldwide anti-bribery laws, as well as various trade laws and regulations (including economic sanctions, export laws, and customs laws), and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.
The FCPA and similar worldwide anti-bribery and anti-corruption laws prohibit companies and their intermediaries from corruptly providing any payments or other benefits to foreign government officials for the purpose of obtaining or retaining business. The U.S. Departments of Justice, Securities & Exchange Commission, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of the FCPA, economic sanctions laws, export control laws, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control, or OFAC. In addition, the U.K. Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors. An organization that fails to prevent bribery by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented adequate procedures to prevent bribery.
Similarly, U.S. and similar worldwide trade laws, including economic sanctions, export laws, and customs laws, regulate our ability to conduct business with certain jurisdictions and counterparties, and regulate the ways in which we may export and import products around the world. In connection with these laws, various government agencies may require us to obtain export licenses, and may seek to impose modifications to business practices, including requiring the cessation of business activities in or with countries, entities, and individuals targeted with sanctions. The breadth and dynamic nature of these laws and regulations may increase compliance costs, and may subject us to fines, penalties and other sanctions.fines.
Novavax has received a number of regulatory approvals in ex-U.S. jurisdictions and has commenced commercial operations in these international locations.locations, including partnering with third-parties in certain higher-risk jurisdictions. Further, a portion of our business with respect to our manufacturing is conducted outside of the United States.U.S. in higher-risk jurisdictions. We expect our international activities to increase in the future. Though we maintain policies, internal controls and other measures reasonably designed to promote compliance with applicable anti-corruption and trade laws and regulations, our employees or agents may nevertheless engage in improper conduct for which we might be held responsible. Any violations of these anti-corruption or trade laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. If we, or our employees or agents acting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could be subject to criminal and civil enforcement action, suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business, delisting from securities exchanges and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our reputation, our revenue or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption or trade laws and regulations.
Risks Related to our Intellectual Property
Our success depends on our ability to maintain the proprietary nature of our technology.
Our success in large part depends on our ability to maintain the proprietary nature of our technology and other trade secrets. To do so, we must prosecute and maintain existing patents, obtain new patents and pursue trade secret and other intellectual property protection. We also must operate without infringing the proprietary rights of third-parties or allowing third-parties to infringe our rights. We currently have or have rights to over 550560 U.S. and foreign patents and patent applications covering our technologies. However, patent issues relating to pharmaceuticals and biologics involve complex legal, scientific and factual questions. To date, no consistent policy has emerged regarding the breadth of biotechnology
patent claims that are granted by the U.S. Patent and Trademark Office (“USPTO”) or enforced by the federal courts. Therefore, we do not know whether any particular patent applications will result in the issuance of patents, or that any patents issued to us will provide us with any competitive advantage. We also cannot be sure that we will develop additional proprietary products that are patentable. Furthermore, there is a risk that others will independently develop or duplicate similar technology or products or circumvent the patents issued to us.
Although our patent filings include claims covering various features of our vaccine candidates, including composition, methods of manufacture and use, our patents do not provide us with complete protection against the development of competing products. Some of our know-how and technology is not patentable. To protect our proprietary rights in unpatentable intellectual property and trade secrets, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information.
Failure to obtain trademark registrations for proposed product names/brands, in the U.S. or abroad, may adversely impact our business.
Trademark registration to protect the trademarks for our proposed products will require approval from the USPTO in the United StatesU.S. and in trademark offices throughout the world in our key markets. The USPTO or a trademark office in a key international jurisdiction may refuse registration of any of our trademarks on a variety of potential grounds. If registration is not granted to one of our trademarks in the United StatesU.S. or in another key international jurisdiction, we may be required to adopt an alternative name for that proposed product. If we adopt an alternative name, we would lose the benefit of any existing trademark applications for such developmental candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA and other regulatory authorities.
Third parties may claim we infringe their intellectual property rights.
Our research, development and commercialization activities, including any vaccine candidates resulting from these activities, may be found to infringe patents or trademarks owned by third-parties and to which we do not hold licenses or other rights. There may be rights we are not aware of, including applications that have been filed, but not published that, when issued, could be asserted against us. These third-parties could bring claims against us, and that may cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent or trademark infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or biologic drug candidate that is the subject of the suit.
As a result of patent or trademark infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from the third party. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be non- exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent or trademark infringement claims, we are unable to enter into licenses on acceptable terms. All of the issues described above could also impact our collaborators, which would also impact the success of the collaboration and therefore us.
There has been substantial litigation and other proceedings regarding patent, trademark, and other intellectual property rights in the pharmaceutical and biotechnology industries.
We may become involved in litigation to defend or enforce our intellectual property or the intellectual property of our collaborators or licensors, which could be expensive and time-consuming.
Competitors may infringe our patents or the patents of our collaborators or licensors. As a result, we may be required to file patent infringement suits to prevent unauthorized uses. This can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology. An adverse determination of any litigation or defense proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at the risk of not issuing. Competitors may infringe our trademarks or the trademarks of collaborators or licensors. As a result, we may be required to file suit to counter infringement for unauthorized use of an identical or confusingly similar trademark. This can be expensive and time-consuming.
Even if we are successful, litigation may result in substantial costs and distraction to our management. Even with a broad portfolio, we may not be able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the U.S.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.
The scope, validity, and ownership of our patent claims may be challenged in various venues and, if we do not prevail, our ability to exclude competitors may be harmed, potentially reducing our ability to succeed commercially.
We may be subject to a variety of challenges from third parties that relate to the scope of the claims or to their validity. Such challenges can be mounted in post-grant review, ex parte re-examination, and inter partes review proceedings before the USPTO, or similar adversarial proceedings in other jurisdictions. If we are unsuccessful in any such challenge, the scope of our claims could be narrowed or could be invalidated. Any such outcome could impair our ability to exclude competitors from the market in those countries, potentially impacting our commercial success.
Our patents may be subject to various challenges related to ownership and inventorship, including interference or derivation proceedings. Third parties may assert that they are inventors on our patents or that they are owners of the patents. While we perform inventorship analyses to insure that the correct inventors are listed on our patents, we cannot be certain that a court of competent jurisdiction would arrive at the same conclusions we do. If we are unsuccessful in defending against ownership or inventorship challenges, a court may require us to list additional inventors, may invalidate the patent, or may transfer ownership of the patent to a third party. Any of these outcomes may harm our ability to exclude competitors and potentially impact our commercial success. Further, if ownership is transferred to a third party we may be required to seek a license to those rights to preserve our exclusive ability to practice the invention. Such a license may not be available on commercially reasonable terms, or at all. If we are unable to obtain a license, we may be required to expend time, effort, and other resources to design around the patent. Any such license may be non-exclusive and if a competitor is able to obtain a license from the third party, our ability to exclude that competitor from the market may be negatively impacted.
Even if we are ultimately successful, defending any such challenges may cause us to incur substantial expenses and may require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
The scope, validity, and ownership of our trademark rights/registrations may be challenged in various venues in the U.S. and abroad and, if we do not prevail, our ability to exclude competitors from using and registering confusingly similar trademarks may be harmed, potentially reducing our ability to succeed commercially.
We may be subject to a variety of challenges from third parties that relate to the validity of our trademark registrations in the U.S. and internationally. Such challenges can be mounted in trademark cancellation and opposition proceedings before the USPTO, or similar adversarial proceedings in other jurisdictions. If we are unsuccessful in any such challenge, our trademark registrations could be narrowed or could be refused or canceled. Any such outcome could impair our ability to exclude competitors from using a confusingly similar mark, potentially impacting our commercial success.
