| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| Delaware | 22-2816046 | ||||||||||
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| (I.R.S. Employer Identification No.) | |||||||||
| 21 Firstfield Road, | |||||||||||
| Gaithersburg, | Maryland | 20878 | |||||||||
| (Address of principal executive offices) |
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| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common Stock, Par Value $0.01 per share | NVAX | The Nasdaq Global Select Market | ||||||
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| Item 16. | FORM 10-K SUMMARY | |||||||
Item 1.BUSINESS
Drug Administration (“FDA”) for EUA of NVX-CoV2373. We also advanced our NanoFlu Program vaccine program through a Phase 3 clinical trial, which demonstrated positive top-line results and achieved statistical significance in key secondary endpoints. Additionally, we are exploring a number of combination vaccine candidates including a COVID-Influenza combination vaccine currently in a Phase 1/2 clinical trial. We believe that our protein-subunit-based candidates elicit differentiated immune responses that may be more efficacious than naturally occurring immunity or other vaccine approaches. These vaccine candidates incorporate our proprietary saponin-based Matrix-M™ adjuvant to enhance the immune response and stimulate higher levels of neutralizing antibodies.
We are also developingB-cell populations, thereby boosting immune stimulating saponin-based adjuvants through our wholly owned Swedish subsidiary, Novavax AB. Our leadresponse. Matrix-M™ adjuvant Matrix-M™, has been shown to enhanceproduce a long-lasting memory response, through the production of plasma cells, memory B-cells, high affinity antibodies, and CD4+ T-cells. This potent mechanism of action enables a lower dose of antigen required to achieve the desired immune responsesresponse and was well-toleratedwe believe thereby contributes to increased vaccine supply and manufacturing capacity. These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile.
Product Pipeline
Our product pipeline includesdemonstrated high efficacy against both the original COVID-19 strain and commonly circulating COVID-19 variants of concern (“VoC”), while maintaining a favorable safety profile. We also advanced our NanoFlu Program through a Phase 3 clinical trial, which demonstrated positive top-line results and achieved statistical significance in key secondary endpoints. We initiated a trial of a combination vaccine candidates engineered to elicit differentiated immune responses with the potential to provide increased protection. Our nanoparticle technology targets antigens with conserved epitopes essential for viral function. Our vaccine technology has the potential to be applied broadly to a wide variety of human infectious diseases.
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*Supported by the $89.1 million grant from the Bill and Melinda Gates Foundation (“BMGF”)
A current summaryconsisting of our significant researchNanoFlu Program and development programsNVX-CoV2373 and status of the related product candidatesremain interested in development follows:
Respiratory Syncytial Virus
We have identified three susceptible target populations that could benefit from thefurther development of our RSV Program for respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”). Ongoing Phase 3 trials are being conducted for R21, a malaria candidate, by our partners, Jenner Institute, University of Oxford, which is formulated with our Matrix-M
Repeat infection and lifelong susceptibility to RSV are common and we currently estimate the global cost burden of RSV to be in excess of $88 billion.1 Despite decades of effort to develop an RSV vaccine, there are currently no licensed vaccines. We made a breakthrough in developing a vaccine that targets the fusion protein, or F-protein, of the virus. The F-protein has highly conserved amino acid sequences, called antigenic sites, which we believe are ideal vaccine targets. We genetically engineered a novel F-protein antigen resulting in enhanced immunogenicity by exposing a number of these antigenic sites. The Novavax RSV F Vaccine assembles into a recombinant protein nanoparticle optimized for F-protein antigen presentation. We are seeking to bring the first RSV vaccine to marketavailable to combat the estimated 64 million RSV infections that occur globally each year.2,3
RSV Infants via Maternal Immunization Program
Burden of Disease
RSV is the most common cause of lower respiratory tract infections and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide.4,5 In the U.S., RSV is the leading cause of hospitalization of infants, and globally, is second only to malaria as a cause of death in children under one year of age.6,7 Despite the induction of post-infection immunity, repeat infection and lifelong susceptibility to RSV is common.8,9
Clinical Trial Update
Prepare Phase 3 Trial (Ongoing)
We initiated Prepare™, a global pivotal Phase 3 clinical trial of our RSV F Vaccine, using aluminum phosphate as an adjuvant, in approximately of 4,600 healthy pregnant women in December 2015. The primary objective of the Prepare trial is to determine the efficacy of maternal immunization with the RSV F Vaccine against symptomatic RSV lower respiratory tract infection with objective measures of medical significance in infants through a minimum of the first 90 days of life and up to the first six months of life.
The Prepare trial utilizes a group sequential design. We will initiate a prescribed interim efficacy analysis when we have approximately 4,600 enrolled women, currently expected in mid-2018, and report results from this interim analysis, expected in early 2019. Assuming successful interim analysis results, the trial would be concluded without further enrollment. In 2017, with approximately 1,300 participants in the Prepare trial, we conducted an informational analysis that provided a positive indication of our vaccine’s potential efficacy (between 45% and 100%10), further de-risking this important program. These results have allowed us to make go-forward decisions relating to various program-related activities.
The Prepare trial is supported by a grant (the “Grant”) of up to $89.1 million from BMGF. The Grant supports development activities, product licensing efforts and World Health Organization (“WHO”) prequalification of our RSV F Vaccine. In 2015, along with the Grant agreement (the “Grant Agreement”), we concurrently entered into a Global Access Commitments Agreement with BMGF, under which we agreed to make a certain amount of the RSV F Vaccine available and accessible at affordable pricing to people in certain low and middle income countries.
1 Estimated value of life lost, future health implications and lost earnings; preliminary data based on Novavax research of available epidemiology and health outcomes data
2 Nair, H.,et al., (2010) Lancet. 375:1545 – 1555
3 WHO Acute Respiratory Infections September 2009 Update:http://apps.who.int/vaccine_research/diseases/ari/en/index2.html
4 Nair, H.,et al., (2010) Lancet. 375:1545 - 1555
5 CDC:https://www.cdc.gov/rsv/research/us-surveillance.html
6 Hall, C.B.et al. (2013) Pediatrics; 132(2):E341-348
7 Oxford Vaccine Group: http://www.ovg.ox.ac.uk/rsv
8 Glezen, W.P.et al. (1986) Am J Dis Child; 140:543-546
9 Glenn, G.M.et al. (2016) JID; 213(3):411-12
10 Assumes 2:1 randomization
Phase 2 Safety and Immunogenicity Trial (Completed)
In September 2015, we announced positive top-line data from our Phase 2 clinical trial of our RSV F Vaccine in 50 healthy pregnant women and their infants. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine in pregnant women in their third trimester, and assessed the transplacental transfer of maternal antibodies induced by the vaccine. The trial also examined the impact of maternal immunization on infant safety during the first year of life and RSV-specific antibody levels through the infants’ first six months of life. Immunized women demonstrated a geometric mean 14-fold rise in anti-F IgG, a 29-fold rise in palivizumab-competing antibodies and 2.7 and 2.1-fold rises in microneutralization titers against RSV/A and RSV/B, respectively. In contrast, women who received placebo demonstrated no significant change in antibody levels. The infants’ antibody levels at delivery averaged 90-100% of the mothers’ levels, indicating efficient transplacental transfer of antibodies from mother to infant. The estimated half-lives of infant PCA, anti-F IgG, and RSV/A and RSV/B microneutralizing antibodies, based on data through day 60, were 41, 30, 36 and 34 days, respectively.
Fast Track Designation
The U.S. Food and Drug Administration (“FDA”) granted Fast Track designation to our RSV F Vaccine for protection of infants via maternal immunization. Fast Track designation is intended for products that treat serious or life-threatening diseases or conditions, and that demonstrate the potential to address unmet medical needs for such diseases or conditions. The program is designed to facilitate development and expedite review of drugs to treat serious and life-threatening conditions so that approved products can reach the market expeditiously.
RSV Older Adults Program
Burden of Disease
Older adults (60 years of age and older) are at increased risk for RSV disease due in part to immunosenescence, the age-related decline in the human immune system. In this population, RSV is an important respiratory virus, distinct from influenza, which is frequently responsible for serious lower respiratory tract disease and may lead to hospitalization or even death. Additionally, RSV infection can also lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, (“COPD”), asthma and congestive heart failure. In the U.S., the incidence rate is approximately 2.5 million infections per year, and
11 Falsey, A.R. et al. (2005) NEJM. 352:1749–59 extrapolated to 2015 census population
12 Falsey, A.R. et al. (1995) JID.172:389-94
13 Falsey, A.R. et al. (2005) NEJM. 352:1749–59 extrapolated to 2015 census population
14 W.W. Thompson et al. Mortality associated with influenza and respiratory syncytial virus in the United States. JAMA 2003; 289(2): 179-186
15 K. Widmeret al. Rates of hospitalizations for respiratory syncytial virus, human metapneumovirus, and influenza virus in older adults. J Infect Dis. 2012; 206: 56-62
16 K. Widmeret al. Respiratory syncytial virus & human metapneumovirus-associated emergency department and hospital burden in adults. Influenza and Other Respiratory Viruses. 2014; 8(3): 347-352.
Clinical Trial Updates and Analyses
Phase 2 (E-205) Safety and Immunogenicity Clinical Trial (Completed)
In July 2017, we announced positive top-line data from our Phase 2 clinical trial ofdemonstrated that our RSV F Vaccine inProgram for older adults known as E-205. The objective of the E-205 trial was to assess safety and immunogenicity to one and two dose regimens of the RSV F Vaccine, with and withouteither aluminum phosphate or our proprietary Matrix-M
Further Analyses of Prior Clinical Trials
Following the September 2016 announcement of top-line results of Resolve™, our Phase 3 clinical trial of our RSV F Vaccine in older adults conducted during the 2015-16 RSV season in the U.S., we conducted multiple analyses on the clinical data from the Resolve trial, as well as the other completed Phase 2 clinical trials conducted in older adults. Our analyses of these clinical trials sought to better understand their results. More detailed descriptions of each of these RSV older adult clinical trials are found under “Clinical Trial Updates and Analyses” below; the trials are named and briefly described in the following table:
| Clinical Trial Name | Phase | Description | Conducted | Participants(#) | ||||
| E-201 | Phase 2 | Efficacy in prevention of all symptomatic RSV disease | 2014-15 RSV season | 1,600 | ||||
| Resolve (or E-301) | Phase 3 | Efficacy in prevention of msLRTD | 2015-16 RSV season | 11,856 | ||||
| E-202 Rollover | Phase 2 | Immunogenicity in response to serial immunization after E-201 | 2015-16 RSV season | 1,329 | ||||
| E-205 | Phase 2 | Immunogenicity in one or two doses, with or without adjuvant | 2017 | 300 |
We have found that seasonal variation in attack rate, meaning the incidence of infectious disease in an at-risk population, may have a large impact on demonstrating vaccine efficacy in a particular year. Lower attack rates may mean that either the virus is less common in a given season, or alternatively, that the population being studied has increased intrinsic resistance in that season due to a variety of potential factors such as recent prior exposure. In our E-201 trial, we witnessed a high attack rate and showed a clear demonstration of efficacy. In our Resolve trial the following year, we observed a primary endpoint attack rate of only one-fourth that of the previous season. This scenario represents a conundrum that influenza vaccine developers have experienced for decades: “low attack rate” influenza seasons make it very difficult to demonstrate vaccine efficacy.
Additional further analyses of the Resolve trial data indicate that our RSV F Vaccine was associated with a 61% reduction in hospitalizations due to COPD exacerbations, and the same analysis of the E-201 trial showed a similar signal, supporting this finding. We believe that such higher-risk patients represent an unmet medical need with a significant healthcare cost burden that could potentially be addressed by such a vaccine.
Resolve (E-301) Phase 3 Trial (Completed)
In September 2016, we announced top-line data from our Resolve trial. Resolve was a randomized, observer-blinded, placebo-controlled trial that began in November 2015, and was fully enrolled with 11,856 older adults at 60 sites in the U.S. by December 2015. The trial did not meet its pre-specified primary or secondary efficacy objectives and did not demonstrate vaccine efficacy. The primary objective of the Resolve trial was to demonstrate efficacy in the prevention of moderate-severe RSV (“msLRTD”), as defined by the presence of multiple lower respiratory tract symptoms. The secondary objective of the trial was to demonstrate efficacy of the RSV F Vaccine in reducing the incidence of all symptomatic respiratory disease due to RSV ARD. The trial also evaluated the safety of an unadjuvanted, 135 microgram dose of the RSV F Vaccine compared to placebo. Consistent with our previous clinical experience, the vaccine was well-tolerated.
Phase 2 (E-202) Rollover Trial (Completed)
In September 2016, we announced positive top-line data from our E-202 rollover trial of our RSV F Vaccine in older adults. The trial was a randomized, observer-blinded, placebo-controlled rollover trial, which enrolled 1,329 older adults from our prior E-201 trial, conducted at the same 10 sites in the U.S. as the E-201 trial. The primary objectives of the trial were to evaluate safety and serum anti-F IgG antibody concentrations in response to immunization with thenon-adjuvanted RSV F Vaccine. The exploratory objectives of the trial evaluated the efficacy of a second annual dose of the RSV F Vaccine in the prevention of RSV ARD and RSV msLRTD. Participants previously randomized to receive 135 microgram RSV F Vaccine or placebo were re-enrolled and re-randomized to receive either 135 microgram RSV F Vaccine or placebo. This trial design resulted in four separate trial arms: a) participants receiving a placebo in both the first trial and second trial (“Placebo-Placebo”); b) participants receiving RSV F Vaccine in the first trial and placebo in the second trial (“Vaccine-Placebo”); c) participants receiving placebo in the first trial and RSV F Vaccine in the second trial (“Placebo-Vaccine”); and d) participants receiving RSV F Vaccine in both the first trial and second trial (“Vaccine-Vaccine”).
The E-202 rollover trial demonstrated immunogenicity in all active vaccine recipients, with a 6-fold increase in anti-F IgG in the Placebo-Vaccine arm, consistent with the E-201 trial. There was higher anti-F IgG at baseline in the Vaccine-Vaccine arm compared to the Placebo-Vaccine arm and the Vaccine-Vaccine arm showed a greater than 2-fold increase in anti-F IgG from the higher baseline.
Phase 2 (E-201) Trial in Older Adults (Completed)
In August 2015, we announced positive top-line data from our E-201 trial of our RSV F Vaccine in 1,600 older adults. The E-201 trial was designed to prospectively examine the incidence of all symptomatic respiratory illnesses associated with RSV infection, in community-living older adults who were treated with placebo. The trial also evaluated safety and immunogenicity of our RSV F Vaccine compared to placebo. Finally, the trial estimated the efficacy of our RSV F Vaccine in reducing the incidence of respiratory illness due to RSV. The trial was the first to demonstrate efficacy of an active RSV immunization in any clinical trial population. In the per protocol population, the clinical trial showed statistically significant vaccine efficacy in prevention of all symptomatic RSV disease (41%) and, in an ad hoc analysis, showed a decrease in RSV disease with any symptoms of lower respiratory tract infection (45%) in older adults. The clinical trial established an attack rate for symptomatic RSV disease of 4.9% in older adults, 95% of which included lower respiratory track symptoms. Efficacy against more severe RSV illness, defined by the presence of multiple lower respiratory tract symptoms or signs associated with difficulty breathing, was 64% in ad hoc analyses.
RSV Pediatrics Program
Burden of Disease
There are currently approximately 18 million children in the U.S. between six months and five years of age.17 By the age of five, essentially all children will have been exposed to RSV and will likely have developed natural immunity against the virus, thus decreasing the rate of severe disease in these children. In the U.S., RSV is responsible for approximately 57,000 hospitalizations of children under five years of age annually, the vast majority of which occur in infants less than one year old, and especially those under six months of age.18,19,20,21,22
Clinical Trial Update
In September 2015, we announced positive top-line data from our Phase 1 clinical trial of our RSV F Vaccine in healthy children between two and six years of age. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine, with one or two doses, with or without aluminum phosphate adjuvant. Trial enrollment was concluded with a smaller than planned cohort so that dosing could be completed ahead of the 2014-15 RSV season. The vaccine was well-tolerated and serum samples collected from a subset of 18 immunized children in the per-protocol population, demonstrated that the RSV F Vaccine was highly immunogenic at all formulations and regimens. There were greater than 10-fold increases in both anti-F IgG and PCA antibody titers in the adjuvanted group and greater than 6-fold increases in anti-F IgG and PCA antibody titers in the unadjuvanted group. Development of our RSV F Vaccine for pediatrics would likely follow successful development of our RSV F Vaccine for maternal immunization.
17 U.S. Census.www.census.go/population/international/data/idb/informationGateway.php
18 Stockman, L.J.et al (2012) Pediatr Infect Dis J. 31: 5-9
19 CDC update May 5, 2015.http://www.cdc.gov/rsv/research/us-surveillance.html
20 Boyce, T.G.et al (2000) Pediatrics; 137: 865-870
21 Hall, C.B.et al (2009) NEJM; 360(6): 588-98
22 Hall, C.B.et al (2013) Pediatrics; 132(2): E341-8
Influenza
Burden of Disease
Influenza is a world-wide infectious disease that causes illness in humans ranging from mild to life-threatening symptoms or even death. Serious illness occurs not only in susceptible populations such as pediatrics and older adults, but also in the general population largely because of infection by unique strains of influenza for which most humans have not developed protective antibodies. Current estimates for seasonal influenza vaccine growth in the top seven markets (U.S., Japan, France, Germany, Italy, Spain and UK), show a potential increase from approximately $3.2 billion in the 2012-13 season to $5.3 billion by the 2021-22 season.23
The Advisory Committee for Immunization Practices of the Center for Disease Control and Prevention (“CDC”) recommends that all persons aged six months and older be vaccinated annually against seasonal influenza. Influenza is a major burden on public health worldwide: an estimated one million deaths each year are attributed to influenza.24 It is further estimated that, each year, influenza attacks between 5% and 10% of adults and 20% to 30% of children, causing significant levels of illness, hospitalization and death.25 One important advantage of recombinant seasonal influenza vaccines, like the candidate we are developing, is that once licensed for commercial sale, large quantities of such vaccine could potentially be manufactured quickly and in a cost-effective manner, without the use of either live influenza virus or eggs. Our recombinant influenza nanoparticles also can display conserved antigenic regions, which have the potential to elicit broadly neutralizing antibodies that appear to protect against a range of “drifted” strains, or influenza strains in which, over time, the hemagglutinin antigen undergoes an accumulation of genetic mutations at the hemagglutinin antigen sites that bind with neutralizing antibodies, potentially resulting in reduced protection of those antibodies. Additionally, nanoparticles offer improved purity and manufacturability and advantages for co-formulation with other nanoparticle-based vaccines.
Clinical Trial Update
In February 2018, we reported positive top-line results from our Phase 1/2 clinical trial of our nanoparticle seasonal influenza vaccine candidate, including our proprietary Matrix-M adjuvant (“NanoFlu™ vaccine”), in older adults that was initiated in September 2017. The trial was a randomized, observer-blinded, active comparator-controlled trial in approximately 330 healthy older adults. The primary objective of the trial wasWe continue to assess the safety and immunogenicity of two concentrations (15 micrograms or 60 micrograms) of NanoFlu vaccine compareddevelopment opportunities for our RSV Program for older adults.
Overall, NanoFlu vaccine was well-tolerated over the three-week trial period. Given the strength of these trial results, we have submitted for publication627 thousand deaths worldwide in a peer-reviewed medical journal and/or for presentation at an upcoming scientific meeting. Based on these results, we expect to begin a Phase 2 trial of our NanoFlu vaccine in the third quarter of 2018.
23 Influenza Vaccines Forecasts. Datamonitor (2013)
24 Resolution of the World Health Assembly. (2003) WHA56.19. 28
25 WHO position paper (2012) Weekly Epidemiol Record; 87(47): 461–76
Preclinical Analyses
Preclinical data in which NanoFlu was compared in a head-to-head challenge study against IIV3-HD, as well as IIV3-SD (standard dose) seasonal influenza vaccine, was announced in August 2017 and provided a strong rationale for the initiation of the Phase 1/2 trial. Our NanoFlu vaccine demonstrated significantly stronger and broader immune responses (microneutralizing antibodies) against homologous and heterologous influenza strains, including a series of drifted H3N2 strains evolved across over more than a decade of influenza seasons. In this preclinical challenge study, we showed that our NanoFlu vaccine was more protective than the licensed comparator vaccines against both a homologous H3N2 virus and a ten-year old drifted H3N2 strain. In parallel, we announced the achievement of significant improvements in manufacturing yields and product purity.
Emerging Viruses
Ebola Virus
EBOV, formerly known as Ebola hemorrhagic fever, is a severe, often fatal illness in humans. Multiple strains of EBOV have been identified, the most recent of which, the Makona EBOV strain, is associated with a case fatality rate of 50% to 90%.26 There are currently no licensed treatments proven to neutralize the virus, but a range of blood, immunological and drug therapies are under development. Despite the development of such therapies, current vaccine approaches target either a previous strain of the virus or were initially developed to be delivered by genetic vectors. In contrast, our EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) was developed using the Makona EBOV strain.
In July 2015, we announced positive top-line data from our Phase 1 clinical trial of our Ebola GP Vaccine in ascending doses, with and without our Matrix-M adjuvant, in 230 healthy adults. Participants received either one or two intramuscular injections ranging from 6.5 micrograms to 50 micrograms of antigen, with or without adjuvant, or placebo. Immunogenicity was assessed at multiple time points, including days 28 and 35. These Phase 1 data demonstrated that our Ebola GP Vaccine is highly immunogenic, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant, resulted in significant antigen dose-sparing. The adjuvanted Ebola GP Vaccine was highly immunogenic at all dose levels; the adjuvanted two-dose regimens induced Ebola anti-GP antibody geometric mean responses between 45,000 and 70,000 ELISA units, representing a 500 to 750-fold rise over baseline at day 35. In 2015, we also announced successful data from two separate non-human primate challenge studies of our Ebola GP Vaccine in which, in both cases, the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected.
Zika Virus
2020. We initiated development of a vaccine against the Zika virus (“ZIKV”) in response to the unmet global medical need for a response to this serious disease. The subsequent evolving epidemiology of ZIKV, which saw significant reductions in cases both in the U.S. and around the world in 2017, along with the uncertainty of governmental and non-governmental organization funding, has caused us to suspend these development efforts in lieu of competing resources and corporate priorities around more promising product development.
Combination Respiratory Vaccine
Given the ongoing development of our RSV F Vaccine and our desire to develop a combination respiratory vaccine with the potential to protect against both RSV and seasonal influenza, we made the decision to shift our seasonal influenza vaccine development focus from VLP-based seasonal influenza vaccines to nanoparticle-based seasonal influenza vaccines. We remain confident that a combination nanoparticle vaccine against both RSV and influenza is feasible.
26 WHO: http://www.who.int/mediacentre/factsheets/fs103/en/
CPLB Joint Venture (India)
CPL Biologicals Private Limited (“CPLB”), our joint venture company with Cadila Pharmaceuticals Limited (“Cadila”) in India, is actively developing a number of vaccine candidates that were genetically engineered by us. CPLB is owned 20% by us and 80% by Cadila. CPLB operates a manufacturing facility in India for the production of vaccines.
Seasonal Influenza
Since 2016, CPLB has been marketing CadiFlu-S, its trivalent VLP influenza vaccine in India, with limited sales in 2017 and expected in 2018.
Rabies
In October 2016, CPLB initiated its Phase 3 clinical trial in India of a recombinant rabies G protein vaccine candidate that can be administered in prophylactic regimens, both pre and post-exposure. The post-exposure regimen has the potential to use fewer doses (three doses) than the current standard of care (five doses). Data from the trial are expected in 2018.
Vaccine Technology
Our recombinant protein nanoparticle vaccine technology is based on self-assembly of surface protein antigens from pathogenic organisms including viruses, bacteria or parasites. The conformations of these nanoparticles are similar but not identical to the natural structure of surface antigens of disease organisms, and lack the genetic material required for replication and therefore are not infectious. Potential immunological advantages of protein nanoparticles may be associated with the nanoparticle conformation and the presentation of key functional epitopes that are often immunologically hidden in the native pathogen. This leads to efficient recognition by the immune system’s antigen presenting cells that trigger robust immune responses. Recognition of the nanoparticle vaccine’s repeating protein patterns by the antigen presenting cells’ toll-like receptors to stimulate innate immunity and the high purity and lack of synthetic material adds to the potential safety of recombinant nanoparticle vaccines. Protein nanoparticle vaccine technology has expanded our early-stage vaccines in development to include both virus and non-virus disease targets. Our most advanced protein nanoparticle vaccine candidate is our RSV F Vaccine, which self-assembles from our highly purified F-protein antigen.
Matrix Adjuvants
Adjuvants are predominantly used to enable a vaccine to increase the amplitude of the immune response and qualitatively change it, broaden its specificity to provide protection against related microorganisms and allow for effective immunization with much lower doses of antigen. Novavax AB has developed a number of adjuvant formulations, all based on our proprietary Matrix™ technology. These adjuvant formulations possess excellent immunostimulatory features with the ability to increase and prolong the protective benefits of vaccines.
While adjuvants based on novel, poorly characterized substances have been hampered by safety concerns and limited efficacy, Matrix adjuvants stimulate strong antibody and cell-mediated immune responses. Matrix adjuvants may allow for lower antigen doses, longer-duration immune responses and carry a lower risk for allergic reactions or other adverse events. Our Matrix technology typically induces strong cellular activation of both Th1 and Th2 types, thereby generating all classes and subclasses of antibodies, as well as potent cellular responses, including cytotoxic T lymphocytes. Our Matrix-M adjuvant provides a potent adjuvant effect that has been well-tolerated in clinical trials. We also believe that the strong immune response and opportunity to reduce the quantity of antigen dose can significantly reduce the production cost of our vaccines. This means that our Matrix-M adjuvantmalaria 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-M
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.
RSV
There is currently no approved RSV vaccine for sale in the world; however, a
There are aimportant role in addressing this global public health crisis.
Vaccine candidates against EBOV have beenother products in development for more thanby our competitors. At this time, there are a decade; however,number of companies and other organizations with the recent epidemic in West Africa (now subsided), focus on viable vaccine candidates has intensified. The WHO has reported two vaccine candidates thatin late-stage clinical trials. In older adults, GSK, Pfizer, and Janssen are currently being tested in humans: one by GlaxoSmithKlinePhase 3 trials. GSK and Pfizer both are in collaboration with NIAID,Phase 3 trials for infants via maternal immunization. Additionally, both the AstraZeneca / Sanofi partnered monoclonal antibody and the other by a collaboration of NewLink Genetics, Merck Vaccines USA (“Merck”) and the Public Health Agency of Canada. The Merck vaccine is the only one to have completed some humanmonoclonal antibody are in Phase 3 trials before the epidemic faded, to have had data published, and to now be planning to file for licensure. While these and other vaccine candidates offer promise, we believe there are accompanying challenges, including: high-dose level requirements; utilization of glycoprotein from older strains that have a significant number of amino acid changes when compared to the 2014 Makona strain; difficult storage requirements at temperatures below –60°C; and challenges associated with immunity to the viral vectors, which could limit their multi-dose vaccine potential. In contrast, we have developed a Phase 1 vaccine candidate that has performed well with low doses utilizing our Matrix-M adjuvant, was derived from the 2014 Makona strain, appears to be stable at 2–8°C and appears to provide enhanced immunogenicity as a multi-dose vaccine.
in infants.
Patents and Proprietary Rights
Licenses
.Since 2007, we have maintained a non-exclusive license arrangement with Wyeth Holdings LLC, a subsidiary of Pfizer Inc. (Wyeth), to a family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022.
In addition to our VLP program, wejurisdictions.
Secrets
Similar pathways exist in Europe and other geographies.
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 cGMPcurrent 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.
