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Item 2. Management’s Discussion and Analysis

2021-05-10 compared with 2020-11-10 · 349 added, 391 removed, 72 unchanged (91% of the section changed)

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the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies;

the development of our

preclinical product candidates;

the development of our preclinical product candidates;

the conduct, timing and potential results from clinical trials and other preclinical studies;

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the expected timing and content of regulatory actions;

funding from Operation Warp Speed (“OWS”), the U.S.

funding from the U.S.

government partnership formerly known as Operation Warp Speed (“OWS”), the U.S.

Department of Defense (“DoD”) and the Coalition for Epidemic Preparedness Innovations (“CEPI”), and payments from the Bill & Melinda Gates Foundation (“BMGF”);

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and other matters referenced herein.

Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” or “assume,” the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” "aim," or “assume,” the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Forward-looking statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements.

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In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

We are a late-stage biotechnology company promoting improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs.

Our vaccine candidates, including both our coronavirus vaccine candidate, NVX-CoV2373, and our influenza vaccine candidate, NanoFlu, are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis.

We believe that our protein-based candidates elicit differentiated immune responses that may be more efficacious than naturally occurring immunity or other, more traditional vaccine approaches.

Our technology may be used to target a variety of infectious diseases.

We are also developing proprietary immune stimulating saponin-based adjuvants at Novavax AB, our wholly owned Swedish subsidiary.

Our lead adjuvant, Matrix-M™, has been shown to enhance immune responses and has been well-tolerated in multiple clinical trials.

Product Pipeline

Current Development Stage

● NVX-CoV2373 (1)(2)

● Middle East Respiratory Syndrome (“MERS”)

● Severe Acute Respiratory Syndrome (“SARS”)

Seasonal Influenza

● NanoFlu (Older Adults) (1)

Respiratory Syncytial Virus (“RSV”)

● ResVax (4) (Infants via Maternal Immunization)

● Older Adults (1)

Combination Vaccines

● NanoFlu/NVX-CoV2373 (1)

● NanoFlu/RSV (1)

Ebola Virus (“EBOV”) (1)

(1) Includes Matrix-M adjuvant

Novavax, Inc., together with our wholly-owned subsidiaries, Novavax AB and Novavax CZ, is a biotechnology company promoting improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs.

Our vaccine candidates, including both our coronavirus vaccine candidate (“NVX-CoV2373”) and our seasonal quadrivalent influenza vaccine candidate (“NanoFlu”), are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis.

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.

To date, we have formulated many of the vaccine candidates in our pipeline with our Matrix-M adjuvant, including NVX-CoV2373 and NanoFlu.

Our Matrix-M adjuvant, which enables dose-sparing, has been shown to enhance functional immune responses and has been well-tolerated in multiple clinical trials to date.

Near-term Clinical Development Pipeline

Our development pipeline encompasses vaccine candidates addressing therapeutic areas including coronavirus, seasonal influenza, respiratory syncytial virus (“RSV”) and other emerging infectious diseases.

At the forefront of our pipeline is NVX-CoV2373.

We have also advanced our NanoFlu program through a Phase 3 clinical trial, demonstrating positive top-line results and achieving statistical significance in key secondary endpoints.

We continue to evaluate the viability of certain

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combination vaccines, including combinations of our NanoFlu, NVX-CoV2373 and respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”).

As the world continues to address the global COVID-19 pandemic, we remain focused today on bringing our NVX-CoV2373 vaccine candidate to market following global regulatory approvals.

Through the initiation of crossover and booster studies in our clinical trials, as well as development of our variant strain vaccine candidates, we continue to collect data to optimize vaccine performance.

We expect these continued clinical insights will enable us to evolve our booster strategy to most effectively address the evolving COVID-19 pandemic.

In addition to our COVID-19 clinical development, NanoFlu continues to be a priority for our team, especially as it relates to a potential combined NanoFlu / NVX-CoV2373 vaccine.

Although NVX-CoV2373 and NanoFlu are our near-term priorities, we remain optimistic that the additional programs in our pipeline, including our vaccine candidates for RSV and other emerging infectious diseases, present viable opportunities for future development.

A summary and status of our near-term clinical and preclinical development program follows:

(1) Supported by funding from OWS, DoD, CEPI and BMGF

(3) Ongoing U.S.

Phase 2 and South Africa Phase 2b;

initiated UK Phase 3 in September 2020;

initiation of U.S.

Phase 3 expected by the end of November 2020

(4) Supported by a grant from BMGF

A summary and status of these vaccine programs follows:

Coronaviruses (“CoV”), so named for their “crown-like” appearance, are a large family of viruses, some of which are believed to have spread from animals to humans.

These viruses cause human diseases such as MERS and SARS, and COVID-19, the disease resulting from the SARS CoV-2 coronavirus.

COVID-19 first emerged in late 2019 in China, and, as of March 2020, the World Health Organization declared it a global pandemic.

No vaccines proven to prevent COVID-19 have been approved for sale in the U.S., United Kingdom (“UK”), Japan, or European Union, although a range of vaccine candidates are under development.

We have successfully produced NVX-CoV2373, designed to provide protection against SARS-CoV-2.

We engineered NVX-CoV2373 from the genetic sequence of SARS-CoV-2 using our recombinant nanoparticle technology to generate the antigen derived from the coronavirus spike (S) protein.

NVX-CoV2373 includes our proprietary Matrix-M adjuvant.

Clinical Development

In October 2020, we announced we expect to begin a Phase 3 clinical trial in the U.S.

and Mexico by the end of November 2020.

This pivotal Phase 3 clinical trial is being conducted with support from the U.S.

Government through OWS.

The trial is expected to enroll up to 30,000 participants in the U.S.

and Mexico, with proportional representation among diverse populations most vulnerable to COVID-19 distributed across race/ethnicity, age and those living with co-morbidities.

In November 2020, we announced that the U.S.

Food and Drug Administration’s (“FDA”) granted NVX-CoV2373 Fast Track designation, which 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.

Specifically, Fast Track designation facilitates meetings to discuss

all aspects of development to support licensure and provides the opportunity to submit sections of a U.S.

biologics license application (“BLA”) on a rolling basis as data become available.

This permits the FDA to review modules of the BLA as they are received instead of waiting for the entire BLA submission.

In September 2020, we initiated our first Phase 3 study in the UK, in partnership with the UK Government’s Vaccines Taskforce.

The trial is a randomized, placebo-controlled, observer-blinded study to evaluate the efficacy, safety and immunogenicity of NVX-CoV2373 in subjects aged 18 to 84 years.

In October 2020, we expanded enrollment from 10,000 to 15,000 volunteers, some of whom have been recruited through the National Health Service Vaccine Registry.

The increased enrollment is likely to facilitate assessment of safety and efficacy in a shorter time period than originally anticipated.

Half of the trial participants will receive two intramuscular injections of NVX-CoV2373 comprising 5 micrograms of antigen with 50 micrograms of Matrix-M, administered 21 days apart, while the other half of the trial participants will receive placebo.

The trial is designed to enroll at least 25 percent of participants over the age of 65 as well as to prioritize groups that are most affected by COVID-19.

Additionally, up to 400 participants will also receive a licensed seasonal influenza vaccine as part of a co-administration sub-study.

The primary endpoint is first occurrence of PCR-confirmed symptomatic COVID-19 with onset at least seven days after the second study vaccination in volunteers who have not been previously infected with SARS-CoV-2.

The primary efficacy analysis will be an event-driven analysis based on the number of participants with symptomatic or moderate/severe COVID-19 disease.

The trial protocol calls for unblinding of data once 152 participants have achieved mild, moderate or severe endpoints.

Two interim analysis are planned once 66 and 110 endpoints have occurred.

As of November 9, 2020, we have enrolled over 9,000 participants in this trial.

We expect this trial to be fully enrolled by the end of November 2020, and dependent on the overall COVID-19 attack rate, interim data in this event-driven trial are expected as soon as early first quarter 2021.

These data are expected to serve as the basis for global licensure.

In August 2020, we initiated a Phase 2b clinical trial in South Africa to evaluate the efficacy of NVX-CoV2373.

The trial includes two cohorts.

In October 2020, we expanded enrollment from 2,665 to 4,404.

One cohort evaluates efficacy, safety and immunogenicity in approximately 4,164 healthy adults.

The second cohort evaluates safety and immunogenicity in approximately 240 medically stable, HIV-positive adults.

This allows for evaluation of the vaccine across a diverse, representative study population.

The Phase 2b clinical trial is supported in part by a $15.0 million grant from the BMGF.

In August 2020, we announced positive preliminary immunogenicity and safety results from our Phase 1 portion of the Phase 1/2 clinical trial of NVX-CoV2373 initiated in May 2020.

The Phase 1 portion was a randomized, observer-blinded, placebo-controlled trial in 131 participants at two sites in Australia.

The trial was designed to evaluate the immunogenicity and safety of NVX-CoV2373, both adjuvanted with Matrix-M and unadjuvanted.

The protocol’s two-dose trial regimen assessed two dose sizes (5 and 25 micrograms) with Matrix-M and without.

Results from this trial showed that NVX-CoV2373 was generally well-tolerated, elicited robust antibody responses numerically superior to that seen in human convalescent sera and induced robust polyfunctional CD4 + T cell responses.

In September 2020, the Phase 1 portion clinical results were published in The New England Journal of Medicine.

In August 2020, we initiated the Phase 2 portion of the Phase 1/2 clinical trial.

The Phase 2 portion is designed to evaluate the safety and immunogenicity of NVX-CoV2373 with Matrix-M in participants aged 18 to 84 years.

The secondary objectives of the Phase 2 portion include preliminary evaluation of efficacy.

The Phase 2 portion will assess two dose levels (5 and 25 micrograms), each with 50 micrograms of Matrix-M.