Our trademark registrations may be subject to various challenges related to likelihood of confusion, use of a trademark in commerce, or other grounds in the U.S. and internationally. Third parties may assert that our trademarks infringe on their prior rights or that we are not using a trademark in a particular jurisdiction in connection with the goods/services identified in the trademark registration. While we perform trademark clearance searches and analysis to determine that we are not infringing upon the trademark rights of others, we cannot be certain that a court of competent jurisdiction would arrive at the same conclusions we do. If we are unsuccessful in defending against such challenges, a court may cancel our trademark registration and/or issue an injunction requiring that we cease use of the trademark. We may also not be able to rely on common law rights that we may have in any trademark. Any of these outcomes may potentially impact our commercial success.
Even if we are ultimately successful, defending any such challenges may cause us to incur substantial expenses and may require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
We may need to license intellectual property from third parties and, if our right to use the intellectual property we license is affected, our ability to develop and commercialize our vaccine candidates may be harmed.
We have in the past, and we expect in the future to license intellectual property from third parties and that these licenses will be material to our business. We will not own the patents or patent applications that underlie these licenses, and we may not control either the prosecution or the enforcement of the patents. Under such circumstances, we may be forced to rely upon our licensors to properly prosecute and file those patent applications and prevent infringement of those patents.
While many of the licenses under which we have rights provide us with rights in specified fields, the scope of our rights under these and other licenses may be subject to dispute by our licensors or third parties. In addition, our rights to use these technologies and practice the inventions claimed in the licensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Any of our licenses may be terminated by the licensor if we are in breach of a term or condition of the license agreement, or in certain other circumstances.
Further, any disputes regarding obligations in licenses may require us to take expensive and time-consuming legal action to resolve, and, even if we are successful, may delay our ability to commercialize products and generate revenue. Further, if we are unable to resolve license issues that arise we may lose rights to practice intellectual property that is required to make, use, or sell products. Any such loss could compromise our development and commercialization efforts for current or future product candidates and/or may require additional effort and expense to design around.
Our vaccine candidates and potential vaccine candidates will require several components that may each be the subject of a license agreement. The cumulative license fees and royalties for these components may make the commercialization of these vaccine candidates uneconomical.
If patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize our discoveries.
Important legal issues remain to be resolved as to the extent and scope of available patent protection for biopharmaceutical products and processes in the U.S. and other important markets outside the U.S., such as Europe and Japan. In addition, foreign markets may not provide the same level of patent protection as provided under the U.S. patent system. Litigation or administrative proceedings may be necessary to determine the validity and scope of certain of our and others’ proprietary rights. Any such litigation or proceeding may result in a significant commitment of resources in the future and could force us to do one or more of the following: cease selling or using any of our products that incorporate the challenged intellectual property, which would adversely affect our revenue; obtain a license from the holder of the intellectual property right alleged to have been infringed, which license may not be available on reasonable terms, if at all; and redesign our products to avoid infringing the intellectual property rights of third parties, which may be time-consuming or impossible to do. In addition, changes in, or different interpretations of, patent laws in the U.S. and other countries may result in patent laws that allow others to use our discoveries or develop and commercialize our products. We cannot provide assurance that the patents we obtain or the unpatented technology we hold will afford us significant commercial protection. In Europe, a new unitary patent system, which takes effect on June 1, 2023, may significantly impact European patents, including those granted before the introduction of the new system. Under the new system, applicants can, upon grant of a patent, opt for that patent to become a Unitary Patent which will be subject to the jurisdiction of a new Unitary Patent Court (“UPC”). Patents
granted before the implementation of the new system can be opted out of UPC jurisdiction, remaining as national patents in the UPC countries. Patents that remain under the jurisdiction of the UPC may be challenged in a single UPC-based revocation proceeding that, if successful, could invalidate the patent in all countries who are signatories to the UPC. Further, because the UPC is a new court system and there is no precedent for the court’s laws, there is increased uncertainty regarding the outcome of any patent litigation. We are unable to predict what impact the new patent regime may have on our ability to exclude competitors in the European market. In addition to changes in patents laws, geopolitical dynamics, including Russia’s incursion into Ukraine, may also impact our ability to obtain and enforce patents in particular jurisdictions. If we are unable to obtain and enforce patents as needed in particular markets, our ability to exclude competitors in those markets may be reduced.
If we do not obtain patent term extension and/or patent term adjustment in the United StatesU.S. under the Hatch- Waxman Act and similar extensions in foreign countries, our ability to exclude competitors may be harmed.
In the United States,U.S., the patent term is 20 years from the earliest U.S. non-provisional filing date. Extensions of patent term may be available under certain circumstances. Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, we may be able to extend the term of one patent that covers a marketed product under the Drug Price Competition and Patent Term Restoration Act of 1984, (the “Hatch-Waxman Amendments”) and similar legislation in the European Union.Union and the United Kingdom.
The Hatch-Waxman Amendments permit patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. We may not receive any extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner.
Patent term covering our products may also be extended for time spent during the prosecution of the patent application in the USPTO. This extension is referred to as Patent Term Adjustment (“PTA”). The laws and regulations
governing how the USPTO calculates the PTA is subject to change and changes in the law can reduce or increase any such PTA. Further, the PTA granted by the USPTO may be challenged by a third party. If we do not prevail under such a challenge, the PTA may be reduced or eliminated, shortening the patent term, which may negatively impact our ability to exclude competitors.
Risks Related to Employee Matters, Managing Growth and Information Technology
Our business may be adversely affected if we do not successfully execute our business development initiatives.
We anticipate growing through both internal development projects, as well as external opportunities, which include the acquisition, partnering and in-licensing of products, technologies and companies or the entry into strategic alliances and collaborations. The availability of high quality opportunities is limited, and we may fail to identify candidates that we and our stockholders consider suitable or complete transactions on terms that prove advantageous. In order to pursue such opportunities, we may require significant additional financing, which may not be available to us on favorable terms, if at all. Even if we are able to successfully identify and complete acquisitions, like our business combinations with Novavax CZ (formerly Praha Vaccines) and Novavax AB, strategic transactions involve many risks, including, among others, those related to diversion of management’s attention from other business concerns, unanticipated expenses and liabilities, and increased complexity of our operations, which could prevent us from effectively exploiting acquired facilities, successfully integrating the acquired business and personnel, or fully realizing expected synergies.
To effectively manage our current and future potential growth, we will need to continue to enhance our operational, financial and management processes and to effectively expand, train and manage our employee base. Supporting our growth initiatives will require significant expenditures and management resources, including investments in research and development, manufacturing in-house and through third-party manufacturers and other areas of our business. If we do not successfully manage our growth and do not successfully execute our growth initiatives, then our business and financial results may be adversely impacted, and we may incur asset impairment or restructuring charges.
Given our current cash position and cash flow forecast, and significant uncertainties related to 2023 revenue, funding from the U.S. government, and our pending arbitration with Gavi, substantial doubt exists regarding our ability to continue as a going concern through one year from the date that the financial statements included in this Annual Report were issued.
Our management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. At December 31, 2022, we had $1.3 billion in cash and cash equivalents and restricted cash, of which $236.2 million was raised in December 2022 through concurrent sales of our common stock and issuance of our convertible senior unsecured notes that will mature on December 15, 2027 (the “2027 Notes”). On January 31, 2023, the Company funded the outstanding principal amount of $325.0 million on our convertible senior unsecured notes that matured on February 1, 2023 (the “2023 Notes”). During 2022, we incurred a net loss of $657.9 million and had net cash flows used in operating activities of $415.9 million.
While our current cash flow forecast for the one-year going concern look forward period estimates that we have sufficient capital available to fund operations, this forecast is subject to significant uncertainty, including as it relates to the following:
•2023 Revenue: Our 2023 revenue depends on our ability to successfully develop, manufacture, distribute, or market an updated monovalent or bivalent formulation of a vaccine candidate for COVID-19 for the fall 2023 COVID vaccine season, which is inherently uncertain and subject to a number of risks, including regulatory approvals. We experienced delays in early 2023 in manufacturing our BA.5 clinical trial materials, which has the potential to delay regulatory approval from the FDA for our vaccine candidate for the fall 2023 COVID vaccine season. In addition, in January 2023, VRBPAC announced its intent to provide the industry with its strain protocol guidance in the second quarter of 2023 for the fall 2023 COVID vaccine season. To meet potential demand for fall 2023, we intend to begin manufacturing an updated COVID-19 variant strain-containing formulation prior to the availability of strain protocol guidance. If we begin manufacturing a formulation that is not consistent with the strain protocol guidance, we will not be able to deliver the appropriate vaccine to our customers in sufficient quantities for the fall 2023 COVID vaccine season and we will have incurred significant costs for a formulation that we will be unable to sell.
