NOVAVAX INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Any statements in the discussion below and elsewhere in this Quarterly Report about expectations, beliefs, plans, objectives, assumptions or future events or performance of Novavax, Inc. (“Novavax,” together with its wholly owned subsidiaries Novavax AB and Novavax CZ, the “Company,” “we” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements about our capabilities, goals, expectations regarding future revenue and expense levels and capital raising activities; our operating plans and prospects; potential market sizes and demand for our product candidates; the efficacy, safety and intended utilization of our product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the development of our preclinical product candidates; our expectations related to enrollment in our clinical trials; the conduct, timing and potential results from clinical trials and other preclinical studies; plans for and potential timing of regulatory filings; our expectation of manufacturing capacity, timing, production, distribution and delivery for NVX-CoV2373 by us and our partners; our expectations with respect to the anticipated ongoing development and potential commercialization or licensure of NVX-CoV2373 and NanoFlu™; the expected timing, content and outcomes of regulatory actions; funding from the U.S. government partnership formerly known as Operation Warp Speed (“OWS”), the U.S. Department of Defense (“DoD”) and the Coalition for Epidemic Preparedness Innovations (“CEPI”), and payments from the Bill & Melinda Gates Foundation (“BMGF”); funding under our advance purchase agreements and supply agreements; our available cash resources and usage and the availability of financing generally; plans regarding partnering activities and business development initiatives; and other matters referenced herein. Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” “aim,” or “assume,” the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations about the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements involve estimates, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, and, therefore, you should not place considerable reliance on any such forward-looking statements. Such risks and uncertainties include, without limitation, challenges satisfying, alone or together with partners, various safety, efficacy, and product characterization requirements, including those related to process qualification and assay validation, necessary to satisfy each applicable regulatory authority, like the U.S. Food and Drug Administration (“FDA”), World Health Organization (“WHO”), United Kingdom (“UK”) Medicines and Healthcare Products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”), the Republic of Korea’s Ministry of Food and Drug Safety (“MFDS”), or Japan’s Ministry of Health, Labour and Welfare (“MHLW”); difficulty obtaining scarce raw materials; resource, including human capital and manufacturing capacity, constraints on our ability to pursue these regulatory pathways, alone or with partners, in multiple jurisdictions simultaneously, leading to staggering of regulatory filings and potential regulatory actions; challenges meeting contractual requirements under agreements with multiple commercial, governmental, and other entities; and other risks and uncertainties identified in Part II, Item 1A “Risk Factors” of this Quarterly Report and in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K, which may be detailed and modified or updated in other documents filed with the United States Securities and Exchange Commission (“SEC”) from time to time, and are available at www.sec.gov and at www.novavax.com. You are encouraged to read these filings as they are made. We cannot guarantee future results, events, level of activity, performance or achievement. Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate or materially different from actual results. Further, any forward-looking statement speaks only as of the date when it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Overview Novavax, Inc., together with our wholly-owned subsidiaries, Novavax AB and Novavax CZ, is a biotechnology company promoting improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs. Our vaccine candidates, including both our coronavirus vaccine candidate (“NVX-CoV2373”) and our seasonal quadrivalent influenza vaccine candidate (“NanoFlu ™ ”), are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis. We believe that our protein-subunit-based candidates elicit differentiated immune responses that may be more efficacious than naturally occurring immunity or other vaccine approaches. Additionally, our Matrix-M ™ adjuvant has been shown to enhance functional immune responses and has been well-tolerated in multiple clinical trials. To date, we have formulated many of the vaccine candidates in our pipeline with our Matrix-M ™ adjuvant, including NVX-CoV2373 and NanoFlu ™ . 19 Table of Contents Matrix-M ™ Adjuvant Our Matrix-M™ adjuvant has been a key differentiator within our platform. Our proprietary Matrix-M ™ adjuvant has demonstrated potent and well-tolerated efficacy by stimulating the entry of antigen presenting cells (“APCs”) into the injection site and enhancing antigen presentation in local lymph nodes, which in turn activates T-cell, B-cell, and APC populations, thereby boosting immune response. Matrix-M ™ adjuvant has been shown to increase neutralizing antibodies and induce long-lasting memory B cells, which enhances B-cell immunity and recruits and increases the frequency of CD4+ and CD8+ T-cells to enhance T-cell immunity in preclinical models. The potent immune-stimulating mechanism of action enables a lower dose of antigen required to achieve the desired immune response, ultimately contributing to increased supply and manufacturing capacity. These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile. We continue to evaluate commercial opportunities for the use of our Matrix-M TM adjuvant alongside vaccine antigens produced by other manufacturers. Our Matrix-M ™ adjuvant is being evaluated in combination with several malaria vaccine candidates, including in a Phase 3 trial for R21, a malaria vaccine candidate created by the Jenner Institute, University of Oxford. The University of Oxford has