We completed enrollment of 1,288 healthy volunteers in October 2020, with approximately 50 percent of participants 60 years of age and older, at up to 40 sites in the U.S.

and Australia.

In late October 2020, we reported favorable preliminary reactogenicity data from the Phase 2 portion of the trial during the Centers for Disease Control and Prevention Advisory Committee on Immunization Practices meeting.

In July 2020, we were selected to participate in OWS, a U.S.

government sponsored program working to accelerate the development, manufacturing and distribution of COVID-19 vaccines, therapeutics and diagnostics.

Through a Base Agreement and a Project Agreement (together, the “OWS Agreement”) entered into with Advanced Technology International, Inc., the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with OWS, we are entitled to receive funding up to $1.6 billion to support certain activities related to the development of NVX-CoV2373, and the manufacture and delivery of 100 million doses of NVX-CoV2373 to the U.S.

government as early as late 2020.

We expect this funding will assist in rapidly developing our large-scale manufacturing capacity and transitioning into ongoing production, including the capability to stockpile and distribute large quantities of NVX-CoV2373 for use in clinical trials and potentially for commercial sale, if licensed.

We anticipate

that the OWS Agreement will fund the late-stage clinical studies necessary to determine the safety and efficacy of NVX-CoV2373, including a pivotal Phase 3 clinical trial with up to 30,000 subjects expected to begin by the end of November 2020.

Funding under the OWS Agreement is also expected to support our plans to file submissions for licensure with the FDA.

In June 2020, we were awarded a contract by the U.S.

DoD (the “DoD Contract”) under which we are entitled to receive funding of up to $60.0 million for the manufacturing of NVX-CoV2373.

In May 2020, we signed a restated funding agreement which was modified in November 2020, with CEPI (the “CEPI Funding Agreement”), under which we are entitled to receive funding of up to $399.5 million, in addition to the $3.9 million of funding CEPI provided in March 2020, to be used by us for the development of NVX-CoV2373.

Pursuant to the CEPI Funding Agreement, if approved, a portion of the NVX-CoV2373 supply produced by us, other than vaccine manufactured under the OWS Agreement, is expected to be procured and allocated through the COVAX Facility component of the Access to COVID-19 Tools (ACT) Accelerator, an international equitable vaccine purchasing initiative launched by the World Health Organization, Gavi the Vaccine Alliance, CEPI and other global non-governmental organizations and governmental leaders in 2020.

Manufacturing and Supply

To date, we have increased our projected global manufacturing capacity for NVX-CoV2373 to over two billion annualized doses when we are at full capacity, which we expect to occur in mid-2021.

The antigen component of NVX-CoV2373 is being manufactured at Novavax CZ and at the following partnered manufacturing sites:

● Biofabri S.L.

● FUJIFILM Diosynth Biotechnologies (“FDB”) in North Carolina and Texas in the United States

● FDB in the UK

● Serum Institute of India Private Limited (“SIIPL”) in India

● SK Bioscience Co., Ltd.

(“SK bioscience”) in the Republic of Korea

● Takeda Pharmaceutical Company Limited (“Takeda”) in Japan

Matrix-M adjuvant is being manufactured at Novavax AB and the following partnered manufacturing sites:

● AGC Biologics in the United States and Denmark

● PolyPeptide Group (will manufacture two key intermediaries used in Matrix-M) in the U.S.

In November 2020, we signed a Heads of Terms with the Australian Federal Government to supply up to 40 million doses of NVX-CoV2373 beginning as early as the first half of 2021, subject to the successful completion of the Phase 3 clinical trial program and approval of NVX-CoV2373 by the Therapeutic Goods Administration.

In October 2020, we entered into a SARS-CoV-2 vaccine supply agreement with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the UK (the “Authority”), for the purchase of up to 60 million doses of NVX-CoV2373, plus such additional orders as the Authority may make from time to time.

We agreed to continue to conduct a UK-based Phase 3 clinical trial of NVX-CoV2373 to assess the efficacy of NVX-CoV2373 in the UK population, establish a dedicated supply chain for NVX-CoV2373 in the UK and seek regulatory approval for the NVX-CoV2373 in the UK.

FDB’s UK site is expected to produce up to 180 million doses annually.

We expect to supply up to 60 million doses of NVX-CoV2373 to the UK beginning as early as the first quarter of 2021.

Excess supply of antigen manufactured at the FDB’s site in Billingham, Stockton-on-Tees may be available for us to sell to additional markets outside the UK.

In August 2020, we reached an agreement in principle with the Government of Canada to supply up to 76 million doses of NVX-CoV2373.

We and Canada expect to finalize an advance purchase agreement under which we will supply

doses of NVX-CoV2373 to Canada beginning as early as the second quarter of 2021.

This purchase arrangement will be subject to licensure of NVX-CoV2373 by Health Canada.

In August 2020, we entered into a development and supply agreement with SK bioscience for the antigen component of NVX-CoV2373 for supply to global markets including the COVAX Facility.

In addition, we and SK bioscience signed a letter of intent with the Republic of Korea’s Ministry of Health and Welfare to work toward broad and equitable access to NVX-CoV2373 for the global market as well as to make the vaccine available in South Korea.

Under the terms of the agreement, SK bioscience will manufacture NVX-CoV2373 for use in the final drug product globally during the COVID-19 pandemic.

In August 2020, we announced a partnership with Takeda for the exclusive development, manufacturing and commercialization of NVX-CoV2373 in Japan.

Takeda will receive funding from the Government of Japan’s Ministry of Health, Labour and Welfare to support the technology transfer, establishment of infrastructure and scale-up of manufacturing.

We anticipate that Takeda has a manufacturing capacity of over 250 million doses per year.

We will be entitled to receive payments based on the achievement of certain development and commercial milestones, as well as a portion of proceeds from vaccine sales.

In July 2020, we announced a manufacturing partnership 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.

Also in July 2020, we entered into a supply and license agreement with SIIPL, as amended by the parties in September 2020, under which we granted exclusive and non-exclusive licenses to SIIPL for the development, co-formulation, filling and finishing, registration and commercialization by SIIPL of NVX-CoV2373.

SIIPL has agreed to purchase Matrix-M adjuvant from us and we have granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373 under the terms of the agreement.

We will equally split with SIIPL the revenue from SIIPL’s sale of NVX-CoV2373 in its licensed territory, net of agreed costs.

We granted to SIIPL (i) an exclusive license in India during the agreement, and (ii) a non-exclusive license (a) during the “Pandemic Period” (as declared by the World Health Organization), in all countries other than specified countries designated by the World Bank as upper-middle or high-income countries, with respect to which we retain rights, and (b) after the Pandemic Period, in only those countries designated as low or middle-income by the World Bank.

Following the Pandemic Period, we may notify SIIPL of any bona fide opportunities for us to license NVX-CoV2373 to a third party in such low and middle-income countries and SIIPL would have an opportunity to match or improve such third party terms, failing which, we would have the discretion to remove one or more non-exclusive countries from SIIPL’s license.

We anticipate SIIPL to manufacture approximately one billion doses of NVX-CoV2373 in 2021.

Historically, we developed a vaccine candidate against MERS, a novel coronavirus first identified in 2012, and a vaccine candidate against SARS in 2005.

In 2012, within weeks of obtaining the sequence of the circulating MERS strain, we successfully produced a vaccine candidate designed to provide protection.

Our MERS candidate was based on the major surface spike protein, which we had previously identified as the antigen of choice in our work with our SARS vaccine candidate.

In 2014, in collaboration with the University of Maryland, School of Medicine, we published results that showed our MERS and SARS vaccine candidates both blocked infection in laboratory studies.

Although not in active development, our MERS and SARS vaccine candidates remain viable opportunities to potentially develop independently or in conjunction with other coronavirus development activities.

(2) Ongoing PREVENT-19, a Phase 3 clinical trial in U.S.

Ongoing Phase 3 in UK;

Ongoing Phase 2b in South Africa

(3) Reflects malaria vaccine candidate ("R21"), created by the University of Oxford and formulated with Matrix-M adjuvant;

Ongoing Phase 3 clinical trial in Africa;

R21 is licensed to Serum Institute of India Private Limited ("SIIPL");

Novavax will have commercial rights to sell and distribute R21 in certain countries, primarily in travelers' and military vaccine markets

Matrix-M Adjuvant

Our proprietary Matrix-M adjuvant has demonstrated potent and well-tolerated efficacy by stimulating the entry of antigen presenting cells (APCs) into the injection site and enhancing antigen presentation in local lymph nodes, which in turn activates T cell, B cell, and APC populations, thereby boosting immune response.

Our Matrix-M adjuvant has been shown to increase neutralizing antibodies and induces long-lasting memory B cells, which enhances B-cell immunity and recruits and increases the frequency of CD4+ and CD8+ T cells to enhance T cell immunity in preclinical models.

The potent immune-stimulating mechanism of action is designed to enable a lower dose of antigen required to achieve the desired immune response,

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ultimately contributing to increased supply and manufacturing capacity.

These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile.

NVX-CoV2373 Clinical Development

We have evaluated NVX-CoV2373 in various preclinical and clinical trials, including two Phase 3 trials, one Phase 2b trial, and one Phase 1/2 trial, announcing a number of significant developments in moving our program forward in the first quarter of 2021.

Through our clinical development program to date, we have collected data that indicates a reassuring safety profile and high levels of efficacy for NVX-CoV2373, as well as confirmed the use of a 5 microgram dose of NVX-CoV2373 with Matrix-M adjuvant for our late-stage development.

A summary and status of our clinical development of NVX-CoV2373 follows:

PREVENT-19 Pediatric Expansion

In April 2021, we initiated a pediatric expansion of our PREVENT-19 pivotal Phase 3 U.S.

and Mexico trial.

This expansion of PREVENT-19 will evaluate the efficacy, safety and immunogenicity of NVX-CoV2373 in up to 3,000 adolescent participants aged 12 to 17 across up to 75 sites in the U.S.