In 1992,
NanoFlu.
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.
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.
Manufacturing
Our primary manufacturing facility is located at our corporate headquarters at 20 Firstfield Road in Gaithersburg, Maryland. The facility has 53,000 square feet of combined GMP manufacturing and laboratory space. Our Rockville, Maryland facility houses our 10,000 square foot GMP pilot manufacturing facility that produces early-stage clinical trial material. Novavax AB, located in Uppsala, Sweden, produces our Matrix adjuvants in an approximately 24,000 square foot facility comprised of GMP manufacturing, laboratory and office space.
Sources of Supply
Most
An important component of our Matrix adjuvant technology is extracted from a species of soap-bark tree (Quillaja saponaria) that grows mainly in Chile, and we have been able to acquire high-quality quillaja extract as needed from our current suppliers.
Business Development
We believe our proprietary vaccine technology affords us a range of traditional and non-traditional commercialization options that are broader than those of existing vaccine companies. We strive to create sustainable value by working to obtain non-dilutive funding, similar to our agreement with BMGF to fund our RSV program, that would allow for:
In addition to our aforementioned agreement with BMGF, another example of a strategic relationship is our joint venture we established with Cadila. CPLB is owned 20% by us and 80% by Cadila. It was established in 2009 to develop and manufacture certain vaccine candidates, biogeneric products and diagnostic products for the territory of India. CPLB operates a manufacturing facility in India for the production of vaccines and is actively developing a number of vaccine candidates that were genetically engineered by us.
Employees
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.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
vaccine candidates. U.S. government. The 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. We candidates. 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. development projects or reduce their overall budgets. Value of $100 invested on December 31, PREVENT-19 Phase under the June 2021 Sales Agreement, with a remaining balance of $464.9 million available thereafter. U.S. Recognition this estimate. We have Recent Accounting Pronouncements 2020 Change 2016 to 2017 Change 2015 to 2016 South Korea and Indonesia. receive royalty revenue from the sale of NVX-CoV2373 by such partners. Change 2016 to 2017 Change 2015 to 2016 Research and development expenses increased to equipment; and Other Income (Expense): Change 2016 to 2017 Change 2015 to 2016 income tax expense related to foreign withholding tax on royalties. We year ended December 31, 2020. Change 2016 to 2017 Change 2015 to 2016 licensing arrangements. 2020. As of December 31, 2020. Change 2016 to 2017 2020: third parties. new corporate office facility to accommodate anticipated increases in headcount. private placement. Less than One Year 1 – 3 Years 3 – 5 Years More than 5 Years December 31, 2021. Management’s Report on Internal Control over Financial Reporting Number of Securities to be Issued (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) February 28, 2022 2019 Cash and Cash Equivalents was determined that inventory costs subsequently incurred had a probable future economic benefit. The estimated useful lives of property and equipment are described below: The Company calculates the estimated fair value of a long-lived asset (group) using the income approach. Impairment losses are recognized when the sum of expected future cash flows is less than the assets’ (group’s) carrying value. ASC 958-605. The Company grants from organizations such as CEPI. The Company performs research and development Company’s process development, manufacturing, clinical, regulatory, and quality assurance activities for its clinical development programs. In addition, related indirect costs such as fringe benefits and overhead expenses are also included in research and development expenses. all awards are recognized as incurred. tax expense. Foreign Currency accrued expenses approximates its fair value due to its short-term nature. Goodwill Agreement. 2021, changes in the Company's accounts receivables and deferred revenue balances were as follows (in thousands): 2021, the Company recognized $178.6 million in revenue related to sales-based royalties. For the year ended December 31, 2020, the Company recognized $20.0 million related to a development and commercial milestone payment. deferred revenue and will recognize revenue when the vaccine is delivered to its customers. As of December 31, The Company’s foreign 2019, respectively. of $44.6 million that continue to expire in 2022. Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to 2021 and the returns for the Czech Republic are subject to examination from 2018 through 2021. The (50,84320182021 was $1.1$3.6 billion. Our revenue forand 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 last three fiscal years was $31.2 million in 2017, $15.4 million in 2016, and $36.3 million in 2015. We may not be successful in entering into strategic alliances or collaborative arrangements with other companies or government agencies that result in significant revenue to offset our expenses.foreseeable future. Our net losses for the last three fiscal years were $183.8$1.7 billion in 2021, $418.3 million in 2017, $280.02020, and $132.7 million in 2016, and $156.9 million in 2015.Our recent historical2019.for other general and administrative operating expenses.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 research and development efforts to supportdevelop, test, manufacture, and make regulatory filings for our vaccine candidates, and, if our product candidates are approved, commercialization efforts.efforts. In 2016,and manufacture of NVX-CoV2373 has been substantial, and we expect such levels of investment to continue for example, we experienced a significant increase in researchthe rest of 2022 and development expenses compared to prior years primarily due to additional RSV F Vaccine clinical trials in older adults and infants via maternal immunization, as well as higher employee-related costs to support developmentbeyond, although the precise magnitude of our RSV F Vaccinetotal investment will depend on the duration of the COVID-19 pandemic, the competitive landscape, the timing and other potential vaccine candidates.Although certain specified costs associated with the developmentresults of our RSV F Vaccineapplications for infants via maternal immunization may be reimbursed underregulatory 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 contract with BMGF, weinvestments. We expect to continue to incur significant operating expenses and anticipate significant losses over time as we seek to:·conduct clinical trials for RSV F Vaccine and other potential vaccine candidates;·conduct preclinical studies for other potential vaccine candidates;·comply with the FDA’s manufacturing facility and compliance requirements in anticipation of commercialization;·invest in our manufacturing process for commercial-scale and cost-efficiency; and·maintain, expand and protect our intellectual property portfolio.have limited financial resources and we may not be ablewill continue to require significant funding to maintain our current level of operations or be able toand fund the further development of our vaccine candidates.expect tocurrently generate sufficient revenue from product sales, licensing fees, royalties, milestones, contract research or other sources in amounts sufficient to fully fund our operations for the foreseeable future, andoperations. We, therefore, we will therefore use our cash resources, and expect to require additional funds, to maintain our operations, continue our research and development programs, commence future preclinical studies and clinical trials, seek regulatory approvals and manufacture and market any products that are approved for commercialization.products. We will seek suchoperations primarily through the sale of equity and debt securities, government funding and grant agreements, and additional fundsfunding may not be available to us on favorable terms, or at all. 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 sufficient 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, collaborativeas well as existing cash, potential collaborations, strategic alliances and marketing, distribution or licensing arrangements, funding from governmental and development arrangements, non-dilutive government contractsnon-governmental funding entities, and grants andpotentially 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 acceptable terms, if 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, certain of the supply agreements for NVX-CoV2373 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. 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 general and administrative infrastructure,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.15uncertain.uncertain, particularly due to the COVID-19 pandemic. Access to capital markets is critical to our ability to operate. Traditionally, biotechnology companies have funded their research and development expenditures throughby 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 researchdevelopment, manufacturing, regulatory and developmentcommercialization efforts. We require significant capital for researchour current and development for our vaccine candidates and clinical trials.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. There is no certainty that theThe capital and credit markets willmay not be available to raise additionalsupport future capital raising activity on favorable terms. If economic conditions become worse,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 scheduledcontemplated would be compromised. Moreover, we rely and intend to rely on third-parties,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-partiesthird parties are unable to adequately satisfy their contractual commitments to us in a timely manner, our business could be adversely affected.Even with the Grant Agreement with BMGF,may notwill be able to fully fund our RSV F Vaccine for infants via maternal immunization.GrantOWS Agreement, reimbursesthe DoD Agreement and the CEPI funding agreement each reimburse a portion of specifiedthe expenses associated with the development and commercialization of NVX-CoV2373. To the extent funding commitments in such agreements are conditioned on our RSV F Vaccine for infants via maternal immunization, and additional activities likely will be needed and BMGFmeeting certain milestones or conditions, including regulatory approval in applicable jurisdictions, we may not reimburseultimately receive the full amount of committed funds and could be exposed to urgent need for additional funding to support our NVX-CoV2373 development, manufacturing and distribution activities. For example, infor any portion of these activities.The Grant Agreementto prioritize alignment with BMGF does not assure success in future clinical trials ofthe FDA on our RSV F Vaccine for infants via maternal immunization oranalytic methods before conducting additional U.S. manufacturing and further indicated that the vaccine candidateUSG will not fund additional U.S. manufacturing until such agreement has been made. The OWS Agreement 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 licensedin 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 FDA.Grant Agreement reimbursesCEPI funding agreement 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 for NVX-CoV2373 that include prepayments from the purchasers. Certain of the 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. In the event we are unable to successfully develop and commercialize NVX-CoV2373 or fail to meet certain regulatory milestones or product volume or delivery timing obligations under our supply agreements, we may be required to refund significant portions of the prepayments, which could have a portion of specified expenses associated with the development ofmaterial and adverse effect on our RSV F Vaccine for infants via maternal immunization, but we remain fully responsible for conducting these development activities. The Grant Agreement does not guarantee that any of these activities will be successful.financial condition. Our inability to succeed with key clinical or development activities could jeopardize our ability to obtain licensure from the FDA licensureor other regulatory authorities to sell this vaccine.CollaborationsNVX-CoV2373. As a result, our existing funding and contractssupply agreements may be insufficient to fund our commercial launch.wholly owned subsidiary Novavax AB,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:regionalrespect to which NVX-CoV2373 proves less effective;suchhave manufactured may be determined to be unsalable based on criteria imposed by regulators as Cadilathey complete regulatory approvals;BMGF,manufacturing or marketing products; orinternational providers, exposethird parties to manufacture the antigen component of NVAX-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 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 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 NVX-CoV2373 in adequate quantities to address global demand.risks associated with doingclinical trial data prior to licensure. This development may be viewed negatively by our potential collaborators and partners, which may make the ongoing development of ResVax, and any other RSV F Vaccine candidates, more challenging.outsidereputation and negative media attention;Swedish-based 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.AB is a wholly owned subsidiary of Novavax, Inc. We also have formed a joint venture with CadilaCZ, as well as numerous partnered manufacturing sites, including FUJIFILM in the United States, SIIPL in India, SK bioscience in Korea, and Takeda in Japan, among others.Challenges manufacturing either the antigen component or the adjuvant, or issues in later manufacturing stages, could compromise production of NVX-CoV2373.establishedlimited experience. We are highly dependent on third-party organizations to conduct a significant amount of our vaccine manufacturing activities. Ifdevelopment agreement with BMGFquantities or, if and have entered into other agreementswhen necessary, in commercial quantities and at sufficient yields and at required specifications, then commercialization will be delayed, and we will need to identify and reach supply arrangements with companiesadditional third parties. Third-party manufacturers also must receive FDA or equivalent foreign regulatory body approval before they can produce clinical material or commercial product. Our vaccines are in competition with other countries.products for access to these third-party facilities and may be subject to delays in manufacture if third parties prioritize other products. We plan to continuemay not be able to enter into collaborationsany necessary additional third-party manufacturing arrangements on acceptable terms, or partnershipson a timely basis. In addition, we have to enter into technical transfer agreements and share our know-how with companies, non-profit organizationsthe third-party manufacturers, which can be time-consuming and local governmentsmay result in various partsdelays.world. Riskslimited number of conducting business outsidethird-party manufacturers with 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;·existing, new or changes in interpretations of existing trade protections measures, including tariffs, and import 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, changes in or changes in interpretations of tax laws;·political instability and actual or anticipated military or potential conflicts;·economic instability, inflation, recession and interest rate fluctuations;·minimal or diminished protection of intellectual property in many jurisdictions; and·possible nationalization and expropriation.16These risks, individually orexpertise, 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 aggregate,production of our vaccine. We and our third-party manufacturers may also encounter production challenges related to:conditions,condition, results of operations and cash flows.may enteranticipate entering into additional regional collaborations. Our relationships with CadilaSIIPL, Takeda, 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.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 evenastorage conditions, which could subject our vaccine candidates to risk of loss or damage.eventsreturned or out of date products. Failure to effectively maintain our supply logistics, by us or third parties, could delay our development effortslead to additional manufacturing costs and negatively impactdelays in our ability to obtain regulatory approvalsupply required quantities for and to manufacture, market and sell, a vaccine. Vaccine candidates that initially appear promising often fail to yield successful products. In many cases, preclinical studies or clinical trials will show thator otherwise.candidate is not efficacious or that it raises safety concerns or has other side effects that outweigh its intended benefit. Successrecall which could harm our reputation, business, and financial results. 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 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 usagefound. A government-mandated or post-marketing clinical trials may identify safetyvoluntary recall by us or our strategic collaborators could occur as a result of manufacturing errors, design or labeling defects or other previously unknown problems with the product, which may result in regulatory approvals being suspended, limited to narrow indications or revoked, which may otherwise prevent successful commercialization. Intense competition in the vaccine industry could also limit the successful commercializationdeficiencies and issues. Recalls of any products for which we receive commercial approval.·research and development;·preclinical testing;·designing and implementing clinical trials;·regulatory processes and approvals;·production and manufacturing; and·sales and marketing of approved products.·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;17·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.Ltd,Ltd., Sanofi Pasteur, SA, Pfizer Inc., Johnson & Johnson, AstraZeneca, and MedImmune,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.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 and quicker to manufacture. Many of Even if our competitors are working on new products and new generations of current products, intended to be more efficacious than those currently marketed. Our nanoparticle seasonal influenzaRSV vaccine candidate receives regulatory approval, it may not prove to beachieve significant sales if other, more efficacious than current products or productseffective vaccines under development by our competitors. Further, our manufacturing system may not provide enough savings of time or moneycompetitors are also approved.provide the required differentiation for commercial success.We believe that there are at least two EBOV vaccine candidates currently being tested in late stage clinical trials: one by GlaxoSmithKline in collaboration with the U.S. National Institute of AllergyRegulatory and Infectious Diseases, and the other by a collaboration of NewLink Genetics, Merck Vaccines USA and the Public Health Agency of Canada. Additional vaccine candidates also are being tested, although in earlier stage clinical trials. Vaccine candidates against EBOV have been in development for more than a decade by large pharmaceutical companies, smaller biotech companies, government agencies and academic labs worldwide, and with the high visibility of the recent West Africa epidemic, development activities are likely to continue and potentially increase.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.
Compliance Matters18If 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 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 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.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 in the total amount of $20 million aggregate for all claims arising from the use of products in clinical trials prior to FDA approval. Coverage is relatively expensive, and the market pricing fluctuates significantly. Therefore, we may not be able to maintain insurance at a reasonable cost. We may not be able to maintain our existing insurance coverage or obtain coverage for the use of our other products in the future. This 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 items, 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.Regardless of merit or eventual outcome, liability claims may result in:·decreased demand for our products;·impairment of our business reputation;·withdrawal of clinical trial participants;·costs of related litigation;·substantial monetary awards to participant or other claimants;·loss of revenue; and·inability to commercialize our vaccine candidates.We may not be able to win government, academic institution or non-profit contracts or grants.From time to time, we may apply for contracts or grants from government agencies, academic institutions, and non-profit organizations. Such contracts or grants can be highly attractive because they provide capital to fund the ongoing development of our technologies and vaccine candidates without diluting our stockholders. However, there is often significant competition for these contracts or grants. Entities offering contracts or grants may have requirements to apply for or to otherwise be eligible to receive certain contracts or grants that our competitors may be able to satisfy that we cannot. In addition, such entities may make arbitrary decisions as to whether to offer contracts or make grants, to whom the contracts or grants will be awarded and the size of the contracts or grants to each awardee. Even if we are able to satisfy the award requirements, we may not be a successful awardee. Therefore, we may not be able to win any contracts or grants in a timely manner, if at all.19Raising 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, current 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.Our business may be adversely affected if we do not successfully execute our business development initiatives. 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 combination with Novavax AB, we may not be able to integrate the assets or take full advantage of the opportunities and, consequently, may not realize the benefits that we expect.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 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.Litigation 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. Regardless of the merits of any claims that may be brought against us, litigation 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, 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.Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.In the ordinary course of our business, we 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 could be an attractive target of criminal attack by malicious third parties with a wide range of motives and expertise, including organized criminal groups, “hactivists,” patient groups, disgruntled current or former employees and others. Hacker attacks are of ever-increasing levels of sophistication, and despite our security measures, our information technology and infrastructure may be vulnerable to such attacks or may be breached due to employee error or malfeasance. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Furthermore, if our systems become compromised, we may not promptly discover the intrusion. Like other companies in our industry, we have experienced attacks to our data and systems, including malware and computer viruses. Attacks could have a material impact on our business, operations or financial results. Any access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.20PRODUCT DEVELOPMENT RISKSBecause our vaccine product development efforts depend on new and rapidly evolving technologies, we cannot be certain that our efforts will be successful.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 our vaccines could fail for a variety of reasons, and include the possibility that:·our recombinant nanoparticle vaccine technologies, any or all of the products based on such technologies or our proprietary manufacturing process will be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances or commercial viability;·we are unable to scale-up our manufacturing capabilities in a cost-effective manner;·the products, if safe and effective, will be difficult to manufacture on a large-scale or uneconomical to market;·our manufacturing facility will fail to continue to pass regulatory inspections;·proprietary rights of third-parties will prevent us or our collaborators from exploiting technologies, and manufacturing or marketing products; and·third-party competitors will gain greater market share due to superior products or marketing capabilities.We have not completed the development of vaccine products and we may not succeed in obtaining the FDA licensure or foreign regulatory approvals necessary to sell suchour vaccine products.inby the U.S. FDA and regulatory authorities in other countries,jurisdictions, including the European Medicines Agency (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.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 havehas yet gained regulatory approval in the U.S., although NVX-CoV2373 has received provisional registration, conditional marketing authorization or elsewhere.emergency·performance of preclinical (animal and laboratory) tests;·submissions 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 intended for commercial use, including appropriate manufacturing data and regulatory inspections;·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.Thethe FDA or a foreign regulatory bodyauthority 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 ultimately grant approval for commercial sale in any jurisdiction.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.21If we are unable to 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 in product development, clinical trials, regulatory approval and commercial distribution.Completion of our clinical trials and commercialization of our vaccine candidates require access to, or development of, facilities to manufacture our vaccine candidates at sufficient yields and at commercial-scale. We have limited experience manufacturing any of our vaccine candidates in the volumes that will be necessary to support large-scale clinical trials or commercial sales. Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency or quality.Manufacturing our vaccine candidates involves a complicated process with which we have limited experience. If we are unable to manufacture our vaccine candidates in clinical quantities or, when necessary, in commercial quantities and at sufficient yields, then we must rely on third-parties. Other third-party manufacturers must also receive FDA approval before they can produce clinical material or commercial products. Our vaccines may be in competition with other products for access to these facilities and may be subject to delays in manufacture if third-parties give other products greater priority. We may not be able to enter into any necessary 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.Like influenza, a licensed RSV vaccine would likely be seasonal in nature. If a seasonal vaccine is not available early enough in the season, we would likely have difficulty selling that vaccine. For these reasons, any delay in the delivery of a seasonal vaccine could result in lower sales volumes, lower sale prices, or no sales. Strains of the seasonal influenza change annually, which means that inventory of seasonal vaccine cannot be sold during a subsequent influenza season. We believe that while RSV strains may also change annually, our RSV F Vaccine is directed at highly-conserved epitopes that are unlikely to change annually, although that has not yet been definitively demonstrated. Any delay in the manufacture of our vaccines could adversely affect our ability to sell the vaccines.Our reliance on contract manufacturers may adversely affect our operations or result in unforeseen delays or other problems beyond our control. 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 on a commercial-scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions in the production of our vaccine. A third-party manufacturer may also encounter difficulties in production. These problems may include:·difficulties with production costs, scale up and yields;·availability of raw materials and supplies;·quality control and assurance;·shortages of qualified personnel;·compliance with strictly enforced federal, state and foreign regulations that vary in each country where products might be sold; and·lack of capital funding.As a result, any delay or interruption 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 will 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 pipeline; 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. If we fail to establish a sufficient number of collaborations or government relationships on acceptable terms, we may not be able to commercialize our vaccine candidates or generate sufficient revenue to fund further research and development efforts.22Even if we establish new collaborations or obtain government funding, these relationships may never 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;·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.Our collaborators will be subject to the same regulatory approval of their manufacturing facility and process as us. Before we could begin commercial manufacturing of any of our vaccine candidates, we and our collaborators must pass a pre-approval inspection before FDA approval and comply with the FDA’s GMP regulations. If our collaborators fail to comply with these requirements, our vaccine candidates would not be approved. If our collaborators fail to comply with these requirements after approval, we could be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell our products.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.Because we depend on third-parties to conduct some of our laboratory testing, clinical trials, and manufacturing, we may encounter delays in or lose some control over our efforts to develop products.We are dependent on third-party research organizations to conduct some of our laboratory testing, clinical trials and manufacturing activities. If we are unable to obtain any necessary services on acceptable terms, we may not complete our product development efforts in a timely manner. We may lose some control over these activities and become too dependent upon these parties. These third-parties may not complete testing or manufacturing activities on schedule, within budget, or when we request. We may not be able to secure and maintain suitable research organizations to conduct our laboratory testing, clinical trials and manufacturing activities. We have not manufactured any of our vaccine candidates at a commercial level and may need to identify additional third-party manufacturers to scale-up and manufacture our products.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 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 or meet expected deadlines. In addition, these third-parties may need to be replaced or the quality or accuracy of the data they obtain may be compromised or the product they manufacture may be contaminated 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 commercially manufacture, our vaccine candidates.23Even if licensed to market, our vaccine products may not be initially or ever profitable.Whether Novavax makes a profit from the sale of its vaccine products is dependent on a number of variables, including the costs we incur manufacturing, testing and releasing, packaging and shipping such vaccine product. The Grant Agreement with BMGF necessitates that we commit to a specific amount of sales in certain specified middle and lower income countries, which may impact our ability to make profits. In addition, we have not yet determined pricing for our vaccine products, which is a complicated undertaking that necessitates both regulatory agency and payor support. We cannot predict when, if at all, our approved vaccine products will be profitable to the Company.Our collaborations may not be profitable.We formed CPLB with Cadila in India, but we cannot predict when, if at all, this relationship will lead to additional approved products, sales, or otherwise provide revenue to the Company or become profitable.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, we currently have no dedicated sales, marketing or distribution capabilities. As a result, we will depend on collaborations with third-parties that have established distribution systems and sales forces. 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 regulatory approvals.Even if we receive 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, 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;·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.Unlike RSV, where there is no current vaccine available, there are significant challenges to market seasonal influenza vaccines. For a seasonal vaccine to be accepted in the market, it must demonstrate differentiation from other seasonal vaccines that are currently approved and marketed. This can mean that the vaccine is more effective in certain populations, such as in older adults, or cheaper and quicker to produce. There are no assurances that our influenza vaccine can be differentiated from other influenza vaccines.If our vaccine candidates do not become widely accepted by physicians, patients, third-party payers and other members of the medical community, our business, financial condition and results of operations could be materially and adversely affected.24We 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.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.Our success may depend, in part, on the extent to which reimbursement for the costs of vaccines will be available from third-party payers, such as government health administration authorities, private health insurers (including managed care plans), and other organizations. Over the past decade, the cost of health care has risen significantly, and there have been numerous proposals by legislators, regulators and third-party health care payers to curb these costs. Some of these proposals have involved limitations on the amount of reimbursement for certain products. Similar federal or state health care legislation may be adopted in the future and any products that we or our collaborators seek to commercialize may not be considered cost-effective. Adequate third-party insurance coverage may not be available for us to establish and maintain price levels that are sufficient for realization of an appropriate return on our investment in product development. Moreover, 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.REGULATORY RISKSourthe 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 manufacture or obtain sufficient quantities of materials for use in necessary preclinical studies and clinical trials;·prior regulatory agency review and approval;·approval of the protocol and the informed consent form by the review board of the institution conducting the clinical 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;·negative 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 or prevent further 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.25relationshipssupply agreements with Cadila in India.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. WeAdditionally, regulatory authorities outside the United States 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 foreign regulatory approvals in other relevant jurisdictions on a timely basis, if at all. Approval by aone regulatory agency such as the FDA, does not ensure approval by any other regulatory agencies in other foreign countries.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.Even ifreceivedunclear, 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 vaccine candidates,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.the producta vaccine that had previously received regulatory approval in certain jurisdictions from the market.ifafter a product gains regulatory approval, such approval is likely to limit the indicated uses for which it may be marketed, and the product and the manufacturer of the product will be subject to continuing regulatory review, including adverse event reporting requirements and the FDA’s general prohibitionprohibitions 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 of thesesuch 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,discovered and wediscovered. We cannot provide assurance that newly discovered or developed safety issues will not arise following any 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 do not appearappeared to relatebe unrelated to the vaccine itself and only ifwith the specific event occurs with some regularity over a periodcollection of time does the vaccine become suspect as having a causal relationshipsubsequent information were found to be causally related to the adverse event.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.26 and manufacturing 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 facilityfacilities in Sweden.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-partiesthird 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.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 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 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 Center for Disease Control and Prevention (“CDC”);·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. Some of these proposed and implemented reforms could result in reduced reimbursement rates for medical products, and while we have no current vaccines available for commercial sale, the impact of such reform could nevertheless adversely affect our business strategy, operations and financial results. For example, the Healthcare Reform Act 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, as well as mandatory discounts on drugs (including vaccines) sold to certain Medicare Part D beneficiaries in the coverage gap (the so-called “donut hole”). 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. In addition, we face uncertainties because there are ongoing federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the Healthcare Reform Act. For example, in 2017, the President announced that his administration will withhold the cost-sharing subsidies paid to health insurance exchange plans serving low-income enrollees. Tax reform legislation was also enacted at the end of 2017 that includes provisions that will affect 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”). The Bipartisan Budget Act of 2018 contained various provisions that affect coverage and reimbursement of drugs, including an increase in the mandatory discounts on pharmaceuticals sold to certain Medicare Part D beneficiaries in the coverage gap starting in 2019. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.27If obtain marketing approval, 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.governments. In additiongovernments (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 mentioned above, theand regulations (which may be comparable to foreign laws existing in foreign countries) that may affect our ability to operate include:·the Food, Drug and Cosmetic Act, which among other things, strictly regulates drug product marketing and promotion and prohibits manufacturers from marketing such products for off-label use;·the federal anti-kickback law, which prohibits, among other things, persons from 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 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 payors that are false or fraudulent;·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 so-called “federal sunshine” law (also known as “open payments”) which requires pharmaceutical and medical device manufacturers to report certain financial interactions to the federal government for re-disclosure to the public;·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;·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 payor, 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.