partnered with SIIPL for commercial development of R21 and has granted them a license for the vaccine. We expect to manufacture and supply the Matrix-M ™ adjuvant component of R21 to SIIPL. We believe the use of our Matrix-M ™ adjuvant in R21 may present a significant commercial opportunity for our adjuvant, pending possible licensure. Near-term Clinical Development Pipeline Our development pipeline encompasses vaccine candidates addressing therapeutic areas including coronavirus, seasonal influenza, respiratory syncytial virus (“RSV”) and other emerging infectious diseases. At the forefront of our pipeline is our COVID-19 vaccine candidate, NVX-CoV2373. We advanced NVX-CoV2373 through two Phase 3 clinical trials, which demonstrated high efficacy against both the original COVID-19 strain and commonly circulating COVID-19 variants of concern ("VoC"), while maintaining a favorable safety profile. We also advanced our NanoFlu ™ vaccine program through a Phase 3 clinical trial, which demonstrated positive top-line results and achieved statistical significance in key secondary endpoints. We recently initiated a trial of a combination vaccine consisting of NanoFlu ™ and NVX-CoV2373 and remain interested in further development of the respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”). RSV F Vaccine may be considered for further development. We remain focused on bringing our NVX-CoV2373 vaccine candidate to market following global regulatory authorizations. Through ongoing crossover and booster studies in our clinical trials, as well as the development of our COVID-19 variant strain vaccine candidates, we continue to collect data to characterize and optimize vaccine performance. We expect to leverage these clinical insights to advance the use of our COVID-19 vaccine for both primary vaccination around the globe and to further develop a booster strategy amidst the ongoing and evolving COVID-19 pandemic. Although NVX-CoV2373 and NanoFlu ™ are our near-term priorities, we remain optimistic that the additional programs in our pipeline, including our vaccine candidates for RSV and other emerging infectious diseases, present viable opportunities for future development. The pipeline chart below summarizes the clinical and preclinical development programs that we are focused on in the near-term. We will continue to evaluate areas of development focus over time. 20 Table of Contents (1) Supported by funding from OWS, DoD, CEPI and BMGF (2) PREVENT-19, a Phase 3 clinical trial in the U.S. and Mexico; Ongoing PREVENT-19 pediatric expansion in the U.S.; Phase 3 clinical trial in the UK Coronavirus NVX-CoV2373 Clinical Development Our lead vaccine candidate, NVX-CoV2373 has progressed through multiple clinical trials, including two Phase 3 trials, one Phase 2b trial, and one Phase 1/2 trial. We have completed crossover arms in our Phase 3 UK, Phase 2b South Africa, PREVENT-19 Phase 3 U.S. and Mexico, and PREVENT-19 pediatric expansion trials. Through our clinical development program to date, we have established a dose of 5 micrograms of NVX-CoV2373 with Matrix-M ™ adjuvant for late-stage development. We have collected data that indicates a reassuring safety profile and statistically significant levels of efficacy for NVX-CoV2373 against the original COVID-19 strain and commonly circulating VOC. A summary and status of our clinical development of NVX-CoV2373 by trial is as follows: PREVENT-19 Phase 3 U.S. and Mexico PREVENT-19 was a randomized, placebo-controlled, observer-blinded Phase 3 trial to evaluate the efficacy, safety, and immunogenicity of NVX-CoV2373 in 29,960 participants aged 18 years or older across 119 sites in the U.S. and Mexico. Enrollment for PREVENT-19 emphasized recruiting high-risk groups most impacted by COVID-19. In October 2021, the final analysis of our PREVENT-19 Phase 3 trial in the U.S. and Mexico was submitted for peer review and is available ahead of publication via the preprint server on medRxiv. The analysis, previously announced in June 2021, was conducted on events accrued prior to participants receiving crossover vaccine. NVX-CoV2373 achieved its primary endpoint with an overall efficacy of 90.4% despite the majority (82%) of the sequenced cases of illness being attributed to Variants of Interest and VoC. Notably, NVX-CoV2373 demonstrated 100% protection against moderate and severe disease, including those caused by variants. PREVENT-19 was conducted with support and funding from OWS. In August 2021, the U.S. Centers for Disease Control and Prevention (“CDC”) provided guidance for our PREVENT-19 participants in the U.S. stating that they meet the criteria to be considered fully vaccinated two weeks after completion of the active vaccine series. With the CDC’s validation, we expect our participants to be considered fully vaccinated and in compliance with mandated vaccination policies. PREVENT-19 Pediatric Expansion 21 Table of Contents In June 2021, we completed enrollment of the pediatric expansion of our PREVENT-19 Phase 3 trial in the U.S. that was initiated in April 2021. The pediatric expansion is a placebo-controlled trial to evaluate efficacy, safety, and immunogenicity of NVX-CoV2373 in 2,248 adolescent participants aged 12 to 17 years across up to 75 sites in the U.S. Participants randomly received either the vaccine candidate or placebo in two doses, administered 21 days apart. Two-thirds of participants received intramuscular injections of the vaccine and one-third received placebo. All primary and crossover doses have been administered. Participants are being monitored for safety for up to two years following the final administered dose. We expect to have a regulatory package available for global submission in the first quarter of 2022. The subsequent pediatric clinical development plan has been agreed to by the FDA, MHRA and European Medicines Agency (“EMA”) and be initiated after this adolescent study reads out. Phase 3 UK In June 2021, the final analysis of our Phase 3 UK trial was published in the New England Journal of Medicine . The publication of the final analysis highlights the robust safety and efficacy data for NVX-CoV2373. The final analysis confirmed 89.7% overall efficacy, with over 60% of the cases caused by the Alpha (B.1.1.7) variant strain. The analysis also confirmed 