Participants will randomly receive either the vaccine candidate or placebo in two doses, administered 21 days apart.

Two-thirds of participants will receive intramuscular injections of the vaccine and one-third will receive placebo.

A blinded crossover is planned to take place six months after the initial set of vaccinations to ensure that all trial participants receive active vaccine.

Participants will also be monitored for safety for up to two years following the final dose.

PREVENT-19 Phase 3 U.S.

In February 2021, we completed enrollment of PREVENT-19, which we initiated in December 2020.

PREVENT-19 is a randomized, placebo-controlled, observer-blinded trial to evaluate the efficacy, safety and immunogenicity of NVX-CoV2373.

The trial enrolled approximately 30,000 participants aged 18 years or older, notably representing a broad demographic subset.

The trial enrolled participants who are most impacted by COVID-19, including individuals with medical co-morbidities.

The participant trial population is composed of the following:

20% Latin American, 12% African American, 6% Native American, 5% Asian American, and 13% older adults aged 65 years and older.

The trial design has been harmonized to align with other Phase 3 trials conducted under the auspices of OWS, including the use of a single external independent Data and Safety Monitoring Board to evaluate safety and conduct an unblinded review when predetermined interim analysis events are reached.

The trial’s primary endpoint is the prevention of PCR-confirmed, symptomatic COVID-19.

The primary and secondary endpoints will be assessed at least seven days after the second study vaccination in participants who have not been previously infected with SARS-CoV-2.

Two-thirds of the participants were assigned to randomly receive two intramuscular injections of NVX-CoV2373 comprising 5 micrograms of antigen with 50 micrograms of Matrix-M adjuvant, administered 21 days apart, while one-third of the trial participants will receive placebo.

The primary efficacy analysis is event-driven, based on the number of participants with symptomatic mild, moderate or severe COVID-19 disease.

Participants will be followed for 24 months following the second injection.

We expect to collect adequate cases in order to conduct a final analysis in the second quarter of 2021.

PREVENT-19 is being conducted with support from OWS, including a $1.75 billion agreement.

Phase 3 United Kingdom (“UK”)

In March 2021, we announced the results from our final analysis of the Phase 3 UK trial, which we initiated in September 2020.

In the final analysis, NVX-CoV2373 demonstrated 89.7% overall efficacy, 96.4% efficacy against the original COVID-19 strain and 86.3% efficacy against the B.1.1.7 variant strain, first identified in the UK.

Our Phase 3 trial in the UK was in partnership with the UK Government’s Vaccines Taskforce.

The trial was a randomized, placebo-controlled, observer-blinded trial to evaluate the efficacy, safety and immunogenicity of NVX-CoV2373 in over 15,000 enrolled participants aged 18 to 84 years, including 27% of participants over the age of 65.

Half of the trial participants received two intramuscular injections of NVX‑CoV2373 comprising 5 micrograms of antigen with 50 micrograms of Matrix‑M adjuvant, administered 21 days apart, while the other half of the trial participants received placebo.

The primary endpoint was first occurrence of PCR-confirmed symptomatic COVID-19 with onset at least seven days after the second study vaccination in participants who have not been previously infected with SARS-CoV-2.

The final analysis from this trial expanded upon an interim analysis announced in January 2021.

Fourteen days after dose one, vaccine efficacy was 83.4%.

There were no cases of severe disease, including all hospitalization and death, in the vaccine group.

In participants 65 years of age and older, 10 cases of COVID-19 were observed, with 90% of those cases occurring in the placebo group, leading to a vaccine efficacy of 88.9%.

Over 40% of the trial participants had medical comorbidities that placed them at high risk for severe COVID disease (e.g.

hypertension,

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cardiovascular disease, obesity, diabetes) and the vaccine efficacy was 90.9% in this group.

The final analysis also showed that NVX-CoV2373 is well-tolerated, with low levels of severe, serious and medically attended adverse events ("SAEs") at day 35, balanced between vaccine and placebo groups.

Phase 2b South Africa

In March 2021, we announced the complete analysis of our Phase 2b South Africa trial, which we initiated in August 2020.

In the complete analysis, NVX-CoV2373 demonstrated 55.4% efficacy for the prevention of mild, moderate and severe COVID-19 disease in the 95% of the trial population that was HIV-negative.

Overall efficacy, including both HIV-positive and HIV-negative participants, was 48.6% predominantly against the B.1.351 escape variant, with the complete analysis showing that NVX-CoV2373 achieved its primary efficacy endpoint in the overall trial population.

During the efficacy analysis, the B.1.351 variant circulating in South Africa accounted for approximately 93% of sequenced cases in our Phase 2b trial.

The trial enrolled over 4,400 participants.

Half of the trial participants received two intramuscular injections of NVX-CoV2373 comprising 5 micrograms of antigen with 50 micrograms of Matrix-M adjuvant, administered 21 days apart, while the other half of the trial participants received placebo.

The complete analysis from this trial expanded upon an interim analysis announced in January 2021.

The complete analysis showed that vaccine-induced protection began 14 days after dose one, although increased efficacy was observed seven days after dose two, the primary endpoint for the trial.

There were no cases of severe disease in the NVX-CoV2373 group and all hospitalization and death occurred in the placebo group.

This trial also showed that the vaccine is well-tolerated, with low levels of SAEs through day 35, balanced between vaccine and placebo groups.

While an interim analysis announced in January 2021 reported that prior infection with the original COVID-19 strain may not completely protect against subsequent infection by the variant predominantly circulating in South Africa, the complete analysis indicated that there may be a late protective effect of prior exposure with the original COVID-19 strain.

In placebo recipients, at 90 days the illness rate was 8.0% in baseline seronegative participants, with a rate of 5.9% in baseline seropositive participants.

In May 2021, results from the Phase 2b South Africa trial were published in the New England Journal of Medicine .

CEPI funded the manufacturing of doses of NVX-CoV2373 for this Phase 2b clinical trial, which was also supported in part by a $15.0 million grant from BMGF.

NVX-CoV2373 Booster and Crossover Studies

Novavax-Led Booster and Crossover Studies

As of May 2021, we completed the administration of six-month boost doses in the Phase 2 portion of our U.S.

and Australia Phase 1/2 trial, which we began in March 2021.

In this booster study, select participants in the 5 microgram dose cohort from the Phase 2 portion of the Phase 1/2 trial received booster doses at six months to examine the functional immune response of our vaccine candidate.

Two treatment groups were boosted:

a group that previously received only one dose (Day 0) and a group that previously received two doses (Day 0 and Day 21).

Immunology results from this booster study are expected in the third quarter of 2021.

In April 2021, we announced the initiation of crossover arms in both our PREVENT-19 and UK Phase 3 trials.

Under the updated clinical trial protocols, participants will be offered the opportunity to receive an additional round of injections.

Participants who elect to do so will receive an additional two-dose regimen of either vaccine for those who originally received placebo or placebo for those who originally received vaccine.

Participants in these trials will remain blinded to their courses of treatment to preserve the ability to assess efficacy in the trials and will continue to be followed to monitor the safety and durability of protection of the vaccine.

In April 2021, we announced the initiation of crossover arms in our Phase 2b South Africa trial.

Under the updated clinical trial protocol, participants will receive either active vaccine for those who initially received placebo or a booster dose of active vaccine for those who initially received active vaccine.

Participants in the trial will remain blinded to their courses of treatment to preserve the ability to assess efficacy in the trial and will continue to be followed to monitor the safety and durability of protection of the vaccine.

Comparing COVID-19 Vaccine Schedule Combinations - Stage 2 ("Com-COV2")

In April 2021, we announced our participation in Com-COV2, a newly expanded investigator-initiated Phase 2 clinical trial conducted by the University of Oxford and supported by the UK Vaccines Taskforce.

NVX-CoV2373 is one of four COVID-19 vaccines that will be studied to evaluate the potential for combined regimens that mix vaccines from different manufacturers to achieve immune protection against COVID-19.

The trial will enroll 1,050 adults 50 years of age or older who received their first vaccination during the prior 8-12 weeks.

Participants will receive one of four different vaccines as a second dose, 350 of whom will be administered NVX-CoV2373.

The trial will compare the immune system responses from those who

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receive a heterologous regimen to those who receive a homologous regimen.

Participants in this non-inferiority study will be followed for reactogenicity (safety) and immune responses.

The UK Medicines Healthcare products Regulatory Agency (“MHRA”) and Joint Committee on Vaccination and Immunisation will formally assess the safety and efficacy of any new vaccination regiment before it is made available to the public.

Top-line data from this clinical trial are expected in the third quarter of 2021.

NVX-CoV2373 Clinical Development Conducted by Partners

Phase 2/3 India

In March 2021, SIIPL initiated a Phase 2/3 clinical trial of NVX-CoV2373 in India.

The initial cohort was fully enrolled in April 2021 and the total study includes approximately 1,600 participants aged 18 to 65 years.

Phase 1/2 Japan

In March 2021, Takeda Pharmaceutical Company Limited (“Takeda”) completed enrollment of a Phase 1/2 clinical trial of NVX-CoV2373 in Japan.

This placebo-controlled trial will evaluate the immunogenicity and safety of NVX-CoV2373 in 200 participants aged 20 years and older.

Variant Strain (Monovalent and/or Bivalent) Vaccine Development

Our nanoparticle vaccine technology is purpose-built to rapidly address evolving infectious disease threats.

In January 2021, we initiated development of new constructs against the emerging strains of COVID-19, and in February 2021, we selected variant strain vaccines for preclinical evaluation.

In May 2021, we announced data from a preclinical study of our B.1.351 variant strain vaccine candidate in non-human primates ("NHPs").

In this preclinical study, NHPs originally received a two-dose regimen of NVX-CoV2373.

A year after initial vaccination, NHPs received two doses of our B.1.351 variant strain vaccine candidate, with Matrix-M adjuvant and administered 21 days apart.

