What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-10 · 196 added, 138 removed, 326 unchanged (51% of the section changed)

31 unchanged sentences

Commitments and contingencies

Preferred stock, $ 0.01 par value, 2,000,000 shares authorized at March 31, 2021 and December 31, 2020;

no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Preferred stock, $ 0.01 par value, 2,000,000 shares authorized at June 30, 2021 and December 31, 2020;

no shares issued and outstanding at June 30, 2021 and December 31, 2020

Stockholders' equity:

Common stock, $ 0.01 par value, 600,000,000 shares authorized at March 31, 2021 and December 31, 2020;

and 74,470,583 shares issued and 74,061,594 shares outstanding at March 31, 2021 and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020

Common stock, $ 0.01 par value, 600,000,000 shares authorized at June 30, 2021 and December 31, 2020;

and 74,672,351 shares issued and 74,248,279 shares outstanding at June 30, 2021 and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020

Additional paid-in capital 3,237,085 2,535,476

Accumulated deficit ( 2,449,235 ) ( 1,874,199 )

Treasury stock, 408,989 shares, cost basis at March 31, 2021 and 396,626 shares, cost basis at December 31, 2020

Treasury stock, 424,072 shares, cost basis at June 30, 2021 and 396,626 shares, cost basis at December 31, 2020

( 47,205 ) ( 41,806 )

Accumulated other comprehensive (loss) income ( 357 ) 7,024

Accumulated other comprehensive income 4,170 7,024

Total stockholders’ equity 745,562 627,209

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For the Three Months Ended

June 30, For the Six Months Ended

2021 2020 2021 2020

Government contracts $ 240,534 $ — $ 623,238 $ —

Grant and other 34,026 35,538 98,551 38,915

Royalties 23,457 — 23,457 —

Total revenue 298,017 35,538 745,246 38,915

6 unchanged sentences

Interest expense ( 5,968 ) ( 3,403 ) ( 10,807 ) ( 6,806 )

Other expense ( 6,593 ) —

Other income (expense) 2,659 2,612 ( 3,934 ) 2,613

Net loss before income tax expense $ ( 348,769 ) $ ( 17,521 ) $ ( 568,471 ) $ ( 43,385 )

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For the Three Months Ended

June 30, For the Six Months Ended

2021 2020 2021 2020

Net loss $ ( 352,317 ) $ ( 17,521 ) $ ( 575,036 ) $ ( 43,385 )

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Three Months Ended March 31, 2021 and 2020

Three Months Ended June 30, 2021 and 2020

(in thousands, except share information)

Common Stock Additional

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Shares Amount

Balance at March 31, 2021 74,470,583 $ 745 $ 3,180,114 $ ( 2,096,918 ) $ ( 44,457 ) $ ( 357 ) $ 1,039,127

Non-cash stock-based compensation — — 53,123 — — — 53,123

Stock issued under incentive programs 201,768 2 3,848 — ( 2,748 ) — 1,102

Foreign currency translation adjustment — — — — — 4,527 4,527

Net loss — — — ( 352,317 ) — — ( 352,317 )

Balance at June 30, 2021 74,672,351 $ 747 $ 3,237,085 $ ( 2,449,235 ) $ ( 47,205 ) $ 4,170 $ 745,562

Balance at March 31, 2020 53,906,322 $ 539 $ 1,450,279 $ ( 1,457,665 ) $ ( 2,638 ) $ ( 14,486 ) $ ( 23,971 )

Preferred stock beneficial conversion feature — — 24,139 ( 24,139 ) — — —

Non-cash stock-based compensation — — 7,932 — — — 7,932

Stock issued under incentive programs 316,815 3 8,947 — — — 8,950

Issuance of common stock, net of issuance costs of $ 2,647

7,039,495 70 207,775 — — — 207,845

Unrealized loss on marketable securities — — — — — 176 176

Foreign currency translation adjustment — — — — — 1,115 1,115

Net loss — — — ( 17,521 ) — — ( 17,521 )

Balance at June 30, 2020 61,262,632 $ 612 $ 1,699,072 $ ( 1,499,325 ) $ ( 2,638 ) $ ( 13,195 ) $ 184,526

The accompanying notes are an integral part of these financial statements.