•Funding from the U.S. Government: Our USG Agreement will expire by its terms in December 2023. We had anticipated that the U.S. government would extend the USG Agreement until the full $1.8 billion authorized amount had been realized. In February 2023, in connection with the execution of Modification 17 to the USG Agreement, the U.S. government indicated to us that the award may not be extended past its current period of performance. If the USG Agreement is not amended, as we had previously expected, then we may not receive all of the remaining $416 million in funding we had previously anticipated pursuant to the USG Agreement.
•Pending Arbitration: On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration regarding an alleged material breach by us of the Gavi APA. The outcome of that arbitration is inherently uncertain, and it is possible we could be required to refund all or a portion of the remaining advance payments of $697.4 million. See Note 3 and Note 18 to our consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for additional information related to the arbitration with Gavi.
Management believes that, given the significance of these uncertainties, substantial doubt exists regarding our ability to continue as a going concern through one year from the date that these financial statements are issued.
Our ability to fund Company operations is dependent upon revenue related to vaccine sales for our products and product candidates, if such product candidates receive marketing approval and are successfully commercialized; the resolution of certain matters, including whether, when, and how the dispute with Gavi is resolved; and management’s plans, which include resolving the dispute with Gavi and may include raising additional capital through a combination of equity and debt financing, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. New financings may not be available to us on commercially acceptable terms, or at all. Also, any collaborations, strategic alliances, and marketing, distribution, or licensing arrangements may require us to give up some or all of our rights to a product or technology, which in some cases may be at less than the full potential value of such rights. In addition, the regulatory and commercial success of NVX-CoV2373 and our other vaccine candidates, including an influenza vaccine candidate, CIC vaccine candidate, or a COVID-19 variant strain-containing monovalent or bivalent formulation, remains uncertain. If we are
unable to obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate some or all of our operations, or downsize our organization, any of which may have a material adverse effect on our business, financial condition, results of operations, and ability to operate as a going concern.
Security breaches and other disruptions to our information technology systems or those of the vendors on whom we rely could compromise our information and expose us to liability, reputational damage, or other costs.
In the ordinary course of our business, we and many of our current and future strategic partners, vendors, contractors, and consultants collect and store sensitive data, including intellectual property, our proprietary business information and data about our clinical participants, suppliers and business partners and personally identifiable information. The secure maintenance of this information is critical to our operations and business strategy. Some of this information represents an attractive target of criminal attack by malicious third parties with a wide range of motives and expertise, including nation-states, organized criminal groups, “hacktivists,” patient groups, disgruntled current or former employees and others. Our ongoing operating activities also depend on functioning information technology systems. Cyber attacks are of ever-increasing levels of sophistication, and, despite our security measures, our information technology systems and infrastructure and those of our vendors and partners are not immune to such attacks or breaches. In 2020, several domestic and foreign security agencies announced that government actors or government-affiliated actors were specifically targeting organizations engaging in COVID-19 vaccine development and research. Our profile as an OWSa recipient of funding under the USG Agreement and our development of NVX-CoV2373 may result in greater risk of cyber attack. Any such attack could result in a material compromise of our networks, and the information stored there could be accessed, publicly disclosed, lost, rendered, permanently or temporarily, inaccessible. Furthermore, we may not promptly discover a system intrusion. Like other companies in our industry, we have and third parties with connections to our systems or with data relevant to our business have experienced attacks to our data and systems, including malware and computer viruses. Additionally, we partner with sites that store our clinical trial data. Attacks could have a material impact on our business, operations or financial results. Any access, disclosure or other loss of information, whether stored by us or our partners, or other cyberattack causing disruption to our business, including ransomware, could result in reputational, business, and competitive harms, significant costs related to remediation and strengthening our cyber defenses, legal claims or proceedings, government investigations, liability including under laws that protect the privacy of personal information, and increased insurance premium, all of which could adversely affect our business. We also may need to pay a ransom if a “ransomware” infection prevents access or use of our systems and we may face reputational and other harms in addition to the cost of the ransom if an attacker steals certain critical data in the course of such an attack.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and our failure to comply with data protection laws and regulations could lead to government enforcement actions, which would cause our business and reputation to suffer.
Evolving state, federal and foreign laws, regulations and industry standards regarding privacy and security apply to our collection, use, retention, protection, disclosure, transfer and other processing of personal data. Privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements, which increases the costs incurred by us in complying with such laws, which may be substantial. For example, the European Union’s General Data Protection Regulation 2016/679 (“GDPR”),GDPR, which became effective in May 2018, imposes a broad array of requirements for processing personal data, including elevated disclosure requirements regarding collection and use of such data, requirements that companies allow individuals to obtain copies or demand deletion of personal data held by those companies, limitations on retention of information, and public disclosure of significant data breaches, among other things. The GDPR provides for substantial penalties for non-compliance of up to the greater of €20 million or 4% of global annual revenue for the preceding financial year. From January 1, 2021 the GDPR has been retained in U.K., as it forms part of the law of England and Wales, Scotland and Northern Ireland by virtue of section 3 of the European Union (Withdrawal) Act 2018, as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (SI 2019/419) (“UK GDPR”), alongside the U.K.’s Data Protection Act 2018. Our efforts to comply with GDPR, the UK GDPR and other privacy and data protection laws impose significant costs and challenges that are likely to increase over time, and we are exposed to substantial penalties or litigation related to violations of existing or future data privacy laws and regulations.
Furthermore, the GDPR and UK GDPR impose strict restrictions surrounding the transfer of personal data to countries outside the EEA and the U.K., including to the United States.U.S. In 2016, the EU and United StatesU.S. agreed to a transfer framework for data transferred from the European Union to the United States,U.S., called the EU-US Privacy Shield. On July 16, 2020, however, the Court of Justice of the European Union issued a decision that declared the Privacy Shield framework invalid and raised
questions about whether the European Commission’s Standard Contractual Clauses (“SCCs”), an alternative to the Privacy Shield, can lawfully be used for cross-border data transfers. On June 4, 2021, the European Commission adopted new SCCs under the GDPR for personal data transfers outside of the EEA. Under this legal mechanism, we may have obligations to conduct transfer impact assessments for such cross-border data transfers and implement additional security measures. As we incorporate the new SCCs into our contractual arrangements, we may be required to expend significant resources to update our contractual arrangements and to comply with the new obligations. If we are unable to implement a valid compliance mechanism for cross-border personal information transfers, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing or transferring personal information from Europe to the United States.U.S. An inability to import personal information from Europe to the United StatesU.S. may significantly and negatively impact our business operations, including by limiting our ability to conduct clinical trials in Europe; limiting our ability to collaborate with contract research organizations, service providers, contractors and other companies subject to the GDPR; or requiring us to increase our data processing capabilities in Europe at significant expense.