Within seven days of receiving boost doses, NHPs exhibited a strong antibody response, as well as a strong functional immune response.

We are currently conducting preclinical studies on multiple variant strain vaccine candidates.

We expect to initiate clinical evaluation of one or more of our candidates.

NVX-CoV2373 Regulatory and Licensure

As of May 2021, we continue to work to complete various CMC requirements, which ensure that our manufacturing processes are in accordance with regulatory standards (see further discussion of our manufacturing activities below under NVX-CoV2373 Manufacturing and Supply).

We expect to complete multiple filings for authorization in the third quarter of 2021.

Below is a summary and status of our regulatory processes.

In February 2021, we announced the initiation of a rolling review processes with non-clinical data to the MHRA and the European Medicines Agency (“EMA”).

As a part of the rolling reviews, we continue to submit information, including clinical and manufacturing data.

We aim to file for authorization with these regulatory authorities in the third quarter of 2021.

Through the date of filing this Form 10-Q, we continue to be in communication with the FDA through submissions to our open investigational new drug application (“IND”) and discussions on various aspects of the program required to support the regulatory approval process.

We plan to file submissions for Emergency Use Authorization (“EUA”) with the FDA and aim to complete our EUA filing in the third quarter of 2021.

NVX-CoV2373 has previously been granted Fast Track designation by the FDA, which 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.

We have also initiated the rolling review process with submissions to several other regulatory agencies worldwide, including Health Canada, Australian Therapeutic Goods Administration (“TGA”) and New Zealand Medsafe.

Additionally, we anticipate starting rolling submissions to the World Health Organization for Emergency Use Listing.

As part of the rolling reviews, we will continue to submit additional information, including clinical and manufacturing data as they become available.

These rolling reviews are initiated to expedite the assessment of vaccines, particularly during public health emergencies.

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In addition to these rolling review processes, in April 2021, SK bioscience Ltd.

("SK bioscience") initiated the regulatory submission process in collaboration with Novavax to the Republic of Korea's Ministry of Food and Drug Safety ("MFDS") for authorization of NVX-CoV2373.

COVID-19 Vaccine Funding

We have secured critical funding throughout 2020 and into 2021 that fueled the development of NVX-CoV2373.

Through the date of filing this Form 10-Q, funding for NVX-CoV2373 encompasses over $2 billion from sources including BMGF, CEPI, the DoD, and OWS.

In April 2021, our Base Agreement and a Project Agreement (together, the “OWS Agreement”) entered into with Advanced Technology International, Inc., the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with OWS, was amended to fully fund the agreement up to $1.75 billion to support certain activities related to the development of NVX-CoV2373.

This includes the manufacture and delivery of 100 million doses of NVX-CoV2373 to the U.S.

The OWS Agreement will fund the late-stage clinical studies necessary to determine the safety and efficacy of NVX-CoV2373, including PREVENT-19.

Funding under the OWS Agreement is also expected to support our plans to file submissions for EUA and licensure with the FDA.

A summary and status of our historical COVID-19 funding developments follows:

NVX-CoV2373 Manufacturing and Supply

We have established a global manufacturing and supply chain to support the commercialization of NVX-CoV2373.

With significant progress made throughout 2020 and through the first quarter of 2021, our global supply chain now spans over 10 countries and includes Novavax owned facilities in the Czech Republic and Sweden, as well as partnerships with contract manufacturing organizations around the world.

In the first quarter of 2021, we took additional steps to expand our global supply chain and ready our company for commercialization.

These developments included securing additional manufacturing capacity for NVX-CoV2373, as well as furthering existing collaborations with manufacturing partners globally.

During the first quarter of 2021, we experienced a shortage of raw materials, which has impacted the timing by which we expect to realize our anticipated total manufacturing capacity.

In the quarter, we also continued to advance CMC activities.

These include ongoing analytical testing and product characterization, as well as the qualification and validation of assays

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needed to demonstrate process consistency across our network of manufacturing facilities.

Completion of these CMC activities and final determination of doses available for distribution upon potential regulatory approvals is dependent on availability of critical manufacturing supplies, results of analytical testing, and the ultimate efficiency of our manufacturing processes at each facility.

Considering the above, we expect our global manufacturing capacity of NVX-CoV2373 to be approximately 100 million doses per month by the end of the third quarter of 2021.

We anticipate the remainder of our manufacturing capacity will come online in the fourth quarter of 2021, which we expect will support total global manufacturing capacity of approximately 150 million doses per month.

Of this anticipated capacity, approximately one billion annualized doses will be manufactured by SIIPL.

A summary and status of key manufacturing and supply developments entered into or amended during the first quarter of 2021 follows:

In March 2021, we announced an agreement in principle with GSK and the UK Government Vaccines Taskforce to support the manufacturing of up to 60 million doses of NVX-CoV2373 for use in the UK.

Under the agreement, GSK will provide fill and finish manufacturing capacity at its Barnard Castle Facility in the North East of England beginning as early as May 2021.

We expect to negotiate a final agreement with GSK to include additional terms and conditions.

In February 2021, we entered into a non-exclusive manufacturing agreement with Jubilant HollisterStier.

Under the terms of the agreement, Jubilant HollisterStier will provide fill and finish manufacturing services for the production of NVX-CoV2373.

Jubilant HollisterStier’s facility in Spokane, Washington has begun production activities of NVX-CoV2373 final drug product intended for commercial distribution in the U.S.

In February 2021, we reached a Memorandum of Understanding ("MOU") with the Canadian government to produce NVX-CoV2373 in Canada.

We plan to produce NVX-CoV2373 at the National Research Council’s Biologics Manufacturing Centre in Montreal once both the vaccine candidate and the facility receive Health Canada approvals.

The MOU also includes a broader intention for the Government of Canada and us to work together to increase our Canadian presence.

We will explore a range of partnership opportunities for us to expand vaccine production in Canada, including partnerships with Canadian contract manufacturers.

We recently initiated the rolling submission process for regulatory approval to Health Canada.

In February 2021, we announced a collaboration and license agreement with SK bioscience, which expanded upon our development and supply agreement entered into in August 2020.

Under these agreements, SK bioscience has been granted an exclusive license to develop, manufacture and commercialize NVX-CoV2373 in the Republic of Korea.

Concurrently, SK bioscience finalized an advance purchase agreement with the Republic of Korea to supply 40 million doses of NVX-CoV2373 beginning in 2021.

SK bioscience will expand its capacity to manufacture the antigen component of NVX-CoV2373 for use in the final drug product globally, including product distributed by the COVAX Facility.

SK bioscience will also purchase a certain quantity of NVX-CoV2373 directly from us, subject to the approval by relevant regulatory authority, and sufficient doses of our Matrix-M adjuvant to manufacture the remainder of the 40 million doses of NVX-CoV2373 SK bioscience expects to sell to the Korean government.

SK bioscience will pay a tiered royalty in the low to middle double-digit range on the sale of NVX-CoV2373 in the Republic of Korea.

In February 2021, we finalized an exclusive license agreement with Takeda for the development, manufacturing and commercialization of NVX-CoV2373 in Japan.

This agreement followed a collaboration agreement with Takeda announced in August 2020.

We will transfer technology and supply our Matrix-M adjuvant to Takeda, who will manufacture the vaccine

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Takeda will receive funding from the Government of Japan’s Ministry of Health, Labour and Welfare ("MHLW") to support the technology transfer, establishment of infrastructure and scale-up of manufacturing.

We anticipate that Takeda will have a manufacturing capacity of 250 million doses per year.

In May 2021, the MHLW announced that contract discussions were ongoing with Takeda to potentially order 150 million doses of NVX-CoV2373.

Distribution of NVX-CoV2373 in Japan by Takeda is expected to begin in late 2021 or early 2022 and will continue into 2022 onwards.

We will be entitled to receive royalty payments based on the achievement of certain development and commercial milestones, as well as on a portion of net profits from vaccine sales.

Takeda is responsible for regulatory submission to Japan’s Pharmaceutical and Medical Devices Agency (“PMDA”).

NVX-CoV2373 Supply Agreements

We expect our global supply chain will enable us to deliver upon our supply commitments around the world.

We have entered into advance purchase agreements (referred to as "APAs" or "supply agreements" throughout this Form 10-Q), as well as multiple supply and license agreements with strategic partners.

The APAs typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment.

Such upfront payments generally become non-refundable upon our achievement of certain development and commercial milestones.

We expect to sign additional APAs or supply agreements that are currently in active discussions and negotiations.

In addition to our supply agreements, we have committed 110 million doses of NVX-CoV2373 to the U.S.

government in relation to the funding received from OWS and the DoD.

A summary and status of key supply agreements executed since the beginning of 2021 and through the date of filing this Form 10-Q follows:

In May 2021, we finalized an APA with Gavi, the Vaccine Alliance ("Gavi"), building upon our MOU previously announced in February 2021.

Under the terms of the agreement, 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies.

We expect to manufacture and distribute 350 million doses of NVX-CoV2373 to countries participating under the COVAX Facility.

Under a separate purchase agreement with Gavi, SIIPL is expected to manufacture and deliver the balance of the 1.1 billion doses of NVX-CoV2373 for low- and middle-income countries participating in the COVAX Facility.

We expect to deliver doses with antigen and adjuvant manufactured at facilities directly funded by the investments previously received from CEPI.

We expect to supply significant doses that Gavi would allocate to low, middle and high income countries, subject to certain limitations, utilizing a tiered pricing schedule and Gavi may prioritize such doses to low and middle income countries, at lower prices.

Additionally, we may provide additional doses, to the extent available from CEPI funded manufacturing facilities, in the event that SIIPL cannot materially deliver expected vaccine doses to the COVAX Facility.Together with SIIPL, we expect to initiate delivery of the cumulative 1.1 billion doses in the third quarter of 2021, pending receipt of appropriate regulatory authorizations.

