Item 1. Financial Statements
Item 1. Financial Statements
NOVAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
June 30,
2021 December 31,
2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,074,880 $ 553,398
Marketable securities — 157,649
Restricted cash 46,398 93,880
Accounts receivable 49,989 262,012
Unbilled services 21,374 —
Prepaid expenses and other current assets 162,351 181,264
Total current assets 2,354,992 1,248,203
Restricted cash 1,461 1,460
Property and equipment, net 213,186 179,954
Intangible assets, net 5,281 5,725
Goodwill 134,294 135,379
Other non-current assets 40,373 11,758
Total assets $ 2,749,587 $ 1,582,479
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 73,995 $ 54,332
Accrued expenses 249,178 142,468
Deferred revenue 1,220,073 273,228
Current portion of finance lease liabilities 98,383 105,862
Other current liabilities 9,887 3,782
Total current liabilities 1,651,516 579,672
Convertible notes payable 322,746 322,035
Non-current finance lease liabilities 9,193 40,083
Other non-current liabilities 20,570 13,480
Total liabilities 2,004,025 955,270
Commitments and contingencies
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 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
747 714
Additional paid-in capital 3,237,085 2,535,476
Accumulated deficit ( 2,449,235 ) ( 1,874,199 )
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 income 4,170 7,024
Total stockholders’ equity 745,562 627,209
Total liabilities and stockholders’ equity $ 2,749,587 $ 1,582,479
The accompanying notes are an integral part of these financial statements.
1
Table of Contents
NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
(unaudited)
For the Three Months Ended
June 30, For the Six Months Ended
June 30,
2021 2020 2021 2020
Revenue:
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
Expenses:
Research and development 570,685 34,846 1,163,356 51,741
General and administrative 73,161 17,719 136,351 27,098
Total expenses 643,846 52,565 1,299,707 78,839
Loss from operations ( 345,829 ) ( 17,027 ) ( 554,461 ) ( 39,924 )
Other income (expense):
Investment income 369 297 731 732
Interest expense ( 5,968 ) ( 3,403 ) ( 10,807 ) ( 6,806 )
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 )
Income tax expense 3,548 — 6,565 —
Net loss $ ( 352,317 ) $ ( 17,521 ) $ ( 575,036 ) $ ( 43,385 )
Basic and diluted net loss per share $ ( 4.75 ) $ ( 0.30 ) $ ( 7.82 ) $ ( 0.84 )
Basic and diluted weighted average number of common shares outstanding 74,118 58,618 73,580 51,401
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
For the Three Months Ended
June 30, For the Six Months Ended
June 30,
2021 2020 2021 2020
Net loss $ ( 352,317 ) $ ( 17,521 ) $ ( 575,036 ) $ ( 43,385 )
Other comprehensive income (loss):
Net unrealized losses on marketable securities available-for-sale, net of reclassifications — 176 ( 9 ) 44
Foreign currency translation adjustment 4,527 1,115 ( 2,845 ) ( 731 )
Other comprehensive loss 4,527 1,291 ( 2,854 ) ( 687 )
Comprehensive loss $ ( 347,790 ) $ ( 16,230 ) $ ( 577,890 ) $ ( 44,072 )
The accompanying notes are an integral part of these financial statements.
2
Table of Contents
NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Three Months Ended June 30, 2021 and 2020
(in thousands, except share information)
(unaudited)
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Treasury
Stock Other
Comprehensive
Income (Loss) Stockholders'
Equity
(Deficit)
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.