Privacy laws and regulations are also expanding in the United States.U.S. The California Consumer Privacy Act (“CCPA”),CCPA, which became effective January 1, 2020, substantially expands privacy obligations of many businesses, requiring new disclosures to California consumers, imposing new rules for collecting or using information about minors and affording consumers new abilities, such as the right to know whether their data is sold or disclosed and to whom, the right to request that a company delete their personal information, the right to opt-out of the sale of personal information and the right to non-discrimination in terms of price or service when a consumer exercises a privacy right. Like the GDPR, the CCPA establishes potentially significant penalties for violation. The CCPA also provides a private right of action along with statutory damages for certain data breaches, which is expected to increase risks related to data breach litigation. The California Privacy Rights Act (“CPRA”), which will become operational in 2023, expands on the CCPA, creating new consumer rights and protections, including the right to correct personal information, the right to opt out of the use of personal information in automated decision making, the right to opt out of “sharing” consumer’s personal information for cross-context behavioral advertising, and the right to restrict use of and disclosure of sensitive personal information, including geolocation data to third parties. Similar restrictions are also included in the Virginia Consumer Data Protection Act (“VCDPA”) and the Colorado Privacy Act (“CPA”), the first comprehensive state privacy statutes to follow the CCPA. We will need to evaluate and potentially update our privacy program to seek to comply with the CPRA, VCDPA, CPA and other US privacy laws, and we expect to incur additional expense in our effort to comply.
There is also a likelihood that other states will follow California, Colorado and Virginia in enacting more comprehensive privacy laws. Such legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, and may require additional investment of resources in compliance programs, impact strategies, reduce the availability of previously useful data and result in increased compliance costs and/or changes in business practices and policies.
Collaborations and contracts of our wholly owned subsidiaries Novavax AB and Novavax CZ, with regional partners, such as SIIPL, Takeda and SK bioscience, as well as with international providers, expose us to additional risks associated with doing business outside the U.S.
Swedish-based Novavax AB and Czech Republic-based Novavax CZ are wholly owned subsidiaries of Novavax, Inc. We also have entered into a supply and license agreement with SIIPL, collaboration and license agreements with each of Takeda and SK bioscience and other agreements and arrangements with foreign governments and companies in other countries. We plan to continue to enter into collaborations or partnerships with companies, non-profit organizations and local governments in various parts of the world. Risks of conducting business outside the U.S. include negative consequences of:
•the costs associated with seeking to comply with multiple regulatory requirements that govern our ability to develop, manufacture and sell products in local markets;
•failure to comply with anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;
•new or changes in interpretations of existing trade protections measures, including tariffs, embargoes, andsanctions, import restrictions, and export licensing requirements;
•difficulties in and costs of staffing, managing and operating our international operations;
•changes in environmental, health and safety laws;
•fluctuations in foreign currency exchange rates;
•new or changes in interpretations of existing tax laws;
•political instability and actual or anticipated military or potential conflicts (including, without limitation, the ongoing conflict between Russia and Ukraine, and a wider European or global conflict);
•economic instability, inflation, recession and interest rate fluctuations;
•minimal or diminished protection of intellectual property in many jurisdictions; and
•possible nationalization and expropriation.
These risks, individually or in the aggregate, could have a material adverse effect on our business, financial conditions, results of operations and cash flows.
If we are unable to attract or retain key management or other personnel, our business, operating results and financial condition could be materially adversely affected.
We depend on our senior executive officers, as well as key scientific and other personnel. The loss of these individuals or our failure to implement an appropriate succession plan could harm our business and significantly delay or prevent the achievement of research, development or business objectives. Turnover in key executive positions resulting in lack of management continuity and long-term history with our Company could result in operational and administrative inefficiencies and added costs.
We may not be able to attract qualified individuals for key positions on terms acceptable to us. Competition for qualified employees is intense among pharmaceutical and biotechnology companies, and the loss of qualified employees, or an inability to attract, retain and motivate additional highly skilled employees could hinder our ability to complete clinical trials successfully and otherwise develop marketable products.
We also rely from time to time on outside advisors who assist us in formulating our research and development and clinical strategy. We may not be able to attract and retain these individuals on acceptable terms, which could delay our development efforts.
Risks Related to Our Convertible Senior Notes
Servicing our 3.75%5.00% convertible senior unsecured notes due 20232027 requires a significant amount of cash, and we may not have sufficient cash flow to pay our debt.
In 2016,2022, we issued $325$175.3 million aggregate principal amount of Notes. Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. We do not expect our business to be able to generate cash flow from operations sufficient to service our debt and make necessary capital expenditures and may therefore be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness, which is non-callable and matures in 2023,2027, unless earlier converted, redeemed, or repurchased, will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, and limit our flexibility in planning for and reacting to changes in our business.
We may not have the ability to raise the funds necessary to repurchase the Notes as required upon a fundamental change, and our future debt may contain limitations on our ability to repurchase the Notes.
Holders of the Notes will have the right to require us to repurchase their Notes for cash upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. A fundamental change may also constitute an event of default or prepayment under, and result in the acceleration of the maturity of, our then-existing indebtedness. We cannot assure that we will have sufficient financial resources, or will be able to arrange financing, to pay the fundamental change repurchase price in cash with respect to any Notes surrendered by holders for repurchase upon a fundamental change. In addition, restrictions in our then existing credit facilities or other indebtedness, if any, may not allow us to repurchase the Notes upon a fundamental change. Our failure to repurchase the Notes upon a fundamental change when required would result in an event of default with respectpursuant to the indenture governing the Notes which could, in turn, constitute a default under the terms of our other indebtedness, if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes.
Capped call transactions entered into in connection with our Notes may affect the value of our common stock.
In connection with our Notes, we entered into capped call transactions (the “capped call transactions”) with certain financial institutions. The capped call transactions are expected to generally reduce the potential dilution upon conversion of the Notes into shares of our common stock.
In connection with establishing their initial hedges of the capped call transactions, these financial institutions or their respective affiliates entered into various derivative transactions with respect to our common stock and/or to purchase our common stock. The financial institutions, or their respective affiliates, may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes. This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect the value of our common stock.
Risks Related to Ownership of Our Common Stock
Because our stock price has been and will likely continue to be highly volatile, the market price of our common stock may be lower or more volatile than expected.
Our stock price has been highly volatile. From January 1, 20212022 through December 31, 2021,2022, the closing sale price of our common stock has been as low as $112.98$8.86 per share and as high as $319.93$142.90 per share. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. For example, the trading prices of biopharmaceutical companies in particular have been highly volatile as a result of the COVID-19 pandemic, inflation and increased interest rates. These broad market fluctuations may cause the market price of our common stock to be lower or more volatile than expected.
Furthermore, given the global focus on the COVID-19 pandemic and our investment in developing a COVID-19 vaccine, information in the public arena on this topic, whether or not accurate, has had and will likely continue to have an outsized impact (positive or negative) on our stock price. Information related to our development, manufacturing, regulatory and commercialization efforts with respect to NVX-CoV2373, or information regarding such efforts by competitors with respect to their COVID-19 vaccines and vaccine candidates, may meaningfully impact our stock price. As a result of this
volatility, you may not be able to sell your common stock at or above your initial purchase price. The market price of our common stock may be influenced by many other factors, including:
•future announcements about us or our collaborators or competitors, including the results of testing, technological innovations or new commercial products;
•clinical trial results;
•delays in making regulatory submissions;
•depletion of our cash reserves;
•sale of equity securities or issuance of additional debt;
•announcement by us of significant strategic partnerships, collaborations, joint ventures, capital commitments or acquisitions;
•changes in government regulations;
•impact of competitor successes and in particular development success of vaccine candidates that compete with our own vaccine candidates;
•developments in our relationships with our collaboration and funding partners;
•announcements relating to health care reform and reimbursement levels for new vaccines and other matters affecting our business and results, regardless of accuracy;
•sales of substantial amounts of our stock by us or existing stockholders (including stock by insiders or 5% stockholders);
•development, spread or new announcements related to pandemic diseases;
•litigation;
•public concern as to the safety of our products;
•significant set-backs or concerns with the industry or the market as a whole;
•regulatory inquiries, reviews and potential action, including from the FDA or the SEC;
•demand for bivalent vaccines;
•recommendations by securities analysts or changes in earnings estimates; and
•the other factors described in this Risk Factors section.
In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation often has been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources, which could seriously harm our business, financial condition, and results of operations, and prospects.
Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders or require us to relinquish rights to our technologies or vaccine candidates.