Under the agreement, we expect to receive an upfront payment from Gavi and an additional payment after securing emergency use listing for NVX-CoV2373 by the World Health Organization ("WHO").

In January 2021, we finalized an APA with the Government of Canada to supply up to 76 million doses of NVX-CoV2373.

Canada has committed to purchase 52 million doses of NVX-CoV2373 with the option for up to an additional 24 million doses.

Under the agreement, we expect to supply doses of NVX-CoV2373 to Canada following authorization by Canada’s regulatory agency.

Seasonal Influenza

NanoFlu Program (Older Adults)

Influenza is a world-wide infectious disease with serious illness generally occurring in more susceptible populations such as children under 18 years old and older adults, but also occurring in the general population.

According to a 2019 Global Data forecast of influenza vaccines, the market for seasonal influenza vaccines is expected to grow from approximately $4.6 billion in 2018 to approximately $6.5 billion in 2028 (in the countries comprising the eight major markets).

Recent flu seasons have shown an increase in the influenza disease burden.

For the 2017-18 flu season, the

Centers for Disease Control and Prevention estimates that influenza in the U.S.

resulted in 48.8 million illnesses, 959,000 hospitalizations and 79,400 deaths, a dramatic increase across all categories compared to previous years.

In March 2020, we announced positive top-line results from our Phase 3 clinical trial of our nanoparticle seasonal quadrivalent influenza vaccine candidate, which includes our proprietary Matrix-M adjuvant (“NanoFlu”).

This positive data will support a BLA, which BLA will include process performance qualification and a lot consistency clinical trial, and licensure of NanoFlu using the FDA accelerated approval pathway.

In October 2020, we announced the formation of a leadership team within the Company focused on advancing NanoFlu to regulatory licensure.

The leadership team will establish a separate NanoFlu development unit within our Company, which we expect to benefit from joint shared services with key cross-functional departments within the Company and to build on the Company’s established knowledge base in the discovery and development of innovative vaccines to prevent serious infectious diseases.

Respiratory Syncytial Virus (RSV)

Currently, there is no approved RSV vaccine available to combat the estimated 64 million RSV infections that occur globally each year.

We have identified three susceptible target populations that we believe could benefit from the development of our respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) in different formulations:

(1) infants via maternal immunization, (2) older adults (60 years and older) and (3) children six months to five years old (“pediatrics”).

With our current estimates of the annual global cost burden of RSV in excess of $88 billion, we believe our RSV F Vaccine represents a multi-billion dollar worldwide opportunity.

ResVax Program (Infants via Maternal Immunization)

ResVax is our adjuvanted RSV F Vaccine for infants via maternal immunization.

RSV is the most common cause of lower respiratory tract infections (“LRTI”) and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide.

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.

In February 2019, we announced data from our Prepare trial, initiated in December 2015.

The Prepare trial was conducted to determine whether ResVax reduced incidence of medically significant RSV-positive LRTI in infants through a minimum of the first 90 days of life and up through the first six months of life.

While the data did not meet the trial’s primary efficacy endpoint, it did demonstrate efficacy against a secondary objective by reducing RSV LRTI hospitalizations in treated infants.

In July 2020, these data were published in the New England Journal of Medicine.

BMGF supported the Prepare trial for ResVax through a grant of up to $89.1 million pursuant to a grant agreement we entered into with BMGF in September 2015 (the “BMGF Grant Agreement”), including our efforts to conduct certain follow-on analyses of the Phase 3 data.

We are assessing opportunities to bring ResVax to market, in conjunction with our pursuit of a regulatory licensure approach for the U.S., the European Union and other geographies.

RSV Older Adults Program

Older adults (60 years and older) are at increased risk for RSV disease due in part to immunosenescence, the age-related decline in the human immune system.

RSV infection can also lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma and congestive heart failure.

alone, a reported RSV incidence rate of 5.5% in older adults would account for approximately 2.5 million infections per year.

We estimate that approximately 900,000 medical interventions are caused by RSV disease in this U.S.

population each year.

We followed up the 2016 Phase 3 clinical trial of our RSV F Vaccine, which failed to meet its pre-specified primary or secondary efficacy objectives, with a 2017 Phase 2 clinical trial in older adults, to assess safety and immunogenicity of one and two dose regimens of our RSV F Vaccine, with and without aluminum phosphate or our proprietary Matrix-M adjuvant.

Immunogenicity results from the 2017 trial indicate that both adjuvants increase the magnitude, duration and quality of the immune response versus the non-adjuvanted RSV F Vaccine.

We continue to assess the development opportunities for our RSV F Vaccine in older adults.

RSV Pediatrics Program

By the age of five, essentially all children will have been exposed to RSV and will likely develop natural immunity against the virus;

however, children under five remain vulnerable to RSV disease, offering a strong rationale for a pediatric vaccine that could offer enhanced protection.

In 2015, we announced positive results in our Phase 1 clinical trial evaluating the safety and immunogenicity of our RSV F Vaccine in healthy children between two and six years of age.

We continue to assess the development opportunities for our RSV F Vaccine for pediatrics.

To date, we have advanced NanoFlu through a Phase 3 clinical trial in which NanoFlu achieved all primary endpoints and achieved statistical significance in key secondary endpoints.

In 2020, we took steps to ensure the continued advancement of NanoFlu in parallel with our COVID-19 activities and formed a leadership team solely dedicated to our NanoFlu program.

This NanoFlu development unit benefits from joint shared services with key cross-functional departments and builds on the Company’s established knowledge base in the discovery and development of innovative vaccines.

Our NanoFlu team remains focused on seeking regulatory approval from the FDA under the accelerated approval pathway previously granted and exploring the potential for a combination NanoFlu / NVX-CoV2373 vaccine.

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Combination Vaccines

With the ongoing development of NanoFlu, NVX-CoV2373, and RSV F Vaccine, a strong rationale exists for developing two combination respiratory vaccines designed to protect susceptible populations against these diseases.

Although testing is at an early stage, we believe that a combination vaccine against both influenza in combination with COVID-19, and influenza in combination with RSV, may be achievable since both vaccines are created using our recombinant nanoparticle technology and include our proprietary Matrix-M adjuvant.

EBOV is a filovirus that produces severe, often fatal illness in humans.

Within the last decade, it has produced two large outbreaks in Sub-Saharan Africa with high mortality.

There are currently two vaccines licensed to prevent EBOV.

We developed an EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) expressed in insect cells, using our core recombinant baculovirus technology.

Although not in active development, our Ebola GP Vaccine is a viable development opportunity in the event of dedicated funding or a partnership arrangement.

Sale of Preferred Stock

In June 2020, we entered into an agreement to sell 438,885 shares of newly designated Series A Convertible Preferred Stock, par value $0.01 per share (“Preferred Stock”), at a purchase price of $455.70 per share, convertible into 4,388,850 shares of common stock, to an investment fund affiliated with RA Capital Management (“RA Capital”) in a private placement, at an effective purchase price per share of common stock equal to the June 12, 2020 closing price of our common stock.

Upon closing, we received gross proceeds of approximately $200 million.

Holders of Preferred Stock are not entitled to cumulative dividends, are not entitled to vote on matters submitted to common stockholders and have a liquidation preference over common stockholders (see “Note 9 – Preferred Stock” included in our Notes to Consolidated Financial Statements).

With the ongoing development of NanoFlu, NVX-CoV2373 and our RSV F Vaccine, a strong rationale exists for potentially developing combination respiratory vaccines designed to protect susceptible populations against these diseases.

Although testing is at an early stage, we believe that the combination of influenza with COVID-19, influenza with RSV, and influenza with both RSV and COVID-19 may be achievable, as these vaccines all use our recombinant nanoparticle technology and include our proprietary Matrix-M adjuvant.

NanoFlu / NVX-CoV2373

In May 2021, we completed a preclinical study of our NanoFlu / NVX-CoV2373 vaccine candidate to assess its immunogenicity and protective efficacy in animal models.

Preclinical data from this study showed that the combination vaccine induced strong functional antibodies, with hemagglutination inhibition ("HAI") and ACE2 receptor inhibiting titers that were comparable to immunization with the respective component vaccines alone.

The combination vaccine also induced high levels of anti-S IgG and neutralizing antibody titers, as well as induced antibodies against the SARS-CoV-2 spike protein neutralizing epitopes.

We expect to initiate clinical evaluation of NanoFlu / NVX-CoV2373 later in 2021.

R21 is a malaria vaccine candidate created by the Jenner Institute, University of Oxford, and is formulated with our Matrix-M adjuvant.

The University of Oxford has partnered with SIIPL for commercial development of R21, as well as granted a license to SIIPL for the vaccine.

We expect to manufacture and supply the Matrix-M adjuvant component of R21 to SIIPL.

As of May 2021, SIIPL has committed to the provision of over 200 million doses per year of R21 after licensure.

Additionally, SIIPL has rights to use Matrix-M adjuvant in the vaccine in regions where the disease is endemic and will pay royalties to us on its market sales of the vaccine.

We will have commercial rights to sell and distribute the SIIPL-manufactured vaccine in certain countries, primarily in the travelers’ and military vaccine markets.

R21 Clinical Development

In May 2021, the first doses were administered in a Phase 3 licensure trial of R21 to assess the efficacy and safety of the malaria vaccine candidate.

This double-blinded, randomized, controlled Phase 3 trial includes 4,800 participants aged five to 36 months across five sites in Burkina Faso, Kenya, Mali and Tanzania.

Participants will receive three vaccinations four weeks apart and a booster vaccination one year later.

Results from this Phase 3 trial could potentially lead to licensure of R21 by 2023.

In April 2021, we announced the pre-print publication of data in Preprints with The Lancet from a Phase 2b clinical trial evaluating R21.