96.4% efficacy against non-Alpha (non-B.1.1.7) variant strains, which represents strains most similar to the original COVID-19 virus. The trial was conducted in partnership with the UK government Vaccines Taskforce (“VTF”) and led by researchers at St George’s, University of London and St George’s Hospital, London. In June 2021, the National Health Service (“NHS”), UK government VTF and National Institute for Health Research determined participants in our Phase 3 UK trial may be considered fully vaccinated under the standard NHS program. Phase 3 UK Influenza Co-Administration Sub-Study In October 2021, the final analysis of our Phase 3 UK influenza co-administration sub-study was accepted by a peer-reviewed journal and is available ahead of publication via the preprint server on medRxiv. Previously, we announced data from this sub-study in June 2021. In this sub-study, 431 participants from our Phase 3 UK trial received an approved seasonal influenza vaccine (Seqirus, adjuvanted, trivalent seasonal influenza vaccine or a cell-based quadrivalent seasonal influenza vaccine). Approximately half of the participants in the study were co-vaccinated with NVX-CoV2373, while the remainder received placebo. Results demonstrated a robust immune response and a favorable safety and reactogenicity profile. Immunogenicity of the influenza vaccine was preserved with concomitant administration, while a modest decrease in the immunogenicity of NVX-CoV2373 was found. There was an adequate number of participants aged 18 to 64 years to confirm an efficacy trend of 87.5% against COVID-19. The co-administration sub-study represents the first study of a SARS-CoV-2 vaccine candidate and an approved influenza vaccine, and was led by researchers at St George’s, University of London and St George’s Hospital, London. NVX-CoV2373 Booster Studies Novavax-Led Booster Study In August 2021, we announced data from our six-month booster study in the Phase 2 portion of our U.S. and Australia Phase 1/2 trial, which we initiated in March 2021. Select participants in the 5 microgram dose cohort from the Phase 2 portion of the Phase 1/2 trial received a third 5 microgram dose (booster dose) at six months to examine the functional immune response of our vaccine candidate. Analysis of sera from primary vaccination series notably showed cross-reactive functional antibodies to Alpha (B.1.1.7), Beta (B.1.351) and Delta (B.1.617.2) variant spike proteins, all of which increased 6- to 10-fold with the booster dose. In September 2021, we initiated a twelve-month booster dose for select participants in the Phase 2 portion of our U.S. and Australia Phase 1/2 trial. In this booster study, select participants in the 5 microgram dose cohort from our six-month booster study in the Phase 2 portion of the Phase 1/2 trial will receive an additional 5 microgram dose (a booster dose) at twelve months to examine the functional immune response of our vaccine candidate. NVX-CoV2373: Partner-Led Vaccine Mix and Match Clinical Studies We recognize the importance of exploring NVX-CoV2373 alongside the use of other COVID-19 vaccine manufacturers. We continue to develop our booster strategy through our participation in multiple partner-led trials evaluating the potential for mixed vaccine regimens in primary and booster settings. A summary and status of our participation in partner-led vaccine interchangeability trials follows: 22 Table of Contents NVX-CoV2373 Regulatory and Licensure We have completed multiple regulatory submissions and expect to complete additional filings. We are in constant discussions with regulatory authorities globally for our completed and anticipated submissions. We continue to work closely with governments, regulatory authorities, and non-governmental organizations in our commitment to ensuring equitable global access to our COVID-19 vaccine. Below is a summary and status of our regulatory processes through the date of filing this Form 10-Q. In November 2021, in partnership with Serum Institute of India Pvt. Ltd. (“SIIPL”), we received emergency use authorization (“EUA”) from the National Agency of Drug and Food Control of the Republic of Indonesia, or Badan Pengawas Obat dan Makanan, following the August 2021 regulatory submission made by SIIPL with our support. EUA was granted for our recombinant nanoparticle protein-based vaccine with our Matrix-M TM adjuvant, which will be manufactured and marketed in Indonesia by SIIPL under the brand name COVOVAX™. Indonesia contracted with SIIPL for the purchase of 50 million doses of COVOVAX™. This marks the first regulatory authorization worldwide of a protein-based COVID-19 vaccine based on Phase 3 clinical data demonstrating efficacy and a favorable safety profile. In November 2021, we completed the rolling submission of all modules required by the EMA to support final regulatory review. The final step to complete the application in the European Union will be an invitation from EMA to file for conditional marketing authorization ("CMA"). In October and November 2021, we completed rolling regulatory submissions in key markets for NVX-CoV2373. We filed for CMA with the UK MHRA, leveraging our manufacturing partnership with SIIPL. Additionally, we filed for provisional approval with Australia’s Therapeutic Goods Administration, authorization with Health Canada, and provisional approval with New Zealand Medicines and Medical Devices Authority and the WHO for emergency use listing ("EUL"). In partnership with SIIPL, in August 2021, for our COVID-19 vaccine that will be manufactured and commercialized with SIIPL, we filed regulatory submission for EUA with the Drugs Controller General of India, regulatory agencies in Indonesia and the Philippines, and EUL with the WHO. The grant of EUL by the WHO is a prerequisite for exports to numerous countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. These filings mark the first protein-based COVID-19 vaccine submitted in these markets. In the U.S, we are in continued discussions with the FDA about submission of our investigational new drug application for NVX-CoV2373. We continue to address and complete various Chemistry, Manufacturing and Controls ("CMC") requirements, which ensure that our manufacturing processes are in accordance with regulatory standards. As of November 2021, we validated the potency and purity of our assays and are in the final process of testing our product using these assays. We expect to submit the complete regulatory package to the FDA by the end of 2021. 