If we are unable to partner with a third-party to advance the development of one or more of our vaccine candidates, we will need to raise money through additional debt or equity financings. To the extent that we raise additional capital by issuing equity securities, our stockholders will experience immediate dilution, which may be significant. There is also a risk that such equity issuances may cause an ownership change under the Internal Revenue Code of 1986, as amended, and similar state provisions, thus limiting our ability to use our net operating loss carryforwards and credits. To the extent that we raise additional capital through licensing arrangements or arrangements with collaborative partners, we may be required to relinquish, on terms that may not be favorable to us, rights to some of our technologies or vaccine candidates that we would otherwise seek to develop or commercialize ourselves. In addition, economic conditions may also negatively affect the desire or ability of potential collaborators to enter into transactions with us. They may also have to delay or cancel research and development projects or reduce their overall budgets.
Provisions of our Second Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws and Delaware law could delay or prevent the acquisition of the Company, even if such acquisition would be beneficial to stockholders, and could impede changes in our Board.
Provisions in our organizational documents could hamper a third party’s attempt to acquire, or discourage a third-party from attempting to acquire control of, the Company. Stockholders who wish to participate in these transactions may not have the opportunity to do so. Our organizational documents also could limit the price investors are willing to pay in the future for our securities and make it more difficult to change the composition of our Board in any one year. For example, our
organizational documents provide for a staggered board with three classes of directors serving staggered three-year terms and advance notice requirements for stockholders to nominate directors and make proposals.
As a Delaware corporation, we are also afforded the protections of Section 203 of the Delaware General Corporation Law, which will prevent us from engaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless advance board or stockholder approval was obtained.
Any delay or prevention of a change of control transaction or changes in our Board or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then current market price for their shares.
We have never paid dividends on our capital stock, and we do not anticipate paying any such dividends in the foreseeable future.
We have never paid cash dividends on our common stock. We currently anticipate that we will retain all of our earnings for use in the development of our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, of our common stock would be the only source of gain for stockholders until dividends are paid, if at all.
General Risk Factors
Litigation or regulatory investigations could have a material adverse impact on our results of operation and financial condition.
In addition to intellectual property litigation, from time to time, we may be subject to other litigation or regulatory investigations. Regardless of the merits of any claims that may be brought against us, litigation or regulatory investigations could result in a diversion of management’s attention and resources and we may be required to incur significant expenses defending against these claims. If we are unable to prevail in litigation or regulatory investigations, we could incur substantial liabilities. Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of our estimates could be wrong.
We or the third parties upon whom we depend may be adversely affected by natural or man-made disasters or public health emergencies, such as the COVID-19 pandemic.
Our operations, and those of our clinical research organizations, contract manufacturing organizations, vendors of materials needed in manufacturing, collaboration partners, distributors and other third parties upon whom we depend, could be subject to fires, extreme weather conditions, earthquakes, power shortages, telecommunications failures, water shortages,
floods, hurricanes, typhoons, war, political unrest, sabotage or terrorism and other natural or man-made disasters, as well as public health emergencies, such as the COVID-19 pandemic. The occurrence of any of these business disruptions could prevent us from using all or a significant portion of our facilities and it may be difficult or impossible for us to continue certain activities for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event and we may incur substantial expenses and delays as a result. Our ability to manufacture our product candidates and obtain necessary clinical supplies for our product candidates could be disrupted if the operations of our contract manufacturing organizations or suppliers are affected by a natural or man-made disaster, or a public health emergency.
The outbreak of COVID-19 may materially and adversely affect our business and our financial results.
The COVID-19 pandemic continues to present substantial global economic and public health challenges, which may materially and adversely impact our business, financial condition and results of operations. In response to COVID-19, various aspects of our business operations have been, and could continue to be, disrupted. We continuehave implemented our Ways of Working guidelines, which allow employees the flexibility to implementwork remotely either full time or in a work from home policy,hybrid manner to provide
employees with our administrative employees working outside of our offices, and on-site staff restricted to only those required to execute certain laboratory and related support activities.continued flexibility based on business needs. Working remotely could increase our cybersecurity risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. In addition, as a result of state or local restrictions, our on-site staff conducting research and development may not be able to access our laboratories, and these core activities may be significantly limited or curtailed, possibly for extended periods of time. Travel restrictions and other governmental measures may also result in a disruption or delay in the performance of our third-party contractors and suppliers. If such third parties are unable to adequately satisfy their contractual commitments to us in a timely manner, our business could be adversely affected. Furthermore, while some jurisdictions have recently started to phasephased out restrictions imposed on commercial activities at varying degrees, a resurgence of COVID-19, coupled with a potential surge in variant strains of COVID-19, in certain geographies could result in restrictions being reinstated.
Our clinical trials, whether planned or ongoing, may be affected by the COVID-19 pandemic. Study procedures (particularly any procedures that may be deemed non-essential), site initiation, participant recruitment and enrollment, participant dosing, shipment of our product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis may be paused or delayed due to changes in hospital or research institution policies, federal, state or local regulations, prioritization of hospital and other medical resources toward efforts to treat or prevent COVID-19, or other reasons related to the pandemic. In addition, there could be a potential effect of COVID-19 to the operations of the FDA or other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates. Any prolongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.
The trading prices for our common stock and that of other biopharmaceutical companies have been highly volatile due to the COVID-19 pandemic, especially as a result of investor concerns and uncertainty related to the impact of the outbreak on the economies of countries worldwide. These broad market and industry fluctuations, as well as general economic, political and market conditions, may negatively impact the market price of shares of our common stock.
The COVID-19 pandemic continues to rapidly evolve. The extent to which the outbreak impacts our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the emergence of variant strains, the duration of the pandemic, travel restrictions and social distancing in the U.S. and other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and other countries to contain and treat the disease.
The United Kingdom’s withdrawal from the European Union could result in increased regulatory and legal complexity, which may make it more difficult for us to do business in the UK and/or Europe and impose additional challenges in securing regulatory approval of our product candidates in the UK and/or Europe.
The United Kingdom’s exit from the European Union as of January 31, 2020, with a transitional period up to December 31, 2020, commonly referred to as “Brexit”, has caused political and economic uncertainty, including in the regulatory framework applicable to our operations and vaccine candidates in the United Kingdom and the European Union, and this uncertainty may persist for years. Brexit could, among other outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. As one of the Brexit consequences, the EMA has relocated from the United Kingdom to the Netherlands. This has led to a significant reduction of the EMA workforce, which has resulted and could further result in significant disruption and delays in its administrative procedures, such as granting clinical trial authorization or opinions for marketing authorization, disruption of importation and export of active substance and other
components of new drug formulations, and disruption of the supply chain for clinical trial product and final authorized formulations. As the European Union granted conditional marketing authorization for NVX-CoV2373 after January 1, 2021, it is not grandfathered in the UK. We therefore must seek to obtain a separate marketing authorization for Great Britain or “GB” (England, Scotland and Wales while the UK,European Union conditional marketing authorization continues to be applicable in Northern Ireland), increasing our regulatory burden. The GB product license for NuvaxovidTM was granted on February 3, 2022, following a rigorous review of the safety, quality and effectiveness of this vaccine by the UK Medicines and Healthcare products Regulatory Agency and expert advice from the UK’s independent scientific advisory body, the Commission on Human Medicines.
On September 22, 2022, the Department for Business, Energy & Industry Strategy published the Retained EU law (Revocation and Reform) Bill 2022 (the “Bill”) and introduced it to the UK Parliament. The Bill seeks to provide a domestic law basis for amending or revoking over 2,400 well-established retained EU laws that operate across 21 sectors of the UK
economy, including those concerning the life sciences industry, by December 31, 2023. The Bill will add further uncertainty to the future of medicines regulation and the potential regulatory burden that may arise in the U.K.