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, including28INTELLECTUAL PROPERTY RISKS350550 U.S. patents and corresponding 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 biotechnologyourany 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.There is a risk that third-parties may challenge our existing patents or claim that we are infringing their patents or proprietary rights. We could incur substantial costs in defending patent infringement suits or in filing suits against others to have their patents declared invalid or claim infringement. It is also possible that we may be required to obtain licenses from third-parties to avoid infringing third-party patents or other proprietary rights. We cannot be sure that such third-party licenses would be available to us on acceptable terms, if at all. If we are unable to obtain required third-party licenses, we may be delayed in or prohibited from developing, manufacturing or selling products requiring such licenses.infringe or be claimedfound 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 wouldmay 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.third-party.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,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.protectdefend or enforce our patentsintellectual property or the patentsintellectual property of our collaborators or licensors, which could be expensive and time-consuming.claimssuits to counter infringement forprevent unauthorized use.uses. This can be expensive particularly for a company of our size, 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.29this kind 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.third-partiesthird 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 and the patent or claims thereof could be invalidated. Any such outcome could impair our ability to exclude competitors from the market in those countries, potentially impacting our commercial success.Third-partiesThird 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.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-partythird 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,third party, our ability to exclude that competitor from the market may be negatively impacted.third-partiesthird 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.third-partiesthird 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 willmay not control either the prosecution or the enforcement of the patents. We willUnder 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.Our license agreement with Wyeth, which gives us rights to a family of patents and patent applications that are expected to expire in early 2022, covering VLP technology for use in human vaccines in certain fields of use, is non-exclusive. If each milestone is achieved for any particular vaccine candidate, we would likely be obligated to pay an aggregate of $15 million to Wyeth for each vaccine candidate developed and commercialized under the agreement. Achievement of each milestone is subject to many risks, including those described in these risk factors. Annual license fees under the Wyeth agreement aggregate to $0.3 million per year. In September 2015, the Company entered into an amendment to the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment owed as a result of CPLB’s initiation of a Phase 3 clinical trial for its recombinant trivalent seasonal VLP influenza vaccine candidate in 2014 into a revised milestone payment of $4 million.30third-parties.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.third-parties,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.OUREmployee Matters, Managing Growth and Information TechnologySENIORSenior Notes (the “Notes”) requires a significant amount of cash, and we may not have sufficient cash flow to pay our debt. in the foreseeable future, 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, 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.31 you 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 respect to 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.RISKS RELATED TO OUR COMMON STOCK AND ORGANIZATIONAL STRUCTUREFrom January 1, 2017 through December 31, 2017, the closing sale price of our common stock has been as low as $0.73 per share and as high as $1.63 per share. The market price of our common stock may be influenced by many 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;·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 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 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;32·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;·recommendations by securities analysts or changes in earnings estimates; and·the other factors described in this Risk Factors section.In addition, the stock market in general, and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have particularly affected the market price for many of those companies. These fluctuations have often been unrelated to the operating performance of these companies. These broad market fluctuations may cause the market price of our common stock to be lower or more volatile than expected.The Nasdaq Global Select Marketlisting requirement; if a participating company no longer meets such requirements and failsresult of thiscorrect the listing deficiency, its stock may be delisted.The Nasdaq Global Select Market (“Nasdaq”), on which oursell your common stock is listed and traded, has listing requirements that include a $1 minimum closing bid price requirement. If we fail to satisfy thisat or other listing requirements, Nasdaq may elect, subject to any potential cure periods, to initiate a process that may delist our common stock. Should such a delisting occur, it may adversely impact the liquidity andabove your initial purchase price. The market price of our common stock impedemay be influenced by many other factors, including:would constitute a fundamental change under our Notes.third-party’sthird 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. Certain provisions include the right of the existence ofFor 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.Item 1B.None.33Item 2.PROPERTIESWe lease three facilitiesoneapproximately 170,000 square feet of office space in Rockville, Maryland. Novavax AB, leases a facilityGaithersburg, Maryland (“700QO”) which the Company intends to use for manufacturing, research and development, and offices. The term of the 700QO lease agreement is approximately 15 years, and the Company has the option to extend the Lease Agreement for two successive five-year terms.Uppsala, Sweden. A summarythe United States and foreign locations 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 current facilities is set forth below.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.PropertyApproximateBrief PropertyLocationSquare FootageDescriptionRockville, MD51,000Vaccine research and development and manufacturing facility20FF Gaithersburg, MD53,000Corporate headquarters, vaccine research and development and manufacturing facility21FF Gaithersburg, MD53,000Research and development laboratory facility and offices22FF Gaithersburg, MD40,000Executive, administrative, clinical and regulatory officesUppsala, Sweden24,000Adjuvant manufacturing facility and research and development and officesTotal square footage221,000Item 3.LEGAL PROCEEDINGScurrentlyare 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 do not expect the resolution of these other legal proceedings to have noa material pending legal proceedings.adverse effect on our financial position, results of operations, or cash flows.Item 4.MINE SAFETY DISCLOSURES34Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERSThe following table sets forth the range of high and low closing sale prices for our common stock as reported on the Nasdaq Global Select Market for each quarter in the two most recent years:Quarter Ended High Low December 31, 2017 $ 1.54 $ 1.00 September 30, 2017 $ 1.51 $ 0.96 June 30, 2017 $ 1.22 $ 0.73 March 31, 2017 $ 1.63 $ 1.22 December 31, 2016 $ 2.08 $ 1.18 September 30, 2016 $ 8.34 $ 1.29 June 30, 2016 $ 7.27 $ 4.33 March 31, 2016 $ 7.89 $ 4.36 On March 9, 2018, the last sale price reported on the Nasdaq Global Select Market for our common stock was $2.06. Our common stock was held by approximately 359133 stockholders of record as of March 9, 2018,February 21, 2022, 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 have not paid any cash dividends on our common stock since our inception. We do not anticipate declaring or paying any cash dividends in the foreseeable future.compares thematches Novavax, Inc.'s cumulative 5-Year total stockholdersshareholder return on our common stock for the last five fiscal years with the cumulative total return onreturns of the Nasdaq Composite Index and the Russell 2000 Growth Biotechnology Index (which includes Novavax) overIndex. The graph tracks the same period, assuming theperformance of a $100 investment of $100 in our common stock and in each index (with the Nasdaqreinvestment of all dividends) from December 31, 2016 to December 31, 2021.Index indexRussell 2000Russell2000 Growth Biotechnology Index
31, 2012, and reinvestments31.
20122016 in stock or index, including reinvestment of dividends, for fiscal years ended December 31: 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 Novavax, Inc. $ 100.00 $ 270.90 $ 313.76 $ 443.92 $ 66.67 $ 65.61 Nasdaq Composite Index $ 100.00 $ 141.63 $ 162.09 $ 173.33 $ 187.19 $ 242.29 RUSSELL 2000 Growth Biotechnology Index $ 100.00 $ 156.19 $ 194.09 $ 215.77 $ 171.98 $ 274.91 12/30/16 12/29/17 12/31/18 12/31/19 12/31/20 12/31/21 Novavax, Inc. $ 100 $ 98.41 $ 146.03 $ 15.79 $ 442.5 $ 567.74 NASDAQ Composite $ 100 $ 129.64 $ 125.96 $ 172.17 $ 249.51 $ 304.85 Russell 2000 Growth Biotechnology $ 100 $ 159.84 $ 131.82 $ 192.39 $ 299.05 $ 208.12 36Item 6.SELECTED FINANCIAL DATAThe following table sets forth selected financial data for each of the years in the five-year period ended December 31, 2017, which has been derived from our audited consolidated financial statements. The information below should be read in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report. These historical results are not necessarily indicative of results that may be expected for future periods. Year Ended December 31, 2017(1) 2016(2) 2015(3) 2014(4) 2013(5) (in thousands, except per share amounts) Statements of Operations Data: Revenue $ 31,176 $ 15,353 $ 36,250 $ 30,659 $ 20,915 Net loss (183,769 ) (279,966 ) (156,937 ) (82,947 ) (51,983 ) Basic and diluted net loss per share (0.63 ) (1.03 ) (0.60 ) (0.37 ) (0.31 ) Weighted average shares used in computing basic and diluted net loss per share 292,669 270,802 262,248 225,848 169,658 As of December 31, 2017(1) 2016(2) 2015(3) 2014(4) 2013(5) (in thousands) Balance Sheet Data: Cash, cash equivalents and marketable securities $ 157,303 $ 235,479 $ 230,656 $ 168,056 $ 133,068 Total current assets 203,311 287,830 287,257 188,158 145,001 Working capital(6) 129,636 221,424 210,763 154,042 126,879 Total assets 302,493 394,301 386,038 276,002 235,125 Long-term debt, less current portion(7) 317,763 316,339 37 503 1,199 Accumulated deficit (1,114,359 ) (929,996 ) (650,030 ) (493,093 ) (410,146 ) Total stockholders’ (deficit) equity (101,732 ) (5,546 ) 292,669 229,618 203,234 (1)In 2017, we had sales of 50,889,910 shares of common stock resulting in net proceeds of approximately $63 million.(2)In 2016, we issued $325 million aggregate principal amount of convertible senior unsecured notes resulting in net proceeds of approximately $315 million.(3)In 2015, we had sales of 29,163,620 shares of common stock resulting in net proceeds of approximately $204 million.(4)In 2014, we had sales of 28,750,000 shares of common stock resulting in net proceeds of approximately $108 million.(5)In 2013, we completed the acquisition of Novavax AB and had sales of 44,452,343 shares of common stock resulting in net proceeds of approximately $129 million.(6)Working capital is computed as the excess of current assets over current liabilities.(7)Includes non-current portion of capital leases.37Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSNovavax”, andNovavax,” together with its wholly owned subsidiarysubsidiaries Novavax AB and Novavax CZ, the “Company,” “we” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements with respect toabout our capabilities, goals, expectations regarding future revenue and expense levels and capital raising activities, including possible proceeds fromactivities; our December 2017 Sales Agreement;operating plans and prospects; 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 expectations with respect to the anticipated ongoing development and commercialization or licensure of NVX-CoV2373 and NanoFlu Program; the expected timing, content, and contentoutcomes of regulatory actions; reimbursement byfunding from the U.S. government partnership formerly known as Operation Warp Speed (“OWS”), the U.S. Department of HealthDefense (“DoD”) and Human Services, Biomedical Advanced Researchthe Coalition for Epidemic Preparedness Innovations (“CEPI”), and Development Authority (“HHS BARDA”); payments under our license with Wyeth Holdings LLC, a subsidiary of Pfizer Inc. (“Wyeth”); payments byfrom the Bill & Melinda Gates Foundation (“BMGF”); funding under our advance purchase agreements and supply agreements; our available cash resources and usage and the availability of financing generally,generally; plans regarding partnering activities and business development initiatives and the adoption of stock incentive plans and amendments thereto; the effectiveness, and expected costs and savings, and the timing of such costs and savings, associated with the implementation, of our restructuring efforts,initiatives; and other matters referenced herein. You generally can identify theseGenerally, forward-looking statements bycan 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” or“assume,” the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.involvedare 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 to differ materially from those expressed or implied in the statements. Any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate or materially different than actual results.Because the risk factors discussed in this Annual Report, and other risk factors of which we are not aware, could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, made by or on behalf of us,and, therefore, you should not place undueconsiderable reliance on any such forward-looking statements. These statements are subject toSuch risks and uncertainties knowninclude, without limitation, challenges satisfying, alone or together with partners, various safety, efficacy, and unknown, which could cause actual resultsproduct characterization requirements, including those related to process qualification and developmentsassay validation, necessary to differ materially from those expressedsatisfy applicable regulatory authorities, such as the U.S. Food and Drug Administration (“FDA”), World Health Organization (“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 impliedJapan’s Ministry of Health, Labour and Welfare (“MHLW”); unanticipated challenges or delays in such statements. We have included important factorsconducting 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 the cautionary statements included in this Annual Report, particularly thosemultiple 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 that could cause actual results or events to differ materially from forward-looking statements. These and other riskson Form 10-K, which may also be detailed and modified or updated in our reports and other documents filed with the United States Securities and Exchange Commission (“SEC”) from time to time.time, and are available at www.sec.gov and at www.novavax.com. You are encouraged to read these filings as they are made.on whichwhen 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.38clinical-stage biotechnology company focused onthat promotes improved health globally through the discovery, development, and commercialization of recombinant nanoparticleinnovative vaccines and adjuvants. Using innovativeto prevent serious infectious diseases. The Company's proprietary recombinant nanoparticle vaccine technology weplatform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticles designed to address urgent global health needs.to efficientlyin our near-term pipeline, including both NVX-CoV2373 and effectively respond to both known and emerging disease threats. Our vaccine candidatesthe NanoFlu Program, are genetically engineered, three-dimensional nanostructures that incorporateof recombinant proteins critical to disease pathogenesispathogenesis. At the forefront of our pipeline is our COVID-19 vaccine candidate, NVX-CoV2373. NVX-CoV2373 has received provisional approval, conditional marketing authorization (“CMA”) and mayemergency use authorization (“EUA") from multiple regulatory authorities globally. In January 2022, we also submitted a request to the FDA for emergency use authorization of NVX-CoV2373. We also advanced our NanoFlu Program vaccine program through a Phase 3 clinical trial, which demonstrated positive top-line results and achieved statistical significance in key secondary endpoints. Additionally, we are currently evaluating a COVID-influenza combination vaccine in a Phase 1/2 clinical trial, which combines the company's NVX-CoV2373 and our NanoFlu Program vaccine candidates.We believe that our protein-subunit-based candidates elicit differentiated immune responses whichthat may be more efficacious than naturally occurring immunity or traditional vaccine. Our product pipeline targets a variety of infectious diseases, with clinicalother vaccine approaches. These vaccine candidates against respiratory syncytial virus (“RSV”), influenza and Ebola virus (“EBOV”), and preclinical programs for other infectious disease vaccine candidates.We are also developing immune stimulatingincorporate Novavax' proprietary saponin-based adjuvants through our wholly owned Swedish subsidiary, Novavax AB. Our leadMatrix-M™ adjuvant Matrix-M™, has been shown to enhance the immune responsesresponse and was well-toleratedstimulate high levels of neutralizing antibodies.multipleour clinical trials, that we have conducted.Product PipelineOur product pipeline includes vaccine candidates engineered to elicit differentiated immune responses with the potential to provide increased protection. Our nanoparticle technology targets antigens with conserved epitopes essential for viral function. Our vaccine technology has the potential to be applied broadly to a wide variety of human infectious diseases.ProgramCurrentDevelopment StageRespiratory Syncytial Virus (“RSV”)·Infants via Maternal Immunization*Phase 3·Older AdultsPhase 2·PediatricsPhase 1Nanoparticle Influenza (“NanoFlu”)Phase 1/2Combination Influenza/RSVPreclinicalEmerging Viruses·Ebola Virus (“EBOV”)Phase 1·Zika Virus (“ZIKV”)Preclinical*Supported by the $89.1 million grant from BMGFA current summary of our significant research and development programs and status of the related product candidates in development follows:Respiratory Syncytial VirusWe have identified three susceptible target populations that could benefit fromas well as the development of COVID-19 variant strain vaccine candidates, we continue to collect data to characterize and optimize vaccine performance. We expect to leverage these clinical insights to advance the use of our respiratory syncytial virus fusion (F) protein nanoparticleCOVID-19 vaccine candidate (“RSV F Vaccine”)for both primary vaccination around the globe, to use within a booster setting, and for the pediatric population amidst the ongoing and evolving COVID-19 pandemic.different formulations: infants via maternal immunization, older adults (60 years of age and older) and children six months to five years of age (“pediatrics”). We believeour pipeline, including our vaccine candidates in our RSV FProgram, and our partner-led malaria candidates, present strong opportunities for future development. represents a multi-billion dollar revenue opportunity, worldwide. Currently, there is no approved RSV vaccine available.39Repeat infectionlifelong susceptibilityNew Zealand; received Biologics License Application approval in South Korea with our partner, SK bioscienceRSV are common and we currently estimate the global cost burden of RSVSouth Africa, for NVX-CoV2373 to be in excessmarketed as CovovaxTMeffortHealth to develop an RSV vaccine, there are currently no licensed vaccines. We made a breakthrough in developing a vaccine that targets the fusion protein, or F-protein, of the virus. The F-protein has highly conserved amino acid sequences, called antigenic sites, which we believe are ideal vaccine targets. We genetically engineered a novel F-protein antigen resulting in enhanced immunogenicity by exposing a number of these antigenic sites. The Novavax RSV F Vaccine assembles into a recombinant protein nanoparticle optimized for F-protein antigen presentation. We are seeking to bring the first RSV vaccine to market to combat the 64 million RSV infections that occur globally each year.2,3RSV Infants via Maternal Immunization ProgramBurden of DiseaseRSV is the most common cause of lower respiratory tract infections and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide.4,5 In the U.S., RSV is the leading cause of hospitalization of infants, and globally, is second only to malaria as a cause of death in children under one year of age.6,7 Despite the induction of post-infection immunity, repeat infection and lifelong susceptibility to RSV is common.8,9Clinical Trial UpdatePrepare Phase 3 Trial (Ongoing)We initiated Prepare™, a global pivotal Phase 3 clinical trial of our RSV F Vaccine, using aluminum phosphate as an adjuvant, in approximately 4,600 healthy pregnant women in December 2015. The primary objective of the Prepare trial is to determine the efficacy of maternal immunization with the RSV F Vaccine against symptomatic RSV lower respiratory tract infection with objective measures of medical significance in infants throughsupply a minimum of 5 million vaccine doses90 daysquarter of life2022upefficacy of a third dose of NVX-CoV2373six monthsquarter of life.The Prepare2022utilizes a group sequential design. We will initiate a prescribed interim efficacy analysis when we have approximately 4,600 enrolled women, currentlyfor COVID-influenza combination vaccinemid-2018, and report results from this interim analysis, expected in early 2019. Assuming successful interim analysis results, the trial would be concluded without further enrollment. In 2017, with approximately 1,300 participants in the Prepare trial, we conducted an informational analysis that provided a positive indication of our vaccine’s potential efficacy (between 45% and 100%10), further de-risking this important program. These results have allowed usApril 2022make go-forward decisions relating to various program-related activities.The Prepare trial is supported by a grant (the “Grant”) of up to $89.1 million from BMGF. The Grant supports development activities, product licensing efforts and World Health Organization (“WHO”) prequalification of our RSV F Vaccine. In 2015, along with the Grant agreement (the “Grant Agreement”), we concurrently entered into a Global Access Commitments Agreement with BMGF, under which we agreed to make a certain amount of the RSV F Vaccine available and accessible at affordable pricing to people in certain low and middle income countries.1 Estimated value of life lost, future health implications and lost earnings; preliminary data based on Novavax research of available epidemiology and health outcomes data2 Nair, H.,et al., (2010) Lancet. 375:1545 – 15553 WHO Acute Respiratory Infections September 2009 Update:http://apps.who.int/vaccine_research/diseases/ari/en/index2.html4 Nair, H.,et al., (2010) Lancet. 375:1545 - 15555 CDC:https://www.cdc.gov/rsv/research/us-surveillance.html6 Hall, C.B.et al. (2013) Pediatrics; 132(2):E341-3487 Oxford Vaccine Group: http://www.ovg.ox.ac.uk/rsv8 Glezen, W.P.et al. (1986) Am J Dis Child; 140:543-5469 Glenn, G.M.et al. (2016) JID; 213(3):411-1210 Assumes 2:1 randomization40Phase 2 Safety and Immunogenicity Trial (Completed)In September 2015, we announced positive top-line data from ourinitiate Phase 2 clinical trial of our RSV F Vaccine in 50 healthy pregnant womenfor COVID-influenza combination vaccine and their infants. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine in pregnant women in their third trimester, and assessed the transplacental transfer of maternal antibodies induced by the vaccine. The trial also examined the impact of maternal immunization on infant safety during the first year of life and RSV-specific antibody levels through the infants’ first six months of life. Immunized women demonstrated a geometric mean 14-fold rise in anti-F IgG, a 29-fold rise in palivizumab-competing antibodies and 2.7 and 2.1-fold rises in microneutralization titers against RSV/A and RSV/B, respectively. In contrast, women who received placebo demonstrated no significant change in antibody levels. The infants’ antibody levels at delivery averaged 90-100% of the mothers’ levels, indicating efficient transplacental transfer of antibodies from mother to infant. The estimated half-lives of infant PCA, anti-F IgG, and RSV/A and RSV/B microneutralizing antibodies, based on data through day 60, were 41, 30, 36 and 34 days, respectively.Fast Track DesignationThe FDA granted Fast Track designation to our RSV F Vaccine for protection of infants via maternal immunization. Fast Track designation is intended for products that treat serious or life-threatening diseases or conditions, and that demonstrate the potential to address unmet medical needs for such diseases or conditions. The program is designed to facilitate development and expedite review of drugs to treat serious and life-threatening conditions so that approved products can reach the market expeditiously.RSV Older Adults ProgramBurden of DiseaseOlder adults (60 years of age and older) are at increased risk for RSV disease due to immunosenescence, the age-related decline in the human immune system. In this population, RSV is an important respiratory virus, distinct from influenza, which is frequently responsible for serious lower respiratory tract disease and may lead to hospitalization or even death. Additionally, RSV infection can lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease (“COPD”), asthma and congestive heart failure. In the U.S., the incidence rate is approximately 2.5 million infections per year, and RSV is increasingly recognized as a significant cause of morbidity and mortality in the population of 64 million older adults.11,12 Based on our analysis of published literature applied to 2014 U.S. population estimates, the disease causes 207,000 hospitalizations and 16,000 deaths among adults older than 65.13,14 Annually, we estimate that there are approximately 900,000 medical interventions directly caused by RSV disease across all populations.15,1611 Falsey, A.R. et al. (2005) NEJM. 352:1749–59 extrapolated to 2015 census population12 Falsey, A.R. et al. (1995) JID.172:389-9413 Falsey, A.R. et al. (2005) NEJM. 352:1749–59 extrapolated to 2015 census population14 W.W. Thompson et al. Mortality associated with influenza and respiratory syncytial virus in the United States. JAMA 2003; 289(2): 179-18615 K. Widmeret al. Rates of hospitalizations for respiratory syncytial virus, human metapneumovirus, and influenza virus in older adults. J Infect Dis. 2012; 206: 56-6216 K. Widmeret al. Respiratory syncytial virus & human metapneumovirus-associated emergency department and hospital burden in adults. Influenza and Other Respiratory Viruses. 2014; 8(3): 347-352.41Clinical Trial Updates and AnalysesPhase 2 (E-205) Safety and Immunogenicity Clinical Trial (Completed)In July 2017, we announced positive top-line data from our Phase 2 clinical trial of our RSV F Vaccine in older adults known as E-205. The objective of the E-205 trial was to assess safety and immunogenicity to one and two dose regimens of the RSV F Vaccine, with and without aluminum phosphate or our proprietary Matrix-M adjuvant, in older adults. The trial was a randomized, observer-blinded, placebo-controlled trial which enrolled 300 older adults in the Southern Hemisphere. Participants were enrolled and vaccinated outside of the RSV season to best assess immunogenicity. Immunogenicity results indicated both aluminum phosphate and Matrix-M adjuvants increased the magnitude, duration and quality of the immune response relative to RSV F antigen alone. All formulations and regimens were safe and well-tolerated. The data support the inclusion of adjuvanted formulations of our RSV F Vaccine in future older adult trials, although we do not currently expect to initiate such trials in 2018 without additional funding.Further Analyses of Prior Clinical TrialsFollowing the September 2016 announcement of top-line results of Resolve™, our Phase 3 clinical trial of our RSV F Vaccine in older adults conducted during the 2015-16 RSV season in the U.S., we conducted multiple analyses on the clinical data from the Resolve trial, as well as the other completed Phase 2 clinical trials conducted in older adults. Our analyses of these clinical trials sought to better understand their results. More detailed descriptions of each of these RSV older adult clinical trials are found under “Clinical Trial Updates and Analyses” below; the trials are named and briefly described in the following table: Clinical Trial Name Phase Description Conducted Participants(#) E-201 Phase 2 Efficacy in prevention of all symptomatic RSV disease 2014-15 RSV season 1,600 Resolve (or E-301) Phase 3 Efficacy in prevention of msLRTD 2015-16 RSV season 11,856 E-202 Rollover Phase 2 Immunogenicity in response to serial immunization after E-201 2015-16 RSV season 1,329 E-205 Phase 2 Immunogenicity in one or two doses, with or without adjuvant 2017 300 We have found that seasonal variation in attack rate, meaning the incidence of infectious disease in an at-risk population, may have a large impact on demonstrating vaccine efficacy in a particular year. Lower attack rates may mean that either the virus is less common in a given season, or alternatively, that the population being studied has increased intrinsic resistance in that season due to a variety of potential factors such as recent prior exposure. In our E-201 trial, we witnessed a high attack rate and showed a clear demonstration of efficacy. In our Resolve trial the following year, we observed a primary endpoint attack rate of only one-fourth that of the previous season. This scenario represents a conundrum that influenza vaccine developers have experienced for decades: “low attack rate” influenza seasons make it very difficult to demonstrate vaccine efficacy.Additional further analyses of the Resolve trial data indicate that our RSV F Vaccine was associated with a 61% reduction in hospitalizations due to COPD exacerbations, and the same analysis of the E-201 trial showed a similar signal, supporting this finding. We believe that such higher-risk patients represent an unmet medical need with a significant healthcare cost burden that could potentially be addressed by such a vaccine.42Resolve (E-301) Phase 3 Trial (Completed)In September 2016, we announced top-line data from our Resolve trial. Resolve was a randomized, observer-blinded, placebo-controlled trial that began in November 2015, and was fully enrolled with 11,856 older adults at 60 sites in the U.S. by December 2015. The trial did not meet its pre-specified primary or secondary efficacy objectives and did not demonstrate vaccine efficacy. The primary objective of the Resolve trial was to demonstrate efficacy in the prevention of moderate-severe RSV (“msLRTD”), as defined by the presence of multiple lower respiratory tract symptoms. The secondary objective of the trial was to demonstrate efficacy of the RSV F Vaccine in reducing the incidence of all symptomatic respiratory disease due to RSV ARD. The trial also evaluated the safety of an unadjuvanted, 135 microgram dose of the RSV F Vaccine compared to placebo. Consistent with our previous clinical experience, the vaccine was well-tolerated.Phase 2 (E-202) Rollover Trial (Completed)In September 2016, we announced positive top-line data from our E-202 rollover trial of our RSV F Vaccine in older adults. The trial was a randomized, observer-blinded, placebo-controlled rollover trial, which enrolled 1,329 older adults from our prior E-201 trial, conducted at the same 10 sites in the U.S. as the E-201 trial. The primary objectives of the trial were to evaluate safety and serum anti-F IgG antibody concentrations in response to immunization with the RSV F Vaccine. The exploratory objectives of the trial evaluated the efficacy of a second annual dose of the RSV F Vaccine in the prevention of RSV ARD and RSV msLRTD. Participants previously randomized to receive 135 microgram RSV F Vaccine or placebo were re-enrolled and re-randomized to receive either 135 microgram RSV F Vaccine or placebo. This trial design resulted in four separate trial arms: a) participants receiving a placebo in both the first trial and second trial (“Placebo-Placebo”); b) participants receiving RSV F Vaccine in the first trial and placeboNanoFlu standalone in the second trial (“Vaccine-Placebo”); c) participants receiving placebo in the first trial and RSV F Vaccine in the second trial (“Placebo-Vaccine”); and d) participants receiving RSV F Vaccine in both the first trial and second trial (“Vaccine-Vaccine”).The E-202 rollover trial demonstrated immunogenicity in all active vaccine recipients, with a 6-fold increase in anti-F IgG in the Placebo-Vaccine arm, consistent with the E-201 trial. There was higher anti-F IgG at baseline in the Vaccine-Vaccine arm compared to the Placebo-Vaccine arm and the Vaccine-Vaccine arm showed a greater than 2-fold increase in anti-F IgGhalf of 2022the higher baseline.2 (E-201) Trial in Older Adults (Completed)In August 2015, we announced positive top-line data from our E-201 trial of our RSV F Vaccine in 1,600 older adults. The E-201 trial was designed to prospectively examine the incidence of all symptomatic respiratory illnesses associated with RSV infection, in community-living older adults who were treated with placebo. The trial also evaluated safety and immunogenicity of our RSV F Vaccine compared to placebo. Finally, the trial estimated the efficacy of our RSV F Vaccine in reducing the incidence of respiratory illness due to RSV. The trial was the first to demonstrate efficacy of an active RSV immunization in any clinical trial population. In the per protocol population, the clinical trial showed statistically significant vaccine efficacy in prevention of all symptomatic RSV disease (41%) and, in an ad hoc analysis, showed a decrease in RSV disease with any symptoms of lower respiratory tract infection (45%) in older adults. The clinical trial established an attack rate for symptomatic RSV disease of 4.9% in older adults, 95% of which included lower respiratory track symptoms. Efficacy against more severe RSV illness, defined by the presence of multiple lower respiratory tract symptoms or signs associated with difficulty breathing, was 64% in ad hoc analyses.43RSV Pediatrics ProgramBurden of DiseaseThere are currently approximately 18 million children in the U.S. between six months and five years of age.17 By the age of five, essentially all children will have been exposed to RSV and will likely have developed natural immunity against the virus, thus decreasing the rate of severe disease in these children. In the U.S., RSV is responsible for approximately 57,000 hospitalizations of children under five years of age annually, the vast majority of which occur in infants less than one year old, and especially those under six months of age.18,19,20,21,22Clinical Trial UpdateIn September 2015, we announced positive top-line data from our Phase 1 clinical trial of our RSV F Vaccine in healthy children between two and six years of age. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine, with one or two doses, with or without aluminum phosphate adjuvant. Trial enrollment was concluded with a smaller than planned cohort so that dosing could be completed ahead of the 2014-15 RSV season. The vaccine was well-tolerated and serum samples collected from a subset of 18 immunized children in the per-protocol population, demonstrated that the RSV F Vaccine was highly immunogenic at all formulations and regimens. There were greater than 10-fold increases in both anti-F IgG and PCA antibody titers in the adjuvanted group and greater than 6-fold increases in anti-F IgG and PCA antibody titers in the unadjuvanted group. Development of our RSV F Vaccine for pediatrics would likely follow successful development of our RSV F Vaccine for maternal immunization.InfluenzaBurden of DiseaseInfluenza is a world-wide infectious disease that causes illness in humans ranging from mild to life-threatening symptoms or even death. Serious illness occurs not only in susceptible populations such as pediatrics and older adults, but also in the general population largely because of infection by unique strains of influenza for which most humans have not developed protective antibodies. Current estimates for seasonal influenza vaccine growth in the top seven markets (U.S., Japan, France, Germany, Italy, Spain and UK), show a potential increase from approximately $3.2 billion in the 2012-13 season to $5.3 billion by the 2021-22 season.23The Advisory Committee for Immunization Practices of the Center for Disease Control and Prevention (“CDC”) recommends that all persons aged six months and older be vaccinated annually against seasonal influenza. Influenza is a major burden on public health worldwide: an estimated one million deaths each year are attributed to influenza.24 It is further estimated that, each year, influenza attacks between 5% and 10% of adults and 20% to 30% of children, causing significant levels of illness, hospitalization and death.25 One important advantage of recombinant seasonal influenza vaccines, like the candidate we are developing, is that once licensed for commercial sale, large quantities of such vaccine could potentially be manufactured quickly and in a cost-effective manner, without the use of either live influenza virus or eggs. Our recombinant influenza nanoparticles also can display conserved antigenic regions, which have the potential to elicit broadly neutralizing antibodies that appear to protect against a range of “drifted” strains, or influenza strains in which, over time, the hemagglutinin antigen undergoes an accumulation of genetic mutations at the hemagglutinin antigen sites that bind with neutralizing antibodies, potentially resulting in reduced protection of those antibodies. Additionally, nanoparticles offer improved purity and manufacturability and advantages for co-formulation with other nanoparticle-based vaccines.17 U.S. Census.www.census.go/population/international/data/idb/informationGateway.php18 Stockman, L.J.et al (2012) Pediatr Infect Dis J. 31: 5-919 CDC update May 5, 2015.http://www.cdc.gov/rsv/research/us-surveillance.html20 Boyce, T.G.et al (2000) Pediatrics; 137: 865-87021 Hall, C.B.et al (2009) NEJM; 360(6): 588-9822 Hall, C.B.et al (2013) Pediatrics; 132(2): E341-823 Influenza Vaccines Forecasts. Datamonitor (2013)24 Resolution of the World Health Assembly. (2003) WHA56.19. 2825 WHO position paper (2012) Weekly Epidemiol Record; 87(47): 461–7644Clinical Trial UpdateIn February 2018, we reported positive top-line results from our Phase 1/2 clinical trial of our nanoparticle seasonal influenza vaccine candidate, including our proprietary Matrix-M adjuvant (“NanoFlu™ vaccine”), in older adults that was initiated in September 2017. The trial was a randomized, observer-blinded, active comparator-controlled3 trial in approximately 330 healthy older adults. The primary objective of the trial was to assess the safety and immunogenicity of two concentrations (15 micrograms or 60 micrograms) of NanoFlu vaccine compared to the leading licensed egg-based, high-dose influenza vaccine for older adults (“IIV3-HD”). Key findings from the trial include that NanoFlu vaccine induced:·Significantly higher hemagglutination inhibition (“HAI”) antibody responses against homologous H1N1 and H3N2 influenza viruses and comparable HAI responses against the homologous B/Brisbane strain;·Significantly higher HAI immune responses against historic and forward-drifted H3N2 virus strains; and·Strong neutralizing antibody responses that correlate with HAI results.Overall, NanoFlu vaccine was well-tolerated over the three-week trial period. Given the strength of these trial results, we have submitted for publication in a peer-reviewed medical journal and/or for presentation at an upcoming scientific meeting. Based on these results, we expect to begin a Phase 2 trial of our NanoFlu vaccine in the third quarter of 2018.Preclinical AnalysesPreclinical data in which NanoFlu was compared in a head-to-head challenge study against IIV3-HD, as well as IIV3-SD (standard dose) seasonal influenza vaccine, was announced in August 2017 and provided a strong rationale for the initiation of the Phase 1/2 trial. Our NanoFlu vaccine demonstrated significantly stronger and broader immune responses (microneutralizing antibodies) against homologous and heterologous influenza strains, including a series of drifted H3N2 strains evolved across over more than a decade of influenza seasons. In this preclinical challenge study, we showed that our NanoFlu vaccine was more protective than the licensed comparator vaccines against both a homologous H3N2 virus and a ten-year old drifted H3N2 strain. In parallel, we announced the achievement of significant improvements in manufacturing yields and product purity.Emerging VirusesEbola VirusEBOV, formerly known as Ebola hemorrhagic fever, is a severe, often fatal illness in humans. Multiple strains of EBOV have been identified, the most recent of which, the Makona EBOV strain, is associated with a case fatality rate of 50% to 90%.26 There are currently no licensed treatments proven to neutralize the virus, but a range of blood, immunological and drug therapies are under development. Despite the development of such therapies, current vaccine approaches target either a previous strain of the virus or were initially developed to be delivered by genetic vectors. In contrast, our EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) was developed using the Makona EBOV strain.26 WHO: http://www.who.int/mediacentre/factsheets/fs103/en/45In July 2015, we announced positive top-line data from our Phase 1 clinical trial of our Ebola GP Vaccine in ascending doses, with and without our Matrix-M adjuvant, in 230 healthy adults. Participants received either one or two intramuscular injections ranging from 6.5 micrograms to 50 micrograms of antigen, with or without adjuvant, or placebo. Immunogenicity was assessed at multiple time points, including days 28 and 35. These Phase 1 data demonstrated that our Ebola GP Vaccine is highly immunogenic, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant, resulted in significant antigen dose-sparing. The adjuvanted Ebola GP Vaccine was highly immunogenic at all dose levels; the adjuvanted two-dose regimens induced Ebola anti-GP antibody geometric mean responses between 45,000 and 70,000 ELISA units, representing a 500 to 750-fold rise over baseline at day 35. In 2015, we also announced successful data from two separate non-human primate challenge studies of our Ebola GP Vaccine in which, in both cases, the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected.Zika VirusWe initiated development of a vaccine against the Zika virus (“ZIKV”) in response to the unmet global medical need for a response to this serious disease. The subsequent evolving epidemiology of ZIKV, which saw significant reductions in cases both in the U.S. and around the worldMexico published in 2017, along with the uncertaintygovernmental and non-governmental organization funding, has caused us to suspend these development efforts in lieu of competing resources and corporate priorities around more promising product development.Combination Respiratory VaccineGiven the ongoing development of our RSV F Vaccine and our desire to develop a combination respiratory vaccine with the potential to protect against both RSV and seasonal influenza, we made the decision to shift our seasonal influenza vaccine development focusMedicineVLP-based seasonal influenza vaccines to nanoparticle-based seasonal influenza vaccines. We remain confident that a combination nanoparticle vaccine against both RSV and influenza is feasible.CPLB Joint Venture (India)CPL Biologicals Private Limited (“CPLB”), our joint venture company with Cadila Pharmaceuticals Limited (“Cadila”) in India, is actively developing a number of vaccine candidates that were genetically engineered by us. CPLB is owned 20% by us and 80% by Cadila. CPLB operates a manufacturing facility in India for the production of vaccines.Seasonal InfluenzaSince 2016, CPLB has been marketing CadiFlu-S, its trivalent VLP influenza vaccine in India, with limited sales in 2017 and expected in 2018.RabiesIn October 2016, CPLB initiated itsUK Phase 3 clinical trialinfluenza co-administration sub-study published in Indiaa recombinant rabies G protein vaccine candidate that can be administeredCOV-Boost study led by University of Southampton NHS published in prophylactic regimens, both pre and post-exposure. The post-exposure regimen has the potential to use fewer doses (three doses) than the current standard of care (five doses). Data from the trial are expected in 2018.
Lancet46In January 2017,entered into anissued and sold 2.6 million of shares of our common stock resulting in net proceeds of approximately $565 million under our various At Market Issuance Sales Agreements. The most recent At Market Issuance Sales Agreement, (“January 2017 Sales Agreement”), which allowed us to issue and sell up to $75 million in gross proceeds of our common stock. During 2017, we sold 50.9 million shares of common stock under the January 2017 Sales Agreement resulting in $63.4 million in net proceeds at a weighted average sales price of $1.27 per share. From January 1 through January 17, 2018, we sold 6.8 million shares of common stock resulting in $10.3 million in net proceeds. The January 2017 Sales Agreement was fully utilized at that time.In December 2017, we entered into an At Market Issuance Sales Agreement (“December 2017in June 2021 (the “June 2021 Sales Agreement”), which and is currently in effect, allows us to issue and sell up to $75$500 million in gross proceeds of shares of our common stock. FromIn January 17, 2018 through March 9, 2018,2022, we sold 12.70.4 million shares of our common stock resulting in$26.0 million in net proceeds leaving $48.6of $34.7 million remaining.generally accepted in the United States.atas of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates, particularly estimates relating to accounting for revenue, the valuation of our marketable securities, stock-based compensation, long-lived assetslease accounting, pre-launch inventory, and goodwillaccounting for research and development expenses have a material impact on our consolidated financial statements and are discussed in detail throughout our analysis of the results of operations discussed below.under researchfrom arrangements within the scope of ASC 606 following the five-step model: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when a contract hasit is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to our customer. We recognize contribution revenue within the scope of ASC 958-605 when the funder-imposed conditions have been executed, the contract price is fixed or determinable, delivery of services or products has occurred and collection of the contract price is reasonably assured. Payments received in advance of work performedsubstantially met. Contributions are recorded as deferred revenue until the period in which research and lossesdevelopment activities are performed that satisfy the funder-imposed conditions.any,significant, may impact the timing of revenue and fee recognition on our contracts. Allowable contract costs include direct costs incurred on the contract and indirect costs that are applied in the form of rates to the direct costs. Progress billings under the contracts are initially based on provisional indirect billing rates, agreed upon between us and the U.S. government. These indirect rates are subject to review on an annual basis. The impact of changes in the indirect billing rates are recorded in the period when such changes are identified and reflect the difference between actual indirect costs incurred compared to the estimated amounts used to determine the provisional indirect billing rates agreed upon with the U.S. government. We recognize revenue on our U.S government contracts based on reimbursable allowable contract costs incurred in the period up to the transaction price. For our cost-reimbursable-plus-fixed-fee contracts, we recognize the fixed fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the underlying performance obligation as determined under the EAC process. Changes in estimates related to the EAC process are recognized in the period when such changes are made on a cumulative catch-up basis. We include the transaction price comprising both funded and unfunded portions of customer contracts, in which they become known.historically performed researchnot experienced any material difference as a result of change in estimate arising from the EAC process.developmentCEPI Forgivable Loan Funding (each as defined in “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements). The CEPI Forgivable Loan Funding is designated for U.S. Government agencies under cost reimbursable fixed-fee contracts. Under such cost reimbursable fixed-fee contracts, we were reimbursedthe prepayment of certain manufacturing activities. We analyzed these other funding arrangements and recognized revenuedetermined that they are not within the scope of ASC 606 as allowable costs were incurred plusthey do not provide a portion of the fixed-fee earned. We consider fixed-fees under cost reimbursable contracts to be earned in proportiondirect economic benefit to the allowable costs incurred in performance of the work as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. Under our HHS BARDA contract, certain activities were pre-approved by HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursable contracts are recorded as research and development expenses. Payments to us under cost reimbursable contracts, such as the HHS BARDA contract, are provisional payments subject to adjustment upon audit by the government. An audit of indirect rates by the U.S. government for the years ended December 31, 2011 and 2012 was completed in the first quarter of 2014, which resulted in $7.7 million revenue recognized in 2015 relating to the recovery of additional costs for the settlement of indirect rates for such years as collection of the amount became reasonably assured. An audit of indirect rates for the years ended December 31, 2013 and 2014 was completed in the first quarter of 2017. When the final determination of the additional costs for the years ended December 31, 2013 and 2014 has been made, and such amount is known and collection of the amount is reasonably assured, revenue and billings will be adjusted accordingly.47Under our Grant Agreement with BMGF, we are reimbursed for certain costs that support development activities, including our global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and efforts to obtain WHO prequalification of our RSV F Vaccine.grantor. Payments received under the Grant Agreementgrant funding arrangements are considered conditional contributions under the scope of ASC 958-605 and are recorded as deferred and recognized as revenue whenuntil the period in which such research and development activities are performed.actually performed that satisfy the funder-imposed conditions. Payments received under the CEPI Forgivable Loan Funding are only repayable if the proceeds of sales to one or more third parties of NVX-CoV2373 cover our costs of manufacturing such vaccine candidate, not including manufacturing costs funded by CEPI. As the financial risk remains with CEPI, we have determined that the use of the CEPI Forgivable Loan Funding is outside the scope of ASC Topic 470, analyze grant agreements to determine whether thehave determined that payments received under these agreements should be recorded as revenue or asunder ASC 958-605 rather than a reduction to research and development expenses. This is consistent with our policy of presenting such amounts as revenue. In reaching this determination, management considerswe considered a number of factors, including whether we are the principal under the arrangement, and whether the arrangement is significant to, and part of, our core operations. Historically,We will record revenue as we perform the contractual research and development services.receivedand the sale of proprietary Matrix-MTM adjuvant. The license is deemed to be the predominant item to which the milestone payments and sales-based royalties relate. Because development milestone payments are contingent on the achievement of milestones that are not within our control or the control of the licensee, such as regulatory approvals, the payments are not considered probable of being achieved and are excluded from the transaction price until the milestone is achieved. We recognize revenue when the development milestone is achieved. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or predominant item to which the payments relate, we recognize revenue on the satisfaction (or partial satisfaction) of the performance obligation to which some or all of the payment has been allocated, which is normally when the related sales occur.grant agreements have been recognizedthe contract. Depending on the contract, the lease commencement date, defined as revenue sincethe date on which the lessor makes the underlying asset available for use by the lessee and is the date on which the Company is required to accrue lease expenses, may be different than the inception date of the contract. We determine the non-cancellable lease term of our embedded leases based on the impact of certain expected milestones on our option to terminate the lease where we act asare reasonably certain to not exercise that option. We evaluate changes to the terms and conditions of a principallease contract to determine if they result in a new lease or a modification of an existing lease. For lease modifications, we remeasure and reallocate the remaining consideration in the arrangementcontract and reassess the activities are core to our operations.Revenue associated with upfront payments under arrangements is recognized overlease classification at the contract term or when all obligations associated with the upfront payment have been satisfied.Marketable SecuritiesOur marketable securities are classified as available-for-sale securities and are carried at fair value. Unrealized gains and losses on these securities, if determined not to be “other-than-temporary,” are included in accumulated other comprehensive income (loss) in stockholders’ deficit. Investments are evaluated periodically to determine whether a decline in value is “other-than-temporary.” Management reviews criteria, such as the magnitude and durationeffective date of the decline,modification. We classify leases as well aseither operating or finance leases based on the Company’s abilityeconomic substance of the agreement. We also enter into non-cancelable lease agreements for facilities and certain equipment.holdmake lease payments arising from the securities until market recovery,lease, and corresponding right-of-use (“ROU”) assets, which represent the right to predict whetheruse an underlying asset for the loss in value is other-than-temporary. If a decline in value is determined to be other-than-temporary,lease term, based on the present value of the security is reduced andfixed future payments over the impairment is recordedlease term. We calculate the present value of future payments using the discount rate implicit in the statementslease, if available, or our incremental borrowing rate. For all leases that have a lease term of operations. For marketable securities carried12 months or less at fair value,the commencement date (referred to as “short-term” leases), we disclosehave elected to apply the level within the fair value hierarchy as prescribed by Accounting Standard Codification (“ASC”) Topic 820,Fair Value Measurements and Disclosures. We evaluate the types of securitiespractical expedient in our investment portfolio to determine the proper classification in the fair value hierarchy based on trading activity and market inputs. We generally obtain information from an independent third-party to help us determine the fair value of securities in Level 2 of the fair value hierarchy. Investment income is recorded when earned and included in investment income.Stock-Based CompensationWe account for our stock-based compensation under our equity compensation plans in accordance with ASC Topic 718,Compensation-Stock Compensation. This standard requires us842, measure the cost of employee services received in exchange for equity awards based on the grant-date fair value of the award. Employee stock-based compensation is estimated at the date of grant based on the award’s fair value using the Black-Scholes option-pricing model and is recognizednot recognize a lease liability or ROU asset but instead, recognize lease payments as an expense on a straight-line basis over the requisite servicelease term and variable lease payments that do not depend on an index or rate, as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements. In determining the lease period, we evaluate facts and circumstances that could affect the period over which we are reasonably certain to use the underlying asset while taking into consideration the non-cancelable period over which we have the right to use the underlying asset and any option period to extend or terminate the lease if we are reasonably certain to exercise the option. We re-evaluate short-term leases that are modified and if they no longer meet the requirements to be treated as a short-term lease, we recognize and measure the lease liability and ROU asset as if the date of the modification is the lease commencement date (see Note 7 to the accompanying consolidated financial statements). For short-term leases that are modified and continue to meet the requirements to be treated as a short-term lease, we remeasure the fixed lease payments under the modified lease, and recognize lease payments as an expense on a straight-line basis over the modified lease term.those awards expectedresearch and development activities under ASC Topic 730, Research and Development,if they do not have an alternative future use, in research and development projects or otherwise.vest. The Black-Scholes option-pricing model requiresdetermine the present value of lease obligations and the term of embedded leases in our manufacturing supply agreements.certain assumptions,NVX-CoV2373 following regulatory authorization by EMA and the most significantWHO in December 2021, we began to capitalize inventory costs associated with the related supply of NVX-CoV2373, as it was determined that inventory costs subsequently incurred had a probable future economic benefit.arewe have been invoiced in advance of the service. This estimation process includes a review of:expected volatilityservices provided and efforts expended pursuant to contracts, statements of work and related change orders with the service provider, as well as discussion with internal personnel and external service providers as to the progress of the market price of our common stockservices and the expected termagreed-upon fee to be paid for such services. The financial terms of these agreements are based on negotiated terms, vary from contract to contract and may result in an uneven level of activity over time. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the award. Our estimateexpense. Additionally, invoicing from third-party service providers may not coincide with actual work performed and can result in a prepaid or an accrual position at the end of the expected volatility is based on historical volatility overperiod. The estimation process requires us to make significant judgments and estimates in determining the look-back period correspondingservices incurred as of the balance sheet date, which may result in either a prepaid or an accrual balance. As actual costs become known, we adjust our estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from the related estimates and could result in us reporting amounts that are too high or too low in a particular period. Our prepaid and accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from CROs, CMOs, CDMOs, and third-party service providers. Due to the expected term. The expected term represents the period during which our stock-based awards are expected to be outstanding. We estimate this amount based on historical experience of similar awards, giving consideration to the contractual termsnature of the awards, vesting requirementsestimation process, there may be a difference between estimated costs and expectation of future employee behavior, including post-vesting exercise and forfeiture history. We review our valuation assumptions at each grant date and, as a result, our assumptionsactual costs incurred. Historically, we have not experienced any material differences in future periods may change. Also, the accounting estimate of stock-based compensation expense is reasonably likely to change from period to period as further equity awards are made and adjusted for cancellations.
prior periods.48Impairments of Long-Lived AssetsWe account for the impairment of long-lived assets (including finite-lived intangible assets) by performing an evaluation of the recoverability of the carrying value of long-lived asset (group) whenever events or changes in circumstances indicate that the carrying value of the asset (group) may not be recoverable. Examples of events or changes in circumstances that indicate that the recoverability of the carrying value of an asset (group) should be assessed include, but are not limited to, the following: a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, a significant physical change in an asset, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, an adverse action or assessment by a regulator, an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset, a current period operating or cash flow loss combined with a history of operating or cash flow losses and/or a projection or forecast that demonstrates continuing losses associated with an asset used for the purpose of producing revenue. We consider historical performance and anticipated future results in our evaluation of potential impairment. Accordingly, when indicators of impairment are present, we evaluate the carrying value of these assets (group) in relation to the operating performance of the business and future undiscounted cash flows expected to result from the use of these asset (groups). Impairment losses are recognized when the sum of expected future cash flows is less than the assets’ (group’s) carrying value.GoodwillGoodwill is subject to impairment tests annually or more frequently should indicators of impairment arise. The Company has determined since its only business is the development of recombinant vaccines that it operates as a single operating segment and has one reporting unit. The Company primarily utilizes the market approach and, if considered necessary, the income approach to determine if it has an impairment of its goodwill. The market approach is based on market value of invested capital. To ensure that the Company’s capital stock is the appropriate measurement of fair value, the Company considers factors such as its trading volume, diversity of investors and analyst coverage. If considered necessary, the income approach is used as a confirming look to the market approach. Goodwill impairment may exist if the carrying value of the reporting unit exceeds its estimated fair value. If the carrying value of the reporting unit exceeds its fair value, step two of the impairment analysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value, should such a circumstance arise.At December 31, 2017 and 2016, the Company used the market approach to determine if the Company had an impairment of its goodwill. The fair value of the Company’s single reporting unit was substantially higher than its carrying value, resulting in no impairment to goodwill at December 31, 2017 and 2016.3―2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (under the caption “Recent Accounting Pronouncements”).2017, 20162021 and 2015(amounts in tables are presented in thousands, except per share information)theour historical consolidated financial condition and results of operations of Novavax, including Novavax AB’s operations, and should be read in conjunction with the consolidated financial statements and notes thereto set forth in this Annual Report.Report on Form 10-K. Additional information concerning factors that could cause actual results to differ materially from those in our forward-looking statements is described under Part I, Item 1A, “Risk Factors” of this Annual Report.
Report on Form 10-K.49Revenue: 2017 2016 2015 Revenue: Total revenue $ 31,176 $ 15,353 $ 36,250 $ 15,823 $ (20,897 ) Revenue2017the year ended December 31, 2020.2021 2020 Change Revenue (in thousands): Grants $ 948,709 $ 453,210 $ 495,499 Royalties and other 197,581 22,388 175,193 Total revenue $ 1,146,290 $ 475,598 $ 670,692 2021 2020 Change Grant Revenue (in thousands) U.S. Government Partnership (a) $ 788,953 $ 204,727 $ 584,226 U.S. DoD 21,683 12,519 9,164 CEPI 135,445 223,158 (87,713) BMGF 2,628 12,806 (10,178) Total grant revenue $ 948,709 $ 453,210 $ 495,499 $31.2$948.7 million as compared to $15.4$453.2 million for 2016,2020, an increase of $15.8 million, or 103%. Revenue$495.5 million. Grant revenue for 20172021 and 2016 was2020 primarily comprised ofrevenue for services performed under the GrantOWS Agreement and CEPI Funding Agreement. The increase in revenue was primarily due to a much lesser extent, the HHS BARDA contract and revenue from Novavax AB. Revenue increased development activities related to NVX-CoV2373 under the Grant Agreement in the amount of $18.8 million as a result of increased enrollment of participants in the Prepare trial, whichOWS Agreement.partially offset by $2.2 million in decreased revenue from services performed under the HHS BARDA contract, which expired in accordance with its terms in September 2016.Revenue for 2016 was $15.4$197.6 million as compared to $36.3$22.4 million for 2015, a decrease2020, an increase of $20.9 million, or 58%. Revenue for 2016$175.2 million. Royalties and 2015 wasother revenue primarily comprised of services performedroyalties under the Grant Agreementour licensing arrangements, and the HHS BARDA contract, and to a much lesser extent, the PATH Vaccine Solutions clinical development agreement and revenue from Novavax AB. The decrease in revenue is primarily due to a reduction of revenue under the HHS BARDA contract of $31.2 million due to a lower level of activity during 2016 as compared to 2015, $7.7 million recognized in 2015 from the recovery of additional costs for the settlement of indirect rates for the years ended December 31, 2011 and 2012 and $3.1 million relating to our Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccine candidate in Australia (“205 Trial”) as collection of the amount became reasonably assured in 2015. This decreaseincrease in revenue was partially offsetdue to increased sales-based royalties by an increase of $9.4 million in revenue recorded under the Grant Agreement relatingour license partners to our ongoing RSV F Vaccine Phase 3 clinical trial for the protection of infants via maternal immunization.2018 under the Grant Agreement2022 to significantly increase as compared to 2021 due to our NVX-CoV2373 program, which we anticipate will continue to be higher thanfunded by OWS and/or other revenue sources. Further, we anticipate bringing our NVX-CoV2373 vaccine candidate to market following receipt of global regulatory authorizations, and potential approvals that should significantly increase revenue (also see below under Liquidity and Capital Resources in 2017this Management's Discussion and Analysis). In anticipation, we have entered into various APAs, as well as multiple collaboration and license agreements with strategic partners, to supply NVX-CoV2373 in their specified territories under which we continueare entitled to enroll participants in Prepare. 2017 2016 2015 Expenses: Research and development $ 168,435 $ 237,939 $ 162,644 $ (69,504 ) $ 75,295 General and administrative 34,451 46,527 30,842 (12,076 ) 15,685 Total expenses $ 202,886 $ 284,466 $ 193,486 $ (81,580 ) $ 90,980 2021 2020 Change Expenses (in thousands): Research and development $ 2,534,508 $ 747,027 $ 1,787,481 General and administrative 298,358 145,290 153,068 Total expenses $ 2,832,866 $ 892,317 $ 1,940,549 Research and development expenses include salaries, stock-based compensation, laboratory supplies, consultants and subcontractors, including external contract research organizations, and other expenses associated with our process development, manufacturing, clinical, regulatory and quality assurance activities for our programs. In addition, indirect costs such as fringe benefits and overhead expenses related to research and development activities, are also included in research and development expenses. Research and development expenses decreased to $168.4 million for 2017 from $237.9 million for 2016, a decrease$237.9approximately $2.5 billion for 2021 as compared to $747.0 million for 2016 from $162.6 million for 2015,2020, an increase of $75.3$1.8 billion, due to increased development activities relating to NVX-CoV2373, as summarized in the table below.2021 2020 Research and Development Expenses (in thousands) NVX-CoV2373 $ 2,245,935 $ 609,401 NanoFlu 7,761 14,802 Other vaccine development programs 818 2,651 Total direct external research and development expense 2,254,514 626,854 Employee expenses 130,576 45,882 Stock-based compensation expense 86,928 55,955 Facility expenses 26,100 7,232 Other expenses 36,390 11,104 Total research and development expenses $ 2,534,508 $ 747,027 or 46%. The increaseand $217 million, respectively, related to the acceleration of manufacturing costs for leases that we determined were embedded in multiple manufacturing supply agreements with CMOs and CDMOs.wasrelated to NVX-CoV2373 of $2.2 billion and $609.4 million, respectively, primarily duecomprised of costs related to increased costs associatedthe following: RSV F Vaccine clinical trials and higher employee-related costs, including increased non-cash stock-based compensationthird-party consultants related to the development of $4.4 million.Expenses by Functional AreaWe track our researchNVX-CoV2373;development manufacturing the antigen drug substance and Matrix-M™ adjuvant components of NVX-CoV2373 under agreements that we established with third-party CMOs and CDMOs;by the type of costs incurred in identifying, developing, manufacturing and testing vaccine candidates. We evaluate and prioritize our activities according to functional area and therefore believe that project-by-project information would not form a reasonable basis for disclosure to our investors. Historically, we did not account for internal research and development expenses by project, since our employees’ work time is spread across multiple programs and our internal manufacturing clean-room facility produces multiple vaccine candidates.The following summarizes our research and development expenses by functional area for the years ended December 31, 2017, 2016procurement of raw materials, laboratory supplies, and 2015 (in millions). 2017 2016 2015 Manufacturing $ 81.6 $ 115.6 $ 81.2 Vaccine Discovery 5.5 6.1 6.2 Clinical and Regulatory 81.3 116.2 75.2 Total research and development expenses $ 168.4 $ 237.9 $ 162.6 ·the number of participants who participate in the clinical trials;·the number of sites included in the clinical trials;·if clinical trial locations are domestic, international or both;·the time to enroll participants;·the duration of treatment and follow-up;·the safety and efficacy profile of the vaccine candidate; and·the cost and timing of, and the ability to secure, regulatory approvals. with any significant degree of certainty 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. decreasedincreased to $34.5$298.4 million for 20172021 from $46.5$145.3 million for 2016, a decrease2020, an increase of $12.1 million, or 26%.$153.1 million. The decrease wasincrease in general and administrative expenses is primarily due to lowerincreased employee-related costs, including stock-based compensation expense, and an increase in professional fees including for pre-commercialization activities, and lower employee-related costs, as compared to 2016. At December 31, 2017, we had 48 employees dedicated to general and administrative functions versus 53 employees asin support of December 31, 2016. our NVX-CoV2373 program.2018,2022, we expect general and administrative expenses to increase primarilysignificantly as compared to 2021 due to higher anticipated employeeincreased activities related to supporting our NVX-CoV2373 program and increases in employee-related costs and professional fees.General We also expect to incur selling and administrativemarketing expenses increased to $46.5 million for 2016 from $30.8 million for 2015, an increasefollowing regulatory authorizations, and potential approvals, of $15.7 million, or 51%. The increase in general and administrative expenses was primarily due to higher employee-related costs driven by the administrative requirements needed to support our expanding research and development activities, and professional fees for pre-commercialization activities.