23 Table of Contents COVID-19 Vaccine Funding We have secured critical funding throughout 2020 and into 2021 to support the development of NVX-CoV2373. Through the date of filing this Form 10-Q, funding for NVX-CoV2373 encompasses over $2 billion from sources including the BMGF, CEPI, the DoD, and OWS. In April 2021, our Base Agreement and a Project Agreement (together, as amended and supplemented, the “OWS Agreement”) entered into with Advanced Technology International, Inc., the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with OWS, was amended to fully fund the agreement up to $1.75 billion to support certain activities related to the development of NVX-CoV2373. This includes the manufacture and delivery of 100 million doses of NVX-CoV2373 to the U.S. government. We expect this funding will assist in rapidly developing our large-scale manufacturing capacity and transitioning into ongoing production, including the capability to stockpile and distribute large quantities of NVX-CoV2373 for use in clinical trials and potentially for commercial sale, if authorized for emergency use or licensed. The OWS Agreement is funding the late-stage clinical studies necessary to determine the safety and efficacy of NVX-CoV2373, including PREVENT-19. Funding under the OWS Agreement is expected to support our plans to file submissions for EUA and licensure with the FDA. Accepted analytical methods that we can use to demonstrate our vaccine’s purity, potency and consistent lot manufacturing are critical to attaining licensure in all the territories we intend to sell our vaccine. In the U.S., these analytical methods will be reviewed and approved by the FDA. As of September 30, 2021, the Company's OWS agreement was amended to increase the contract ceiling by $52.9 million for a revised total of $1.8 billion. The agreement’s authorized funding and scope remains unchanged at $1.75 billion for support of 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. In July 2021, the U.S. government instructed us to prioritize alignment with the FDA on our 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 us 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. A summary and status of our historical COVID-19 funding developments follows: NVX-CoV2373 Manufacturing and Supply We have established a global manufacturing and supply chain to support the commercialization of NVX-CoV2373. With significant progress made throughout 2020 and through the third quarter of 2021, our global supply chain spans over ten countries and includes Novavax-owned facilities in the Czech Republic and Sweden, as well as partnerships with contract 24 Table of Contents manufacturing organizations around the world. In the third quarter of 2021, we remained focused on readying our global supply chain for commercialization to ensure we will promptly deliver NXV-CoV2373 upon anticipated regulatory authorizations. We have reached our global manufacturing capacity of NVX-CoV2373 of approximately 100 million doses per month as of the end of the third quarter of 2021. We anticipate the remainder of our manufacturing capacity will be ready by the end of the fourth quarter of 2021, which we expect will support total global manufacturing capacity of approximately 150 million doses per month, including doses manufactured by our partner SIIPL. We expect to have manufacturing capacity in excess of 2 billion annual doses in 2022. NVX-CoV2373 Manufacturing Agreements In October 2021, we entered into a supply agreement with SIIPL and Serum Life Sciences Limited (“SLS"), an affiliate of SIIPL, for the manufacture of NVX-CoV2373. In October 2021, we also entered into a contract development manufacture agreement with SLS, where SLS will manufacture and supply finished vaccine product to us using antigen drug substance and Matrix-M™ adjuvant supplied by us. In October 2021, we entered into a contract manufacturing agreement with Mabion S.A. (“Mabion”) for the large-scale manufacturing of NVX-CoV2373 through 2026. This agreement follows the successful completion of technology transfer to Mabion for antigen production of NVX-CoV2373. Following this agreement, we anticipate rapid scale-up in manufacturing of NVX-CoV2373 at Mabion’s Good Manufacturing Practice-certified facility located near Warsaw, Poland. In September 2021, Takeda Pharmaceutical Company Limited (“Takeda”) finalized an agreement with the government of Japan’s Ministry of Health, Labour and Welfare (“MHLW”) for the purchase of 150 million doses of NVX-CoV2373. The announcement followed a recent update from MHLW on its ongoing efforts to secure coronavirus vaccine for the citizens of Japan. These efforts include vaccine procurement by Takeda based on technology transfer from us, with Takeda in the process of manufacturing implementation at its facility, pursuant to the terms of the collaboration and license agreement we entered into with Takeda in February 2021, under which we granted Takeda an exclusive license to develop, manufacture and commercialize NVX-CoV2373 in Japan. Under the agreement, Takeda purchases Matrix-M™ adjuvant from us to manufacture doses of finished NVX-CoV2373, and we are entitled to receive payments from Takeda based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of NVX-CoV2373. Distribution of Novavax’ vaccine in Japan by Takeda is expected to begin in 2022. Takeda anticipates the capacity to manufacture 250 million doses of NVX-CoV2373 per year. In August 2021, we extended our partnership with FUJIFILM Diosynth Biotechnologies through an agreement for long-term commercial manufacturing of NVX-CoV2373 through 2025. Under this agreement, FUJIFILM Diosynth Biotechnologies will continue to manufacture the antigen component of NVX-CoV2373 at its sites in Morrisville, North Carolina, College Station, Texas, and Billingham, UK. This development follows a previous manufacturing agreement with FUJIFILM Diosynth Biotechnologies, which we entered into in July 2020. NVX-CoV2373 Supply Agreements We expect our global supply chain will enable us to deliver upon our supply commitments around the world. We