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Six Months Ended June 30, 2021 and 2020

(in thousands, except share information)

Common Stock Additional

Capital Accumulated

Deficit Treasury

Comprehensive

Income (Loss) Stockholders'

Shares Amount

Balance at December 31, 2020 71,350,365 $ 714 $ 2,535,476 $ ( 1,874,199 ) $ ( 41,806 ) $ 7,024 $ 627,209

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Net loss — — — ( 575,036 ) — — ( 575,036 )

Balance at March 31, 2021 74,470,583 $ 745 $ 3,180,114 $ ( 2,096,918 ) $ ( 44,457 ) $ ( 357 ) $ 1,039,127

Balance at June 30, 2021 74,672,351 $ 747 $ 3,237,085 $ ( 2,449,235 ) $ ( 47,205 ) $ 4,170 $ 745,562

Balance at December 31, 2019 32,399,352 $ 324 $ 1,260,551 $ ( 1,431,801 ) $ ( 2,583 ) $ ( 12,508 ) $ ( 186,017 )

Preferred stock beneficial conversion feature — — 24,139 ( 24,139 ) — —

Non-cash stock-based compensation — — 11,897 — — — 11,897

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Net loss — — — ( 43,385 ) — — ( 43,385 )

Balance at March 31, 2020 53,906,322 $ 539 $ 1,450,279 $ ( 1,457,665 ) $ ( 2,638 ) $ ( 14,486 ) $ ( 23,971 )

Balance at June 30, 2020 61,262,632 $ 612 $ 1,699,072 $ ( 1,499,325 ) $ ( 2,638 ) $ ( 13,195 ) $ 184,526

The accompanying notes are an integral part of these financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended June 30,

Operating Activities:

3 unchanged sentences

Non-cash stock-based compensation 106,183 11,897

Right-of-use assets expensed 951 —

Right-of-use assets written off 12,707 —

Other 3,855 ( 1,081 )

3 unchanged sentences

Deferred revenue 946,845 157,173

Net cash provided by (used in) operating activities 663,085 ( 23,110 )

Net cash provided by operating activities 807,497 92,524

Investing Activities:

Capital expenditures ( 28,932 ) ( 3,884 )

Acquisition of Novavax CZ, net of cash required — ( 164,204 )

Purchases of marketable securities ( 2,167 ) ( 107,608 )

2 unchanged sentences

Financing Activities:

Net proceeds from sale of preferred stock — 199,822

Net proceeds from sales of common stock 564,859 393,763

Proceeds from the exercise of stock-based awards 26,750 5

Treasury stock related to tax withholding on stock-based awards ( 2,651 ) —

Net proceeds from the exercise of stock-based awards 26,903 8,955

Finance lease payments ( 53,618 ) —

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Supplemental disclosure of non-cash activities:

Capital expenditures included in accounts payable and accrued expenses $ 9,076 $ 125

Right-of-use assets from new lease agreements $ 28,826 $ —

Capital expenditures included in accounts payable and accrued expenses $ 11,037 $ 2,753

Supplemental disclosure of cash flow information:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

Note 1 – Organization

Novavax, Inc.

(“Novavax,” and together with its wholly owned subsidiaries, Novavax AB and Novavax CZ, the “Company”) is a biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs.

The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFlu TM , are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines.

(“Novavax,” and together with its wholly owned subsidiaries, including Novavax AB and Novavax CZ, the “Company”) is a biotechnology company that promotes improved health globally through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases.

The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFlu ™ , are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines.

NVX-CoV2373 and NanoFlu ™ include the use of the Company's proprietary Matrix-M ™ adjuvant.

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GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.

The consolidated balance sheet as of March 31, 2021, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three months ended March 31, 2021 and 2020, the consolidated statements of changes in stockholders’ equity (deficit) for the three months ended March 31, 2021 and 2020 and the consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’ equity (deficit) and cash flows, respectively, for the periods presented.

The consolidated balance sheet as of June 30, 2021, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three and six months ended June 30, 2021 and 2020, the consolidated statements of changes in stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020 and the consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’ equity (deficit) and cash flows, respectively, for the periods presented.

Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in consolidated financial statements prepared in accordance with U.S.

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The unaudited consolidated financial statements include the accounts of Novavax, Inc.

and its wholly owned subsidiaries, Novavax AB and Novavax CZ.

and its wholly owned subsidiaries, including Novavax AB and Novavax CZ.

All intercompany accounts and transactions have been eliminated in consolidation.

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The translation of operating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction.

Translation gains and losses are recognized as a component of accumulated other comprehensive loss in the accompanying unaudited consolidated balance sheets.

Accumulated other comprehensive (loss) income included a foreign currency translation balance of $( 0.4 ) million and $ 7.0 million as of March 31, 2021 and December 31, 2020, respectively.

Translation gains and losses are recognized as a component of accumulated other comprehensive income in the accompanying unaudited consolidated balance sheets.

Accumulated other comprehensive income included a foreign currency translation balance of $ 4.2 million and $ 7.0 million as of June 30, 2021 and December 31, 2020, respectively.

The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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Corporate debt securities 1,386,056 246,668

Agency securities 110,993 —

Cash and cash equivalents $ 2,074,880 $ 553,398

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The Company will utilize the CEPI and BMGF funds as it incurs expenses for services performed under these agreements.

As of March 31, 2021, the restricted cash balances (both current and non-current) consisted of $ 1.2 million for payments received from BMGF, $ 30.9 million of payments under the CEPI funding agreements and $ 1.5 million of security

As of December 31, 2020, the restricted cash balances (both current and non-current) consisted of $ 1.5 million for payments received from BMGF, $ 92.4 million of payments under the CEPI funding agreements and $ 1.5 million of security deposits of security deposits.

As of June 30, 2021, the restricted cash balances (both current and non-current) consisted of $ 1.2 million for payments received from BMGF, $ 45.2 million of payments under the CEPI funding agreements and $ 1.5 million of security deposits.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows (in thousands):

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Cash, cash equivalents and restricted cash $ 2,122,739 $ 648,738

Revenue Recognition

The Company has various arrangements that include a right for a third party to use the Company's intellectual property as a functional license.

These licensing arrangements include sales-based royalties, as well as certain development and commercial milestone payments, and the license is deemed to be the predominant item to which the sales-based royalties or milestone payments relate.

For arrangements that include a development or regulatory milestone payment, the Company evaluates whether the associated event is considered probable of achievement and estimates the amount to be included in the transaction price using the most likely amount method.

Milestone payments that are not within the Company or licensee's control, such as those dependent upon receipt of regulatory approval, are not considered probable of achievement until the triggering event occurs.

At the end of each reporting period, the Company reevaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis and affect revenue and results of operations in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or predominant item to which the payments relate, the Company recognizes revenue on the satisfaction (or partial satisfaction) of its performance obligation to which some or all of the payment has been allocated, which is normally on the occurrence of the related sales.

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price for the variable consideration that represents a sales-based royalties under the licensing arrangements.

Consideration for optional goods and/or services is excluded from the transaction price at contract inception.

During the three and six months ended June 30, 2021, the Company recognized sales-based royalties of $ 23.5 million.

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes .

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The Company is currently subject to examination in all open tax years.

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

During the three and six months ended June 30, 2021, the Company recognized $ 3.5 million and $ 6.6 million, respectively, of income tax expense related to foreign withholding tax on royalties.

Net Loss per Share

Net loss per share is computed using the weighted average number of shares of common stock outstanding.

As of March 31, 2021 and 2020, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 6,273,234 and 4,968,953 , respectively.

As of March 31, 2021, the Company’s Notes (see Note 8) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $ 136.20 or higher.

These shares, after giving effect to the add back of interest expense and unamortized debt issuance costs on the Notes (see Note 8) and any shares due to the Company upon settlement of its capped call transactions are excluded from the computation, as their effect is antidilutive.

As of June 30, 2021 and 2020, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 6,092,983 and 7,797,651 , respectively.

As of June 30, 2021, the Company’s Notes (see Note 7) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $ 136.20 or higher.

These shares, after giving effect to the add back of interest expense and unamortized debt issuance costs on the Notes and any shares due to the Company upon settlement of its capped call transactions, are excluded from the computation, as their effect is antidilutive.

Recent Accounting Pronouncements

Not Yet Adopted

In August 2020, the FASB issued ASU No.

In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

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ASU 2020-06 will be effective January 1, 2022 for the Company and may be applied using a full or modified retrospective approach.

Early adoption is permitted, but no earlier than January 1, 2021 for the Company.

Management has evaluated the impact of adopting ASU 2020-06 and has determined that it will not have a material impact on the Company’s consolidated financial statements.

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The following table represents the Company's fair value hierarchy for its financial assets and liabilities (in thousands):

Fair Value at March 31, 2021 Fair Value at December 31, 2020

Fair Value at June 30, 2021 Fair Value at December 31, 2020

Assets Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

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Convertible notes payable $ — $ 580,405 $ — $ — $ 407,238 $ —

(1) Classified as cash and cash equivalents as of March 31, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(2) Includes $ 25,022 and $ 44,052 classified as cash and cash equivalents as of March 31, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(3) Includes $ 1,547,137 and $ 246,668 classified as cash and cash equivalents as of March 31, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(1) Classified as cash and cash equivalents as of June 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(2) Includes $ 199,990 and $ 44,052 classified as cash and cash equivalents as of June 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(3) Includes $ 1,386,056 and $ 246,668 classified as cash and cash equivalents as of June 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(4) Includes $ 110,993 classified as cash and cash equivalents as of June 30, 2021 on the consolidated balance sheets.

Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor's valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics.

Pricing of the Company's Notes (see Note 7) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates and credit spreads among others.

During the three months ended March 31, 2021 and 2020, the Company did not have any transfers between levels .

During the six months ended June 30, 2021 and 2020, the Company did not have any transfers between levels .

Note 4 – Marketable Securities

Marketable securities classified as available-for-sale as of March 31, 2021 and December 31, 2020 were comprised of (in thousands):

March 31, 2021 December 31, 2020

Marketable securities classified as available-for-sale as of June 30, 2021 and December 31, 2020 were comprised of (in thousands):

June 30, 2021 December 31, 2020

Losses Fair Value Amortized

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thus, the Company's investment policy limits investments to certain types of instruments with high-grade credit ratings, places restrictions on maturities and concentrations in certain industries and requires the Company to maintain a certain level of liquidity.

Note 5 – Acquisition of Novavax CZ

The results of operations from Novavax CZ, acquired in May 2020, have been included in the consolidated financial statements since the date of acquisition.

As a result, the consolidated financial results for the three months ended March 31, 2020 do not reflect Novavax CZ results.

During the three months ended March 31, 2021, Novavax CZ did not recognize any revenue, recorded an exchange rate loss on intercompany loans of $ 5.9 million that is included in other expense in the Consolidated Statement of Operations, and a net loss of $ 16.7 million from Novavax CZ operations.

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The supplemental pro forma financial information for the periods set forth below gives effect to the acquisition as if it had occurred as of January 1, 2020.

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that time.

The unaudited pro forma financial information combines the historical results of operations of the Company and Novavax CZ for the periods presented below and reflects the application of certain pro forma adjustments (in thousands, except per share amounts):

Three Months Ended

Revenue $ 447,229 $ 3,377

Net loss ( 222,719 ) ( 27,625 )

Basic and diluted net loss per share $ ( 3.05 ) $ ( 0.53 )

Pro forma adjustments include the recognition of depreciation expense based on the acquisition date fair value and remaining useful lives of Novavax CZ fixed assets (net of historical depreciation expense) and the elimination of costs related to the acquisition, which are non-recurring in nature.

As of June 30, 2021, all of the Company's investments were in securities classified as cash and cash equivalents.

Note 5 – Goodwill and Other Intangible Assets

The change in the carrying amounts of goodwill for the three months ended March 31, 2021 was as follows (in thousands):

The change in the carrying amounts of goodwill for the six months ended June 30, 2021 was as follows (in thousands):

Balance at December 31, 2020 $ 135,379

Currency translation adjustments ( 1,085 )

Balance at March 31, 2021 $ 130,879

Balance at June 30, 2021 $ 134,294

Identifiable Intangible Assets

Purchased intangible assets consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

Purchased intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Amount Accumulated

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Total identifiable intangible assets $ 12,688 $ ( 7,407 ) $ 5,281 $ 13,208 $ ( 7,483 ) $ 5,725

Amortization expense for the three months ended March 31, 2021 and 2020 was $ 0.1 million and $ 0.2 million respectively.

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Amortization expense for the six months ended June 30, 2021 and 2020 was $ 0.2 million and $ 0.3 million, respectively.

Estimated amortization expense for existing intangible assets for the remainder of 2021 and for each of the five succeeding years ending December 31 will be as follows (in thousands):

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Note 6 - Leases

During the three months ended March 31, 2021, the Company determined that a supply agreement with a contract manufacturing organization was an arrangement that contained an embedded lease under ASC Topic 842, Leases (“ASC 842”) as it has the exclusive use of, and control over, a portion of the manufacturing facility and equipment of the supplier during the contractual term of the arrangement.

The lease has a term of 12 months or less at the commencement date and lease payments are recognized as an expense on a straight-line basis over the lease term and variable lease payments, which 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.

During the three months ended March 31, 2021, the Company recognized a short-term lease expense of $ 127.6 million related to its embedded leases, including a new lease that commenced during the first quarter of 2021.

During the three months ended March 31, 2020, the Company did no t incur any short-term embedded lease expense.

During the second quarter of 2021, the Company evaluated the impact of changes in facts and circumstances on its Contract Manufacturing Organizations and Contract Development and Manufacturing Organizations agreements that had previously been determined to represent embedded lease arrangements.

The Company concluded that the impact resulted in the modification of existing leases and, in accordance with its policy, the Company remeasured and reallocated the remaining consideration in the contracts and reassessed the lease classification as of the effective date of the modification.

As a result, the Company recognized a Right-Of-Use ("ROU") asset and a corresponding long-term operating lease liability of $ 11.4 million on the remeasurement of one of its long-term supply agreements using an incremental borrowing rate of 6.5 %.

The Company expensed the ROU asset since it relates to research and development activities for the development of NVX-CoV2373 for which the Company does not have an alternative future use.