3
Table of Contents
NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Six Months Ended June 30, 2021 and 2020
(in thousands, except share information)
(unaudited)
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Treasury
Stock Other
Comprehensive
Income (Loss) Stockholders'
Equity
(Deficit)
Shares Amount
Balance at December 31, 2020 71,350,365 $ 714 $ 2,535,476 $ ( 1,874,199 ) $ ( 41,806 ) $ 7,024 $ 627,209
Non-cash stock-based compensation — — 106,183 — — 106,183
Stock issued under incentive programs 743,019 7 30,593 — ( 5,399 ) — 25,201
Issuance of common stock, net of issuance costs of $ 7,292
2,578,967 26 564,833 — — — 564,859
Unrealized loss on marketable securities — — — — — ( 9 ) ( 9 )
Foreign currency translation adjustment — — — — — ( 2,845 ) ( 2,845 )
Net loss — — — ( 575,036 ) — — ( 575,036 )
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
Stock issued under incentive programs 350,054 3 9,007 — ( 55 ) — 8,955
Issuance of common stock, net of issuance costs of $ 5,145
28,513,226 285 393,478 — — — 393,763
Unrealized loss on marketable securities — — — — — 44 44
Foreign currency translation adjustment — — — — — ( 731 ) ( 731 )
Net loss — — — ( 43,385 ) — — ( 43,385 )
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.
4
Table of Contents
NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June 30,
2021 2020
Operating Activities:
Net loss $ ( 575,036 ) $ ( 43,385 )
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization 4,727 1,905
Non-cash stock-based compensation 106,183 11,897
Right-of-use assets written off 12,707 —
Other 3,855 ( 1,081 )
Changes in operating assets and liabilities:
Receivables, prepaid expenses and other assets 193,004 ( 61,079 )
Accounts payable and accrued expenses 115,212 27,094
Deferred revenue 946,845 157,173
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 )
Proceeds from maturities and sale of marketable securities 159,807 29,750
Net cash provided by (used in) investing activities 128,708 ( 245,946 )
Financing Activities:
Net proceeds from sale of preferred stock — 199,822
Net proceeds from sales of common stock 564,859 393,763
Net proceeds from the exercise of stock-based awards 26,903 8,955
Finance lease payments ( 53,618 ) —
Net cash provided by financing activities 538,144 602,540
Effect of exchange rate on cash, cash equivalents and restricted cash ( 348 ) 276
Net increase in cash, cash equivalents and restricted cash 1,474,001 449,394
Cash, cash equivalents and restricted cash at beginning of period 648,738 82,180
Cash, cash equivalents and restricted cash at end of period $ 2,122,739 $ 531,574
Supplemental disclosure of non-cash activities:
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:
Cash interest payments $ 10,046 $ 6,094
Cash paid for income taxes $ 3,017 $ —
The accompanying notes are an integral part of these financial statements.
5
Table of Contents
NOVAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(unaudited)
Note 1 – Organization
Novavax, Inc. (“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.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. 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 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. GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).
The unaudited consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries, including Novavax AB and Novavax CZ. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements are presented in U.S. dollars. The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona), and the functional currency of Novavax CZ, which is located in the Czech Republic, is the local currency (Czech Koruna). The translation of assets and liabilities of these subsidiaries to U.S. dollars is made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of the statement of operations data is made at the average exchange rate in effect for the period. The translation of operating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction. Translation gains and losses are recognized as a component of accumulated other comprehensive 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. Results for this or any interim period are not necessarily indicative of results for any future interim period or for the entire year. The Company operates in one business segment.
6
Table of Contents
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents consist of the following at (in thousands):
June 30,
2021 December 31,
2020
Cash $ 82,563 $ 122,312
Money market funds 238,028 96,116
Government-backed securities 57,250 44,250
Treasury securities 199,990 44,052
Corporate debt securities 1,386,056 246,668
Agency securities 110,993 —
Cash and cash equivalents $ 2,074,880 $ 553,398
Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature.
Marketable Securities
The Company invests in marketable securities that generally consist of debt securities with maturities greater than three months from the date of purchase that include commercial paper, government-backed securities, treasury securities, corporate notes and agency securities. Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company's ability and intent to hold the investment to maturity.
Interest and dividend income are recorded when earned and included in investment income in the consolidated statements of operations. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations. The specific identification method is used in computing realized gains and losses on the sale of the Company's securities.
The Company classifies its marketable securities with readily determinable fair values as “available-for-sale.” Investments in securities that are classified as available-for-sale are measured at fair market value in the consolidated balance sheets, and unrealized gains and losses on marketable securities are reported as a separate component of stockholders' equity (deficit) until realized. Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company's ability to hold the securities, including whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer's financial condition and business outlook to predict whether the loss in value is other-than-temporary. Realized gains and losses and declines in value determined to be other-than-temporary are recorded as other income (expense) in the consolidated statements of operations.