have entered into advance purchase agreements (referred to as "APAs" or "supply agreements" throughout this Form 10-Q), as well as multiple supply and license agreements with strategic partners. The APAs typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment. Such upfront payments generally become non-refundable upon our achievement of certain development and commercial milestones. Certain of the APAs and supply agreements may be terminated by the counterparty if we do not timely achieve requisite regulatory approval for NVX-CoV2373 in the relevant jurisdictions under such agreements. If the APAs were terminated, the refundable portion of the upfront payments will be repaid. In August 2021, we executed an APA with the European Commission acting on behalf of various European Union member states, to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the European Commission to purchase an additional 100 million doses through 2023. Seasonal Influenza NanoFlu ™ Vaccine Program (Older Adults) In September 2021, the final analysis of the primary endpoint of our pivotal Phase 3 clinical trial for NanoFlu TM was published in The Lancet Infectious Diseases . We previously announced that NanoFlu TM achieved the trial’s primary endpoints, 25 Table of Contents demonstrating non-inferior immunogenicity to Fluzone® Quadrivalent against all four influenza virus strains included in the vaccine, while also showing both enhanced wild-type hemagglutination-inhibiting antibody responses against homologous strains (22-66% increased) and six heterologous A/H3N2 strains (34-46% increased) as compared to Fluzone® Quadrivalent. Additionally, NanoFlu TM showed potent induction of polyfunctional antigen-specific CD4+ T-cells against A(H3N2) and B/Victoria strains, with a 126–189% increase in various post vaccination cell-mediated immunity markers as compared to Fluzone® Quadrivalent. Combination Vaccines Our NanoFlu ™ vaccine team remains focused on advancing combination vaccine candidates. With the ongoing development of NanoFlu ™ , NVX-CoV2373 and our RSV F Vaccine, a strong rationale exists for developing combination respiratory vaccines designed to protect susceptible populations against these diseases. Phase 1/2 Clinical Trial of COVID-NanoFlu™ Combination Vaccine In October 2021, we completed enrollment of our Phase 1/2 study in Australia, which we initiated in September 2021. The trial enrolled 642 healthy adults aged 50 to 70 years across 10 sites and will evaluate the safety, tolerability and immune response of a combination vaccine using NanoFlu™ and NVX-CoV2373, combined with our Matrix-M™ adjuvant. Participants have been either previously infected with the SARS-CoV-2 virus that causes COVID-19 or vaccinated through an authorized vaccine at least eight weeks prior to enrollment. All participants will be randomly assigned to cohorts to evaluate multiple formulations and will be administered doses on Day 0 and again at Day 56. Data from this trial are expected in the first half of 2022. Sales of Common Stock During the nine months ended September 30, 2021 and 2020, we sold 2.6 million and 29.1 million, respectively, of shares of our common stock resulting in net proceeds of approximately $565 million and $446 million, respectively, under our various At Market Issuance Sales agreements. In June 2021, we entered into an At Market Issuance Sales Agreement (the "June 2021 Sales Agreement"), which allows us to issue and sell up to $500 million in gross proceeds of shares of our common stock, and terminated our existing At Market Issuance Sales agreement. As of September 30, 2021, no shares had been sold under the June 2021 Sales Agreement. Critical Accounting Policies and Use of Estimates There are no material changes to our critical accounting policies as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC. Recent Accounting Pronouncements Not Yet Adopted See “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (under the caption “ Recent Accounting Pronouncements ”). Results of Operations The following is a discussion of the historical financial condition and results of the Company’s operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report. Three Months Ended September 30, 2021 and 2020 Revenue: 26 Table of Contents Three Months Ended September 30, 2021 2020 Change Revenue (in thousands): Government contracts $ 97,502 $ 42,938 $ 54,564 Grants and other 41,401 114,086 (72,685) Royalties 39,941 — 39,941 Total revenue $ 178,844 $ 157,024 $ 21,820 Revenue for the three months ended September 30, 2021 was $178.8 million as compared to $157.0 million for the same period in 2020, an increase of $21.8 million. Revenue for the three months ended September 30, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and our funding agreements with CEPI (collectively, the "CEPI Funding Agreement") and royalties under our licensing arrangements. Revenue for the three months ended September 30, 2020 was primarily comprised of revenue for services performed under the CEPI Funding Agreement. The increase in revenue was due to increased development activities relating to NVX-CoV2373 under the OWS Agreement and royalties under our licensing arrangements, partially offset by decreased development activities under the CEPI Funding Agreement as we approach anticipated commercialization of NVX-CoV2373. Revenue in 2021 increased significantly as compared with 2020 due to our NVX-CoV2373 program, which we anticipate will continue to be funded by OWS and CEPI and/or other revenue sources. Further, we anticipate bringing our NVX-CoV2373 vaccine candidate to market following global regulatory approvals which, if achieved, should significantly increase revenue. In anticipation, we have entered into various APA, as well as multiple supply and license agreements with strategic partners to supply NVX-CoV2373 in their specified territories under which we are entitled to receive royalties from the sale of NVX-CoV2373 by such partners. Expenses: Three Months Ended September 30, 2021 2020 Change Expenses (in thousands): Research and development $ 408,195 294,087 $ 114,108 General and administrative 77,793 56,879 20,914 Total expenses $ 485,988 $ 350,966 $ 135,022 Research and Development Expenses In the three months ended September 30, 2021, our research and development