The Phase 2b randomized, controlled, double-blind trial was conducted at the Clinical Research Unit of Nanoro / Institut de Recherche en Sciences de la Santé in Africa and recruited 450 participants aged five to 17 months from the catchment area of Nanoro, Burkina Faso.

In three study arms, participants received 5 micrograms of R21 with either 25 micrograms of Matrix-M adjuvant, 50 micrograms of Matrix-M adjuvant, or a rabies vaccine as a control.

R21 demonstrated 77% efficacy in the higher adjuvant dose group and 71% efficacy in the lower adjuvant dose group.

Both adjuvant dose levels were well tolerated in young children, with no severe reactions to the vaccine reported.

Sales of Common Stock

In May 2020, we entered into an At Market Issuance Sales Agreement (“May 2020 Sales Agreement”), which allows us to issue and sell up to $250 million in gross proceeds of our common stock.

During the nine months ended September 30, 2020, we sold 2.8 million shares of common stock under the May 2020 Sales Agreement resulting in $160.3 million in net proceeds (this amount excludes $3.9 million received in the fourth quarter of 2020 for shares traded in late September 2020).

From October 1, 2020 through November 3, 2020, we sold 0.7 million shares of common stock resulting in $74.1 million in net proceeds, leaving $8.7 million remaining under the May 2020 Sales Agreement.

In March 2020, we entered into an At Market Issuance Sales Agreement (“March 2020 Sales Agreement”), which allowed us to issue and sell up to $150 million in gross proceeds of our common stock.

During the six months ended June 30, 2020, we sold 8.6 million shares of common stock under the March 2020 Sales Agreement resulting in $148.1 million in net proceeds.

The March 2020 Sales Agreement was fully utilized at that time.

In January 2020, we entered into an At Market Issuance Sales Agreement (“January 2020 Sales Agreement”), which allowed us to issue and sell up to $100 million in gross proceeds of our common stock.

During the first quarter of 2020, we sold 10.5 million shares of common stock under the January 2020 Sales Agreement resulting in $98.7 million in net proceeds.

The January 2020 Sales Agreement was fully utilized at that time.

In December 2018, we entered into an At Market Issuance Sales Agreement (“December 2018 Sales Agreement”), which allowed us to issue and sell up to $100 million in gross proceeds of our common stock.

In January 2020, we sold 7.2 million shares of common stock under the December 2018 Sales Agreement resulting in $38.5 million in net proceeds.

The December 2018 Sales Agreement was fully utilized at that time.

In January 2021, we entered into an At Market Issuance Sales Agreement ("January 2021 Sales Agreement"), which allows us to issue and sell up to $ 500 million in gross proceeds of our common stock.

During the first quarter of 2021, we sold 1.7 million shares of common stock under the January 2021 Sales Agreement resulting in $ 452.0 million in net proceeds, leaving $ 42.2 million remaining.

In November 2020, we entered into an At Market Issuance Sales Agreement ("November 2020 Sales Agreement"), which allowed us to issue and sell up to $ 500 million in gross proceeds of its common stock.

From January 1, 2021 through January 20, 2021, we sold 0.9 million shares of common stock resulting in $ 113.0 million in net proceeds, leaving $ 27.2 million remaining under the agreement.

We terminated the November 2020 Sales Agreement by mutual agreement upon entering into the January 2021 Sales Agreement.

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Critical Accounting Policies and Use of Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements (unaudited) and the accompanying notes, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

These estimates, assumptions and judgments particularly in relation to revenue recognition (discussed in greater detail below), lease accounting (discussed in greater detail below) and impairment of long-lived assets have a material impact on our consolidated financial statements and are discussed in detail throughout our analysis of the results of operations discussed below.

For additional discussion of our critical accounting policies and estimates, see Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC.

Revenue Recognition

We perform research and development under government funding, grant, license and clinical development agreements.

Our revenue primarily consists of funding under U.S.

government contracts and other arrangements to advance the clinical development and manufacturing of NVX-CoV2373.

government contracts include the DoD Contract and the OWS Agreement.

Other funding arrangements primarily include a grant and forgivable loan funding from CEPI.

At contract inception, we analyze our revenue arrangements to determine the appropriate accounting under U.S.

Currently, our revenue arrangements represent customer contracts within the scope of ASC Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) or are contributions under the scope of Accounting Standards Codification (ASC) Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”).

We recognize 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 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 it 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 substantially met.

Contributions are recorded as deferred revenue until the period in which research and development activities are performed that satisfy the funder-imposed conditions.

Under our U.S government contracts, we are entitled to receive funding, on a reimbursable-cost or reimbursable-cost-plus fixed fee basis to support certain activities related to the development, manufacture and delivery of NVX-CoV2373 to the U.S.

We analyzed these contracts and determined that they are within the scope of ASC 606.

Our obligations under each of the contracts are not distinct in the context of the contract as they are highly interdependent or interrelated and, as such, they are accounted for as a single performance obligation.

The transaction price under these arrangements is the consideration we expect to receive and consists of the funded contract amount and the unfunded variable amount to the extent that it is probable that a significant reversal of revenue will not occur.

We recognize revenue for these contracts over time as we transfer control over the goods and services and satisfy our performance obligation.

We measure progress toward satisfaction of our 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 our performance obligation.

Under this process, we consider 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 productivity, material and subcontractor costs, and identified risks.

Estimating the total allowable cost at completion of our performance obligation under a contract is subjective and requires us 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 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.

Billings under the contracts are initially based on provisional indirect billing rates, agreed upon between us and the U.S.

These indirect rates are subject to audit 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.

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 reimbursable-cost-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 this estimate.

Our other funding agreements primarily include the CEPI Grant Funding and CEPI Forgivable Loan Funding.

Under our grant funding arrangements including the CEPI Grant Funding, we are entitled to reimbursement for costs that support development related activities of NVX-CoV2373.

The CEPI Forgivable Loan Funding is designated for the prepayment of certain manufacturing activities.

We 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 under the grant funding arrangements are considered conditional contributions under the scope of ASC 958-605 and are recorded as deferred revenue until the period in which such research and development activities are actually performed that satisfy the funder-imposed conditions.

Payments received under the CEPI Forgivable Loan Funding agreements 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, Debt.

The research and development risk is considered substantive, such that it is not yet probable that the development will be successful.

Therefore, we have concluded that ASC Topic 730, Research and Development is considered applicable and most appropriate.

Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, we will account for our obligation under the CEPI Forgivable Loan Funding as a contract to perform research and development for others.

We have determined that payments received under these agreements should be recorded as revenue under 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, we considered a number of factors, including whether we are principal under the arrangement, and whether the arrangement is significant to, and part of, our core operations.

We will record revenue as we perform the contractual research and development services.

Lease Accounting

We determine at the inception of a contract if an arrangement is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration.

Depending on the contract, the lease commencement date, defined as the date on which the lessor makes the underlying asset available for use by the lessee, may be different than the inception date of the contract.

We classify leases as either operating or finance leases based on the economic substance of the agreement.

We enter into non-cancelable lease agreements for office space and certain equipment.

We also enter into supply agreements with contract manufacturing organizations and contract development and manufacturing organizations to manufacture our vaccine candidates.

Certain of these supply agreements include the use of identified manufacturing facilities and equipment that are controlled by us and may qualify as an embedded lease.

We treat supply agreements that contain a lease as lease arrangements in their entirety.

For leases that have a lease term of more than 12 months at the lease commencement date, we recognize lease liabilities, which represent our obligation to make lease payments arising from the lease, and corresponding right-of-use (“ROU”) assets, which represent the right to use an underlying asset for the lease term, based on the present value of the fixed future payments over the lease term.

We calculate the present value of future payments using the discount rate implicit in the lease, if available, or our incremental borrowing rate.

For all leases that have a lease term of 12 months or less at the commencement date (referred to as “short-term” leases), we have elected to apply the practical expedient in ASC Topic 842, Leases (“ASC 842”) to not recognize a lease liability or ROU asset but instead, recognize lease payments as an expense on a straight-line basis over the lease 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 reevaluate short-term leases that are modified and if they no longer meets the requirements to be treated as short-term leases, we recognize and measure the lease liability and ROU asset as if the date of the modification is the lease commencement date.

For operating leases, we recognize lease expense related to fixed payments 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.

For finance leases, we recognize the amortization of the ROU asset over the shorter of the lease term or useful life of the underlying asset.

We expense ROU assets acquired for research 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.

We use significant assumptions and judgment in evaluating our lease contracts and other agreements under ASC 842, including the determination of whether an agreement is or contains a lease, whether a lease represents an operating or finance lease, the discount rate used to determine the present value of lease obligations and the term of embedded leases in our supply agreements.

There are no material changes to our critical accounting policies as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC.

Recent Accounting Pronouncements Not Yet Adopted

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The following is a discussion of the historical financial condition and results of the Company’s operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report.

Three Months Ended September 30, 2020 and 2019 (amounts in tables are presented in thousands, except per share information or as otherwise indicated)

Three Months Ended

September 30,

Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

2021 2020 Change

Revenue (in thousands):

Government contracts $ 382,704 $ — $ 382,704

Grants and other 64,525 3,377 61,148

Total revenue $ 447,229 $ 3,377 $ 443,852

Revenue for the three months ended September 30, 2020 was $157.0 million as compared to $2.5 million for the same period in 2019, an increase of $154.5 million.

Revenue for the three months ended September 30, 2020 was primarily comprised of revenue for services performed under the CEPI Funding Agreement, participation in OWS and the DOD contract.

Revenue for the three months ended September 30, 2019 was primarily comprised of revenue for services performed under the BMGF Grant Agreement and revenue from Novavax AB.

The significant increase in revenue was due to increased development activities relating to NVX-CoV2373 under the CEPI Funding Agreement, participation in OWS and the DOD contract.

We expect revenue in 2020 to significantly increase due to our NVX-CoV2373 program, which we anticipate will be primarily funded by OWS, CEPI, DoD and/or other potential non-dilutive funding sources.