NVX-CoV2373.51 2017 2016 2015 Other Income (Expense): Investment income $ 1,946 $ 2,143 $ 660 $ (197 ) $ 1,483 Interest expense (14,072 ) (12,965 ) (241 ) (1,107 ) (12,724 ) Other income (expense) 67 (31 ) (120 ) 98 89 Total other income (expense), net $ (12,059 ) $ (10,853 ) $ 299 $ (1,206 ) $ (11,152 ) 2021 2020 Change Other Income (Expense) (in thousands): Investment income $ 1,364 $ 1,014 $ 350 Interest expense (21,127) (15,145) (5,982) Other income (expense) (8,197) 12,591 (20,788) Total other income (expense), net $ (27,960) $ (1,540) $ (26,420) $12.1$28.0 million for 20172021 compared to total other expense, net of $10.9$1.5 million for 2016,2020, an increase of $1.2$26.4 million. OurIn 2021 and 2020, interest expense increasedincluded $7.2 million and $3.1 million, respectively, related to finance leases. In 2021 and 2020, other income included a loss of $7.2 million and a gain of $12.6 million, respectively, due to the issuance of $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”)changes in the first quarterforeign exchange rates, primarily on an intercompany loan with Novavax CZ.2016.had total otherdid not recognize any income tax expense net of $10.9 million for 2016 compared to total other income, net of $0.3 million for 2015, a decrease of $11.2 million. Our investment income increased in 2016 as compared to 2015 due to higher cash, cash equivalents and marketable securities balances. Our interest expense increased due to the issuance of the Notes in the first quarter of 2016. 2017 2016 2015 Net Loss: Net loss $ (183,769 ) $ (279,966 ) $ (156,937 ) $ 96,197 $ (123,029 ) Net loss per share $ (0.63 ) $ (1.03 ) $ (0.60 ) $ 0.40 $ (0.43 ) Weighted average shares outstanding 292,669 270,802 262,248 21,867 8,554 2021 2020 Change Net Loss (in thousands, except per share information): Net loss $ (1,743,751) $ (418,259) $ (1,325,492) Net loss per share $ (23.44) $ (7.27) $ (16.17) Weighted average shares outstanding 74,400 57,554 16,846 20172021 was $183.8 million,$1.7 billion, or $0.63$23.44 per share, as compared to $280.0$418.3 million, or $1.03$7.27 per share, for 2016, a decreased net loss2020, an increase of $96.2 million.$1.3 billion. The decreasedincrease in net loss was primarily due to lower research andincreased development spending, including decreased costsactivities relating to NVX-CoV2373, partially offset by increased revenue under the clinical trialsOWS Agreement and, development activities ofto a lesser extent, royalties under our RSV F Vaccine, and lower overall employee-related costs, as compared to 2016.Net loss for 2016 was $280.0 million, or $1.03 per share, as compared to $156.9 million, or $0.60 per share, for 2015, an increased net loss of $123.0 million. The increased net loss was primarily due to higher research and development spending relating to our RSV F Vaccine and overall higher employee-related costs as compared to 2015.2017 and 20162021 is primarily a result of sales of our common stock in 20172021 and 2015.progress of our research and development programs,CDMO agreements, the progress of preclinical studies and clinical testing,trials, the time and costs involved in obtaining regulatory approvals, the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights and other manufacturing, sales and distribution costs. We plan to continue to have multipledeveloping other vaccines and product candidates, such as our NanoFlu vaccine candidate and potential combination vaccines candidates, which are in various stages of development, and wedevelopment. 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 rate and progress of our preclinical studies and clinical trials andrelated to other research and development activities.in equity offerings,together with revenue under the issuance of convertible debtOWS Agreement and CEPI Funding Agreement that support our NVX-CoV2373 vaccine development activities. We anticipate our future operations to be funded by our cash, cash equivalents and marketable securities, upfront payments under our APAs and revenue under our former contractOWS Agreement, and, following receipt of global regulatory authorizations, and potential approvals, revenue from product sales, royalties under licensing arrangements with HHS BARDA and our current Grant Agreement with BMGF.
strategic partners, and/or other potential funding sources.522017,2021, we had $157.3$1.5 billion in cash and cash equivalents, marketable securities, and restricted cash as compared to $806.4 million as of December 31, 2020. These amounts consisted of $1.5 billion in cash and cash equivalents,and$157.6 million in marketable securities, as compared to $235.5and $95.3 million in restricted cash as of December 31, 2016. These amounts consisted of $106.3 million in cash and cash equivalents and $51.0 million in marketable securities as of December 31, 2017 as compared to $144.4 million in cash and cash equivalents and $91.1 million in marketable securities as of December 31, 2016.20172021 and 2016 (in thousands): 2017 2016 Summary of Cash Flows: Net cash (used in) provided by: Operating activities $ (138,696 ) $ (255,467 ) $ 116,771 Investing activities 35,968 28,017 7,951 Financing activities 64,540 279,030 (214,490 ) Effect on exchange rate on cash and cash equivalents 142 (335 ) 477 Net (decrease) increase in cash and cash equivalents (38,046 ) 51,245 (89,291 ) Cash and cash equivalents at beginning of year 144,353 93,108 51,245 Cash and cash equivalents at end of year $ 106,307 $ 144,353 $ (38,046 ) 2021 2020 Change Summary of Cash Flows (in thousands): Net cash (used in) provided by: Operating activities $ 322,946 $ (42,541) $ 365,487 Investing activities 100,154 (377,778) 477,932 Financing activities 461,713 984,762 (523,049) Effect on exchange rate on cash, cash equivalents and restricted cash (5,292) 2,115 (7,407) Net increase in cash, cash equivalents and restricted cash 879,521 566,558 312,963 Cash, cash equivalents and restricted cash at beginning of year 648,738 82,180 566,558 Cash, cash equivalents and restricted cash at end of year $ 1,528,259 $ 648,738 $ 879,521 used inprovided by operating activities decreasedincreased to $138.7$322.9 million for 2017,2021, as compared to $255.5$42.5 million for 2016.used in 2020. The decreaseincrease in cash usage wasprovided is primarily due to decreased costs relatingpayments under APAs recorded as deferred revenue, partially offset by funding of our increased net loss and the timing of payments to our RSV F Vaccine and lower overall employee-related costs.2017 and 2016,2021, our investing activities primarily consisted of capital expenditures and purchases and maturities of marketable securities. During 2020, our investing activities primarily consisted of capital expenditures, purchases and maturities of marketable securities, and capital expenditures.our acquisition of Novavax CZ. Capital expenditures for 2017the years ended December 31, 2021 and 20162020 were $4.2$57.5 million and $18.2$54.6 million, respectively. The decreaseFor 2022, we expect an increase in our capital expenditures was primarily due to reduced capital requirements based onfurther development activities for our current operating plans. In 2018, we expect our levelNVX-CoV2373 program, including the additional build out of capital expenditures to be consistent with our 2017 spending primarily due toresearch and development and manufacturing facilities and related equipment, and the timelines being extended for the commercializationbuild-out of our RSV F Vaccine.issuance of Notes,under our At Market Issuance Sales Agreements, finance lease payments related to embedded leases and, to a much lesser extent, stock option exercises of stock-based awards and purchases under our employee stock purchase plan. In 2017,2021, we received net proceeds of $63.4approximately $565 million from the sale of shares of common stock through our At Market Issuance Sales Agreements. In 2020, we received net proceeds of approximately $877 million (this amount excludes $3.2 million received in the first quarter of 2021 for shares traded in late December 2020) from selling shares of common stock through our January 2017 Sales Agreement at a weighted average sales price of $1.27 per share. From January 1, 2018 through March 9, 2018, we sold an additional 19.4 million shares of commons stock through both our January 2017 and December 2017various At Market Issuance Sales Agreements resulting in$36.3 million in net proceeds. In 2016, we received net proceeds of $276.5and approximately $200 million through the issuance of our Notes and payments of capped call transactions (see Note 9 to the consolidated financial statements included herewith).In August 2015, we amended the lease for our facility located in Gaithersburg, Maryland to increase the amount of space leased by us to include the entire facility. Under the terms of the amended lease, the landlord provided us with a tenant improvement allowance of $3.9 million, which was fully funded at December 31, 2017. In May 2016, we entered into a new lease for a facility located in Gaithersburg, Maryland and under the terms of the lease the landlord provided us with a tenant improvement allowance of up to $9.6 million, and $1.2 million was funded at December 31, 2017. In January 2018, this new lease was terminated and we paid a termination fee to the landlord of $5.3 million in the first quarter of 2018, which we believe is less than the potential total lease and operating expense cash obligations that could have been incurred over one year.53In 2007, we entered into an agreement to license certain rights from Wyeth. The Wyeth license is a non-exclusive, worldwide license to a family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. The Wyeth license provides for us to make an upfront payment (previously made), ongoing annual license fees, sublicense payments, milestone payments on certain development and commercialization activities and royalties on any product sales. Except in certain circumstances in which we continuously market multiple productspreferred stock in a country within the same vaccine program, the milestone payments are one-time only payments applicable to each related vaccine program. At present, CPLB’s recombinant trivalent seasonal VLP influenza vaccine (“CadiFlu”) is the only program to which the Wyeth license applies. The license may be terminated by Wyeth only for cause and may be terminated by us only after we have provided ninety (90) days’ notice that we have absolutely and finally ceased activity, including through any affiliate or sublicense, related to the manufacturing, development, marketing or sale of products covered by the license. In September 2015, we amended the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment (“Milestone”) owed as a result of CPLB’s initiation of a Phase 3 clinical trial for CadiFlu in 2014. Under the amendment, the milestone payment, which has increased slightly over time, became due on December 31, 2017. The amendment also restructured the final milestone payment to apply to the initial seasonal influenza VLP vaccine candidate being developed outside India. Thus, the aggregate milestone payments for a seasonal influenza VLP vaccine candidate developed and commercialized was increased from $14 million to up to $15 million. In connection with the execution of the amendment, we agreed to pay a one-time only payment to Wyeth. The amendment also increased annual license maintenance fees associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments under the agreement to Wyeth as of December 31, 2017 aggregated $7.6 million. At December 31, 2017, the Milestone is recorded in accrued expenses on the consolidated balance sheet and is expected to be paid in the first quarter of 2018. The Milestone was recorded as a research and development expense in 2014.Based on our most recent cash flow forecast, we believe our current capital, along with anticipated revenue under the Grant Agreement, is sufficient to fund our operating plans for a minimum of twelve months from the date that this Annual Report was filed. Additional capital may be required in the future to develop our vaccine candidates through clinical development, manufacturing and commercialization. We plan to meet such near term capital requirements primarily through cash and investments on hand, and a combination of equity and debt financings, collaborations, strategic alliances and marketing distribution or licensing arrangements and in the longer term, from revenue related to product sales, to the extent our product candidates receive marketing approval and can be commercialized. Our ability to obtain additional capital in the near term will likely be subject to various factors, including our ability to perform and thus generate revenue under the Grant Agreement, our overall business performance and market conditions.Any capital raised by an equity offering or convertible securities has the potential to be substantially dilutive to the existing stockholders and any collaborations, strategic alliances and marketing distribution or licensing arrangements may require us to give up some or all rights to a product or technology at less than its full potential value. There can be no assurances that new financing will be available to us on commercially acceptable terms, if at all. If we are unable to perform under the Grant Agreement or obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate one or more of our product research and development programs, and/or downsize our organization, including our general and administrative infrastructure.20172021 (in thousands): Total Contractual Obligations: Operating leases $ 36,518 $ 6,695 $ 12,109 $ 10,913 $ 6,801 Convertible notes payable 325,000 — — — 325,000 Accrued milestone payment 4,000 4,000 — — — Total contractual obligations $ 365,518 $ 10,695 $ 12,109 $ 10,913 $ 331,801 Contractual Obligations: Total Less than
One Year1 – 3
Years3 – 5
YearsMore than
5 YearsOperating leases $ 81,191 $ 32,959 $ 14,342 $ 14,705 $ 19,185 Finance leases obligation 133,286 133,286 — — — Convertible notes (a) 325,000 — 325,000 — — Contractual obligations recognized as of December 31, 2021 539,477 166,245 339,342 14,705 19,185 Purchase commitments (b) 826,112 826,112 — — — Facilities lease agreement (c) 104,249 5,814 12,067 12,678 73,690 Total contractual obligations $ 1,469,838 $ 998,171 $ 351,409 $ 27,383 $ 92,875 98 to the consolidated financial statements included in thethis Annual Report on Form 10-K regarding our convertible notes payable,Notes, which will mature on February 1, 2023. Our accrued milestone2023, and bear cash interest of 3.75%, payable February 1 and August 1 of each year.isobligations under certain CMO, CDMO, and lab supply agreements that we are not contractually able to terminate for convenience. Certain agreements provide for termination rights subject to termination fees. Under such agreements, we are contractually obligated to make payments to vendors, mainly to reimburse them for their estimated unrecoverable expenses incurred. As of December 31, 2021, these agreements are activemilestone payment incurred in 2014 under the Wyeth agreement, which is expectedCompany expects to be paidreceive value from these arrangements in the first quarterfuture. The exact amount of 2018such obligations is dependent on the timing of termination, and the exact terms of the relevant agreement, and cannot be reasonably estimated.for further discussion).54Off-Balance Sheet ArrangementsWe areobligations, we enter into a variety of agreements and financial commitments in the normal course of business. The terms generally allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. It is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in any off-balance sheet agreements that have or are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe primary objectiveinvestmentbusiness activities, our results of operations are subject to foreign currency exchange rate fluctuations, including our foreign subsidiaries’ operations. We have two foreign consolidated subsidiaries, Novavax AB, which is preservationlocated in Sweden, and Novavax CZ, which is located in the Czech Republic.capital, withour global activities are reported in U.S. dollars, the secondary objectivefunctional currency for our foreign subsidiaries is their respective local currency. Fluctuations in the foreign currency exchange rates of maximizing income. Asthe countries in which we do business will affect our operating results, often in ways that are difficult to predict. A 10% decline in the exchange rate between the U.S. dollar and Swedish Krona would result in a decline of stockholders’ equity (deficit) of approximately $4 million as of December 31, 2017, we had cash2021. A 10% decline in the exchange rate between the U.S. dollar and cash equivalentsCzech Koruna would result in a decline of $106.3stockholders’ equity (deficit) of approximately $4 million marketable securitiesas of $51.0 million, all of which are short-term in nature, and working capital of $129.6 million.marketinterest rate risk is primarily confined to our investment portfolio. As of December 31, 2017, our investments were classified as available-for-sale. We do not believe that a change in the market rates of interest would have any significant impact on the realizable value of our investment portfolio. Changes in interest rates may affect the investment income we earn on our marketable securities when they mature and the proceeds are reinvested into new marketable securities and, therefore, could impact our cash flows and results of operations.Interest and dividend income is recorded when earned and included in investment income. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income. The specific identification method is used in computing realized gains and losses on the sale of our securities.We are headquartered in the U.S. where we conduct the vast majority of our business activities. We have one foreign consolidated subsidiary, Novavax AB, which is located in Sweden. A 10% decline in the exchange rate between the U.S. dollar and Swedish Krona would result in a decline of stockholders’ deficit of approximately $2.9 million at December 31, 2017.Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAF-25.F-34.Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREItem 9A.CONTROLS AND PROCEDURES interim chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based on that evaluation, the Company’s chief executive officer and interim chief financial officer have concluded that, as of the Evaluation Date, such controls and procedures were effective at the reasonable assurance level.55 generally accepted in the United States (“GAAP”). Such internal control includes those policies and procedures that:·pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and·provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.2017.2021. In making this assessment, our management used the criteria set forth in the 2013Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).Commission. Based on its assessment, our management has determined that, as of December 31, 2017,2021, our internal controls over financial reporting are effective based on those criteria.15 (A) 15.(a)(1). interim chief financial officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarterly period ended December 31, 2017,2021 and has concluded that there was no change that occurred during the quarterly period ended December 31, 20172021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Item 9B.None.56Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE20182022 Annual Meeting of Stockholders scheduled to be held in June 20182022 (the “2018“2022 Proxy Statement”). We expect to file the 20182022 Proxy Statement within 120 days after the close of the fiscal year ended December 31, 2017.2021.Item 11.EXECUTIVE COMPENSATION20182022 Proxy Statement.Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20182022 Proxy Statement.2017.2021. Under these plans, our common stock may be issued upon the exercise and/or vesting of stock optionsequity awards and purchases under our Employee Stock Purchase Plan (“ESPP”). See also the information regarding our stock optionsequity awards and ESPP in Note 1113 to the consolidated financial statements included herewith.Plan Category
Upon Exercise of
Outstanding Options,
Warrants and Rights
(b) Equity compensation plans approved by security holders(1) 46,494,649 $3.51 3,087,705 Equity compensation plans not approved by security holders N/A N/A N/A Plan Category Number of Securities
to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(b)Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)Equity compensation plans approved by security holders (1) 4,523,890 $43.84 3,881,131 Equity compensation plans not approved by security holders N/A N/A N/A Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE1516 to our consolidated financial statements included herewith. We incorporate herein by reference other information required by this item concerning certain other relationships and related transactions and director independence to be contained in the 20182022 Proxy Statement.Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES20182022 Proxy Statement.57Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)The following documents are filed as part of the Annual Report:(1)Index to Financial StatementsF-2F-4F-5F-6F-7F-8(2)Financial Statement Schedules(3)Exhibits4.3 584.4* 10.1†† 10.16†† 5910.14††10.15†10.17††606110.49^ 10.50^ 10.51^ 10.52^ 10.53^ 10.54^ 10.55^ 10.56^ 10.57^ 10.58^ 10.59^ 10.60^ 10.61^ 10.62^ 10.63^ 10.64^* 10.65^* 10.66 10.67 10.68^ 10.69^ 10.70 10.4810.7110.4910.7210.5010.7310.74 6214* 21* 23.1* 31.1* 31.2* 32.1* 32.2* 101 The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2017,2021, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 20172021 and 2016,2020, (ii) the Consolidated Statements of Operations for the three years in the period ended December 31, 2017,2021, (iii) the Consolidated Statements of Comprehensive Loss for the three years in the period ended December 31, 2017,2021, (iv) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three years in the period ended December 31, 2017,2021, (v) the Consolidated Statements of Cash Flows for the three years in the period ended December 31, 2017,2021, and (vi) the Notes to Consolidated Financial Statements.104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). Item 16.FORM 10-K SUMMARY63NOVAVAX, INC.NOVAVAX, INC. By:By: /s/ Stanley C. Erck Stanley C. Erck President and Chief Executive Officer Interim Chief Financial Officer and DirectorMarch 14, 2018NameTitleDateName Title Date /s/ Stanley C. Erck President and Chief Executive Officer Interimand Director (Principal Executive Officer)March 14, 2018February 28, 2022Stanley C. Erck /s/ James P. Kelly Executive Vice President, Chief Financial Officer and DirectorTreasurer (Principal Executive Officer and Principal Financial and Principal Accounting Officer)February 28, 2022 James P. Kelly /s/ James F. Young Chairman of the Board of Directors March 14, 2018February 28, 2022James F. Young /s/ Gregg H. Alton Director February 28, 2022 Gregg H. Alton /s/ Richard H. Douglas Director March 14, 2018February 28, 2022Richard H. Douglas /s/ Gary C. EvansRachel K. KingDirector March 14, 2018February 28, 2022Gary C. EvansRachel K. King/s/ Margaret G. McGlynn Director February 28, 2022 Margaret G. McGlynn /s/ Michael A. McManus Director March 14, 2018February 28, 2022Michael A. McManus /s/ Rajiv I. Modi Director March 14, 2018February 28, 2022Rajiv I. Modi 64/s/ David M. Mott Director February 28, 2022 David M. Mott 2017, 20162021, 2020, and 2015F-22F-45F-56F-67F-78F-89F-120172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2017,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with U.S. generally accepted accounting principles.2017,2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 14, 2018February 28, 2022 expressed an unqualified opinion thereon./s/ Ernst & Young LLPRevenue recognition related to the cost-based input method for U.S. government contracts Description of the Matter How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over recognition of revenue under the cost-based input method. For example, we tested controls over the appropriateness of significant assumptions regarding the estimation of allowable costs to be incurred for the performance obligations and controls over the appropriateness of the indirect rate calculation.
To test the recognition of revenue under the cost-based input method, our audit procedures included among others, reviewing management’s estimate to total allowable costs at completion for consistency with contract terms, obtaining an understanding of the stage of completion through review of project deliverables, evidence of stage of completion including discussion with clinical research and manufacturing teams, and comparing actual results to prior management estimates. To test the recognition of revenue related to indirect rates, our audit procedures included among others, testing the allowability of the underlying costs used in the Company’s calculation of indirect rates. We utilized specialists to evaluate the treatment of significant indirect cost types.Identification of embedded leases related to manufacturing supply agreements Description of the Matter How We Addressed the Matter in Our Audit Baltimore, MarylandMarch 14, 2018F-22017,2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Novavax, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on the COSO criteria.20172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2017,2021, and the related notes and our report dated March 14, 2018February 28, 2022 expressed an unqualified opinion thereon./s/ Ernst & Young LLPBaltimore, MarylandMarch 14, 2018F-3 December 31, 2017 2016 (in thousands, except share and per
share information) ASSETS Current assets: Cash and cash equivalents $ 106,307 $ 144,353 Marketable securities 50,996 91,126 Restricted cash 28,234 30,314 Prepaid expenses and other current assets 17,774 22,037 Total current assets 203,311 287,830 Restricted cash 890 4,590 Property and equipment, net 35,987 40,184 Intangible assets, net 7,873 9,225 Goodwill 53,563 51,673 Other non-current assets 869 799 Total assets $ 302,493 $ 394,301 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 5,613 $ 5,685 Accrued expenses 29,610 24,508 Accrued interest 5,078 5,078 Deferred revenue 25,625 30,079 Other current liabilities 7,749 1,056 Total current liabilities 73,675 66,406 Deferred revenue 2,500 2,500 Convertible notes payable 317,763 316,339 Other non-current liabilities 10,287 14,602 Total liabilities 404,225 399,847 Commitments and contingencies — — Stockholders’ deficit: Preferred stock, $0.01 par value, 2,000,000 shares authorized; no shares issued and outstanding at December 31, 2017 and 2016 — — Common stock, $0.01 par value, 600,000,000 shares authorized at December 31, 2017 and 2016; and 323,684,820 shares issued and 323,229,390 shares outstanding at December 31, 2017 and 271,701,397 shares issued and 271,245,967 shares outstanding at December 31, 2016 3,237 2,717 Additional paid-in capital 1,020,457 935,997 Accumulated deficit (1,114,359 ) (929,996 ) Treasury stock, 455,430 shares, cost basis at both December 31, 2017 and 2016 (2,450 ) (2,450 ) Accumulated other comprehensive loss (8,617 ) (11,814 ) Total stockholders’ deficit (101,732 ) (5,546 ) Total liabilities and stockholders’ deficit $ 302,493 $ 394,301 December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 1,515,116 $ 553,398 Marketable securities — 157,649 Restricted cash 11,490 93,880 Accounts receivable 454,993 262,012 Prepaid expenses and other current assets 173,520 181,264 Total current assets 2,155,119 1,248,203 Property and equipment, net 228,696 179,954 Intangible assets, net 4,770 5,725 Goodwill 131,479 135,379 Other non-current assets 56,689 13,218 Total assets $ 2,576,753 $ 1,582,479 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 127,050 $ 54,332 Accrued expenses 673,731 137,390 Deferred revenue 1,422,944 273,228 Current portion of finance lease liabilities 130,533 105,862 Other current liabilities 36,061 8,860 Total current liabilities 2,390,319 579,672 Deferred revenue 172,528 — Convertible notes payable 323,458 322,035 Non-current finance lease liabilities — 40,083 Other non-current liabilities 42,121 13,480 Total liabilities 2,928,426 955,270 Commitments and contingencies 0 0 Preferred stock, $0.01 par value, 2,000,000 shares authorized at December 31, 2021 and 2020; no shares issued and outstanding at December 31, 2021 and 2020 — — Stockholders’ equity (deficit): Common stock, $0.01 par value, 600,000,000 shares authorized at December 31, 2021 and 2020; and 76,433,151 shares issued and 75,841,171 shares outstanding at December 31, 2021 and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020 764 714 Additional paid-in capital 3,351,967 2,535,476 Accumulated deficit (3,617,950) (1,874,199) Treasury stock, 591,980 shares, cost basis at December 31, 2021 and 396,626 shares, cost basis at December 31, 2020 (85,101) (41,806) Accumulated other comprehensive income (loss) (1,353) 7,024 Total stockholders’ equity (deficit) (351,673) 627,209 Total liabilities and stockholders’ equity (deficit) $ 2,576,753 $ 1,582,479 F-4 Year Ended December 31, 2017 2016 2015 (in thousands, except per share information) Revenue: Government contract $ — $ 2,184 $ 33,344 Grant and other 31,176 13,169 2,906 Total revenue 31,176 15,353 36,250 Expenses: Research and development 168,435 237,939 162,644 General and administrative 34,451 46,527 30,842 Total expenses 202,886 284,466 193,486 Loss from operations (171,710 ) (269,113 ) (157,236 ) Other income (expense): Investment income 1,946 2,143 660 Interest expense (14,072 ) (12,965 ) (241 ) Other income (expense) 67 (31 ) (120 ) Net loss $ (183,769 ) $ (279,966 ) $ (156,937 ) Basic and diluted net loss per share $ (0.63 ) $ (1.03 ) $ (0.60 ) Basic and diluted weighted average number of common shares outstanding 292,669 270,802 262,248 Year Ended December 31, 2021 2020 2019 Revenue: Grants $ 948,709 $ 453,210 $ 15,937 Royalties and other 197,581 22,388 2,725 Total revenue 1,146,290 475,598 18,662 Expenses: Research and development 2,534,508 747,027 113,842 Gain on sale of assets — — (9,016) General and administrative 298,358 145,290 34,417 Total expenses 2,832,866 892,317 139,243 Loss from operations (1,686,576) (416,719) (120,581) Other income (expense): Investment income 1,364 1,014 1,512 Interest expense (21,127) (15,145) (13,612) Other income (expense) (8,197) 12,591 (13) Loss before income tax expense (1,714,536) (418,259) (132,694) Income tax expense 29,215 — — Net loss $ (1,743,751) $ (418,259) $ (132,694) Basic and diluted net loss per share $ (23.44) $ (7.27) $ (5.51) Basic and diluted weighted average number of common shares outstanding 74,400 57,554 24,100 Year Ended December 31, 2017 2016 2015 (in thousands) Net loss $ (183,769 ) $ (279,966 ) $ (156,937 ) Other comprehensive income (loss): Net unrealized (losses) gains on marketable securities available-for-sale (50 ) 54 42 Foreign currency translation adjustment 3,247 (2,744 ) (2,561 ) Other comprehensive income (loss) 3,197 (2,690 ) (2,519 ) Comprehensive loss $ (180,572 ) $ (282,656 ) $ (159,456 ) Year Ended December 31, 2021 2020 2019 Net loss $ (1,743,751) $ (418,259) $ (132,694) Other comprehensive income (loss): Net unrealized gains (losses) on marketable securities available-for-sale, net of reclassifications (9) 9 5 Foreign currency translation adjustment (8,368) 19,523 (1,322) Other comprehensive income (loss) (8,377) 19,532 (1,317) Comprehensive loss $ (1,752,128) $ (398,727) $ (134,011) F-5STOCKHOLDERS’STOCKHOLDERS' EQUITY (DEFICIT)Year Ended December 31, 2017, 2016 and 2015 Accumulated Total Additional Other Stockholders’ Common Stock Paid-in Accumulated Treasury Comprehensive Equity Shares Amount Capital Deficit Stock Income(Loss) (Deficit) (in thousands, except share information) Balance at December 31, 2014 239,287,294 $ 2,393 $ 729,373 $ (493,093 ) $ (2,450 ) $ (6,605 ) $ 229,618 Non-cash compensation cost for stock options, ESPP and restricted stock — — 13,431 — — — 13,431 Exercise of stock options/Purchases under ESPP 1,950,748 19 4,782 — — — 4,801 Restricted stock issued as compensation 25,000 — — — — — — Issuance of common stock, net of issuance costs of $11,912 29,163,620 292 203,983 — — — 204,275 Unrealized gain on marketable securities — — — — — 42 42 Foreign currency translation adjustment — — — — — (2,561 ) (2,561 ) Net loss — — — (156,937 ) — — (156,937 ) Balance at December 31, 2015 270,426,662 2,704 951,569 (650,030 ) (2,450 ) (9,124 ) 292,669 Non-cash compensation cost for stock options, ESPP and restricted stock — — 19,160 — — — 19,160 Exercise of stock options/Purchases under ESPP 1,254,735 13 3,789 — — — 3,802 Restricted stock issued as compensation 20,000 — — — — — — Payment of capped call transactions and costs — — (38,521 ) — — — (38,521 ) Unrealized gain on marketable securities — — — — — 54 54 Foreign currency translation adjustment — — — — — (2,744 ) (2,744 ) Net loss — — — (279,966 ) — — (279,966 ) Balance at December 31, 2016 271,701,397 2,717 935,997 (929,996 ) (2,450 ) (11,814 ) (5,546 ) Cumulative effect of adoption of ASU 2016-09 — — 594 (594 ) — — — Non-cash compensation cost for stock options, ESPP and restricted stock — — 19,809 — — — 19,809 Exercise of stock options/Purchases under ESPP 1,093,513 11 1,141 — — — 1,152 Issuance of common stock, net of issuance costs of $1,065 50,889,910 509 62,916 — — — 63,425 Unrealized loss on marketable securities — — — — — (50 ) (50 ) Foreign currency translation adjustment — — — — — 3,247 3,247 Net loss — — — (183,769 ) — — (183,769 ) Balance at December 31, 2017 323,684,820 $ 3,237 $ 1,020,457 $ (1,114,359 ) $ (2,450 ) $ (8,617 ) $ (101,732 ) Common Stock Additional
Paid-in
CapitalAccumulated
DeficitTreasury
StockAccumulated
Other
Comprehensive
Income (Loss)Total
Stockholders’ Equity (Deficit) Shares Amount Balance at December 31, 2018 19,245,302 $ 192 $ 1,144,621 $ (1,299,107) $ (2,450) $ (11,191) $ (167,935) Stock-based compensation — — 17,048 — — — 17,048 Stock issued under incentive programs 173,873 2 1,122 — (132) — 992 Fractional shares purchased in stock split — — — — (1) — (1) Issuance of common stock, net of issuance costs of $1,655 12,980,177 130 97,760 — — — 97,890 Unrealized gain on marketable securities — — — — — 5 5 Foreign currency translation adjustment — — — — — (1,322) (1,322) Net loss — — — (132,694) — — (132,694) Balance at December 31, 2019 32,399,352 324 1,260,551 (1,431,801) (2,583) (12,508) (186,017) Preferred stock beneficial conversion feature — — 24,139 (24,139) — — — Conversion of preferred stock 4,388,850 44 199,778 — — — 199,822 Stock-based compensation — — 128,035 — — — 128,035 Stock issued under incentive programs 2,168,725 22 44,447 — (39,223) — 5,246 Issuance of common stock, net of issuance costs of $11,416 32,393,438 324 878,526 — — — 878,850 Unrealized gain on marketable securities — — — — — 9 9 Foreign currency translation adjustment — — — — — 19,523 19,523 Net loss — — — (418,259) — — (418,259) Balance at December 31, 2020 71,350,365 714 2,535,476 (1,874,199) (41,806) 7,024 627,209 Stock-based compensation — — 183,626 — — — 183,626 Stock issued under incentive programs 2,503,819 24 68,032 — (43,295) — 24,761 Issuance of common stock, net of issuance costs of $7,292 2,578,967 26 564,833 — — — 564,859 Unrealized loss on marketable securities — — — — — (9) (9) Foreign currency translation adjustment — — — — — (8,368) (8,368) Net loss — — — (1,743,751) — — (1,743,751) Balance at December 31, 2021 76,433,151 $ 764 $ 3,351,967 $ (3,617,950) $ (85,101) $ (1,353) $ (351,673) F-6 Year Ended December 31, 2017 2016 2015 (in thousands) Operating Activities: Net loss $ (183,769 ) $ (279,966 ) $ (156,937 ) Reconciliation of net loss to net cash used in operating activities: Depreciation and amortization 9,817 8,505 5,983 Loss on disposal of property and equipment 269 374 681 Amortization of debt issuance costs 1,424 1,305 ― Lease incentives received 1,933 1,963 2,792 Non-cash stock-based compensation 19,809 19,160 13,431 Other 2,715 663 1,460 Changes in operating assets and liabilities: Restricted cash 5,780 3,301 (36,204 ) Prepaid expenses and other assets 2,590 (1,119 ) (1,790 ) Accounts payable and accrued expenses 5,192 (4,808 ) 9,075 Deferred revenue (4,456 ) (6,057 ) 36,140 Other liabilities ― 1,212 (721 ) Net cash used in operating activities (138,696 ) (255,467 ) (126,090 ) Investing Activities: Capital expenditures (4,189 ) (18,202 ) (18,268 ) Purchases of marketable securities (218,045 ) (356,556 ) (228,521 ) Proceeds from maturities of marketable securities 258,202 402,775 225,519 Net cash provided by (used in) investing activities 35,968 28,017 (21,270 ) Financing Activities: Principal payments of capital leases (37 ) (71 ) (67 ) Principal payments of notes payable ― (395 ) (600 ) Changes in restricted cash ― (819 ) (126 ) Proceeds from issuance of convertible notes ― 325,000 ― Payments of costs related to issuance of convertible notes ― (9,966 ) ― Payments for capped call transactions and costs ― (38,521 ) ― Net proceeds from sales of common stock 63,425 ― 204,275 Proceeds from the exercise of stock options and employee stock purchases 1,152 3,802 4,801 Net cash provided by financing activities 64,540 279,030 208,283 Effect of exchange rate on cash and cash equivalents 142 (335 ) (150 ) Net (decrease) increase in cash and cash equivalents (38,046 ) 51,245 60,773 Cash and cash equivalents at beginning of year �� 144,353 93,108 32,335 Cash and cash equivalents at end of year $ 106,307 $ 144,353 $ 93,108 Supplemental disclosure of non-cash activities: Capital expenditures included in accounts payable and accrued expenses $ 15 $ 697 $ 2,797 Supplemental disclosure of cash flow information: Cash interest payments $ 12,188 $ 6,189 $ 96 Year Ended December 31, 2021 2020 2019 Operating Activities: Net loss $ (1,743,751) $ (418,259) $ (132,694) Reconciliation of net loss to net cash used in operating activities: Depreciation and amortization 12,661 4,885 5,676 Gain on sale of assets — — (9,016) Right-of-use assets expensed 144,433 245,861 — Non-cash stock-based compensation 183,626 128,035 17,048 Other items, net (7,641) (15,080) 6,381 Changes in operating assets and liabilities: Accounts receivable, prepaid expenses, and other assets (192,265) (422,689) (4,202) Accounts payable and accrued expenses 600,326 163,161 (11,485) Deferred revenue 1,325,557 271,545 (8,331) Net cash provided by (used in) operating activities 322,946 (42,541) (136,623) Investing Activities: Capital expenditures (57,486) (54,622) (1,857) Acquisition of Novavax CZ, net of cash acquired — (165,516) — Proceeds from sale of assets — — 18,333 Purchases of marketable securities (2,167) (363,202) (17,484) Proceeds from maturities of marketable securities 159,807 205,562 39,500 Net cash provided by (used in) investing activities 100,154 (377,778) 38,492 Financing Activities: Net proceeds from sale of preferred stock — 199,822 — Net proceeds from sales of common stock 564,859 875,623 97,392 Net proceeds from the exercise of stock-based awards 24,761 5,382 992 Finance lease payments (127,907) (96,065) — Net cash provided by financing activities 461,713 984,762 98,384 Effect of exchange rate on cash, cash equivalents, and restricted cash (5,292) 2,115 (32) Net increase in cash, cash equivalents, and restricted cash 879,521 566,558 221 Cash, cash equivalents, and restricted cash at beginning of year 648,738 82,180 81,959 Cash, cash equivalents, and restricted cash at end of year $ 1,528,259 $ 648,738 $ 82,180 Supplemental disclosure of non-cash activities: Sale of common stock under the Sales Agreement not settled at year-end $ — $ 3,227 $ 497 Capital expenditures included in accounts payable and accrued expenses $ 10,338 $ 9,255 $ 49 Right-of-use assets from new lease agreements $ 179,210 $ 247,599 $ — Supplemental disclosure of cash flow information: Cash interest payments, net of amounts capitalized $ 19,428 $ 13,705 $ 12,188 Cash paid for income taxes $ 12,606 $ — $ — F-7December 31, 2017, 2016 and 2015subsidiary,subsidiaries, including Novavax AB and Novavax CZ, the “Company”) is a clinical-stage biotechnology company focused onthat promotes improved global health through the discovery, development, and commercialization of recombinant nanoparticleinnovative vaccines and adjuvants. Using innovative proprietary recombinant nanoparticle vaccine technology, and its proprietary saponin-based adjuvant technology, the Company produces vaccine candidates to efficiently and effectively respond to both known and emerging disease threats.prevent serious infectious diseases. The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFlu, are genetically engineered, three-dimensional nanostructures that incorporateof recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccine.vaccines. NVX-CoV2373 and NanoFluinclude the use of the Company's proprietary Matrix-MTM adjuvant.Company’s product pipeline targets a varietyauthorization follows the European Medicines Agency's (“EMA”) Committee for Medicinal Products for Human Use recommendation to authorize the vaccine and is applicable in all 27 European Union member states.infectious diseases,2021, in partnership with clinical vaccine candidatesSerum Institute of India Private Limited (“SIIPL”), the WHO granted EUL for respiratory syncytial virusNVX-CoV2373 to be manufactured and marketed by SIIPL as CovovaxTM, the Drugs Controller General of India granted emergency use authorization (“RSV”EUA”) for NVX-CoV2373, which will be manufactured and marketed in India by SIIPL under the brand name CovovaxTM, influenzathe National Agency of Drug and Ebola virus (“EBOV”)Food Control of the Republic of Indonesia, or Badan Pengawas Obat dan Makanan, granted EUA for NVX-CoV2373, to be manufactured and marketed in Indonesia by SIIPL under the brand name Covovax™, and preclinical programsthe Philippine Food and Drug Administration granted EUA for other infectious disease vaccine candidates.Note 2 – LiquidityThe Company’s vaccine candidates currently under development, some of which include adjuvants, will require significant additional researchNVX-CoV2373, to be manufactured and development efforts that include extensive preclinical studies and clinical testing, and regulatory approval prior to commercial use.As a clinical-stage biotechnology company,marketed in the Company has primarily funded its operations with proceeds from the sale of its common stock in equity offerings, the issuance of convertible debt, revenue under its former contract with the Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“HHS BARDA”) and more recently, revenuePhilippines by SIIPL under the grant agreement (“Grant Agreement”) with the Bill & Melinda Gates Foundation (“BMGF”)brand name CovovaxManagement regularly reviews the Company’s cash and cash equivalents and marketable securities relative to its operating budget and forecast to monitor the sufficiency of the Company’s working capital, and anticipates continuing to draw upon available sources of capital to support its product development activities. Based on the Company’s most recent cash flow forecast, the Company believes its current capital, along with anticipated revenue under the Grant Agreement (see Note 7), is sufficient to fund its operating plans for a minimum of twelve months from the date that this Annual Report was filed. The Company plans to meet its near term capital requirements primarily through cash and investments on hand, and a combination of equity and debt financings, collaborations, strategic alliances and marketing distribution or licensing arrangements and in the longer term, from revenue related to product sales, to the extent its product candidates receive marketing approval and can be commercialized. There can be no assurances that new financings will be available to the Company on commercially acceptable terms, if at all. Also, any collaborations, strategic alliances and marketing distribution or licensing arrangements may require the Company to give up some or all rights to a product or technology at less than its full potential value. If the Company is unable to perform under the Grant Agreement or obtain additional capital, the Company will assess its capital resources and may be required to delay, reduce the scope of, or eliminate one or more of its product research and development programs, and/or downsize its organization, including its general and administrative infrastructure.32 – Summary of Significant Accounting Policiessubsidiary,subsidiaries, including Novavax AB.AB and Novavax CZ. All intercompany accounts and transactions have been eliminated in consolidation. generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.F-8at December 31 (in thousands): 2017 2016 Cash $ 10,482 $ 17,481 Money market funds 36,762 95,896 Asset-backed securities 16,007 19,000 Corporate debt securities 43,056 11,976 Cash and cash equivalents $ 106,307 $ 144,353 December 31, 2021 2020 Cash $ 96,372 $ 122,312 Money market funds 361,822 96,116 Government-backed securities 266,250 44,250 Treasury securities — 44,052 Corporate debt securities 790,672 246,668 Cash and cash equivalents $ 1,515,116 $ 553,398 asset-backedgovernment-backed securities, treasury securities, corporate notes, and corporate notes.agency securities. Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company’s ability and intent to hold the investment to maturity.isare recorded when earned and included in investment income in the consolidated statements of operations. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations. The specific identification method is used in computing realized gains and losses on the sale of the Company’s securities.holding gains and losses on marketable securities are reported as a separate component of stockholders’ deficitequity (deficit) until realized. Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company’s ability to hold the securities, until marketincluding whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer’s financial condition and business outlook to predict whether the loss in value is other-than-temporary. If a decline in value is determined to be other-than-temporary, the value of the security is reduced and the impairment is recorded as other income (expense) in the consolidated statements of operations.December 31, 2021 2020 Cash and cash equivalents $ 1,515,116 $ 553,398 Restricted cash current 11,490 93,880 Restricted cash non-current (1) 1,653 1,460 Cash, cash equivalents and restricted cash $ 1,528,259 $ 648,738 which possibly expose the Company to concentration of credit risk and consist primarily of cash and cash equivalents and marketable securities. The Company’s investment policy limits investments to certain types of instruments, including asset-backed securities, high-grade corporate debt securities, and money market funds, places restrictions on maturities and concentrations in certain industries and requires the Company to maintain a certain level of liquidity. At times, the Company maintains cash balances in financial institutions, which may exceed federally insured limits. The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk on its cash and cash equivalents.Fair Value MeasurementsPercentage of Revenue
for Year Ended December 31,Percentage of Accounts Receivable as of December 31, 2021 2020 2019 2021 2020 U.S. government (a) 71 % 46 % 40 % * 78 % CEPI 12 % 47 % * * * BMGF * * 45 % * * SK bioscience, Co., Ltd. 14 % * * * * Gavi, the Vaccine Alliance * * * 77 % * Government of New Zealand * * * * 17 % applies Accounting Standards Codification (“ASC”) Topic 820,Fair Value Measurementscapitalizes the costs of production as inventory when regulatory authorization and Disclosures (“ASC 820”), for financial and non-financial assets and liabilities.ASC 820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow)subsequent commercialization are considered probable and the cost approach (costCompany expects to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:F-9·Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.·Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.·Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.Restricted CashThe Company’s current and non-current restricted cash includes payments received under the Grant Agreement (see Note 7) and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases. The Company will utilize the fundsrealize future economic benefit from the Grant Agreementsales of the product candidate.incurs expenses for services performed under the agreement. At December 31, 2017 and 2016, the restricted cash balances (both current and non-current) consist of payments received under the Grant Agreement of $27.4 million and $33.2 million, respectively, and security deposits of $1.7 million at both dates.assets, generally three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of the improvements or the remaining term of the lease.assets. Repairs and maintenance costs are expensed as incurred.Useful Life Buildings 25 years Machinery and equipment 5 - 7 years Computer hardware 3 years Leasehold improvements Shorter of useful life or remaining term of the lease one1 reporting unit. The Company primarily utilizes primarily the market approach and, if considered necessary, the income approach to determine if it has an impairment of its goodwill. The market approach is based on market value of invested capital. To ensure that the Company’s capital stock is the appropriate measurement of fair value, the Company considers factors such as its trading volume, diversity of investors, and analyst coverage. If considered necessary, the income approach is used to corroborate the results of the market approach. Goodwill impairment may exist if the carrying value of the reporting unit exceeds its estimated fair value. If the carrying value of the reporting unit exceeds its fair value, step two of the impairment analysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value, should such a circumstance arise.December 31, 2017October 1, 2021 and 2016,2020, the Company used the market approach to determine if the Company had an impairment of its goodwill. The fair value of the Company’s single reporting unit was substantially higher than its carrying value, resulting in no impairment to goodwill at December 31, 2017 and 2016.Other Intangible AssetsThe Company’s intangible assets include proprietary adjuvant technology and collaboration agreements, which were measured at their estimated fair values as of their acquisition dates. Amortization expense for intangible assets is recorded on a straight-line basis overOctober 1, 2021 and 2020.expected useful livesCompany analyzes its revenue arrangements to determine the appropriate accounting under U.S. GAAP. Currently, the Company’s revenue arrangements represent customer contracts within the scope of the assets, rangingASC Topic 606, Revenue from seven to 20 years. Intangible assetsContracts with Customers (Topic 606) (“ASC 606”), or are subject to amortization are reviewed for impairment whenever events or changesthe contribution guidance in circumstances indicateASC Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”), which applies to business entities that receive contributions within the carrying amountscope of an intangible asset may not be recoverable. The Company’s evaluation of intangible assets completed during the years ended December 31, 2017 and 2016 resulted in no impairment losses.F-10Equity Method Investmenthas an equity investmentrecognizes revenue from arrangements within the scope of ASC 606 following the five-step model: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in CPL Biologicals Private Limited (“CPLB”).the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) it satisfies a performance obligation. The Company accountsonly applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for this investment using the equity method (see Note 7). Undergoods or services itequity methodscope of accounting, investmentsASC 958-605 when the funder-imposed conditions have been substantially met. Contributions are stated at initial costrecorded as deferred revenue until the period in which research and development activities are adjusted for subsequent additional investmentsperformed that satisfy the funder-imposed conditions.the Company’s proportionate share of earnings or losses and distributions up to the amount initially invested or advanced.Revenue Recognitionfor U.S. Government agencies and on behalf of grantors and other collaborators under cost reimbursable and fixed price contracts, includinggovernment funding, grant, license, grant and clinical development agreements. The revenue primarily consists of funding under U.S. government contracts and other arrangements to advance the clinical development and manufacturing of NVX-CoV2373. The Company’s U.S. government contracts are with the U.S. Department of Defense (the “DoD”) and the U.S. government partnership formerly known as Operation Warp Speed (“OWS”) (see Note 12). Other funding arrangements primarily include a grant and forgivable loan funding from CEPI (see Note 12).under researchfor these contracts whenover time as the Company transfers control over the goods and services and satisfies the performance obligation. The Company measures progress toward satisfaction of the performance obligation using an Estimate-at-Completion (“EAC”) process, which is a cost-based input method that reviews and monitors the progress towards the completion of the Company’s performance obligation. Under this process, management considers the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs, and other identified risks. Estimating the total allowable cost at completion of the performance obligation under a contract has been executed,is subjective and requires the Company to make assumptions about future activity and cost drivers. Changes in these estimates can occur for a variety of reasons and, if significant, may impact the timing of revenue and fee recognition on the Company’s contracts. Allowable contract costs include direct costs incurred on the contract price is fixed or determinable, deliveryand indirect costs that are applied in the form of services or products has occurredrates to the direct costs. Progress billings under the contracts are initially based on provisional indirect billing rates, agreed upon between the Company and collectionthe U.S. government. These indirect rates are subject to review on an annual basis. The Company records the impact of changes in the indirect billing rates in the period when such changes are identified. These changes reflect the difference between actual indirect costs incurred compared to the estimated amounts used to determine the provisional indirect billing rates agreed upon with the U.S. government. The Company recognizes revenue on the U.S government contracts based on reimbursable allowable contract costs incurred in the period up to the transaction price. For cost-reimbursable-plus-fixed-fee contracts, the Company recognizes the fixed-fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the contractunderlying performance obligation as determined under the EAC process. The Company recognizes changes in estimates related to the EAC process in the period when such changes are made on a cumulative catch-up basis. The Company includes the transaction price comprising both funded and unfunded portions of customer contracts in this estimate.reasonably assured.primarily entitled to reimbursement for costs that support development related activities of NVX-CoV2373. The Company analyzed these other funding arrangements and determined that they are not within the scope of ASC 606 as they do not provide a direct economic benefit to the grantor. Payments received in advanceunder the grant funding arrangements are considered conditional contributions under the scope of work performedASC 958-605 and are recorded as deferred revenue and losses on contracts, if any, are recognized in the period in which they become known.Under its Grant Agreement with BMGF (see Note 7), the Company is reimbursed for certain costs that support development activities, including the Company’s global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and efforts to obtain World Health Organization (“WHO”) prequalification of its RSV F Vaccine. Payments received under the Grant Agreement are recognized as revenue inuntil the period in which such research and development activities are performed.actually performed in a manner that satisfies the funder-imposed conditions. Payments received under the CEPI Forgivable Loan Funding agreement are only repayable if the proceeds of sales to one or more third parties of NVX-CoV2373 cover the Company’s costs of manufacturing such vaccine candidate, not including manufacturing costs funded by CEPI. As the financial risk remains with CEPI, the Company determined that the use of the funds from the CEPI agreement is outside the scope of ASC Topic 470, analyzes its grant agreements to determine whether thehas determined that payments received under these agreements should be recorded as revenue or asunder ASC 958-605 rather than a reduction to research and developmentmanagement considersthe Company considered a number of factors, including whether the Companyit is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s core operations. Historically, payments received under grant agreements have been recognized as revenue since theThe Company acts as a principal in the arrangement and the activities are core to its operations.Under cost reimbursable contracts with U.S. Government agencies, the Company is reimbursed and recognizeswill record revenue as allowable costs are incurred plus a portion ofit performs the fixed-fee earned. The Company considers fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred in performance of the work as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. Under its HHS BARDA contract (see Note 7), certain activities were pre-approved by HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursable contracts are recorded ascontractual research and development expenses. Paymentsservices.under cost reimbursable contracts with agenciesor licensee's control, the payments are not considered probable of being achieved and are excluded from the transaction price until the milestone is achieved. The Company recognizes revenue when the development milestone is achieved. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or predominant item, the Company recognizes revenue on the satisfaction (or partial satisfaction) of the U.S. Government, such asperformance obligation, which is when the HHS BARDArelated sales occur.are provisional payments subject to adjustment upon audit by the government. When the final determination of the additional reimbursable costs for any year has been made,research organizations (“CROs”), CMOs, and such amount is knownCDMOs and collection of the amount is reasonably assured, revenue and billings will be adjusted accordingly.Revenue associated with upfront payments under arrangements is recognized over the contract term or when all obligationsother expenses associated with the upfront payment have been satisfied.itsthe Company’s Employee Stock Purchase Plan, as amended and restated (the “ESPP”), at fair value. The Company recognizes compensation expense related to such awards on a straight-line basis over the requisite service period (generally the vesting period) of the equity awards, whichbased on the award's fair value at the grant date. The requisite service period is typically occurs ratably over periods ranging from six monthsone to four years. Effective January 1, 2017, the Company accountsForfeitures for forfeitures when they occur. See Note 11 for a further discussion on stock-based compensation.wasis based on the Company’s historical option exercise experience and post-vesting forfeiture experience using the historical expected term from the vesting date, whereas the expected term for purchases under the ESPP wasis based on the purchase periods included in the offering. The expected volatility wasis determined using historical volatilities based on stock prices over a look-back period corresponding to the expected term. The risk-free interest rate wasis determined using the yield available for zero-coupon U.S. Governmentgovernment issues with a remaining term equal to the expected term. The Company has never paid a dividend, and as such, the dividend yield is zero, and the Company does not intend to pay dividends in the foreseeable future.F-11Restricted stock awards have been recorded as compensation expense over the expected vesting period basedSee Note 13 for a further discussion on the fair value at the award date using the straight-line methodstock-based compensation.Interestpenaltiesforeign tax net operating losses, which may be subject to limitation in future periods. Management has fully reserved the related to incomedeferred tax matters are recordedassets with a valuation allowance in the current reporting period as income tax expense. At December 31, 2017 and 2016,it is more likely than not that the Company had no accruals for interest or penalties related to income tax matters.On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted into law, and the new legislation contains certain key tax provisions that affected the Company, including a reduction of the corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, among others.benefit will not be realized. The Company is requiredcurrently subject to recognizeexamination in all open tax years.effect of the tax law changes in the period of enactment, such as re-measuring its U.S. deferred tax assets and liabilities as well as reassessing the net realizable amounts of its deferred tax assets and liabilities. Inyear ended December 2017, the SEC issued Staff Accounting Bulletin No. 118,Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows31, 2021, the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Act was passed laterecognized $29.2 million in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, the Company considers the deferred tax re-measurements and other items to be incomplete due to the forthcoming guidance and its ongoing analysis of final year-end data and tax positions. The Company expects to complete its analysis within the measurement period in accordance with SAB 118, although it does not expect there to be any adjustment to the income tax expense related to foreign withholding tax on royalties. During the Company’s consolidated statement of operations duringyears ended December 31, 2020 and 2019, the re-measurement period. See Note 13 for additional information onCompany recognized no income taxes.usingby dividing net loss by the weighted averageweighted-average number of shares of common stock outstanding.outstanding for the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding after giving consideration to the dilutive effect of certain securities outstanding during the period. At December 31, 2017, 20162021, 2020, and 2015,2019, the Company had potentially dilutive outstanding stock options, stock appreciation rights, and unvested restricted stock awards totaling 46,513,399, 39,277,732units. The Company has generated a net loss in all periods presented; therefore the basic and 23,832,545 shares, respectively.diluted net loss per share are the same because the inclusion of the potentially dilutive securities would be anti-dilutive. As of December 31, 2017 and 2016,2021, the Company’sCompany's Notes were(see Note 8) would have been convertible into approximately 47,716,9002,385,800 shares of the Company’sCompany's common stock.stock assuming a common stock price of $136.20 or higher. These shares, after giving effect to the add back of interest expense and unamortized debt issuance costs on the Notes and any shares due to the Company upon settlement of its capped call transactions, (see Note 9) are excluded from the computation, as their effect is antidilutive.F-12isare made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of the statement of operations data is made at the average exchange rate in effect for the period. The translation of operating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction. Translation gains and losses are recognized as a component of accumulated other comprehensive lossincome (loss) in the accompanying consolidated balance sheets. The foreign currency translation adjustment balance included in accumulated other comprehensive lossincome (loss) was $8.6$(1.4) million and $11.8$7.0 million at December 31, 20172021 and 2016,2020, respectively.one1 operating segment: the development of recombinant vaccines. The Company does not operate separate lines of business with respect to its vaccine candidates. Accordingly, the Company does not have separately reportable segments as defined by ASC Topic 280,Segment Reporting.RecentlyMarch 2016,August 2020, the Financial Accounting Standards Board (“FASB”("FASB") issued Accounting Standards Update (“ASU”("ASU") 2016-09, Compensation - Stock Compensation (Topic 718) that simplifiesNo. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for share-based payment transactions, including the income tax consequences, the treatmentcertain financial instruments with characteristics of forfeitures, classification of awards as either equity or liabilities and classificationequity, including certain convertible instruments and contracts on the statement of cash flows. The Company adopted this standard on the effective date, January 1, 2017, and, as part of the adoption, elected to account for forfeitures when they occur. The impact from adoption of the provisions related to forfeitures was reflected in the Company’s consolidated financial statements on a modified retrospective basis, resulting in an adjustment to accumulated deficit of $0.6 million.Not Yet AdoptedIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under Topic 605, Revenue Recognition. The new standard requires a company to recognize revenue when it transfers goods and services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. ASU 2014-09 defines a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. In July 2015, the FASB approved a one-year deferral of the effective date ofentity’s own equity. Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It will also remove certain settlement conditions that are currently required for equity contracts to 2018qualify for public companies, with an option that would permit companies to adopt the new standard as early asderivative scope exception and will simplify the original effective date of 2017. Early adoption prior to the original effective date is not permitted.diluted earnings per share calculation for convertible instruments. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. The Company has completed an assessment of the potential changes from adopting ASU 2014-09, primarily by reviewing its current revenue streams and deferred revenue balances, and determined there will be no material change to the recognition of its revenue. The Company will apply ASU 2014-09 on a modified retrospective basis as of January 1, 2018.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) that increases transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements for both lessees and lessors. The standard2020-06 will be effective January 1, 2019 for the Company, with early adoption permitted. The standard will be applied using a modified retrospective approach to the beginning of the earliest period presented in the financial statements. The Company is expecting to adopt this standard on January 1, 2019 and is currently evaluating the potential impact to its consolidated financial statements and related disclosures.F-13In November 2016, the FASB issued ASU 2016-18,Statement of Cash Flows - Restricted Cash (“ASU 2016-18”), which requires that the change in total cash and cash equivalents at the beginning of period and end of period on the statement of cash flows include restricted cash and restricted cash equivalents. ASU 2016-18 also requires companies who report cash and cash equivalents and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows. The standard will be effective January 1, 20182022 for the Company and will be applied using a modified retrospective transition method to each period presented. The Companyapproach. Management has evaluated the impact of adopting ASU 2020-06 and has determined that it will adopt ASU 2016-18 as of January 1, 2018. Although the Company’s restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows, the adoption is not expected to have a material impact on the other aspectsCompany’s consolidated financial statements.Company’s consolidatedCompany's investments were in securities classified as cash flow statements, or its consolidated financial statementsand cash equivalents. Marketable securities classified as a whole, including related disclosures.In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017-04”), which will simplify the goodwill impairment calculation by eliminating Step 2 from the current goodwill impairment test. The new standard does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative goodwill impairment test by comparing the fair valueavailable-for-sale as of its reporting unit to its carrying amount, but if the Company is required to recognize a goodwill impairment charge, under the new standard, the amountDecember 31, 2020 were comprised of the charge will be calculated by subtracting the reporting unit’s fair value from its carrying amount. Under the current standard, if the Company is required to recognize a goodwill impairment charge, Step 2 requires it to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge is calculated by subtracting the reporting unit’s implied fair value of goodwill from the goodwill carrying amount. The standard will be effective January 1, 2020 for the Company, with early adoption permitted, and should be applied prospectively from the date of adoption. The Company is currently evaluating when it will adopt ASU 2017-04 and its expected impact to related disclosures.Note 4– Fair Value MeasurementsThe following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands): Fair Value at December 31, 2017 Fair Value at December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Money market funds(1) $ 36,762 $ ― $ ― $ 95,896 $ ― $ ― Asset-backed securities(2) ― 29,750 ― ― 42,632 ― Corporate debt securities(3) ― 80,309 ― ― 79,470 ― Total cash equivalents and marketable securities $ 36,762 $ 110,059 $ ― $ 95,896 $ 122,102 $ ― Liabilities Convertible notes payable $ ― $ 152,396 $ ― $ ― $ 141,989 $ ― (1)Classified as cash and cash equivalents as of December 31, 2017 and 2016, respectively (see Note 3).(2)Includes $16,007 and $19,000 classified as cash and cash equivalents as of December 31, 2017 and 2016, respectively (see Note 3).(3)Includes $43,056 and $11,976 classified as cash and cash equivalents as of December 31, 2017 and 2016, respectively (see Note 3).Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor’s valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Pricing of the Company’s Notes (see Note 9) has been estimated using other observable inputs, including the price of the Company’s common stock, implied volatility, interest rates and credit spreads among others. Over time, the Company expects a market for the Notes to develop. At that time, the Company intends to use trade data as the principal basis for measuring fair value.During the years ended December 31, 2017 and 2016, the Company did not have any transfers between Levels.The amount in the Company’s consolidated balance sheets for accounts payable approximates its fair value due to its short-term nature. The Company’s milestone payment due to Wyeth (see Note 14) also approximates its fair value at December 31, 2017.F-14December 31, 2020 Amortized Cost Gross Unrealized
GainsGross Unrealized Losses Fair Value Treasury securities $ 10,038 $ — $ (2) $ 10,036 Corporate debt securities 127,003 13 (3) 127,013 Agency securities 20,599 1 — 20,600 Total $ 157,640 $ 14 $ (5) $ 157,649 54 – Marketable SecuritiesMarketable securities classifiedFair Value MeasurementsFair Value at December 31, 2021 Fair Value at December 31, 2020 Assets Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Money market funds (1) $ 361,822 $ — $ — $ 96,116 $ — $ — Government-backed securities (1) — 266,250 — — 44,250 — Treasury securities (2) — — — — 54,088 — Corporate debt securities (3) — 790,672 — — 373,681 — Agency securities — — — — 20,600 — Total cash equivalents and marketable securities $ 361,822 $ 1,056,922 $ — $ 96,116 $ 492,619 $ — Liabilities Convertible notes payable $ — $ 447,509 $ — $ — $ 407,238 $ — available-for-salecash and cash equivalents as of December 31, 20172021 and 2016 were comprised of (in thousands): December 31, 2017 December 31, 2016 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value Asset-backed securities $ 13,748 $ ― $ (5 ) $ 13,743 $ 23,636 $ ― $ (4 ) $ 23,632 Corporate debt securities 37,265 ― (12 ) 37,253 67,457 43 (6 ) 67,494 Total $ 51,013 $ ― $ (17 ) $ 50,996 $ 91,093 $ 43 $ (10 ) $ 91,126 Marketable Securities – Unrealized LossesThe Company owned 19 available-for-sale securities2020 (see Note 2).2017. Of these 19 securities, 18 had combined unrealized losses of less than $0.1 million2020 on the consolidated balance sheets.2017. The2021 and 2020, respectively, on the consolidated balance sheets.investmentstransfers between Levels. a loss position for greater than 12 months as of December 31, 2017. The Company has evaluated its marketable securities and has determined that none of these investments has an other-than-temporary impairment, as it has no intent to sell securities with unrealized losses and it is not likely that the Company will be required to sell any securities with unrealized losses, given the Company’s currentconsolidated balance sheets for accounts payable and anticipated financial position.65 – Goodwill and Other Intangible AssetsGoodwillThe changes in the carrying amounts of goodwill for the years ended December 31, 2017 and 2016 were as follows (in thousands): Year Ended
December 31, 2017 2016 Beginning balance $ 51,673 $ 53,065 Currency translation 1,890 (1,392 ) Ending balance $ 53,563 $ 51,673 20172021 and 20162020 (in thousands): December 31, 2017 December 31, 2016 Gross
Carrying
Amount Accumulated
Amortization Intangible
Assets, Net Gross
Carrying
Amount Accumulated
Amortization Intangible
Assets, Net Finite-lived intangible assets: Proprietary adjuvant technology $ 9,086 $ (2,006 ) $ 7,080 $ 8,222 $ (1,404 ) $ 6,818 Collaboration agreements 4,103 (3,310 ) 793 3,713 (1,306 ) 2,407 Total identifiable intangible assets $ 13,189 $ (5,316 ) $ 7,873 $ 11,935 $ (2,710 ) $ 9,225 F-15December 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Finite-lived intangible assets: Proprietary adjuvant technology $ 8,239 $ (3,469) $ 4,770 $ 9,099 $ (3,374) $ 5,725 Collaboration agreements 3,722 (3,722) — 4,109 (4,109) — Total identifiable intangible assets $ 11,961 $ (7,191) $ 4,770 $ 13,208 $ (7,483) $ 5,725 2017, 20162021, 2020, and 20152019 was $2.2$0.4 million, $0.8$0.6 million, and $0.9$0.7 million, respectively. Estimated amortization expense for existing intangible assets for each of the five succeeding years ending December 31 is as follows (in thousands):Year Amount 2018 $ 761 2019 761 2020 633 2021 454 2022 454 Year Amount 2022 $ 412 2023 412 2024 412 2025 412 2026 412 Year Ended December 31, 2021 2020 Beginning balance $ 135,379 $ 51,154 Goodwill resulting from the acquisition of Novavax CZ — 70,662 Currency translation adjustments (3,900) 13,563 Ending balance $ 131,479 $ 135,379 76 – Grant, U.S. Government Contract and Joint VentureBill & Melinda Gates Foundation Grant AgreementIn supportAcquisition of the Company’s development of its RSV F Vaccine for infants via maternal immunization, in September 2015,Novavax CZGrant Agreement with BMGF, under which it was awardedCompany’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V. (collectively, the “Sellers”) and, solely as guarantors, each of Serum International B.V. and the Company. Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Novavax CZ (formerly, Praha Vaccines a.s.), a grant totaling up to $89.1 millionvaccine manufacturing company (the “Grant”“Acquisition”). The Grant supports development activities, including the Company’s global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and efforts to obtain World Health Organization (“WHO”) prequalificationassets of its RSV F Vaccine. Unless terminated earlier by BMGF, the Grant Agreement will continue in effect until the end of 2021. The Company concurrently entered into a Global Access Commitments Agreement (“GACA”) with BMGFNovavax CZ acquired as a part of the Grant Agreement. UnderAcquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity.May 27, 2020 Prepaid expense and other current assets $ 326 Property and equipment 96,739 Goodwill 70,662 Accounts payable (1,193) Accrued expenses (205) Other non-current liabilities (813) Purchase price, net of cash acquired $ 165,516 Year Ended December 31, 2020 2019 Revenue $ 475,598 $ 18,662 Net loss (419,896) (142,210) Basic and diluted net loss per share $ (7.04) $ (3.22) GACA, among other things,agreement. The Company recognized lease expense related to fixed payments for its short-term operating leases on a straight-line basis over the lease term and lease expense related to variable payments as incurred based on performance or usage in accordance with the contractual agreements. Additionally, during 2021, the Company agreedamended its various CMO and CDMO agreements that modified existing embedded leases under ASC 842 as the Company continued to makehave the exclusive use of, and control over, a certain amountportion of manufacturing facilities and equipment of the RSV F Vaccine availablesupplier during the contractual term of the new arrangement. For leases that were previously determined to represent short-term embedded leases, the modifications did not result in a change in lease classification.accessible2020, the Company recognized ROU assets of $144.4 million and $245.9 million, respectively, for its finance leases and long-term operating related to leases embedded in CMO and CDMO manufacturing supply agreements. The Company expensed the ROU assets since they relate to research and development activities for the development of NVX-CoV2373 for which the Company does not have an alternative future use.affordable pricing700 Quince Orchard Road, Gaithersburg, Maryland ("700QO"). The lease is for approximately 170,000 square feet of space that the Company intends to people in certain lowuse for manufacturing, research and middle income countries. Unless terminated earlier by BMGF, the GACA will continue in effect until the latter of 15 years from its effective date, or 10 years after the first sale of a product under defined circumstances.development, and offices. The term of the GACA may be extendedlease is 15 years with options to extend the lease. The lease provides for an annual base rent of $5.8 million that is subject to future rent increases, and obligates the Company to pay building operating costs. The Company incurred $36.4 million in certain circumstances, by a period of up to five additional years.Payments received in advance that are2021 related to tenant improvement costs and anticipates that it will incur substantial additional tenant improvement costs, net of total landlord contribution of $30.6 million, through 2023 to bring the building to the condition necessary for its intended use. The Company is anticipated to occupy the premises in phases and occupied the third floor during the first quarter of 2022.performance are deferredrent increases and recognized as revenue when the research and development activities are performed. Cash payments received under the Grant are restricted as to their use until expenditures contemplated in the Grant are incurred. In 2017,obligate the Company recognized revenueto pay building operating costs. The Company records operating lease expense for each of its operating leases on a straight-line basis from lease commencement date through the Grant of $29.7 million, and has recognized approximately $42 million in revenue since the inceptionend of the agreement. Atlease term.2017, the Company’s current restricted cash2021 and deferred revenue balances on the consolidated balance sheet represent its estimate of costs to be reimbursed2020 was as follows (in thousands, except weighted-average remaining lease term and revenue to be recognized, respectively, in the next twelve months under the Grant Agreement.HHS BARDA Contract for Recombinant Influenza VaccinesHHS BARDA awarded the Company a contract in 2011, which funded the development of both the Company’s quadrivalent seasonal and pandemic influenza virus-like particle (“VLP”) vaccine candidates. The contract with HHS BARDA was a cost-plus-fixed-fee contract, which reimbursed the Company for allowable direct contract costs incurred plus allowable indirect costs and a fixed-fee earned in the ongoing clinical development and product scale-up of its multivalent seasonal and monovalent pandemic H7N9 influenza VLP vaccine candidates. In September 2014, HHS BARDA exercised and initiated a two-year option to the contract, which included scope to support development activities leading up to planned Phase 3 clinical studies, added $70 million of funding on top of the remainder of the $97 million base period funding and extended the contract until September 2016. In June 2015, the contract was amended to increase the funding by $7.7 million to allowdiscount rate):December 31, Lease Assets and Liabilities Classification 2021 2020 Assets: ROU assets, operating, net Other non-current assets $ 40,123 $ 7,794 Liabilities: Current portion of operating lease liabilities Other current liabilities $ 30,983 $ 3,782 Current portion of finance lease liabilities Current portion of finance lease liabilities 130,533 105,862 Total current lease liabilities $ 161,516 $ 109,644 Non-current portion of operating lease liabilities Other non-current liabilities $ 39,116 $ 10,122 Non-current portion of finance lease liabilities Non-current finance lease liabilities — 40,083 Total non-current lease liabilities $ 39,116 $ 50,205 Weighted-average remaining lease term (years): Operating leases 5.0 4.5 Finance leases 3.7 4.7 Weighted-average discount rate: Operating leases 6.0% 13.8% Finance leases 5.2% 6.4% recovery of additional reimbursable costs under the contract relating to the settlement of indirect ratesoperating and short-term leases for the years ended December 31, 20112021 and 2012.2020 was as follows (in thousands):Year Ended December 31, 2021 2020 Operating lease expense $ 37,027 $ 2,462 Short-term lease expense 468,210 66,805 Variable lease expense 116,435 4,854 Finance lease expense: ROU assets expensed $ 112,528 $ 242,009 Interest expense 7,241 3,097 Total finance lease expense $ 119,769 $ 245,106 Year Ended December 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in operating leases $ 203,991 $ 63,634 Operating cash flows used in finance leases 7,241 3,097 Financing cash flows used in finance leases 127,907 96,065 ROU assets obtained in exchange for operating lease obligations $ 66,682 $ 5,590 ROU assets obtained in exchange for finance lease obligations 112,528 242,009 Year Amount 2022 $ 166,244 2023 7,104 2024 7,238 2025 7,361 2026 7,344 Thereafter 19,186 Total minimum lease payments 214,477 Less: imputed interest (13,845) Total lease liabilities $ 200,632 additional amount was receivedrepresents an initial conversion price of approximately $136.20 per share of the Company’s common stock, representing an approximate 22.5% conversion premium based on the last reported sale price of the Company’s common stock of $111.20 per share on January 25, 2016. In addition, the holders of the Notes may require the Company to repurchase the Notes at par value plus accrued and recorded as revenueunpaid interest following the occurrence of a Fundamental Change (as described in the second quarterIndenture). If a holder of 2015.the Notes converts upon a Make-Whole Adjustment Event (as described in the Indenture), they may be eligible to receive a make-whole premium through an increase to the conversion rate up to a maximum of 8.9928 shares per $1,000 principal amount of Notes (subject to other adjustments as described in the Indenture).HHS BARDA contract expiredNotes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or non-bifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the Notes do contain embedded features indexed to its terms in September 2016. Billingsown stock, but do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope exception from derivative accounting, and also since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the contractproceeds received from the issuance of the convertible debt were provisional billings, subjectrecorded as a liability on the consolidated balance sheets.adjustmententer into privately negotiated capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions are generally expected to reduce the potential dilution upon audit byconversion of the government, and were based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. These indirect rates are subject to audit by HHS BARDA on an annual basis. An audit of indirect rates for the years ended December 31, 2013 and 2014 was completedNotes in the first quarter of 2017. Whenevent that the final determination of the additional reimbursable costs for the years ended December 31, 2013 and 2014 has been made, and such amount is known and collection of the amount is reasonably assured, revenue and billings will be adjusted accordingly. The Company has recognized approximately $114 million in revenue under the HHS BARDA contract since the inception of the contract.F-16CPLB Joint VentureIn 2009, the Company formed a joint venture with Cadila Pharmaceuticals Limited (“Cadila”), CPLB, to develop and manufacture vaccines, biological therapeutics and diagnostics in India. CPLB is owned 20% by the Company and 80% by Cadila. Because CPLB’s activities and operations are controlled and funded by Cadila, the Company accounts for its investment using the equity method. Since the carrying valuemarket price per share of the Company’s initial investment was nominal,common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the Notes. The cap price of the capped call transactions will initially be $194.60 per share, which represented a premium of approximately 75% based on the last reported sale price of the Company’s common stock of $111.20 per share on January 25, 2016, and is subject to certain adjustments under the terms of the capped call transactions. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price, there would nevertheless be dilution upon conversion of the Notes to the extent that such market price exceeds the cap price. The Company evaluated the capped call transactions under ASC 815-10, December 31, 2021 2020 Principal amount of Notes $ 325,000 $ 325,000 Unamortized debt issuance costs (1,542) (2,965) Total convertible notes payable $ 323,458 $ 322,035 Year Ended December 31, 2021 2020 2019 Coupon interest at 3.75% $ 12,188 $ 12,188 $ 12,188 Amortization of debt issuance costs 1,424 1,424 1,424 Total interest expense on Notes $ 13,612 $ 13,612 $ 13,612 has provided no guarantee or commitmentissued 4,388,850 shares of common stock, par value $0.01 per share, and reclassified $199.8 million from Preferred stock to provide future funding, the Company has not recorded nor expects to record losses related to this investmentadditional paid in the foreseeable future.capital. The Company has recognized as an expensea beneficial conversion feature of approximately $24.1 million at the entire amounttime of purchases to date underissuance of the master services agreements related to CPLBPreferred Stock that was recorded in additional paid-in capital and accumulated deficit as the Company has not recordedPreferred Stock issuance was contingently redeemable and convertible at any equity income (loss)time at the option of CPLB (see Note 15).the holder.Note 8 – Other Financial InformationPrepaid Expenses and Other Current AssetsPrepaid expenses and other current assets consist of the following at December 31 (in thousands): 2017 2016 Laboratory supplies $ 13,085 $ 15,736 Other prepaid expenses and other current assets 4,689 6,301 Prepaid expenses and other current assets $ 17,774 $ 22,037 Property and Equipment, netProperty and equipment is comprised of the following at December 31 (in thousands): 2017 2016 Machinery and equipment $ 35,409 $ 32,596 Leasehold improvements 23,664 22,642 Computer hardware 5,091 4,285 Construction in progress 1,129 2,938 65,293 62,461 Less ― accumulated depreciation (29,306 ) (22,277 ) Property and equipment, net $ 35,987 $ 40,184 Depreciation expense was approximately $7.6 million, $7.7 million and $5.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.Accrued ExpensesAccrued expenses consist of the following at December 31 (in thousands): 2017 2016 Employee benefits and compensation $ 11,186 $ 7,300 Research and development accruals 17,542 15,744 Other accrued expenses 882 1,464 Accrued expenses $ 29,610 $ 24,508 Note 9 – Long-Term DebtConvertible NotesIn the first quarter of 2016, the Company issued $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”). The Notes are senior unsecured debt obligations and were issued at par. The Notes were issued pursuant to an indenture dated January 29, 2016 (the “Indenture”), between the Company and the trustee. The Company received $315.0 million in net proceeds from the offering after deducting underwriting fees and offering expenses. The Notes bear cash interest at a rate of 3.75%, payable on February 1 and August 1 of each year, beginning on August 1, 2016. The Notes are not redeemable prior to maturity and are convertible into shares of the Company’s common stock. The Notes are initially convertible into approximately 47,716,900 shares of the Company’s common stock based on the initial conversion rate of 146.8213 shares of the Company’s common stock per $1,000 principal amount of the Notes. This represents an initial conversion price of approximately $6.81 per share of the Company’s common stock, representing an approximate 22.5% conversion premium based on the last reported sale price of the Company’s common stock of $5.56 per share on January 25, 2016. In addition, the holders of the Notes may require the Company to repurchase the Notes at par value plus accrued and unpaid interest following the occurrence of a Fundamental Change (as described in the Indenture). If a holder of the Notes converts upon a Make-Whole Adjustment Event (as described in the Indenture), they may be eligible to receive a make-whole premium through an increase to the conversion rate up to a maximum of 179.8561 shares per $1,000 principal amount of Notes (subject to other adjustments as described in the Indenture).F-17The Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope exception from derivative accounting, and also since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the proceeds received from the issuance of the convertible debt were recorded as a liability on the consolidated balance sheets.In connection with the issuance of the Notes, the Company also paid $38.5 million, including expenses, to enter into privately negotiated capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions are generally expected to reduce the potential dilution upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the Notes. The cap price of the capped call transactions will initially be $9.73 per share, which represented a premium of approximately 75% based on the last reported sale price of the Company’s common stock of $5.56 per share on January 25, 2016, and is subject to certain adjustments under the terms of the capped call transactions. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price, there would nevertheless be dilution upon conversion of the Notes to the extent that such market price exceeds the cap price. The Company evaluated the capped call transactions under ASC 815-10, Derivatives and Hedging - Overall and determined that it should be accounted for as a separate transaction and that the capped call transactions will be classified as an equity instrument.The Company incurred approximately $10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of the Notes, which were recorded as a reduction to the Notes on the consolidated balance sheets. The $10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven year contractual term of the Notes using the effective interest rate method. The Company also incurred $0.9 million of expenses related to the capped call transactions, which were recorded as a reduction to additional paid-in-capital.Total convertible notes payable consisted of the following at (in thousands): December 31,
2017 December 31,
2016 Principal amount of Notes $ 325,000 $ 325,000 Unamortized debt issuance costs (7,237 ) (8,661 ) Total convertible notes payable $ 317,763 $ 316,339 Interest expense incurred in connection with the Notes consisted of the following for the years ended December 31 (in thousands): 2017 2016 Coupon interest $ 12,188 $ 11,240 Amortization of debt issuance costs 1,424 1,305 Total interest expense on Notes $ 13,612 $ 12,545 F-18December 2017,June 2021, the Company entered into an At Market Issuance Sales Agreement (“December 2017(the "June 2021 Sales Agreement”Agreement"), which allows it to issue and sell up to $75$500 million in gross proceeds of its common stock. From January 17, 2018 through March 9, 2018, the Company sold 12.7 million shares of common stock under the December 2017 Sales Agreement resulting in $26.0 million in net proceeds, leaving $48.6 million remaining.In January 2017, the Company entered into an At Market Issuance Sales Agreement (“January 2017 Sales Agreement”), which allowed it to issue and sell up to $75 million in gross proceeds of its common stock. During 2017, the Company sold 50.9 million shares of common stock under the January 2017 Sales Agreement resulting in $63.4 million in net proceeds at a weighted average sales price of $1.27 per share. From January 1 through January 17, 2018, the Company sold 6.8 million shares of common stock resulting in $10.3 million in net proceeds. The January 2017 Sales Agreement was fully utilized at that time.During the first quarter of 2016, in connection with the Company’s issuance of the Notes, the Company also entered into privately negotiated capped call transactions as discussed in Note 9. The cost of the capped call transactions and associated expenses totaling $38.5 million were recorded as a reduction to additional paid-in-capital.In March 2015, the Company completed a public offering of 27,758,620 shares of its common stock, including 3,620,689 shares of common stock that were issued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $7.25 per share resulting in proceeds, net of offering costs of $11.6 million, of approximately $190 million.In 2015, the Company sold 1.4 million shares underand terminated its existing At Market Issuance Sales Agreement, entered into in 2012 (the “2012agreement. As of December 31, 2021, no shares had been sold under the June 2021 Sales Agreement”), at an average sales priceAgreement.$10.63 per share,shares of its common stock resulting in $14.6net proceeds of approximately $565 million in net proceeds. The 2012and $877 million, respectively, under its various At Market Issuance Sales Agreement was fully utilized at that time.Stock-Based CompensationStock OptionsThe 2015 Stock Incentive Plan, as amended, (“2015 Plan”) was approved at the Company’s annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employeesOther Financial Informationconsultants ofOther Current Assetsadvisors to the Company and any present or future subsidiary.The 2015 Plan authorizes the issuance of up to 36,000,000 shares of common stock under equity awards granted under the plan. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100%other current assets consist of the fair market valuefollowing at December 31 (in thousands):December 31, 2021 2020 Prepaid expenses $ 120,029 $ 171,602 Other current assets 53,491 9,662 Prepaid expenses and other current assets $ 173,520 $ 181,264 Company’s common stockfollowing at December 31 (in thousands):December 31, 2021 2020 Land and buildings $ 83,534 $ 79,096 Machinery and equipment 119,998 31,609 Leasehold improvements 10,282 9,684 Computer hardware 9,670 6,126 Construction in progress 35,114 71,232 258,598 197,747 Less: accumulated depreciation (29,902) (17,793) Property and equipment, net $ 228,696 $ 179,954 timeCzech Republic. Depreciation expense was approximately $12.5 million, $4.3 million, and $5.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.grant. Grantsthe following at December 31 (in thousands):December 31, 2021 2020 Employee benefits and compensation $ 38,419 $ 20,752 Research and development accruals 577,100 99,994 Other accrued expenses 58,212 16,644 Accrued expenses $ 673,731 $ 137,390 vesting over periods ranging from six monthsamounts that were billed to four years.F-19Stock Options AwardsThe following is a summarycustomers as of option activity under the 2015 PlanDecember 31, 2021 and the 2005 Plan forDecember 31, 2020, respectively. Accounts receivable also included $35.3 million related to amounts which had not yet been billed to customers as of December 31, 2021. There were no amounts which had not yet been billed to customers as of December 31, 2020. During the year ended December 31, 2017: 2015 Plan 2005 Plan Stock
Options Weighted-
Average
Exercise
Price Stock
Options Weighted-
Average
Exercise
Price Outstanding at January 1, 2017 25,104,603 $ 4.87 14,128,129 $ 3.30 Granted 12,411,543 $ 1.37 — $ — Exercised — $ — (115,000 ) $ 1.25 Canceled (3,840,426 ) $ 4.65 (1,194,200 ) $ 3.92 Outstanding at December 31, 2017 33,675,720 $ 3.61 12,818,929 $ 3.26 Shares exercisable at December 31, 2017 8,550,717 $ 5.87 11,659,554 $ 3.04 Shares available for grant at December 31, 2017 2,279,280 December 31, 2020 Additions Deductions December 31, 2021 Contract receivables: Accounts receivable $ 262,012 2,432,268 (2,239,287) $ 454,993 Contract liabilities $ 273,228 1,598,152 (275,908) $ 1,595,472 fair valueaggregate amount of stock options granted under the 2015 Plan and 2005 Plan was estimated at the date of grant or the date upon which the 2015 Plan was approved by the Company’s stockholders for stock options granted priortransaction price allocated to that time using the Black-Scholes option-pricing model with the following assumptions: 2017 2016 2015 Weighted average fair value of options granted $1.06 $1.88 $4.38 Risk-free interest rate 1.61%-2.34% 0.97%-1.78% 1.19%-2.13% Dividend yield 0% 0% 0% Volatility 88.91%-114.10% 57.86%-108.88% 53.58%-68.39% Expected term (in years) 4.14-7.46 4.22-7.28 3.98-7.34 Expected forfeiture rate(1) N/A 0%-16.33% 0%-16.33% (1) See Note 3 regarding the Company’s adoption of ASU 2016-09 in 2017.The Company used the Monte Carlo simulation model to determine the fair value of its 1.7 million shares of stock options containing a market conditionperformance obligations that were granted in 2016 (the “Performance Options”). The fair value of the Performance Optionsunsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties, was estimated with the following assumptions: 99.11% volatility, a 1.74% risk-free interest rate, 5.62% forfeiture rate and 0% dividend yield, which resulted in fair values of $0.74 to $0.92, and expected terms of 1.35 years to 3.50 years.The total aggregate intrinsic value and weighted-average remaining contractual term of stock options outstanding under the 2015 Plan and 2005 Planapproximately $8 billion as of December 31, 2017 was $0.12021. The timing to fulfill performance obligations related to grant agreements will depend on the results of the Company's research and development activities, including clinical trials. The timing to fulfill performance obligations related to advance purchase agreements (“APAs”) will depend on timing of product manufacturing, delivery, and receipt of marketing authorizations. The remaining unfilled performance obligations are expected to be fulfilled in less than one year.Year Ended December 31, 2021 2020 U.S. government partnership (a) $ 788,953 $ 204,727 U.S. DoD 21,683 12,519 CEPI 135,445 223,158 BMGF 2,628 12,806 Total grant revenue $ 948,709 $ 453,210 and 7.7 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual termdoses of stock options exercisablethe vaccine candidate. Funding under the OWS Agreement is payable to the Company for various development, clinical trial, manufacturing, regulatory, and other activities. The OWS Agreement contains terms and conditions that are customary for U.S. government agreements of this nature, including provisions giving the U.S. government the right to terminate the Base Agreement and/or the Project Agreement based on a reasonable determination that the funded project will not produce beneficial results commensurate with the expenditure of resources and that termination would be in the U.S. government’s interest. If the Project Agreement is terminated prior to completion, the Company is entitled to be paid for work performed and costs or obligations incurred prior to termination and consistent with the terms of the OWS Agreement. In July 2021, the U.S. government instructed the Company to prioritize alignment with the U.S. Food and Drug Administration (“FDA”) on the Company's analytic methods before conducting additional U.S. manufacturing and further indicated that the U.S. government will not fund additional U.S. manufacturing until such agreement has been made. In the third quarter of 2021, the Company updated its estimate-at-completion to reflect the impact of the change to the recognition of the fixed fee under the contract. The U.S. government also instructed the Company to proceed with work under the OWS Agreement related to all other activities, including ongoing clinical trials and nonclinical studies, regulatory interactions, analytics/assays and characterization of manufactured vaccine, and project management. In October 2021 and January 2022, the U.S. government extended the prescribed time to meet its July 2021 instructions until April 2022. The performance period under the Project Agreement extends through 2023 to cover clinical trial activities, subject to early termination by the U.S. government or extension by mutual agreement of the parties.Planthe Company entered into the grant agreement with BMGF (the “BMGF Grant Agreement”), under which it was awarded a grant totaling up to $89.1 million (the “Grant”). The Grant supported ResVax development activities, including the Company's global Phase 3 clinical trial in pregnant women in their third trimester and 2005 Planother regulatory efforts. The BMGF Grant Agreement was completed as of December 31, 2017 was less than $0.1 million and 6.2 years, respectively.2021. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price on the last trading dayCompany concurrently entered into a Global Access Commitments Agreement (“GACA”) with BMGF as a part of the period andBMGF Grant Agreement. Under the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2017. This amount is subject to change based on changes to the closing priceterms of the Company’s common stock. The aggregate intrinsic value of options exercised and vesting of restricted stock awards for 2017, 2016 and 2015 was $0.1 million, $2.4 million and $9.7 million, respectively.Employee Stock Purchase PlanIn 2013,GACA, among other things, the Company adopted an Employee Stock Purchase Plan (the “ESPP”), which currently authorizes an aggregate of 3,450,000 shares of common stockagreed to be purchased, and the aggregatemake a certain amount of sharesResVax available and accessible at affordable pricing to people in certain low- and middle-income countries. Unless terminated earlier by BMGF, the GACA will continue to increase 5% on each anniversaryin effect until the later of 15 years from its adoption up toeffective date, or 10 years after the first sale of a maximum of 4,000,000 shares.product under defined circumstances. The number of authorized shares and the maximum number of shares both include an increase of 1,000,000 shares approved at the Company’s 2016 annual meeting of stockholders. The ESPP allows employees to purchase shares of common stockterm of the Company at each purchase date through payroll deductionsGACA may be extended in certain circumstances, by a period of up to five additional years.maximumgrant agreement with BMGF (the “BMGF SA Grant Agreement”) under which it was awarded and received a grant of 15%$15.0 million to support a Phase 2b clinical trial in the Republic of their compensation, at 85%South Africa to evaluate the safety, immunogenicity, and potential efficacy of NVX-CoV2373. As of December 31, 2021, the Company had recognized the full amount of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option periodgrant as revenue.employee was first eligible to participate). At December 31, 2017, there were 808,425 shares available for issuanceresearch and development activities are performed. Cash payments received under the ESPP.
BMGF Grant Agreement and the BMGF SA Grant Agreement are restricted as to their use until expenditures contemplated in the agreements are incurred.F-20The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2017 2016 2015 Range of Black-Scholes fair values of ESPP shares granted $0.45-$5.47 $1.86-$4.76 $1.06-$3.38 Risk-free interest rate 0.45%-1.13% 0.22%-0.61% 0.05%-0.35% Dividend yield 0% 0% 0% Volatility 45.98%-267.85% 43.03%-86.75% 40.79%-64.24% Expected term (in years) 0.5-2.0 0.5-2.0 0.5-2.0 Expected forfeiture rate(1) N/A 5% 5% (1) See Note 3 regarding the Company’s adoption of ASU 2016-09 in 2017.Restricted Stock AwardsThe following is a summary of restricted stock awards activity for2017: Number of
Shares Per Share
Weighted-
Average
Grant-Date
Fair Value Outstanding and Unvested at January 1, 2017 45,000 $ 4.99 Restricted stock granted ― $ ― Restricted stock vested (26,250 ) $ 4.99 Restricted stock forfeited ― $ ― Outstanding and Unvested at December 31, 2017 18,750 $ 4.99 recorded stock-based compensation expensegranted 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 WHO) in all countries other than specified countries designated by the World Bank as upper-middle or high-income countries, with respect to which the Company 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, the Company may notify SIIPL of any bona fide opportunities for awards issuedthe Company to license NVX-CoV2373 to a third party in such low and middle-above mentioned plansCompany with NVX-CoV2373 for commercialization in certain territories.consolidated statementsamount of operations$20.0 million, which is included in Royalties and other revenue on the Statements of Operations. The Company is eligible for a future milestone payment of an additional $20.0 million upon regulatory approval in Japan.follows (in thousands): Year Ended December 31, 2017 2016 2015 Research and development $ 11,750 $ 11,168 $ 6,771 General and administrative 8,059 7,992 6,660 Total stock-based compensation expense $ 19,809 $ 19,160 $ 13,431 2017, there was approximately $36 million of total unrecognized compensation expense2021 and 2020, the Company had deferred revenue related to unvested stock options, ESPPAPAs of $1.6 billion and restricted stock awards. This unrecognized non-cash compensation expense$45.0 million, respectively.be recognized overmanufacture and deliver the balance of the 1.1 billion doses of NVX-CoV2373 for low- and middle-income countries participating in the COVAX Facility. The Company expects to deliver doses with antigen and adjuvant manufactured at facilities directly funded under the Company's funding agreement with CEPI, with initial doses supplied by SIIPL and SLS under a weighted-average periodsupply agreement. The Company expects 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, the Company may provide additional doses of 1.6 years,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. Under the agreement, the Company received an upfront payment from Gavi of $350.0 million in 2021 and will be allocated between researchhas recorded a receivable as of December 31, 2021, fordevelopmentup to 100 million initial doses of NVX-CoV2373, with the option for the Commission to purchase an additional 100 million doses up to a maximum aggregate of 200 million doses in one or more tranches, through 2023. Under the terms of the APA, the Company agreed to manufacture the vaccine in facilities located in the European Union and general and administrative expenses accordingly. This estimate does not includeensure continued efficacy of the impactvaccine against variants of other possible stock-based awards that may be made during future periods.the SARS-CoV-2 virus. Pursuant to the terms of the APA, the Company is prohibited from supplying NVX-CoV2373 to any third party if such delivery would impede or limit the fulfillment of the Company’s obligations to the European Commission under the APA, except with respect to the Company’s obligations under its APA with Gavi.1213 – Stock-Based CompensationYear Ended December 31, 2021 2020 2019 Research and development $ 86,928 $ 55,955 $ 8,436 General and administrative 96,698 72,080 8,612 Total stock-based compensation expense $ 183,626 $ 128,035 $ 17,048 2015 Plan 2005 Plan Stock Options Weighted-
Average
Exercise
PriceStock
OptionsWeighted-
Average
Exercise
PriceOutstanding at January 1, 2021 5,420,463 $ 38.05 214,186 $ 88.11 Granted 81,959 $ 177.84 — $ — Exercised (1,778,688) $ 31.11 (145,961) $ 78.11 Canceled (87,897) $ 120.62 — $ — Outstanding at December 31, 2021 3,635,837 $ 42.60 68,225 $ 109.52 Shares exercisable at December 31, 2021 1,170,259 $ 57.01 68,225 $ 109.52 Shares available for grant at December 31, 2021 3,716,636 Year Ended December 31, 2021 2020 2019 Weighted average Black-Scholes fair value of stock
options and SARs granted$158.02 $80.48 $4.98 Risk-free interest rate 0.5%-1.3% 0.2%-1.5% 1.5%-2.6% Dividend yield —% —% —% Volatility 124.7%-142.0% 116.0%-152.2% 105.4%-134.1% Expected term (in years) 4.1-6.1 3.9-7.6 3.9-7.5 Number of
SharesPer Share
Weighted-
Average
Fair ValueOutstanding and unvested at January 1, 2021 1,044,980 $ 72.59 Restricted stock units granted 316,571 $ 191.82 Restricted stock units vested (488,370) $ 69.02 Restricted stock units forfeited (53,353) $ 141.01 Outstanding and unvested at December 31, 2021 819,828 $ 116.70 Year Ended December 31, 2021 2020 2019 Range of Black-Scholes fair values of ESPP
shares granted$83.47-$238.85 $2.57-$92.67 $2.57-$35.00 Risk-free interest rate 0.1%-0.2% 0.2%-2.6% 1.2%-2.6% Dividend yield —% —% —% Volatility 114.9%-159.4% 66.6%-189.7% 52.2%-171.6% Expected term (in years) 0.5-2.0 0.5-2.0 0.5-2.0 TheUnder its 401(k) plan, the Company has recorded expense of $1.5$3.4 million, $1.5$0.9 million, and $0.8$1.0 million in 2017, 20162021, 2020, and 2015,2019, respectively.F-21subsidiary has asubsidiaries have pension planplans under local tax and labor laws and isare obligated to make contributions to thisthe plan. Contributions and other expenses related to this plan were $0.5$1.7 million, $1.0 million, and $0.7 million in 2017, 20162021, 2020, and 2015.1315 – Income Taxeslossincome (loss) from operations before income tax expense by jurisdiction for the years ended December 31 are as follows (in thousands): 2017 2016 2015 Domestic $ (173,749 ) $ (273,134 ) $ (150,227) Foreign (10,020 ) (6,832 ) (6,710) Total net loss $ (183,769 ) $ (279,966 ) $ (156,937) As a resultYear Ended December 31, 2021 2020 2019 Domestic $ (1,633,016) $ (455,253) $ (124,189) Foreign (81,520) 36,994 (8,505) Loss before income tax expense $ (1,714,536) $ (418,259) $ (132,694) provision forexpense related to foreign withholding tax on royalties. During the years ended December 31, 2017, 20162020 and 2015.Deferred2019, the Company recognized no income tax assets (liabilities) consistexpense.following at December 31 (in thousands): 2017 2016 Deferred tax assets: Federal and State net operating loss carryforward $ 240,550 $ 286,619 Foreign net operating loss carryforward 11,577 9,011 Research tax credits 27,571 23,260 Deferred revenue 668 10,121 Original discount interest 7,167 12,445 Other 16,496 17,981 Total deferred tax assets 304,029 359,437 Valuation allowance (299,862 ) (354,530 ) Net deferred tax assets $ 4,167 $ 4,907 Deferred tax liabilities: Intangibles (1,789 ) (2,090 ) Other (2,378 ) (2,817 ) Total deferred tax liabilities (4,167 ) (4,907 ) Net deferred tax assets $ — $ — At December 31, 2017, the Company has provided provisional accountingprovision for theincome tax effects of enactment of the Act. The Company re-measured certain of its U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. As a result, the Company’s U.S. deferred tax balances at December 31, 2017 were revalued at the newly enacted tax rate, decreasing the net deferred tax asset (before valuation allowance) by approximately $132 million, offset by a decrease in the valuation allowance by the same amount.The valuation allowance decreased $54.7 million during the year ended December 31, 2017 primarily due to the impact of the Act and was partially offsetamount computed by the generation of net operating losses in 2017. The valuation allowance increased by $117.7 million for the year ended December 31, 2016.The differences betweenapplying the U.S. federal statutory tax rate andto the Company’s effective tax rate areis as follows: 2017 2016 2015 Statutory federal tax rate (34 )% (34 )% (34 )% State income taxes, net of federal benefit (3 )% (3 )% (3 )% Research and development and other tax credits (2 )% (2 )% (3 )% Release of FIN 48 liability 0 % 0 % (2 )% Other (1 )% 2 % 1 % Change in tax rate 70 % 0 % 0 % Change in valuation allowance (30 )% 37 % 41 % Income tax provision 0 % 0 % 0 % Realization of net deferred tax assets is dependent on the Company’s ability to generate future taxable income, which is uncertain. Accordingly, a full valuation allowance was recorded against these assets as of December 31, 2017 and 2016 as management believes it is more likely than not that the assets will not be realizable.F-22Year Ended December 31, 2021 2020 2019 Statutory federal tax rate (21) % (21) % (21) % State income taxes, net of federal benefit (6) % (3) % (2) % Research and development and other tax credits (1) % — % (3) % Non-deductible expenses 2 % 4 % — % Non-cash stock-based compensation (4) % (7) % — % Foreign tax expense 1 % — % — % Other 1 % 1 % 1 % Change in tax rate — % (5) % 3 % Change in valuation allowance 30 % 31 % 22 % Income tax provision 2 % — % — % 2017,2021, the Company hadhas available federal, state, and foreign net operating losses of $3.2 billion, $2.8 billion, and $127.6 million, respectively, that may be applied against future taxable income. Federal net operating losses of $0.9 billion will expire in the years 2022 to 2037. The remaining $2.3 billion of federal net operating losses can be carried forward indefinitely. A portion of the foreign net operating losses will begin to expire in 2023. The Company also has research tax credits available as follows (in thousands): Amount Federal and State net operating losses expiring through the year 2037 $ 974,463 Foreign net operating losses (no expiration) 52,621 Research tax credits expiring through the year 2037 27,477 prior ownership changechanges of the Company. TheAs of December 31, 2021, the Company does not expect such limitation, if any, to impact the use of the net operating losses and business tax credits.At December 31, 2017 and 2016, the Company did not have any unrecognized tax benefits. To the extent unrecognized tax benefits are ultimately recognized, it would affect the annual effective income tax rate unless otherwise offset by a corresponding change in the valuation allowance. The Company does not expect that the amounts of unrecognized tax benefits will change significantly within the next twelve months.Sweden.Sweden and the Czech Republic. The Company hadhas U.S. tax net operating losses and credit carryforwards that are subject to examination from 19982002 through 2017. The statute extends for a number of years beyond the year in which the losses were generated for tax purposes. Since a portion of these carryforwards may be utilized in the future, many of these attribute carryforwards remain subject to examination.2021. The returns in Sweden are subject to examination from 20102015 through 2017.December 31, 2021 2020 Deferred tax assets: Federal and state net operating loss carryforward $ 845,731 $ 325,655 Foreign net operating loss carryforward 25,625 8,620 Research tax credits 44,618 35,065 Lease liability 52,852 39,548 Deferred revenue 20,262 60,657 Non-cash stock-based compensation 24,698 22,577 Original discount interest 1,729 3,177 Other 11,801 12,019 Total deferred tax assets 1,027,316 507,318 Valuation allowance (1,015,333) (504,788) Net deferred tax assets $ 11,983 $ 2,530 Deferred tax liabilities: ROU assets (10,071) (1,253) Intangibles (1,034) (1,198) Other (878) (79) Total deferred tax liabilities $ (11,983) $ (2,530) Net deferred tax assets $ — $ — Year Ended December 31, 2021 2020 2019 Unrecognized tax benefits balance at January 1, $ 8,766 $ — $ — Additions for tax positions of current year 4,158 1,413 — Additions for tax positions of prior years — 7,353 — Reductions for tax positions of prior year (1,770) — — Settlements of tax positions of prior years — — — Unrecognized tax benefits balance at December 31, $ 11,154 $ 8,766 $ — 20172021 and 2016,2020, the Company had no accruals for interest or penalties related to income tax matters.Note 14 – Commitments and ContingenciesOperating LeasesCompany conducts its operations from leased facilities. The operating leases for these facilities have terms expiring through 2026, unless earlier terminated bytotal amount of unrecognized tax benefits that, if recognized, would affect the Company in 2023. The leases contain provisions for future rent increases. Also, the leases obligate the Company to pay building operating costs. The Company records a deferred rent liability to account for the funding under improvement allowances and to record rent expense on a straight-line basis for these operating leases.Future minimum rental commitments under non-cancelable leases as of December 31, 2017 (excluding commitments for the Clopper Road Lease as described below as this lease was terminated in January 2018) are as follows (in thousands):Year Operating
Leases 2018 $ 6,695 2019 6,693 2020 5,416 2021 5,398 2022 5,515 Thereafter 6,801 Total minimum lease payments $ 36,518 Total rent expenses approximated $8.4 million, $7.0 million and $4.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.After re-evaluating its real estate needs, the Company amended its lease for approximately 147,000 square feet of facility space located at 1201 Clopper Road, Gaithersburg, Maryland (the “Clopper Road Lease”), allowing for, among other things, the ability to terminate the Clopper Road Lease upon the occurrence of certain events. In January 2018, the landlord terminated the Clopper Road Lease, and the Company paid a termination fee to the landlord of $5.3 million, which the Company believeseffective tax rate is less than the potential total lease and operating expense cash obligations that could have been incurred over one year. The Company expects to record total expense, which includes the termination fee and write-down of the related leasehold improvements, and is partially offset by deferred rent expense previously recorded, of approximately $1 million in the first quarter of 2018 in connection with the termination of the Clopper Road Lease.
$11.2 million.F-23ContingenciesIn 2007, the Company entered into an agreement to license certain rights from Wyeth Holdings Corporation, a subsidiary of Pfizer Inc. (“Wyeth”). The Wyeth license is a non-exclusive, worldwide license to a family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. The Wyeth license provides for the Company to make an upfront payment (previously made), ongoing annual license fees, sublicense payments, milestone payments on certain development and commercialization activities and royalties on any product sales. Except in certain circumstances in which the Company continuously markets multiple products in a country within the same vaccine program, the milestone payments are one-time only payments applicable to each related vaccine program. At present, CPLB’s recombinant trivalent seasonal VLP influenza vaccine (“CadiFlu”) is the only program to which the Wyeth license applies. The license may be terminated by Wyeth only for cause and may be terminated by the Company only after it has provided ninety (90) days’ notice that the Company has absolutely and finally ceased activity, including through any affiliate or sublicense, related to the manufacturing, development, marketing or sale of products covered by the license. In September 2015, the Company entered into an amendment to the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment (“Milestone”) owed as a result of CPLB’s initiation of a Phase 3 clinical trial for CadiFlu in 2014. Under the amendment, the Milestone, which has increased slightly over time, became due on December 31, 2017. The amendment also restructured the final milestone payment to apply to the initial seasonal influenza VLP vaccine candidate being developed outside India. Thus, the aggregate milestone payments for a seasonal influenza VLP vaccine candidate developed and commercialized was increased from $14 million to up to $15 million. In connection with the execution of the amendment, the Company agreed to pay a one-time only payment to Wyeth. The amendment also increased annual license maintenance fees associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments under the agreement to Wyeth as of December 31, 2017 aggregated to $7.6 million. At December 31, 2017, the Milestone is recorded in accrued expenses on the consolidated balance sheet and is expected to be paid in the first quarter of 2018. The Milestone was recorded as a research and development expense in 2014.1516 – Related Party TransactionsDr. Rajiv Modi,Transactiondirectorpurchase price of $45.57 per share, reflecting the closing price of the Company’s common stock on the trading date prior to the date the parties’ agreement regarding the sale, for total gross proceeds of $1.5 million. Mr. Mott joined the Company’s Board of Directors later in the same month.managing directordefendants’ time to respond to the complaints in the Meyer and Yung Actions pending submission of Cadila. a joint proposed briefing schedule on any anticipated motion practice in those cases by March 25, 2022. On February 4, 2022, the Court entered an order consolidating the Meyer and Yung Actions. The financial impact of the claims is not estimable.Cadila formed a joint venture, CPLBCDMOs supplying the Company with production capabilities, and with vendors for preclinical studies, clinical trials, and other goods or services. A number of these arrangements are within the scope of lease accounting (see Note 7). A subsidiaryCertain agreements provide for termination rights subject to termination fees. Under such agreements, the Company is contractually obligated to make payments to vendors, mainly to reimburse them for their estimated unrecoverable expenses. The exact amount of Cadila owned 2.5 million sharessuch obligations are dependent on the timing of termination, and the terms of the Company’s outstanding common stockrelevant agreement, and cannot be reasonably estimated. As of December 31, 2021, most of these agreements were active ongoing arrangements and the Company expects to receive value from these arrangements in the future. The Company recognizes fees related to obligations for terminated contracts where such fees are reasonably estimable. The Company did not accrue obligations that were not reasonably estimable.2017. The Company and Cadila also entered into master services agreements, pursuant to which Cadila or CPLB may perform certain research, development and manufacturing services for the Company. For 2017, 2016 and 2015,2020.incurred $0.1sold 0.4 million $0.4shares of its common stock resulting in net proceeds of $34.7 million and $2.2 million, respectively, in expenses under the master services agreements. No amountJune 2021 Sales Agreement, with a remaining balance of $464.9 million available thereafter.owedmodified to CPLBinclude a Phase 3 efficacy study with respect to 2019n-CoV-301 in adolescents with a booster component and accordingly, the performance period under the master services agreement atProject Agreement was extended to December 31, 2017; however, the Company owed $0.1 million at December 31, 2016.In July 2017, the Company entered into a consulting agreement with Dr. Sarah Frech, the spouse of Mr. Stanley C. Erck, the Company’s President, Chief Executive Officer and Interim Chief Financial Officer. Dr. Frech is a seasoned biotechnology executive with significant experience managing multiple clinical programs. Under the agreement, Dr. Frech provides clinical development and operations services related to the Company’s Phase 3 clinical trial of its RSV F Vaccine for infants via maternal immunization and other professional services. The agreement is scheduled to terminate in July 2018. In 2017, the Company incurred $0.2 million in consulting expenses under the agreement. The amount due and unpaid for services performed under the agreement at December 31, 2017 was less than $0.1 million.
2023.F-24Note 16 – Quarterly Financial Information (Unaudited)The Company’s unaudited quarterly information for the years ended December 31, 2017 and 2016 is as follows: Quarter Ended March 31 June 30 September 30 December 31 (in thousands, except per share data) 2017: Revenue $ 5,680 $ 6,732 $ 8,352 $ 10,412 Net loss $ (43,854 ) $ (44,465 ) $ (44,607 ) $ ) Net loss per share $ (0.16 ) $ (0.16 ) $ (0.15 ) $ (0.16 ) Quarter Ended March 31 June 30 September 30 December 31 (in thousands, except per share data) 2016: Revenue $ 4,218 $ 2,505 $ 3,231 $ 5,399 Net loss $ (77,252 ) $ (79,351 ) $ (66,254 ) $ (57,109 ) Net loss per share $ (0.29 ) $ (0.29 ) $ (0.24 ) $ (0.21 ) The net loss per share was calculated for each three-month period on a stand-alone basis. As a result, the sum of the net loss per share for the four quarters may not equal the net loss per share for the respective twelve-month period.F-25