The cumulative effects of the disruption to the regulatory framework may add considerably to the development lead time to marketing authorization and commercialization of products in the European Union and/or the United Kingdom. It is possible that there will be increased regulatory complexities, which can disrupt the timing of our clinical trials and regulatory approvals. In addition, changes in, and legal uncertainty with regard to, national and international laws and regulations may present difficulties for our clinical and regulatory strategy. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenues and achieve and sustain profitability.
In addition, as a result of Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the European Union. Given these possibilities and others we may not anticipate, as well as the absence of comparable precedent, it is unclear what financial, regulatory and legal implications the withdrawal of the United Kingdom from the European Union will have, how such withdrawal will affect us, and the full extent to which our business could be adversely affected.
We are increasingly a target for public scrutiny, and our business may be impacted by unfavorable publicity.
Given that COVID-19 represents an unprecedented urgent public health crisis, that we are developing NVX-CoV2373 as a COVID-19 vaccine candidate, and that we have received significant funding from the U.S. and foreign governments and other sources to support the development and potential commercialization of NVX-CoV2373, we have observed and are likely to continue to face significant public attention and scrutiny over the complex decisions we have made and will be making regarding the development, testing, manufacturing, allocation and pricing of NVX-CoV2373. If we are unable to successfully manage these risks, we could face significant reputational harm, which could negatively affect our stock price. The intense public interest, including speculation by the media, in the development of NVX-CoV2373 has caused significant volatility in our stock price, which we expect to continue as data and other information from our ongoing clinical trials become publicly available. If concerns should arise about the actual or anticipated efficacy or safety of any of our product candidates, such concerns could adversely affect the market’s perception of these candidates, which could lead to a decline in investors’ expectations and a decline in the price of our common stock.
The increasing use of social media platforms presents new risks and challenges to our business.
Social media is increasingly being used to communicate about pharmaceutical companies’ research, product candidates, and the diseases such product candidates are being developed to prevent. Social media practices in the pharmaceutical industry continue to evolve and regulations relating to such use are not always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business, resulting in potential regulatory actions against us. For example, subjects may use social media channels to comment on their experience in an ongoing blinded clinical trial or to report an alleged adverse event. When such events occur, there is a risk that we fail to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend our business or the public’s legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what we may say about our investigational product candidates. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any social media or networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions, or incur reputational or other harm to our business.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
As of December 31, 2021,2022, we leased approximately 40,00053,000 square feet of office space in Gaithersburg, Maryland that serves as our corporate headquarters, and approximately 170,000 square feet of office space in Gaithersburg, Maryland (“700QO”) which the Company intendsthat we currently use for office space and intend to also use for manufacturing and research and development, and offices.development. The term of the 700QO lease agreement is approximately 15 years, and the Company haswe have the option to extend the Lease Agreement for two successive five-year terms.
In addition,As of December 31, 2022, we lease officesand own approximately 369,000 square feet of office and other space in the United StatesU.S., including our corporate headquarters and 700QO, and approximately 242,000 square feet of office and other space in various foreign locationslocations. We use this space for our services and support, commercial, research and development, manufacturing, and administrative personnel. As of December 31, 2021, we leased approximately 184,000 square feet of office and other space in the United States, in addition to our corporate headquarters, and approximately 176,000 square feet of office space in various foreign locations. Although we believe that our facilities are suitable and adequate for our present needs, the Company’s management continues to review and assess real property requirements that may be necessary to address our current business plan.
Item 3. LEGAL PROCEEDINGS
On November 12, 2021, Sothinathan Sinnathurai filed a purported securities class action in the U.S. District Court for the District of Maryland (the “Maryland Court”) against the Company and certain members of senior management, captioned Sothinathan Sinnathurai v. Novavax, Inc., et al., No. 8:21-cv-02910-TDC (the “Sinnathurai Action”). On January 26, 2022, the Maryland Court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs in the Sinnathurai Action. The co-lead plaintiffs filed a consolidated amended complaint on March 11, 2022, alleging that the defendants made certain purportedly false and misleading statements concerning the Company’s ability to manufacture NVX-CoV2373 on a commercial scale and to secure the NVX-CoV2373’s regulatory approval. The amended complaint defines the purported class as those stockholders who purchased the Company’s securities between February 24, 2021 and October 19, 2021. On April 25, 2022, defendants filed a motion to dismiss the consolidated amended complaint. On December 12, 2022, the Maryland Court issued a ruling granting in part and denying in part defendants’ motion to dismiss. The Maryland Court dismissed all claims against two individual defendants and claims based on certain public statements challenged in the consolidated amended complaint. The Maryland Court denied the motion to dismiss as to the remaining claims and defendants, and directed the Company and other remaining defendants to answer within fourteen days. On December 27, 2022, the Company filed its answer and affirmative defenses.
After the Sinnathurai Action was filed, seven derivative lawsuits were filed: (i) Robert E. Meyer v. Stanley C. Erck, et al., No. 8:21-cv-02996-TDC (the “Meyer Action”), (ii) Shui Shing Yung v. Stanley C. Erck, et al., No. 8:21-cv-03248-TDC (the “Yung Action”), (iii) William Kirst, et al. v. Stanley C. Erck, et al., No. 8:22-cv-00024-TDC (the “Kirst Action”), (iv) Amy Snyder v. Stanley C. Erck, et al., No. 8:22-cv-01415-TDC (the “Snyder Action”), (v) Charles R. Blackburn, et al. v. Stanley C. Erck, et al., No. 1:22-cv-01417-TDC (the “Blackburn Action”), (vi) Diego J. Mesa v. Stanley C. Erck, et al. (the “Mesa Action”), and (vii) Sean Acosta v. Stanley C. Erck, et al. (the “Acosta Action”). The Meyer, Yung, Snyder, and Blackburn Actions were filed in the Maryland Court. The Kirst Action was filed in the Circuit Court for Montgomery County, Maryland, and shortly thereafter removed to the Maryland Court by the defendants. The Mesa and Acosta Actions were filed in the Delaware Court of Chancery (the “Delaware Court”). The derivative lawsuits name members of the Company’s board of directors and certain members of senior management as defendants. The Company is deemed a nominal defendant. The plaintiffs assert derivative claims arising out of substantially the same alleged facts and circumstances as the Sinnathurai Action. Collectively, the derivative complaints assert claims for breach of fiduciary duty, insider selling, unjust enrichment, violation of federal securities law, abuse of control, waste, and mismanagement. Plaintiffs seek declaratory and injunctive relief, as well as an award of monetary damages and attorneys’ fees.
On February 7, 2022, the Maryland Court entered an order consolidating the Meyer and Yung Actions (the “First Consolidated Derivative Action”). The plaintiffs in the First Consolidated Derivative Action filed their consolidated derivative complaint on April 25, 2022. On May 10, 2022, the Maryland Court entered an order granting the parties’ request to stay all proceedings and deadlines pending the earlier of dismissal or the filing of an answer in the Sinnathurai Action. On June 10, 2022, the Snyder and Blackburn Actions were filed. On October 5, 2022, the Maryland Court entered an order granting a request by the plaintiffs in the First Consolidated Derivative Action and the Snyder and Blackburn Actions to consolidate all
three actions and appoint co-lead plaintiffs and co-lead and liaison counsel (the “Second Consolidated Derivative Action”). The co-lead plaintiffs in the Second Consolidated Derivative Action filed a consolidated amended complaint on November 21, 2022. On February 10, 2023, defendants filed a motion to dismiss the Second Consolidated Derivative Action.
On July 21, 2022, the Maryland Court issued a memorandum opinion and order remanding the Kirst Action to state court. On December 6, 2022, the parties to the Kirst Action filed a stipulated schedule pursuant to which the plaintiffs were expected to file an amended complaint on December 22, 2022, and either (i) the parties would file a stipulated stay of the Kirst Action or (ii) the defendants would file a motion to stay the case by January 23, 2023. The plaintiffs filed an amended complaint on December 30, 2022. On January 23, 2023, defendants filed a motion to stay the Kirst action. On February 22, 2023, the parties in the Kirst Action filed for the Court’s approval of a stipulation staying the Kirst Action pending the resolution of defendants’ motion to dismiss in the Second Consolidated Derivative Action. On February 24, 2023, the Court entered an order staying the Kirst Action until a final judgment in the Second Consolidated Derivative Action. The Company takes no position on whether the broader stay entered by the Court in the Kirst Action is likely to be modified to align with the parties’ stipulation.