Three Months Ended

September 30,

Revenue for the three months ended March 31, 2021 was $447.2 million as compared to $3.4 million for the same period in 2020, an increase of $443.9 million.

Revenue for the three months ended March 31, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and the CEPI Funding Agreement.

Revenue for the three months ended March 31, 2020 was primarily comprised of revenue for services performed under the CEPI Funding Agreement, BMGF Grant Agreement and revenue from Novavax AB.

The significant increase in revenue was due to increased development activities relating to NVX-CoV2373 under the OWS Agreement and the CEPI Funding Agreement.

We expect revenue in 2021 to significantly increase as compared with 2020 due to our NVX-CoV2373 program, which we anticipate will continue to be funded by OWS and CEPI and/or other revenue sources.

Further, we anticipate bringing our NVXCoV2373 vaccine candidate to market following global regulatory approvals which, if achieved, should significantly increase revenue.

In anticipation, we have entered into various advance purchase agreements as well as multiple supply and license agreements with strategic partners to supply NVX-CoV2373 in their specified territories under which we are entitled to receive royalty revenue from the sale of NVX-CoV2373 by such partners.

Three Months Ended March 31,

2021 2020 Change

Expenses (in thousands):

Research and development $ 592,671 $ 16,895 $ 575,776

Gain on Catalent transaction

General and administrative 63,190 9,379 53,811

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Research and Development Expenses

Research and development expenses include salaries, stock-based compensation, laboratory supplies, consultants and subcontractors, including external contract research and manufacturing organizations, and other expenses associated with our process development, program-related manufacturing, clinical, regulatory and quality assurance activities for our programs.

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 increased to $294.1 million for the three months ended September 30, 2020 from $18.6 million for the same period in 2019, an increase of $275.5 million.

The increase was primarily due to increased development activities relating to NVX-CoV2373, including the write-off of $187.2 million of ROU assets associated with our manufacturing supply agreements for NVX-CoV2373 that we determined do not currently have an alternative future use, and increased employee-related costs, primarily stock-based compensation expense.

As of September 30, 2020, we had 433 employees dedicated to our research and development programs versus 127 employees as of September 30, 2019.

For 2020, we expect research and development expenses to increase significantly due to our anticipated development activities for our NVX-CoV2373 program (see discussion on our NVX-CoV2373 program above) and increases in employee-related costs.

Expenses by Functional Area

We track our research and development expenses according to the type of costs incurred during identification, development, manufacture and testing of 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 three months ended September 30 (in millions):

Manufacturing

Vaccine Discovery

Clinical and Regulatory

In the three months ended March 31, 2021, our research and development activities were primarily focused on the development of NVX-CoV2373 and included direct external research and development expenses related to NVX-CoV2373 of $538.1 million, primarily comprised of costs related to the following:

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• expenses incurred under agreements with contract research organization ("CROs") that conduct our clinical trials and third-party consultants related to the development of NVX-CoV2373;

• expenses incurred on developing and manufacturing the antigen drug substance and Matrix-M components of NVX-CoV2373 under agreements that we established with third-party contract manufacturing organizations ("CMOs") and contract manufacturing and development organizations ("CDMOs");

• expenses incurred for the procurement of raw materials, laboratory supplies and equipment;

• other costs related to preclinical studies and regulatory consulting, as well as related program management activities to support our growing global operations.

Research and development expenses increased to $592.7 million for three months ended March 31, 2021 as compared to $16.9 million for three months ended March 31, 2020, an increase of $575.8 million primarily due to research and development of NVX-CoV2373, as summarized in the table below (in millions):

Three Months Ended March 31,

NVX-CoV2373 $ 538,125 $ 1,557

NanoFlu 1,126 3,845

Other vaccine development programs 304 1,164

Total direct external research and development expense 539,555 6,566

Employee expenses 24,955 4,568

Stock-based compensation expense 23,790 1,908

Facility expenses 2,995 1,188

Other expenses 1,376 2,665

Total research and development expenses $ 592,671 $ 16,895

We do not provide forward-looking estimates of costs and time to complete our research projects due to the many uncertainties associated with vaccine development.

For 2021, we expect research and development expenses to significantly increase over 2020 expenses due to our continued development activities for our NVX-CoV2373 program and increases in employee-related costs.

Following a potential regulatory approval of NVX-CoV2373, we expect products sales will result in certain types of costs that have been previously recorded as research and development in our Consolidated Statement of Operations to be capitalized as inventory and expensed as cost of goods sold when product is delivered in 2021 and beyond.

Cost of goods sold expenses could be significant in 2021 depending on our commercial shipment levels for those shipments in which the costs were recorded into inventory.

We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertainties associated with vaccine development.

As we obtain data from preclinical studies and clinical trials, we may elect to discontinue or delay clinical trials in order to focus our resources on more promising vaccine candidates.

Completion of clinical trials may take several years or more, but the length of time can vary substantially depending on the phase, size of clinical trial, primary and secondary endpoints and the intended use of the vaccine candidate.

Completion of clinical trials may take several years or more, but the length of time can vary substantially depending upon the phase, size of clinical trial, primary and secondary endpoints and the intended use of the vaccine candidate.

The cost of clinical trials may vary significantly over the life of a project as a result of a variety of factors, including:

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• the safety and efficacy profile of the vaccine candidate;

● the cost, timing, and ability to secure, regulatory approvals.

As a result of these uncertainties, we are unable to determine 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.

• the cost and timing of, and the ability to secure, regulatory approvals.

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As a result of these uncertainties, we are unable to determine the duration and completion costs of our research and development projects or when, and to what extent, we will generate future cash flows from our research projects.

General and Administrative Expenses

General and administrative expenses increased to $56.9 million for the three months ended September 30, 2020 from $7.9 million for the same period in 2019, an increase of $49.0 million.

The increase in general and administrative expenses is primarily due to increased employee-related costs, primarily stock-based compensation expense, and increased professional fees relating to the integration of Novavax CZ and supporting our NVX-CoV2373 program.

As of September 30, 2020, we had 89 employees dedicated to general and administrative functions versus 41 employees as of September 30, 2019.

General and administrative expenses increased to $63.2 million for the three months ended March 31, 2021 from $9.4 million for the same period in 2020, an increase of $53.8 million.

The increase in general and administrative expenses is primarily due to increased employee-related costs, primarily stock-based compensation expense, and supporting our NVX-CoV2373 program.

As of March 31, 2021, we had 155 employees dedicated to general and administrative functions as compared with 40 employees as of March 31, 2020.

For 2021, we expect general and administrative expenses to significantly increase due to increased activities related to supporting our NVX-CoV2373 program and increases in employee-related costs.

Other Income (Expense):

Three Months Ended

September 30,

Other Income (Expense) (in thousands):

Investment income

Interest expense

Other income (expense)

Total other income (expense), net

We had total other expense, net of $3.4 million for the three months ended September 30, 2020 as compared to $3.1 million for the same period in 2019.

In the three months ended September 30, 2020, we recorded a $1.0 million gain on the intercompany loan with Novavax CZ due to changes in the exchange rates and additional interest expense of $1.1 million for finance leases.

Three Months Ended

September 30,

Net Loss (in thousands, except per share information):

Net loss per share

Weighted average shares outstanding

Net loss for the three months ended September 30, 2020 was $197.3 million, or $3.21 per share, as compared to $18.0 million, or $0.74 per share, for the same period in 2019.

The increase in net loss was primarily due to increased development activities relating to NVX-CoV2373, including the write off of $187.2 million of ROU assets associated with our manufacturing supply agreements for NVX-CoV2373 and increased employee-related costs, primarily stock-based compensation expense, partially offset by increased revenue under the CEPI Funding Agreement, the OWS Agreement and the DoD Contract.

The increase in weighted average shares outstanding for the three months ended September 30, 2020 is primarily a result of sales of our common stock in 2020 and 2019.

Nine Months Ended September 30, 2020 and 2019 (amounts in tables are presented in thousands, except per share information or as otherwise indicated)

Nine Months Ended

September 30,

Revenue (in thousands):

Total revenue

Revenue for the nine months ended September 30, 2020 was $195.9 million as compared to $9.8 million for the same period in 2019, an increase of $186.1 million.

Revenue for the nine months ended September 30, 2020 was primarily comprised of revenue for services performed under the CEPI Funding Agreement, the OWS Agreement and the DoD Contract.

Revenue for the nine months ended September 30, 2019 was primarily comprised of revenue for services performed under the BMGF Grant Agreement and revenue from Novavax AB.

The significant increase in revenue was due to increased development activities relating to NVX-CoV2373 under the CEPI Funding Agreement, the OWS Agreement and the DoD Contract.

Nine Months Ended

September 30,

Expenses (in thousands):

Research and development

Gain on Catalent transaction

General and administrative

Total expenses

Research and Development Expenses

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 increased to $345.8 million for the nine months ended September 30, 2020 from $84.5 million for the same period in 2019, an increase of $261.3 million.

This increase was primarily due to increased development activities relating to NVX-CoV2373, including the write off of $187.2 million of ROU assets associated with our manufacturing supply agreements for NVX-CoV2373 that we determined do not currently have an alternative future use, and increased employee-related costs, primarily stock-based compensation expense.

As of September 30, 2020, we had 433 employees dedicated to our research and development programs versus 127 employees as of September 30, 2019.

Expenses by Functional Area

The following summarizes our research and development expenses by functional area for the nine months ended September 30 (in millions):

Manufacturing

Vaccine Discovery

Clinical and Regulatory

Total research and development expenses

General and Administrative Expenses

General and administrative expenses increased to $84.0 million for the nine months ended September 30, 2020 from $26.2 million for the same period in 2019, an increase of $57.7 million.

The increase in general and administrative expenses is primarily due to increased employee-related costs, primarily stock-based compensation expense and increased professional fees relating to the acquisition and integration of Novavax CZ and supporting our NVX-CoV2373 program.