activities were primarily focused on the development of NVX-CoV2373 and included direct external research and development expenses related to NVX-CoV2373 of $341.6 million, primarily comprised of costs related to the following: • expenses incurred under agreements with contract research organization ("CROs") that conduct our clinical trials and third-party consultants related to the development of NVX-CoV2373; • expenses incurred on developing and manufacturing the antigen drug substance and Matrix-M ™ components of NVX-CoV2373 under agreements that we established with third-party contract manufacturing organizations ("CMOs") and contract manufacturing and development organizations ("CDMOs"); • expenses incurred for the procurement of raw materials, laboratory supplies and equipment; and • other costs related to preclinical studies and regulatory consulting, as well as related program management activities to support our growing global operations. Research and development expenses increased to $408.2 million for three months ended September 30, 2021 as compared to $294.1 million for three months ended September 30, 2020, an increase of $114.1 million primarily due to research and development of NVX-CoV2373, as summarized in the table below (in millions): 27 Table of Contents Three Months Ended September 30, 2021 2020 NVX-CoV2373 $ 341,600 $ 249,789 NanoFlu ™ 1,656 2,558 Other vaccine development programs 126 3 Total direct external research and development expense 343,382 252,350 Employee expenses 36,574 10,950 Stock-based compensation expense 21,860 28,730 Facility expenses 4,983 1,914 Other expenses 1,396 143 Total research and development expenses $ 408,195 $ 294,087 For 2021, research and development expenses increased significantly over 2020 expenses due to our continued development activities for our NVX-CoV2373 program and increases in employee-related costs. Following a potential regulatory approval of NVX-CoV2373, we expect product sales will result in certain types of costs that have been previously recorded as research and development in our Consolidated Statement of Operations to be capitalized as inventory and expensed as cost of goods sold when product is delivered. We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertainties associated with vaccine development. As we obtain data from preclinical studies and clinical trials, we may elect to discontinue or delay clinical trials in order to focus our resources on more promising vaccine candidates. Completion of clinical trials may take several years or more, but the length of time can vary substantially depending upon the phase, size of clinical trial, primary and secondary endpoints and the intended use of the vaccine candidate. The cost of clinical trials may vary significantly over the life of a project as a result of a variety of factors, including: • the number of participants who participate in the clinical trials; • the number of sites included in the clinical trials; • if clinical trial locations are domestic, international or both; • the time to enroll participants; • the duration of treatment and follow-up; • the safety and efficacy profile of the vaccine candidate; and • the cost and timing of, and the ability to secure, regulatory approvals. As a result of these uncertainties, we are unable to determine the duration and completion costs of our research and development projects or when, and to what extent, we will generate future cash flows from our research projects. General and Administrative Expenses General and administrative expenses increased to $77.8 million for the three months ended September 30, 2021 from $56.9 million for the same period in 2020, an increase of $20.9 million. The increase in general and administrative expenses is primarily due to an increase in professional fees in support of our NVX-CoV2373 program. For 2021, general and administrative expenses increased significantly due to increased activities related to supporting our NVX-CoV2373 program and increases in employee-related costs and professional fees. Other Income (Expense): 28 Table of Contents Three Months Ended September 30, 2021 2020 Change Other Income (Expense) (in thousands): Investment income $ 330 140 $ 190 Interest expense (5,182) (4,460) (722) Other income (expense) (4,394) 952 (5,346) Total other income (expense), net $ (9,246) $ (3,368) $ (5,878) We had total other expense, net, of $9.2 million for the three months ended September 30, 2021 as compared to $3.4 million for the same period in 2020. In the three months ended September 30, 2021, we recorded a $3.9 million loss due to changes in the foreign exchange rates, primarily on an intercompany loan with Novavax CZ. Income Tax Expense: During the three months ended September 30, 2021, we recognized $6.0 million of income tax expense related to foreign withholding tax on royalties. We did not recognize any income tax expense for the three months ended September 30, 2020. Net Loss: Three Months Ended September 30, 2021 2020 Change Net Loss (in thousands, except per share information): Net loss $ (322,431) $ (197,310) $ (125,121) Net loss per share $ (4.31) $ (3.21) $ (1.10) Weighted average shares outstanding 74,745 61,554 13,191 Net loss for the three months ended September 30, 2021 was $322.4 million, or $4.31 per share, as compared to $197.3 million, or $3.21 per share, for the same period in 2020. The increase in net loss was primarily due to a significant increase in development activities relating to NVX-CoV2373, partially offset by increased revenue under the OWS Agreement and royalties under our licensing arrangements. The increase in weighted average shares outstanding for the three months ended September 30, 2021 is primarily a result of sales of our common stock in 2021 and 2020. Nine Months Ended September 30, 2021 and 2020 Revenue: Nine Months Ended September 30, 2021 2020 Change Revenue (in thousands): Government contracts $ 720,740 $ 43,249 $ 677,491 Grants and other 139,952 152,690 (12,738) Royalties 63,398 — 63,398 Total revenue $ 924,090 $ 195,939 $ 728,151 Revenue for the nine months ended September 30, 2021 was $924.1 million as compared to $195.9 million for the same period in 2020, an increase of $728.2 million. Revenue for the nine months ended September 30, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and CEPI Funding Agreement and royalties under our licensing arrangements. Revenue for the nine months ended September 30, 2020 was primarily comprised of revenue for 29 Table of Contents services performed under the CEPI Funding Agreement. The significant increase in revenue was due to increased development activities relating to NVX-CoV2373 under the OWS Agreement and, to a lesser extent, royalties under our licensing arrangements. Expenses: Nine Months Ended September 30, 2021 2020 Change Expenses (in thousands): Research and development $ 1,571,551 $ 345,828 $ 1,225,723 General and administrative 214,144 83,977 130,167 Total expenses $ 1,785,695 $ 429,805 $ 1,355,890 Research and Development Expenses In the nine months ended September 30, 2021, our research and development activities were primarily focused on the development of NVX-CoV2373 and included direct external research and development expenses related to NVX-CoV2373 of $1.4 billion, primarily comprised of costs related to the following: • expenses incurred under agreements with CROs that conduct our clinical trials and third-party consultants related to the development of NVX-CoV2373; • expenses incurred on developing and manufacturing the antigen drug substance and Matrix-M ™ components of NVX-CoV2373 under agreements that we established with third-party CMOs and CDMOs; • expenses incurred for the procurement of raw materials, laboratory supplies and equipment; and • other costs related to preclinical studies and regulatory consulting, as well as related program management activities to support our growing global operations. Research and development expenses increased to $1.6 billion for the nine months ended September 30, 2021 from $345.8 million for the same period in 2020, an increase of $1.2 billion, primarily due to increased development activities relating to NVX-CoV2373, as summarized in the table below (in millions): Nine Months Ended September 30, 2021 2020 NVX-CoV2373 $ 1,376,921 $ 268,642 NanoFlu ™ 5,950 11,013 Other vaccine development programs 641 1,905 Total direct external research and development expense 1,383,512 281,560 Employee expenses 86,085 20,313 Stock-based compensation expense 70,429 34,735 Facility expenses 11,387 4,003 Other expenses 20,138 5,217 Total research and development expenses $ 1,571,551 $ 345,828 General and Administrative Expenses General and administrative expenses increased to $214.1 million for the nine months ended September 30, 2021 from $84.0 million for the same period in 2020, an increase of $130.1 million. The increase in general and administrative expenses is primarily due to increased employee-related costs, primarily stock-based compensation expense, and an increase in professional fees in support of our NVX-CoV2373 program. Other Income (Expense): 30 Table of Contents Nine Months Ended September 30, 2021 2020 Change Other Income (Expense) (in thousands): Investment income $ 1,061 $ 872 $ 189 Interest expense (15,989) (11,266) (4,723) Other income (expense) (8,328) 3,565 (11,893) Total other income (expense), net $ (23,256) $ (6,829) $ (16,427) We had total other expense, net of $23.3 million for the nine months ended September 30, 2021 as compared to $6.8 million for the same period in 2020. In the nine months ended September 30, 2021, we also recorded an interest expense of $5.6 million for finance leases. In the nine months ended September 30, 2021 and 2020, other income included a loss of $7.0 million and a gain of $3.5 million, respectively, due to changes in the foreign exchange rates, primarily on an intercompany loan with Novavax CZ. Income Tax Expense: During the nine months ended September 30, 2021, we recognized $12.6 million of income tax expense related to foreign withholding tax on royalties. We did not recognize any income tax expense for the nine months ended September 30, 2020. Net Loss: Nine Months Ended September 30, 2021 2020 Change Net Loss (in thousands, except per share information): Net loss $ (897,467) $ (240,695) $ (656,772) Net loss per share $ (12.13) $ (4.39) $ (7.74) Weighted average shares outstanding 73,972 54,810 19,162 Net loss for the nine months ended September 30, 2021 was $897.5 million, or $12.13 per share, as compared to $240.7 million, or $4.39 per share, for the same period in 2020. The increase in net loss was primarily due to increased development activities relating to NVX-CoV2373, increased employee-related costs, primarily stock-based compensation expense, partially offset by increased revenue under the OWS Agreement and, to a lesser extent, royalties under our licensing arrangements. The increase in weighted average shares outstanding for the nine months ended September 30, 2021 is primarily a result of sales of our common stock in 2021 and 2020. Liquidity Matters and Capital Resources Our future capital requirements depend on numerous factors including, but not limited to, our projected activities related to the development of NVX-CoV2373, including significant commitments under various CRO, CMO and CDMO agreements, the progress of preclinical studies and clinical trials, the time and costs involved in obtaining regulatory approvals, the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights and other manufacturing, sales and distribution costs. We plan to continue developing other vaccines and product candidates, such as our NanoFlu ™ vaccine candidate and potential combination vaccines candidates, which are in various stages of development. We believe our operating expenses and capital requirements will fluctuate depending upon the timing of events, such as the progress of our NVX-CoV2373 clinical trials and regulatory approval for the use of NVX-CoV2373 in the U.S. and internationally, as well as the scope, initiation and progress of our preclinical studies and clinical trials related to other research and development activities. We have entered into APAs or supply agreements with Gavi, the European Commission, and various countries globally that, if our COVID-19 vaccine candidate is approved, are expected to result in the delivery of approximately 570 million doses of NVX-CoV2373. The APAs or supply agreements typically contain terms that include upfront payments 31 Table of Contents intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment. Such upfront payments generally become non-refundable upon our achievement of certain development and commercial milestones. However, certain of the APAs and supply agreements may be terminated by the counterparty if we do not timely achieve requisite regulatory approval for NVX-CoV2373 in the relevant jurisdictions under such agreements. If the APAs or supply agreements were terminated, the refundable portion of the upfront payments will be repaid. We expect to sign additional APAs or supply agreements that are currently in active discussions and negotiations. In May 2021, we finalized an APA with Gavi, building upon our MOU previously announced in February 2021. Under the terms of the agreement, 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. We expect to manufacture and distribute 350 million doses of NVX-CoV2373 to countries participating under the COVAX Facility. Under a separate purchase agreement with Gavi, SIIPL is expected to manufacture and deliver the balance of the 1.1 billion doses of NVX-CoV2373 for low- and middle-income countries participating in the COVAX Facility. We expect to deliver doses with antigen and adjuvant manufactured at facilities directly funded by the investments previously received from CEPI. We expect to supply significant doses that Gavi would allocate to low-, middle- and high-income countries, subject to certain limitations, utilizing a tiered pricing schedule and Gavi may prioritize such doses to low- and middle- income countries, at lower prices. Additionally, we may provide additional doses, to the extent available from CEPI-funded manufacturing facilities, in the event that SIIPL cannot materially deliver expected vaccine doses to the COVAX Facility. Together with SIIPL, we expect to initiate delivery of doses following receipt of appropriate regulatory authorizations. Under the agreement, we received an upfront payment of $350 million from Gavi during the second quarter of 2021 and expect to receive an additional payment of $350 million if we secure EUL for NVX-CoV2373 by the WHO. We have also entered into supply and license agreements with strategic partners to supply NVX-CoV2373 in their specified territories under which we are entitled to receive royalties primarily from the sale of NVX-CoV2373 by our partners, such as SIIPL in India, Takeda in Japan and SK bioscience in the Republic of Korea. During the three and nine months ended September 30, 2021, we received royalties of $39.9 million and $63.4 million, respectively, under these licensing arrangements. In the nine months ended September 30, 2021, we funded our operations with cash and marketable securities on hand, upfront payments under APAs, proceeds from the sale of common stock together with revenue under the OWS Agreement and CEPI Funding Agreement that support our NVX-CoV2373 vaccine development activities. We anticipate our future operations to be funded by our cash, cash equivalents and marketable securities, upfront payments under our APAs, revenue under our OWS Agreement and CEPI Funding Agreement, and following any potential global regulatory approvals, revenue from product sales, royalties under licensing arrangements with our strategic partners and/or other potential funding sources. As of September 30, 2021, we had $1.9 billion in cash and cash equivalents, marketable securities and restricted cash as compared to $806.4 million as of December 31, 2020. These amounts consisted of $1.9 billion in cash and cash equivalents and $9.8 million in restricted cash as of September 30, 2021, as compared to $553.4 million in cash and cash equivalents, $157.6 million in marketable securities and $95.3 million in restricted cash as of December 31, 2020. The following table summarizes cash flows for the nine months ended September 30, 2021 and 2020 (in thousands): 2021 2020 Change Net cash provided by (used in): Operating activities $ 665,354 $ 86,027 $ 579,327 Investing activities 116,518 (346,656) 463,174 Financing activities 522,424 580,152 (57,728) Effect on exchange rate on cash, cash equivalents and restricted cash (6,208) 33 (6,241) Net increase in cash, cash equivalents and restricted cash 1,298,088 319,556 978,532 Cash, cash equivalents and restricted cash at beginning of period 648,738 82,180 566,558 Cash, cash equivalents and restricted cash at end of period $ 1,946,826 $ 401,736 $ 1,545,090 Net cash provided by operating activities increased to $665.4 million for the nine months ended September 30, 2021, as compared to $86.0 million for the same period in 2020. The increase in cash provided is primarily due to payments under APAs recorded as deferred revenue, partially offset by funding of our increased net loss and the timing of payments to third parties. 32 Table of Contents During the nine months ended September 30, 2021 and 2020, our investing activities consisted primarily of maturities and sale of marketable securities, net of purchases, our acquisition of Novavax CZ in 2020 and, to a much lesser extent, capital expenditures. Capital expenditures for the nine months ended September 30, 2021 and 2020 were $41.1 million and $12.6 million, respectively, and the increase in capital expenditures was primarily due to the build out of our facilities and related capital expenditures to support NVX-CoV2373. For 2021, we expect our capital expenditures to continue to increase due to further development activities for our NVX-CoV2373 program, including the additional build-out of research and development and manufacturing facilities and related equipment, and the build-out of our new corporate office facility to accommodate anticipated increases in headcount. Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements, payments of finance lease liabilities and exercise of stock-based awards. In the nine months ended September 30, 2021 and 2020, we received net proceeds of approximately $565 million and $446 million, respectively, from selling shares of common stock through our At Market Issuance Sales Agreements. Further, during the nine months ended September 30, 2020, we received approximately $200 million through the issuance of preferred stock in a private placement. Off-Balance Sheet Arrangements We did not have any material off-balance sheet arrangements as of September 30, 2021.