On August 30, 2022, the Mesa Action was filed. On October 3, 2022, the Delaware Court entered an order granting the parties’ request to stay all proceedings and deadlines in the Mesa Action pending the earlier of dismissal of the Sinnathurai Action or the filing of an answer to the operative complaint in the Sinnathurai Action. On January 9, 2023, the court entered an order granting the parties’ request to set a briefing schedule in connection with a motion to stay that defendants intended to file. Pursuant to the order, defendants filed a motion to stay on January 18, 2023. The plaintiff filed his opposition on February 8, 2023. Defendants filed their reply on February 22, 2023. On February 28, 2023, the court granted Defendants’ motion to stay.
On December 7, 2022, the Acosta Action was filed. On February 6, 2023, defendants accepted service of the complaint and summons in the Acosta action. The financial impact of this claim, as well as the claims discussed above, is not estimable.
On February 26, 2021, a NovavaxCompany stockholder named Thomas Golubinski filed a derivative complaint against members of the NovavaxCompany’s board of directors and members of senior management in the Delaware Court, of Chancery, captioned Thomas Golubinski v. Richard H. Douglas, et al., No. 2021-0172-JRS. NovavaxThe Company is deemed a nominal defendant. Golubinski challenged equity awards made in April 2020 and in June 2020 on the ground that they were “spring-loaded,” that is, made at a time when such board members or members of senior management allegedly possessed undisclosed positive material information concerning the Company. The complaint asserted claims for breach of fiduciary duty, waste, and unjust enrichment. The plaintiff sought an award of damages to the Company, an order rescinding both awards or requiring disgorgement, and an award of attorneys’ fees incurred in connection with the litigation. On May 10, 2021, the defendants moved to dismiss the complaint in its entirety. On June 17, 2021, the Company’s stockholders voted FOR ratification of the April 2020 awards and ratification of the June 2020 awards. Details of the ratification proposals are set forth in the Company’s Definitive Proxy Statement filed with the SEC on May 3, 2021. The results of the vote were disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2021. Thereafter, the plaintiff stipulated that, as a result of the outcome of the June 17, 2021 vote, the plaintiff no longer intends to pursue the lawsuit or any claim arising from the April 2020 and June 2020 awards. On August 23, 2021, the plaintiff filed a motion seeking an award of attorneys’ fees and expenses, to which the defendants filed an opposition. On October 18, 2022, the Delaware Court denied the plaintiff’s fee application in its entirety. Under a prior Delaware Court order, the case was automatically dismissed with prejudice upon denial of the plaintiff’s fee application. On November 14, 2022, Golubinski filed a Notice of Appeal in the Supreme Court of the State of Delaware. The actionplaintiff / appellant filed his opening appellate brief on December 30, 2022. The Company filed its responsive brief on January 30, 2023 and the appellant filed his reply brief on February 14, 2023.
On March 29, 2022, Par Sterile Products, LLC (“Par”) submitted a demand for arbitration against the Company with the American Arbitration Association, alleging that the Company breached certain provisions of the Manufacturing and Services Agreement (the “Par MSA”) that the Company entered into with Par in September 2020 to provide fill-finish manufacturing services for NVX-CoV2373. The matter is currently stayed,at a preliminary stage and upontherefore the potential loss is not reasonably estimable. The parties are engaged in discovery and arbitration is scheduled for July 2023. While the Company maintains that no breach of the Par MSA has occurred and intends to vigorously defend the matter, if the final resolution of the plaintiff’s motion for an awardmatter is adverse to the Company, it could have a material impact on the Company’s financial position, results of fees and expenses, the action will be automatically dismissed.operations, or cash flows.
On November 12, 2021, Sothinathan Sinnathurai filed a purported class action in the U.S. District Court for the District of Maryland against Novavax and certain members of senior management, captioned Sothinathan Sinnathurai v. Novavax, Inc., et al., No. 8:21-cv-02910-TDC (the “Sinnathurai Action”). The complaint in the Sinnathurai Action alleges that the defendants made certain purportedly false and misleading statements concerning NVX-CoV2373, including with respect to the Company’s manufacturing capabilities and NVX-CoV2373’s regulatory and commercial prospects. The purported class is defined as those who purchased or otherwise acquired Novavax securities between March 2, 2021 and October 19, 2021. The complaint demands an award of damages on behalf of the purported class and attorneys’ fees incurred in connection with the litigation. On January 26,18, 2022, the court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs inCompany delivered written notice to Gavi to terminate the Sinnathurai Action. The court has orderedGavi APA based on Gavi’s failure to procure the co-lead plaintiffs to file an amended complaint by March 11, 2022. The Company’s response to the amended complaint is due April 25, 2022.
After the Sinnathurai Action was filed, three derivative lawsuits were filed and are currently pending in the U.S. District Court for the Districtpurchase of Maryland: Robert E. Meyer v. Stanley C. Erck, et al., No. 8:21-cv-02996-TDC (the “Meyer Action”), Shui Shing Yung v. Stanley C. Erck, et al., No. 8:21-cv-03248-TDC (the “Yung Action”), and William Kirst, et al. v. Stanley C. Erck, et al., No. 8:22-cv-00024-TDC (the “Kirst Action”). The derivative lawsuits name members350 million doses of the board of directors and certain members of senior management as defendants. Novavax is deemed a nominal defendant. The derivative plaintiffs assert derivative claims arising out of substantially the same alleged facts and circumstances as the Sinnathurai Action. Collectively, the derivative complaints assert claims for breach of fiduciary duty, insider selling, unjust enrichment, violation of federal securities law, abuse of control, waste, and mismanagement. Plaintiffs seek declaratory and injunctive relief, as well as an award of monetary damages and attorneys’ fees. Novavax removed the Kirst ActionNVX-CoV2373 from the Circuit Court for Montgomery County, Maryland. On February 7,Company as required by the Gavi APA. As of November 18, 2022, the plaintiffs inCompany had only received orders under the Kirst Action filedGavi APA for approximately 2 million doses. On December 2, 2022, Gavi issued a motionwritten notice purporting to remandterminate the action to state court and, in response,Gavi APA based on Gavi’s contention that the Company has filed an opposition. The Court also entered an order tolling the defendants’ time to respond to the complaints in the Meyer and Yung Actions pending submission of a joint proposed briefing schedule on any
anticipated motion practiceCompany repudiated the agreement and, therefore, materially breached the Gavi APA. Gavi also contends that, based on its purported termination of the Gavi APA, it is entitled to a refund of the Advance Payment Amount less any amounts that have been credited against the purchase price for binding orders placed by a buyer participating in those casesthe COVAX Facility. As of December 31, 2022, the remaining Gavi Advance Payment Amount of $697.4 million, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, was reclassified from Deferred revenue to Other current liabilities in the Company’s consolidated balance sheet. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on the claims described above. The Company’s response is currently due by March 25, 2022. On February 4, 2022,2, 2023. Arbitration is inherently uncertain, and while we believe that we are entitled to retain the Court entered an order consolidatingremaining Advance Payment Amount received from Gavi, it is possible that we could be required to refund all or a portion of the Meyer and Yung Actions.
remaining Advance Payment Amount from Gavi.
We are also involved in various other legal proceedings arising in the normal course of business. Although the outcomes of these other legal proceedings are inherently difficult to predict, we domanagement does not expect the resolution of these other legal proceedings to have a material adverse effect on our financial position, results of operations, or cash flows.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the Nasdaq Global Select Market under the symbol “NVAX.” Our common stock was held by approximately 133137 stockholders of record as of February 21, 2022, 2023, one of which is Cede & Co., a nominee for Depository Trust Company (“DTC”). All of the shares of common stock held by brokerage firms, banks, and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC, and are therefore considered to be held of record by Cede & Co. as one stockholder. We do not anticipate declaring or paying any cash dividends in the foreseeable future.
Securities Authorized for Issuance under our Equity Compensation Plans
Information regarding our equity compensation plans, including both stockholder approved plans and non-stockholder approved plans, is included in Part III, Item 12 of this Annual Report on Form 10-K.
Performance Graph
The graph below matches Novavax, Inc.'s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the Nasdaq Composite Index and the Russell 2000 Growth Biotechnology Index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 20162017 to December 31, 2021.2022.
COMPARISON OF 5 YEAR CUMULATIVE RETURN*
Among Novavax Inc., the NASDAQ Composite index,
and the Russell2000 Growth Biotechnology Index
*$100 invested on 12/31/1617 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Value of $100 invested on December 31, 20162017 in stock or index, including reinvestment of dividends, for fiscal years ended December 31:ended:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, |
| | 12/30/16 | | 12/29/17 | | 12/31/18 | | 12/31/19 | | 12/31/20 | | 12/31/21 | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Novavax, Inc. | Novavax, Inc. | $ | 100 | | | $ | 98.41 | | | $ | 146.03 | | | $ | 15.79 | | | $ | 442.5 | | | $ | 567.74 | | Novavax, Inc. | $ | 100 | | | $ | 148.39 | | | $ | 16.05 | | | $ | 449.64 | | | $ | 576.9 | | | $ | 41.45 | |
NASDAQ Composite | NASDAQ Composite | $ | 100 | | | $ | 129.64 | | | $ | 125.96 | | | $ | 172.17 | | | $ | 249.51 | | | $ | 304.85 | | NASDAQ Composite | $ | 100 | | | $ | 97.16 | | | $ | 132.81 | | | $ | 192.47 | | | $ | 235.15 | | | $ | 158.65 | |
Russell 2000 Growth Biotechnology | Russell 2000 Growth Biotechnology | $ | 100 | | | $ | 159.84 | | | $ | 131.82 | | | $ | 192.39 | | | $ | 299.05 | | | $ | 208.12 | | Russell 2000 Growth Biotechnology | $ | 100 | | | $ | 82.47 | | | $ | 120.36 | | | $ | 187.09 | | | $ | 130.2 | | | $ | 94.86 | |
This graph is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Any statements in the discussion below and elsewhere in this Annual Report on Form 10-K about expectations, beliefs, plans, objectives, assumptions, or future events or performance of Novavax, Inc. (“Novavax,” together with its wholly owned subsidiaries, Novavax AB and Novavax CZ, the “Company,” “we”“we,” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements about our capabilities, goals, expectations regarding future revenue and expense levels, and capital raising activities; our operating plans and prospects;prospects, including our ability to continue as a going concern through one year from the date of Novavax’ audited financial statements for the year ended December 31, 2022; potential market sizes and demand for our product candidates; the efficacy, safety, and intended utilization of our product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the development of our preclinical product candidates; our expectations related to enrollment in our clinical trials; the conduct, timing, and potential results from clinical trials and other preclinical studies; plans for and potential timing of regulatory filings; our expectation of manufacturing capacity, timing, production, distribution, and delivery for NVX-CoV2373 by us and our partners; our estimate of the number of individuals who may potentially be reached by NVX-CoV2373; our expectations with respect to the anticipated ongoing development and commercialization or licensure of NVX-CoV2373, ongoing development of COVID-19 variant strain-containing monovalent or bivalent formulation, efforts to expand the NVX-CoV2373 label worldwide as a booster, and NanoFlu Program;to various age groups and geographic locations, and our seasonal quadrivalent influenza vaccine, previously known as NanoFlu; the expected timing, content, and outcomes of regulatory actions; funding from the U.S. government partnership formerly known as Operation Warp Speed (“OWS”),under the USG Agreement, the U.S. Department of Defense (“DoD”) and the Coalition for Epidemic Preparedness Innovations (“CEPI”), and payments from the Bill & Melinda Gates Foundation (“BMGF”);CEPI; funding under our advance purchaseAPAs and supply agreements and supply agreements;amendments to, termination of, or legal disputes relating to any such agreement; our available cash resources and usage and the availability of financing generally; plans regarding partnering activities and business development initiatives; and other matters referenced herein. Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” “aim,” or “assume,” the negative of these terms, or other comparable terminology, although not all forward-looking statements contain these words.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations about the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Forward-looking statements involve estimates, assumptions, risks, and uncertainties that could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, and, therefore, you should not place considerable reliance on any such forward-looking statements. Such risks and uncertainties include, without limitation, challenges satisfying, alone or together with partners, various safety, efficacy, and product characterization requirements, including those related to process qualification and assay validation, necessary to satisfy applicable regulatory authorities, such as the U.S. Food and Drug Administration (“FDA”), World Health Organization (“WHO”),FDA, the WHO, United Kingdom (“UK”) Medicines and Healthcare Products Regulatory Agency, (“MHRA”), the European Medicines Agency, (“EMA”), the Republic of Korea’s Ministry of Food and Drug Safety, (“MFDS”), or Japan’s Ministry of Health, Labour and Welfare (“MHLW”);Welfare; unanticipated challenges or delays in conducting clinical trials; difficulty obtaining scarce raw materials and supplies; resource constraints, including human capital and manufacturing
capacity, constraints on the ability of Novavax to pursue planned regulatory pathways, alone or with partners, in multiple jurisdictions simultaneously, leading to staggering of regulatory filings, and potential regulatory actions; challenges meeting contractual requirements under agreements with multiple commercial, governmental, and other entities; and other risks and uncertainties identified in Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K, which may be detailed and modified or updated in other documents filed with the United States Securities and Exchange Commission (“SEC”)SEC from time to time, and are available at www.sec.gov and at www.novavax.com. You are encouraged to read these filings as they are made.
We cannot guarantee future results, events, level of activity, performance, or achievement. Any or all of our forward-looking statements in this Annual Report on Form 10-K may turn out to be inaccurate or materially different from actual results. Further, any forward-looking statement speaks only as of the date when it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We are a biotechnology company that promotes improved health globally through the discovery, development, and commercialization of innovative vaccines to prevent serious infectious diseases. The Company'sOur proprietary recombinant technology platform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticlesnanoparticle vaccines designed to address urgent global health needs.
We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertainties associated with vaccine development. As we obtain data from preclinical studies and clinical trials, we may elect to discontinue or delay clinical trials in order to focus our resources on more promising vaccine candidates. Completion of clinical trials may take several years or more, but the length of time can vary substantially depending upon the phase, size of clinical trial, primary and secondary endpoints, and the intended use of the vaccine candidate. The cost of clinical trials may vary significantly over the life of a project as a result of a variety of factors, including:
As a result of these uncertainties, we are unable to determine the duration and completion costs of our research and development projects or when, and to what extent, we will generate future cash flows from our research projects.
Our future capital requirements depend on numerous factors including, but not limited to, revenue from our product sales and royalties under licensing arrangements with our strategic partners; funding and repayments under our grant agreements; our projected activities related to the development and commercial support of NVX-CoV2373 and variant candidates, including significant commitments under various CRO, CMO, and CDMO agreements,agreements; the progress of preclinical studies and clinical trials,trials; the time and costs involved in obtaining regulatory approvals,approvals; the costs of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rightsrights; and other manufacturing, sales, and distribution costs. We plan to continue developing other vaccines and product candidates, such as our NanoFluinfluenza vaccine candidate and potential combination vaccines candidates, which are in various stages of development. We believe our operating expenses and capital requirements will fluctuate depending upon the timing of events, such as the progress of our NVX-CoV2373 clinical trials and regulatory approval for the use of NVX-CoV2373 in the U.S. and internationally, as well as the scope, initiation and progress of our preclinical studies and clinical trials related to other research and development activities.