As of September 30, 2020, we had 89 employees dedicated to general and administrative functions versus 41 employees as of September 30, 2019.

Other Income (Expense):

Nine Months Ended

September 30,

Three Months Ended March 31,

2021 2020 Change

Other Income (Expense) (in thousands):

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Total other income (expense), net $ (11,070) $ (2,967) $ (8,103)

We had total other expense, net of $6.8 million for the nine months ended September 30, 2020 as compared to $9.0 million for the same period in 2019.

In the nine months ended September 30, 2020, we recorded a $3.5 million gain on the intercompany loan with Novavax CZ due to changes in the exchange rates and additional interest expense of $1.1 million for finance leases.

Nine Months Ended

September 30,

We had total other expense, net, of $11.1 million for the three months ended March 31, 2021 as compared to $3.0 for the same period in 2020.

In the three months ended March 31, 2021, we recorded a $5.9 million loss on the intercompany loan with Novavax CZ due to changes in the exchange rates and additional interest expense of $2.1 million for finance leases.

Income Tax Expense:

During the three months ended March 31, 2021, we recognized $3.0 million of income tax expense related to foreign withholding tax on an advance payment of a license fee.

We did not recognize any income tax expense for the three months ended March 31, 2020.

Three Months Ended March 31,

2021 2020 Change

Net Loss (in thousands, except per share information):

Net loss $ (222,719) $ (25,864) $ (196,855)

Net loss per share $ (3.05) $ (0.58) $ (2.47)

Weighted average shares outstanding 73,035 44,421 28,614

Net loss for the nine months ended September 30, 2020 was $240.7 million, or $4.39 per share, as compared to $100.9 million, or $4.43 per share, for the same period in 2019.

The increase in weighted average shares outstanding for the nine months ended September 30, 2020 is primarily a result of sales of our common stock in 2020 and 2019.

Net loss for the three months ended March 31, 2021 was $222.7 million, or $3.05 per share, as compared to $25.9 million, or $0.58 per share, for the same period in 2020.

The increase in net loss was primarily due to a significant increase in development activities relating to NVX-CoV2373 and increase in employee-related costs, primarily stock-based compensation expense, partially offset by increased revenue under the OWS Agreement and CEPI Funding Agreement.

The increase in weighted average shares outstanding for the three months ended March 31, 2021 is primarily a result of sales of our common stock in 2021 and 2020.

Liquidity Matters and Capital Resources

Our future capital requirements depend on numerous factors including, but not limited to, the commitments and progress of our research and development programs, the progress of preclinical and clinical testing, 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 manufacturing and distribution costs.

We plan to continue to have multiple vaccines and product candidates in various stages of development, and we believe our operating expenses and capital requirements will fluctuate depending upon the timing of events, such as the scope, initiation, rate and progress of our preclinical studies and clinical trials and other research and development activities.

We have primarily funded our recent operations with proceeds from the sale of common stock and preferred stock in equity offerings, revenue under the CEPI Funding Agreement, OWS Agreement and the DoD Contract.

We anticipate our future operations to be additionally funded by OWS, CEPI, DoD and/or other potential non-dilutive funding sources.

As of September 30, 2020, we had $571.6 million in cash and cash equivalents, marketable securities and restricted cash as compared to $82.2 million as of December 31, 2019.

These amounts consisted of $334.2 million in cash and cash equivalents, $169.8 million in marketable securities and $67.6 million in restricted cash as of September 30, 2020 as compared to $78.8 million in cash and cash equivalents and $3.4 million in restricted cash as of December 31, 2019.

The following table summarizes cash flows for the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended

September 30,

Our future capital requirements depend on numerous factors including, but not limited to, our projected activities related to the development of NVX-CoV2373, including significant commitments under various CRO, CMO and CDMO agreements, the progress of preclinical studies and clinical trials, the time and costs involved in obtaining regulatory approvals,

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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 developing other vaccines and product candidates, such as NanoFlu and potential combination vaccines candidates, which are in various stages of development.

We believe our operating expenses and capital requirements will fluctuate depending upon the timing of events, such as the progress of our NVX-CoV2373 clinical trials and approval for the use of NVX-CoV2373 in the U.S.

and internationally, as well as the scope, initiation and progress of our preclinical studies and clinical trials related to other research and development activities.

We have entered into APAs or supply agreements with various countries globally that, if our product candidate is approved, are expected to result in the delivery of approximately 200 million doses of NVX-CoV2373 throughout 2021 and into the first half of 2022.

The APAs or supply agreements typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment.

Such upfront payments generally become non-refundable upon our achievement of certain development and commercial milestones.

We expect to sign additional APAs or supply agreements that are currently in active discussions and negotiations.

In May 2021, we finalized an APA with Gavi, building upon our MOU previously announced in February 2021.

We expect to manufacture and distribute 350 million doses of NVX-CoV2373 to countries participating under the COVAX Facility.

We expect to deliver doses with antigen and adjuvant manufactured at facilities directly funded by the investments previously received from CEPI.

Under the agreement, we expect to receive an upfront payment from Gavi and an additional payment after securing emergency use listing for NVX-CoV2373 by the WHO.

We have also entered into supply and license agreements with strategic partners to supply NVX-CoV2373 in their specified territories under which we are entitled to receive royalty revenue primarily from the sale of NVX-CoV2373 by our partners.

In the three months ended March 31, 2021, we funded our operations with December 31, 2020 cash and marketable securities on hand, upfront payments under APAs, proceeds from the sale of common stock together with revenue under the OWS Agreement and our 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, revenue under our OWS Agreement and CEPI Funding Agreement, and following any potential global regulatory approvals, revenue from product sales, royalty arrangements with our strategic partners and/or other potential funding sources.

As of March 31, 2021, we had $2.0 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 $2.0 billion in cash and cash equivalents, $2.2 million in marketable securities and $33.6 million in restricted cash as of March 31, 2021 as compared to $553.4 million in cash and cash equivalents $157.6 million in marketable securities and $95.3 million in restricted cash as of December 31, 2020.

The following table summarizes cash flows for the three months ended March 31, 2021 and 2020 (in thousands):

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2021 2020 Change

Summary of Cash Flows (in thousands):

Net cash (used in) provided by:

Net cash provided by (used in):

Operating activities $ 663,085 $ (23,110) $ 686,195

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Effect on exchange rate on cash, cash equivalents and restricted cash (1,349) (73) (1,276)

Net increase (decrease) in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash 1,380,332 105,012 1,275,320

Cash, cash equivalents and restricted cash at beginning of period 648,738 82,180 566,558

Cash, cash equivalents and restricted cash at end of period $ 2,029,070 $ 187,192 $ 1,841,878

Net cash provided by operating activities increased to $86.0 million for the nine months ended September 30, 2020, as compared cash used in operating activities to $112.9 million for the same period in 2019.

The increase in cash provided is primarily due to payments received under the CEPI Funding Agreement and OWS Agreement, and the timing of payments to third-parties.

During the nine months ended September 30, 2020 and 2019, our investing activities consisted of purchases and maturities of marketable securities, our acquisition of Novavax CZ in 2020, proceeds from the Catalent transaction in 2019 and, to a much lesser extent, capital expenditures.

Capital expenditures for the nine months ended September 30, 2020 and 2019 were $12.6 million and $1.6 million, respectively.

For 2020, we expect a significant increase in our capital expenditures due to our development activities for our NVX-CoV2373 program.

Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements and issuance of preferred stock in a private placement, payments of finance lease liabilities and to a lesser extent, stock option exercises and purchases under our Employee Stock Purchase Plan.

In the nine months ended September 30, 2020, we received net proceeds of $445.6 million from selling shares of common stock through our At Market Issuance Sales Agreements and $200.0 million through the issuance of preferred stock in a private placement.

In the nine months ended September 30, 2019, we received net proceeds of $67.2 million from selling shares of common stock through our At Market Issuance Sales Agreements.

Based on our most recent cash flow forecast, we believe our current capital is sufficient to fund our operating plans for a minimum of twelve months from the date that this Quarterly Report was filed.

Additional capital may be

required in the future to develop our vaccine candidates through clinical development, manufacturing and commercialization.

Our ability to fund the Company’s operations is dependent upon management’s plans, which include receiving non-dilutive funding from domestic and international sources, raising additional capital in the near term primarily through 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.

New financings may not be available to the Company on commercially acceptable terms, or at all.

Also, any collaborations, strategic alliances and marketing, distribution or licensing arrangements may require us to give up some or all of our rights to a product or technology, which in some cases may be at less than the full potential value of such rights.

Net cash provided by operating activities increased to $663.1 million for the three months ended March 31, 2021, as compared cash used in operating activities of $23.1 million for the same period in 2020.

The increase in cash provided is primarily due to payments under APAs recorded as deferred revenue and the timing of payments to third-parties.

During the three months ended March 31, 2021 and 2020, our investing activities consisted primarily of maturities and sale of marketable securities, net of purchases, and, to a much lesser extent, capital expenditures.

Capital expenditures for the three months ended March 31, 2021 and 2020 were $13.8 million and $0.1 million, respectively, and the increase in capital expenditures was primarily due to the build out of our facilities and related capital expenditures to support NVX-CoV2373.

For 2021, we expect an increase in our capital expenditures due to further development activities for our NVX-CoV2373 program, including the additional build-out of research and development and manufacturing facilities and related equipment, and the build-out of our new corporate office facility to accommodate anticipated increases in headcount.

Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements, payments of finance lease liabilities and exercise of stock-based awards.

In the three months ended March 31, 2021 and 2020, we received net proceeds of $564.9 million and $185.9 million, respectively, from selling shares of common stock through our At Market Issuance Sales Agreements.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of September 30, 2020.

We did not have any material off-balance sheet arrangements as of March 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis