NOVAVAX INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Any statements in the discussion below and elsewhere in this Quarterly Report about expectations, beliefs, plans, objectives, assumptions or future events or performance of Novavax, Inc. (“Novavax,” together with its wholly owned subsidiaries Novavax AB and Novavax CZ, the “Company,” “we” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements about our capabilities, goals, expectations regarding future revenue and expense levels and capital raising activities; potential market sizes and demand for our product candidates; the efficacy, safety and intended utilization of our product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the development of our preclinical product candidates; the conduct, timing and potential results from clinical trials and other preclinical studies; plans for and potential timing of regulatory filings; our expectation of manufacturing capacity, timing, production and delivery for NVX-CoV2373; our expectations with respect to the anticipated ongoing development and potential commercialization or licensure of NVX-CoV2373 and NanoFlu™; the expected timing and content of regulatory actions; 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”); our available cash resources and usage and the availability of financing generally; plans regarding partnering activities, business development initiatives; and other matters referenced herein. Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” "aim," or “assume,” the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements. Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate or materially different from actual results. Risk factors discussed in this Quarterly Report, identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and those of which we are not currently aware, could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements made by or on behalf of us, therefore, you should not place undue reliance on any such forward-looking statements. We have included important factors that could cause results to differ in the cautionary statements included in this Quarterly Report, particularly those identified in Part II, Item 1A “Risk Factors” of this Quarterly Report and in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K. These and other risks may also be detailed and modified or updated in our reports and other documents filed with the Securities and Exchange Commission (“SEC”) from time to time. You are encouraged to read these filings as they are made. We cannot guarantee future results, events, level of activity, performance or achievement. Further, any forward-looking statement speaks only as of the date when it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Overview 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 16 Ta ble of Contents 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 (2) Ongoing PREVENT-19, a Phase 3 clinical trial in U.S. and Mexico; 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, 17 Ta ble of Contents ultimately contributing to increased supply and manufacturing capacity. These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile. Coronavirus 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. and Mexico 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, 18 Ta ble of Contents 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 19 Ta ble of Contents 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. 20 Ta ble of Contents 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. government. 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 authorized for emergency use or licensed. 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 21 Ta ble of Contents 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 22 Ta ble of Contents antigen. 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) 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. 23 Ta ble of Contents Combination Vaccines 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. Malaria R21 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 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. 24 Ta ble of Contents Critical Accounting Policies and Use of Estimates 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 See “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (under the caption “ Recent Accounting Pronouncements ”). Results of Operations 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 March 31, 2021 and 2020 Revenue: 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 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. Expenses: Three Months Ended March 31, 2021 2020 Change Expenses (in thousands): Research and development $ 592,671 $ 16,895 $ 575,776 General and administrative 63,190 9,379 53,811 Total expenses $ 655,861 $ 26,274 $ 629,587 Research and Development Expenses 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: 25 Ta ble of Contents • 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; and • 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, 2021 2020 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 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 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: • the number of participants who participate in the clinical trials; • the number of sites included in the clinical trials; • if clinical trial locations are domestic, international or both; • the time to enroll participants; • the duration of treatment and follow-up; • the safety and efficacy profile of the vaccine candidate; and • the cost and timing of, and the ability to secure, regulatory approvals. 26 Ta ble of Contents 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 $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 March 31, 2021 2020 Change Other Income (Expense) (in thousands): Investment income $ 362 $ 436 $ (74) Interest expense (4,839) (3,403) (1,436) Other income (expense) (6,593) — (6,593) Total other income (expense), net $ (11,070) $ (2,967) $ (8,103) 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. Net Loss: 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 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, 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, 27 Ta ble of Contents 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. 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 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): 28 Ta ble of Contents 2021 2020 Change Summary of Cash Flows (in thousands): Net cash provided by (used in): Operating activities $ 663,085 $ (23,110) $ 686,195 Investing activities 141,609 (57,728) 199,337 Financing activities 576,987 185,923 391,064 Effect on exchange rate on cash, cash equivalents and restricted cash (1,349) (73) (1,276) 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 $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 March 31, 2021.