Restricted Cash
The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements, payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreements and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases. The Company will utilize the CEPI and BMGF funds as it incurs expenses for services performed under these agreements.
7
Table of Contents
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. 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.
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):
June 30,
2021 December 31,
2020
Cash and cash equivalents $ 2,074,880 $ 553,398
Restricted cash current 46,398 93,880
Restricted cash non-current 1,461 1,460
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.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes . Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards.
The Company has historically generated significant federal, state and foreign tax net operating losses, which may be subject to limitation in future periods. Management has fully reserved the related deferred tax assets with a valuation allowance in the current reporting period as more likely than not the related benefit will not be realized. The Company is currently subject to examination in all open tax years.
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 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.
8
Table of Contents
Recent Accounting Pronouncements
Not Yet Adopted
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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts in an entity’s own equity. Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It will also remove certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and will simplify the diluted earnings per share calculation for convertible instruments. ASU 2020-06 will be effective January 1, 2022 for the Company and may be applied using a full or modified retrospective approach. 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.
Note 3 – Fair Value Measurements
The following table represents the Company's fair value hierarchy for its financial assets and liabilities (in thousands):
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
Money market funds(1) $ 238,028 $ — $ — $ 96,116 $ — $ —
Government-backed securities(1) — 57,250 — — 44,250 —
Treasury securities(2) — 199,990 — — 54,088 —
Corporate debt securities(3) — 1,386,056 — — 373,681 —
Agency securities(4) — 110,993 — — 20,600 —
Total cash equivalents and marketable securities $ 238,028 $ 1,754,289 $ — $ 96,116 $ 492,619 $ —
Liabilities
Convertible notes payable $ — $ 580,405 $ — $ — $ 407,238 $ —
(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 six months ended June 30, 2021 and 2020, the Company did not have any transfers between levels .
9
Table of Contents
Note 4 – Marketable Securities
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
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
Treasury securities $ — $ — $ — $ — $ 10,038 $ — $ ( 2 ) $ 10,036
Corporate debt securities — — — — 127,003 13 ( 3 ) 127,013
Agency securities — — — — 20,599 1 — 20,600
Total marketable securities $ — $ — $ — $ — $ 157,640 $ 14 $ ( 5 ) $ 157,649
The primary objective of the Company's investment policy is the preservation of capital; 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. 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
Goodwill
The change in the carrying amounts of goodwill for the six months ended June 30, 2021 was as follows (in thousands):
Amount
Balance at December 31, 2020 $ 135,379
Currency translation adjustments ( 1,085 )
Balance at June 30, 2021 $ 134,294
Identifiable Intangible Assets
Purchased intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):
June 30, 2021 December 31, 2020
Gross
Carrying
Amount Accumulated
Amortization Intangible
Assets, Net Gross
Carrying
Amount Accumulated
Amortization Intangible
Assets, Net
Finite-lived intangible assets:
Proprietary adjuvant technology $ 8,741 $ ( 3,460 ) $ 5,281 $ 9,099 $ ( 3,374 ) $ 5,725
Collaboration agreements 3,947 ( 3,947 ) — 4,109 ( 4,109 ) —
Total identifiable intangible assets $ 12,688 $ ( 7,407 ) $ 5,281 $ 13,208 $ ( 7,483 ) $ 5,725
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):
Year Amount
2021 (remainder) $ 219
2022 437
2023 437
2024 437
2025 437
2026 437
10
Table of Contents
Note 6 - Leases
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
Convertible Notes
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 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):
June 30,
2021 December 31,
2020
Principal amount of Notes $ 325,000 $ 325,000
Unamortized debt issuance costs ( 2,254 ) ( 2,965 )
Total convertible notes payable $ 322,746 $ 322,035
The interest expense incurred in connection with the Notes consisted of the following (in thousands):
Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Coupon interest at 3.75 %
$ 3,047 $ 3,047 $ 6,094 $ 6,094
Amortization of debt issuance costs 356 356 712 712
Total interest expense on Notes $ 3,403 $ 3,403 $ 6,806 $ 6,806
11
Table of Contents
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
Equity Plans
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 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. The 2015 Plan will expire on March 4, 2025.