Modifications to leases with a lease term of 12 months or less at the commencement date did not result in a change in lease classification and, in accordance with the Company's election to apply the practical expedient in ASC Topic 842, Leases (“ASC 842”), it did not recognize a ROU asset or lease liability but instead, lease payments are recognized as an expense on a straight-line basis over the modified lease term and variable lease payments that do not depend on an index or rate, are recognized as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements.

During the three and six months ended June 30, 2021, the Company recognized a short-term lease expense of $ 86.6 million and $ 214.2 million, respectively, related to its embedded leases, including a new lease that commenced during the first quarter of 2021.

The Company did no t recognize a short-term lease expense related to embedded leases during the three and six months ended June 30, 2020.

During the three and six months ended June 30, 2021, the Company recognized $ 1.8 million and $ 4.0 of interest expenses, respectively, on its finance lease liabilities.

The Company did no t recognize any interest expense related to finance lease liabilities during the three and six months ended June 30, 2020.

During the second quarter of 2021, the Company extended the term of certain of its existing research and development facility and offices leases by two years to five years , giving rise to additional ROU assets and related long-term operating lease liabilities of approximately $ 7.2 million.

Note 7 – Long-Term Debt

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The Company incurred approximately $ 10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of $ 325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”), which were recorded as a reduction to the Notes on the consolidated balance sheet.

The $ 10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven years contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method.

The $ 10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven year contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method.

Total convertible notes payable consisted of the following at (in thousands):

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Total convertible notes payable $ 322,746 $ 322,035

Interest expense incurred in connection with the Notes consisted of the following (in thousands):

The interest expense incurred in connection with the Notes consisted of the following (in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Coupon interest at 3.75 %

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Total interest expense on Notes $ 3,403 $ 3,403 $ 6,806 $ 6,806

Note 9 – Stockholders' Equity (Deficit)

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

During the first quarter of 2021, the Company 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.

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

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

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

During the first quarter of 2020, the Company sold 21.5 million shares of common stock resulting in $ 185.9 million in net proceeds under its various At Market Issuance Sales Agreement.

Note 8 – Stockholders' Equity

During the six months ended June 30, 2021 and 2020, the Company sold 2.6 million and 28.5 million, respectively, of shares of its common stock resulting in net proceeds of approximately $ 565 million and $ 392 million, respectively, under its various At Market Issuance Sales agreements.

In June 2021, the Company entered into an At Market Issuance Sales Agreement (the "June 2021 Sales Agreement"), which allows it to issue and sell up to $ 500 million in gross proceeds of shares of its common stock, and terminated its existing At Market Issuance Sales agreement.

As of June 30, 2021, no shares had been sold under the June 2021 Sales Agreement .

Note 9 – Stock-Based Compensation

Stock Options

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015.

Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary.

The 2015 Plan authorizes the issuance of up to 10.9 million shares of common stock under equity awards granted under the 2015 Plan.

The 2015 Plan authorizes the issuance of up to 12.4 million shares of common stock under equity awards granted under the 2015 Plan, including an increase of 1.5 million shares approved for issuance under the 2015 Plan at the Company's 2021 annual meeting of stockholders.

All such shares authorized for issuance under the 2015 Plan have been reserved.

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Stock Options and Stock Appreciation Rights

The following is a summary of stock options and SARs activity under the 2015 Plan and 2005 Plan for the three months ended March 31, 2021:

The following is a summary of stock options and SARs activity under the 2015 Plan and 2005 Plan for the six months ended June 30, 2021:

2015 Plan 2005 Plan

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Canceled ( 50,881 ) $ 121.33 — $ —

Outstanding at March 31, 2021 5,010,097 $ 37.52 178,785 $ 84.47

Shares exercisable at March 31, 2021 590,006 $ 72.46 178,785 $ 84.47

Shares available for grant at March 31, 2021 2,381,759

Outstanding at June 30, 2021 4,818,599 $ 37.50 178,785 $ 84.47

Shares exercisable at June 30, 2021 692,187 $ 70.17 178,785 $ 84.47

Shares available for grant at June 30, 2021 2,360,263

The fair value of stock options granted under the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Weighted average Black-Scholes fair value of stock options granted $ 166.66 $ 77.41 $ 131.66 $ 76.99

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116.0 %- 151.5 %

124.7 %- 142.0 %

116.0 %- 151.5 %

Expected term (in years) 4.1 - 6.1

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of March 31, 2021 was approximately $ 738 million and 8.4 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of March 31, 2021 was $ 81.6 million and 5.3 years, respectively.

The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and SARs) that would have been received by the holders had all stock option and SAR holders exercised their stock options and stock appreciation rights on March 31, 2021.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of June 30, 2021 was approximately $ 865 million and 8.1 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of June 30, 2021 was approximately $ 121 million and 5.5 years, respectively.

This amount is subject to change based on changes to the closing price of the Company's common stock.

The aggregate intrinsic value of stock options and vesting of restricted stock awards for the three months ended March 31, 2021 and 2020 was $ 81.5 million and $ 0.2 million, respectively.

The aggregate intrinsic value of stock options and vesting of restricted stock awards for the six months ended June 30, 2021 and 2020 was approximately $ 115 million and $ 8 million, respectively.

Employee Stock Purchase Plan

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The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15 % of their compensation, at 85 % of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate).

As of March 31, 2021, there were 212,897 shares available for issuance under the ESPP.

As of June 30, 2021, there were 212,876 shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes.

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Range of Black-Scholes fair values of ESPP shares granted $ 128.70 -$ 238.85

$ 2.87 -$ 21.80

$ 128.70 -$ 238.85

$ 2.57 -$ 35.00

Risk-free interest rate 0.1 %

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66.6 %- 150.9 %

120.4 %- 159.4 %

66.6 %- 154.4 %

Expected term (in years) 0.5 - 2.0

Restricted Stock Units

The following is a summary of restricted stock units activity for the three months ended March 31, 2021:

The following is a summary of restricted stock units activity for the six months ended June 30, 2021:

Shares Per Share

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Restricted stock units forfeited ( 17,023 ) $ 128.59

Outstanding and Unvested at March 31, 2021 1,084,352 $ 79.39

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Outstanding and Unvested at June 30, 2021 1,095,599 $ 84.30

The Company recorded all stock-based compensation expense in the consolidated statements of operations as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Research and development $ 24,779 $ 4,098 $ 48,569 $ 6,005

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Total stock-based compensation expense $ 53,123 $ 7,932 $ 106,183 $ 11,897

As of March 31, 2021, there was approximately $ 276 million of total unrecognized compensation expense related to unvested stock options, SARs, restricted stock units and the ESPP.

The increase in unrecognized compensation expense is primarily due to the significant increase in the Company's common stock price in 2020.

This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of 1.1 years, and will be allocated between research and development and general and administrative expenses accordingly.

As of June 30, 2021, there was approximately $ 230 million of total unrecognized compensation expense related to unvested stock options, SARs, restricted stock units and the ESPP.

The increase in unrecognized compensation expense is primarily due to the significant increase in the Company's common stock price starting in 2020.

This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of one year , and will be allocated between research and development and general and administrative expenses accordingly.

This estimate does not include the impact of other possible stock-based awards that may be made during future periods and awards that require approval by the stockholders.

Note 10 – Contingencies

In February 2021, a Novavax stockholder filed a derivative complaint against members of the Company's board of directors and certain senior management in the Delaware Court of Chancery with Novavax as a nominal defendant.

The complaint challenges equity awards made in April 2020 and in June 2020 on the ground that they were “spring-loaded,” that is, made at a time when certain board members or members of senior management allegedly possessed undisclosed positive material information concerning the Company.

In February 2021, a Novavax stockholder filed a derivative complaint against certain members of the Company's board of directors and certain members of senior management in the Delaware Court of Chancery with Novavax as a nominal defendant.

The plaintiff challenges two sets of equity awards made in April 2020 and in June 2020 on the ground that they were “spring-loaded,” that is, made at a time when certain board members or members of senior management allegedly possessed undisclosed positive material information concerning the Company.

The complaint asserts claims for breach of fiduciary duty, waste, and unjust enrichment.

The plaintiff seeks an award of damages to the Company, an order rescinding the 2020 awards or requiring disgorgement, and an award of attorneys’ fees incurred in connection with the litigation.

The defendants intend to move to dismiss the complaint in its entirety.

The financial impact of the plaintiff's claim is not estimable.

The plaintiff seeks an award of damages to the Company, an order rescinding the April 2020 and June 2020 awards or requiring disgorgement, and an award of attorneys’ fees incurred in connection with the litigation.

On May 10, 2021, the defendants moved to dismiss the complaint in its entirety.

On June 17, 2021, the Company’s stockholders voted FOR ratification of the April 2020 awards and ratification of the June 2020 awards.

Details of the ratification proposals are set forth in the Company’s Definitive Proxy Statement filed with the SEC on May 3, 2021.

The results of the vote were disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2021.

Should the plaintiff elect to move forward with his claims, the defendants intend to move for summary judgment on ratification grounds while continuing to pursue dismissal.

As such, the Company is not expecting any material estimable financial impact of the plaintiff's claim.

Note 11 – Revenue

Government Contracts and Grants

During the three months ended March 31, 2021, the Company performed research and development under government contracts and grant, license and clinical development agreements.

Revenue primarily consisted of funding under U.S.

government contracts and the Company's funding arrangement with the CEPI to advance the clinical development and manufacturing of NVX-CoV2373.

The Company’s U.S.

government contracts comprise an agreement with Advanced Technology International (“ATI”), the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed (“OWS”) and a contract with the U.S.

Department of Defense (the “DoD”).

The Company’s revenue from CEPI comprises grant and forgivable loan funding.

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latter is repayable if the proceeds from the sales of NVX-CoV2373 to one or more third parties covers the Company’s costs of manufacturing the vaccine, not including manufacturing costs funded by CEPI.

The Company recorded revenue from its government contracts and grants as follows (in thousands):

During the three and six months ended June 30, 2021 and 2020, the Company performed research and development under government contracts and grant, license and clinical development agreements.

The Company's revenue primarily

consisted of funding under U.S.

government contracts and the Company's funding arrangement with CEPI to advance the clinical development and manufacturing of NVX-CoV2373.

The Company recorded revenue as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Government contracts

OWS $ 239,493 $ — $ 603,053 $ —

DoD 1,041 311 20,185 311

Grants and other

CEPI 31,955 34,246 93,516 36,504

— 159 2,628 414

Other 2,071 822 2,407 1,686

Royalties 23,457 — 23,457 —

Total $ 298,017 $ 35,538 $ 745,246 $ 38,915

Government Contracts and Grants

The Company’s U.S.

Department of Defense (the “DoD”).

As of June 30, 2021, the Company's OWS agreement was fully funded up to $ 1.75 billion to support certain activities related to the development of NVX-CoV2373 and the manufacture and delivery of 100 million doses of the vaccine candidate to the U.S.

government has recently instructed the Company to prioritize alignment with the U.S.

Food and Drug Administration on the Company's analytic methods before conducting additional U.S.

manufacturing and further indicated that the U.S.

government will not fund additional U.S.

manufacturing until such agreement has been made.

government also instructed the Company to proceed with work under the OWS Agreement related to all other activities, including ongoing clinical trials and nonclinical studies, regulatory interactions, analytics/assays and characterization of manufactured vaccine and project management.

The Company’s revenue from CEPI comprises grant and forgivable loan funding.

The latter is repayable if the proceeds from the sales of NVX-CoV2373 to one or more third parties cover the Company’s costs of manufacturing the vaccine, not including manufacturing costs funded by CEPI.

Collaboration and License Agreements

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The agreement is in addition to the Company's existing manufacturing arrangement with SK bioscience 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.

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.

Under the collaboration agreement, SK bioscience was granted an exclusive license to develop, manufacture and commercialize NVX-CoV2373 in the Republic of Korea.

SK bioscience expanded 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 the Company, subject to approval by relevant regulatory authority, and sufficient doses of Matrix-M ™ adjuvant to manufacture the remainder of the 40 million doses of NVX-CoV2373 it 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.

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

The Company recognized royalties of $ 23.5 million during the three and six months ended June 30, 2021 related to SK bioscience's sale of the antigen component of NVX-CoV2373 to the Korean government.

In May 2021, the Company entered a non-binding Memorandum of Understanding ("MOU") with the Ministry of Health and Welfare of Korea and SK bioscience to explore further cooperation in the development and manufacturing of vaccines, including NVX-CoV2373.

Under the MOU, the Company agreed to potentially explore the development of new vaccine products with SK bioscience, including COVID-19 variant vaccines, and/or an influenza/COVID-19 combination vaccine.

In February 2021, the Company finalized a collaboration agreement previously announced in August 2020, with Takeda Pharmaceutical Company Limited (“Takeda”) for the exclusive development, manufacturing and commercialization of NVX-CoV2373 in Japan.

Under the agreement, the Company will transfer technology and supply the Matrix-M adjuvant to Takeda, who will manufacture the antigen component of NVX-CoV2373.

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.

The Company 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 the sale of the vaccine.

Under the agreement, the Company will transfer technology and supply the Matrix-M ™ adjuvant to Takeda, which will manufacture the antigen component of NVX-CoV2373.

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.

The Company will be entitled to receive royalties based on the achievement of certain development and commercial milestones, as well as on a portion of net profits from the sale of the vaccine.

Vaccine Supply Agreements

During the first quarter of 2021, the Company entered into various advanced purchase agreements ("APAs"), including an agreement with Her Majesty the Queen in Right of Canada as represented by the Minister of Public Works and Government Services to supply 52 million doses of NVX-CoV2373.

During the six months ended June 30, 2021, the Company entered into various Advanced Purchase Agreements ("APAs"), including an agreement with Her Majesty the Queen in Right of Canada as represented by the Minister of Public Works and Government Services to supply 52 million doses of NVX-CoV2373.

The Company will submit an application for regulatory approval in Canada following its first submission for regulatory approval in another priority market and the Canada authority will provide reasonable assistance to the Company with obtaining such regulatory approval.

As part of the agreement, Canada will have the option to purchase up to an additional 24 million doses.

As part of the agreement, Canada will have the option to purchase up to an additional 24 million doses of NVX-CoV2373.

In February 2021, the Company reached a MOU with the Canadian government to produce NVX-CoV2373 in Canada.

The Company plans 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.

In February 2021, the Company entered into a Memorandum of Understanding ("MOU") with Gavi, the Vaccine Alliance ("Gavi"), to provide 1.1 billion cumulative doses of NVX-CoV2373 for the COVAX Facility.

In April 2021, the Company finalized an APA with Gavi for vaccine supply and global distribution to COVAX Facility (see Note 13).

During the three months ended March 31, 2021, changes in the Company's accounts receivables, unbilled services and deferred revenue balances were as follows (in thousands):

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December 31, 2020 Additions Deductions March 31, 2021

In May 2021, the Company finalized an APA with Gavi, the Vaccine Alliance ("Gavi") building upon its 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.

The Company expects to manufacture and distribute 350 million doses of NVX-CoV2373 to countries participating under the COVAX Facility.

Under a separate purchase agreement with Gavi, Serum Institute of India Private Limited ("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.

The Company expects to deliver doses with antigen and adjuvant manufactured at facilities directly funded under the Company's funding agreement with CEPI.

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

Additionally, the Company may provide additional doses of NVX-CoV2373, to the extent available from CEPI funded manufacturing facilities, in the event that SIIPL cannot materially deliver expected vaccine doses to the COVAX Facility.

Together with SIIPL, the Company expects to initiate delivery of doses following receipt of appropriate regulatory authorizations.

Under the agreement, the Company received an upfront payment from Gavi of $ 350 million during the second quarter of 2021 and expects to receive an additional payment of $ 350 million if the Company secures emergency use listing for NVX-CoV2373 by the World Health Organization ("WHO").

During the six months ended June 30, 2021, changes in the Company's accounts receivables, unbilled services and deferred revenue balances were as follows (in thousands):

December 31, 2020 Additions Deductions June 30, 2021

Accounts receivable $ 262,012 $ 1,309,924 $ ( 1,521,947 ) $ 49,989

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Deferred revenue 273,228 1,192,483 ( 245,638 ) 1,220,073

As of March 31, 2021, the deferred revenue of $ 822.8 million primarily comprised of approximately $ 772 million related to upfront payments under APAs.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied) was $ 5.0 billion as at March 31, 2021.

As of June 30, 2021, the deferred revenue of $ 1.2 billion primarily comprised of approximately $ 1.1 billion related to upfront payments under APAs.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied) was $ 7.0 billion as at June 30, 2021.

The Company expects to fulfil its unsatisfied performance obligations within 12 months.

Note 12 – Subsequent Events

In May 2021, the Company finalized an APA with Gavi, building upon its MOU previously announced in February 2021.

The Company expects to manufacture and distribute 350 million 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.

The Company expects to deliver doses with antigen and adjuvant manufactured at facilities directly funded under the Company's funding agreement with CEPI.

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

Additionally, the Company may provide additional doses, 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, the Company expects 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, the Company expects to receive an upfront payment from Gavi and an additional payment after securing emergency use listing for NVX-CoV2373 by the World Health Organization.

In April 2021, the Company's OWS agreement was amended to fully fund the agreement up to $ 1.75 billion to support certain activities related to the development of NVX-CoV2373 and the manufacture and delivery of the vaccine candidate to the U.S.

OWS is a partnership among components of the U.S.

Department of Health and Human Services and the U.S.

Department of Defense working to accelerate the development, manufacturing and distribution of COVID-19 vaccines, therapeutics, and diagnostics.

In April 2021, the Company announced the pre-print publication of data from a Phase 2b clinical trial in children demonstrating up to 77 % efficacy for a malaria vaccine candidate, R21, created by the University of Oxford that includes the Company's Matrix-M adjuvant and is licensed to SIIPL.

The Company will manufacture and supply the Matrix-M component of R21 to SIIPL.

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

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

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In August 2021, the Company announced that it finalized the terms of an APA with the European Commission, which the parties expect to execute during the third quarter of 2021, for the purchase of up to 100 million initial doses of NVX-CoV2373, with the option of the European Commission to purchase an additional 100 million doses through 2023.

In August 2021, the Company filed regulatory submissions in partnership with SIIPL for emergency use authorization in multiple markets.

Regulatory submissions were filed with the Drugs Controller General of India, as well as regulatory agencies in Indonesia and the Philippines.

In addition to these filings, the Company expects to file a submission to the WHO for emergency use listing in August of 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 1. Financial Statements