The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.
The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of ten years and may be or were granted with an exercise price that is no less than 100 % of the fair market value of the Company's common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years .
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 six months ended June 30, 2021:
2015 Plan 2005 Plan
Stock
Options and SARs Weighted-Average
Exercise
Price Stock
Options Weighted-Average
Exercise
Price
Outstanding at January 1, 2021 5,420,463 $ 38.05 214,186 $ 88.11
Granted 47,458 $ 148.49 — $ —
Exercised ( 598,441 ) $ 44.14 ( 35,401 ) $ 106.49
Canceled ( 50,881 ) $ 121.33 — $ —
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:
12
Table of Contents
Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Weighted average Black-Scholes fair value of stock options granted $ 166.66 $ 77.41 $ 131.66 $ 76.99
Risk-free interest rate 0.6 %- 1.1 %
0.3 %- 0.6 %
0.5 %- 1.1 %
0.3 %- 1.5 %
Dividend yield — % — % — % — %
Volatility 126.2 %- 142.0 %
116.0 %- 151.5 %
124.7 %- 142.0 %
116.0 %- 151.5 %
Expected term (in years) 4.1 - 6.1
3.9 - 7.6
4.1 - 6.1
3.9 - 7.6
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. 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 June 30, 2021. 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 six months ended June 30, 2021 and 2020 was approximately $ 115 million and $ 8 million, respectively.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan, as amended (the “ESPP”), was approved at the Company's annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 600,000 shares of common stock to be purchased. 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 June 30, 2021, there were 212,876 shares available for issuance under the ESPP.
The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Three Months Ended
June 30, Six Months Ended
June 30,
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 %
1.5 %- 2.6 %
0.1 %
1.5 %- 2.6 %
Dividend yield — % — % — % — %
Volatility 120.4 %- 159.4 %
66.6 %- 150.9 %
120.4 %- 159.4 %
66.6 %- 154.4 %
Expected term (in years) 0.5 - 2.0
0.5 - 2.0
0.5 - 2.0
0.5 - 2.0
13
Table of Contents
Restricted Stock Units
The following is a summary of restricted stock units activity for the six months ended June 30, 2021:
Number of
Shares Per Share
Weighted-
Average
Fair Value
Outstanding and Unvested at January 1, 2020 1,044,980 $ 72.59
Restricted stock units granted 134,099 $ 178.71
Restricted stock units vested ( 66,457 ) $ 79.20
Restricted stock units forfeited ( 17,023 ) $ 128.59
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
June 30,
2021 2020 2021 2020
Research and development $ 24,779 $ 4,098 $ 48,569 $ 6,005
General and administrative 28,344 3,834 57,614 5,892
Total stock-based compensation expense $ 53,123 $ 7,932 $ 106,183 $ 11,897
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 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 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
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
14
Table of Contents
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
June 30,
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
BMGF
— 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. 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”). 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. 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. The U.S. government also instructed the Company to proceed with work under the OWS Agreement related to all other activities, including ongoing clinical trials and nonclinical studies, regulatory interactions, analytics/assays and characterization of manufactured vaccine and project management. 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
In February 2021, the Company finalized an expanded collaboration and license agreement with SK bioscience to manufacture and commercialize NVX-CoV2373 for sale to the government of Korea. Concurrently, SK bioscience finalized an advance purchase agreement with the Korean government to supply 40 million doses of NVX-CoV2373 to the Republic of Korea beginning in 2021. The agreement is in addition to the Company's existing manufacturing arrangement with SK bioscience entered into in August 2020. Under the collaboration agreement, SK bioscience was granted an exclusive license to develop, manufacture and commercialize NVX-CoV2373 in the Republic of Korea. SK bioscience 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 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, which will manufacture the antigen component of NVX-CoV2373. Takeda will receive funding from the Government
15
Table of Contents
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 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 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 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
Unbilled services — 499,239 ( 477,865 ) 21,374
Deferred revenue 273,228 1,192,483 ( 245,638 ) 1,220,073
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 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.
16
Table of Contents