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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-03-01 · 208 added, 162 removed, 176 unchanged (68% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Any statements in the discussion below and elsewhere in this Annual Report about expectations, beliefs, plans, objectives, assumptions or future events or performance of Novavax, Inc.

Any statements in the discussion below and elsewhere in this Annual Report on Form 10-K 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;

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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 and delivery for NVX-CoV2373;

our expectations with respect to the anticipated ongoing development and potential commercialization or licensure of NVX- CoV2373 and NanoFlu™;

the expected timing and content of regulatory actions;

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 commercialization or licensure of NVX-CoV2373 and NanoFlu Program;

the expected timing, content, and outcomes of regulatory actions;

funding from the U.S.

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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, business development initiatives;

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,” or “assume,” the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

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

Any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate or materially different from actual results.

Because the risk factors discussed in this Annual Report and other risk factors of which we are not aware could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements made by or on behalf of us, you should not place undue reliance on any such forward-looking statements.

These statements are subject to risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements.

We have included important factors that could cause results to differ in the cautionary statements included in this Annual Report, particularly those identified in Part I, Item 1A “Risk Factors” of this Annual Report.

These and other risks may also be detailed and modified or updated in our reports and other documents filed with the Securities and Exchange Commission (“SEC”) from time to time.

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 applicable regulatory authorities, such as 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”);

unanticipated challenges or delays in conducting clinical trials;

difficulty obtaining scarce raw materials and supplies;

resource constraints, including human capital and manufacturing capacity, constraints on the ability of Novavax to pursue planned 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 I, Item 1A “Risk Factors” of this 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.

Further, any forward- looking statement speaks only as of the date on which 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.

Any or all of our forward-looking statements in this Annual Report on Form 10-K 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.

We are 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 influenza vaccine candidate, NanoFlu, are genetically engineered, three-dimensional nanostructures of recombinant proteins.

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

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

Our unique technology is paired with our proprietary immune-stimulating adjuvants, developed at Novavax AB, our wholly owned Swedish subsidiary.

To date, we have formulated many of the vaccine candidates in our pipeline with our lead adjuvant,

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Matrix-M™, including NVX-CoV2373 and NanoFlu.

Matrix-M has been shown to enhance functional immune responses and has been well-tolerated in multiple clinical trials.

Matrix-M also enables dose-sparing properties.

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

We have begun rolling reviews with five regulatory authorities worldwide and have initiated submissions to the U.S.

Food and Drug Administration (“FDA”) for our open investigational new drug application.

In addition, NanoFlu continues to be a priority for our team, and we are exploring the potential for a combined NanoFlu / NVX-CoV2373 vaccine.

Our dedicated NanoFlu team continues to seek approval from the FDA under an accelerated approval pathway.

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 respiratory syncytial virus (“RSV”) and other emerging infectious diseases, present viable opportunities for future development.

Near-term Clinical Development Focus

Our development pipeline encompasses vaccine candidates addressing therapeutic areas including coronavirus, seasonal influenza, RSV and other emerging infectious diseases.

At the forefront of our pipeline, we have evaluated our COVID-19 vaccine candidate, NVX-CoV2373, in various preclinical and clinical trials, including two Phase 3 trials, one Phase 2b trial, and one Phase 1/2 trial.

Through our clinical development program, we have demonstrated the safety and efficacy of NVX-CoV2373.

Additionally, in February 2021, we selected candidates for COVID-19 variant strain vaccines as standalone and bivalent candidates.

We plan to initiate clinical testing of these new variant vaccine candidates in mid-2021.

Outside of our COVID-19 vaccine candidate, we have advanced our NanoFlu program through a Phase 3 clinical trial, demonstrating positive top-line results and achieving statistical significance across secondary endpoints.

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

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

Supported by funding from the OWS, DoD, CEPI and BMGF

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

Ongoing Phase 3 in UK;

Ongoing Phase 2b in South Africa

COVID-19 Vaccine Funding

Funding for our NVX-CoV2373 clinical development program encompasses over $2 billion from sources including CEPI, the DoD, and OWS.

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

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NVX-CoV2373 Manufacturing and Supply

With respect to the global manufacturing and supply of NVX-CoV2373, we have secured manufacturing for our antigen component and Matrix-M adjuvant, as well as secured fill / finish activities for NVX-CoV2373 at several sites globally.

Through our various manufacturing partnerships, we expect our projected global manufacturing production rate of NVX-CoV2373 to be over two billion doses annually when we are at full capacity, which we expect to occur in mid-2021.

Of this anticipated capacity, approximately one billion doses will be manufactured by Serum Institute of India Private Limited ("SIIPL").

NVX-CoV2373 and its components are being manufactured at the following Novavax (in bold) and partnered sites:

A summary and status of key manufacturing developments follows:

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NVX-CoV2373 Supply Agreements

Through the date of filing this Form 10-K, we have entered into several supply agreements with various countries globally that, if our COVID-19 product candidate is approved, are expected to result in the delivery of approximately 200 million doses of NVX-CoV2373, throughout 2021 and into the first half of 2022.

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

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

A summary of our current supply agreements follows:

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Sale of Assets

In July 2019, we closed a transaction under an asset purchase agreement (the “Purchase Agreement”) with Catalent, pursuant to which we sold to Catalent certain assets related to our biomanufacturing and development activities located at the facilities situated at each of 20 Firstfield Road in Gaithersburg, MD 20878 and 9920 Belward Campus Drive in Rockville, MD 20850 for approximately $18 million and recorded a gain on the disposition of such assets of $9.0 million.

Pursuant to the transactions contemplated by the Purchase Agreement, approximately 100 Novavax manufacturing and quality employees transferred to Catalent, and we assigned two facility leases to Catalent.

We also entered into other ancillary agreements upon the closing of the transaction, including a Non-Commercial GMP Manufacturing Services Agreement pursuant to which we were required to purchase $6.0 million in certain services from Catalent set forth therein, through July 31, 2020.

The transaction was treated as an asset disposition for accounting purposes.

Sale of Preferred Stock

In June 2020, we entered into a redeemable Series A Convertible Preferred Stock Subscription Agreement, pursuant to which we sold and issued in a private placement 438,885 shares of our newly designated redeemable Series A Convertible Preferred Stock, par value $0.01 per share (“Preferred Stock”), at a purchase price of $455.70 per share, for total gross proceeds of $200.0 million.

During the fourth quarter of 2020, all outstanding shares of the Preferred Stock was converted and we issued 4,388,850 shares of common stock, par value $0.01 per share and reclassified $199.8 million from preferred stock to additional paid in capital.

We recognized a beneficial conversion feature of approximately $24.1 million at the time of issuance of the Preferred Stock that was recorded in additional paid-in capital and accumulated deficit as the Preferred Stock issuance was contingently redeemable and convertible at any time at the option of the holder.

We are 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 proprietary recombinant technology platform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticles designed to address urgent global health needs.

Our vaccine candidates in our near-term pipeline, including both NVX-CoV2373 and the NanoFlu Program, are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis.

At the forefront of our pipeline is our COVID-19 vaccine candidate, NVX-CoV2373.

NVX-CoV2373 has received provisional approval, conditional marketing authorization (“CMA”) and emergency use authorization (“EUA") from multiple regulatory authorities globally.

In January 2022, we also submitted a request to the FDA for emergency use authorization of NVX-CoV2373.

We also advanced our NanoFlu Program vaccine program through a Phase 3 clinical trial, which demonstrated positive top-line results and achieved statistical significance in key secondary endpoints.

Additionally, we are currently evaluating a COVID-influenza combination vaccine in a Phase 1/2 clinical trial, which combines the company's NVX-CoV2373 and our NanoFlu Program vaccine candidates.

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.

These vaccine candidates incorporate Novavax' proprietary saponin-based Matrix-M™ adjuvant to enhance the immune response and stimulate high levels of neutralizing antibodies.

We remain focused on the manufacturing and distribution to bring our NVX-CoV2373 vaccine candidate to market following global regulatory authorizations.

Through ongoing booster studies in our clinical trials, as well as the development of 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, to use within a booster setting, and for the pediatric population amidst the ongoing and evolving COVID-19 pandemic.

Although NVX-CoV2373 and the NanoFlu Program are our near-term priorities, we remain optimistic that the additional programs in our pipeline, including our vaccine candidates in our RSV Program, and our partner-led malaria candidates, present strong opportunities for future development.

Business Highlights

Fourth Quarter 2021 and Recent Highlights

Achieved Multiple Regulatory Authorizations Globally for COVID-19 Vaccine

• Nuvaxovid ™ was granted authorization (emergency, provisional, interim conditional or emergency use listing) in Great Britain, the European Union, the WHO, Canada, Australia, United Arab Emirates, Singapore, and New Zealand;

received Biologics License Application approval in South Korea with our partner, SK bioscience

• Covovax ™ was granted emergency use authorization in India, Indonesia, Philippines, Bangladesh, and emergency use listing from the WHO with our partner, SIIPL

Completed Multiple Regulatory Submissions Globally for COVID-19 Vaccine

• Completed regulatory submissions for authorization for NVX-CoV2373 in the U.S.

and Switzerland

• SIIPL completed submission to South Africa, for NVX-CoV2373 to be marketed as Covovax TM

• Takeda, our partner, completed submission to Japan for a New Drug Application

C OVID-19 Vaccine Advanced Purchase Agreement

• Executed APA with Israel’s Ministry of Health to supply a minimum of 5 million vaccine doses

◦ Option to purchase an additional 5 million doses

C OVID-19 Vaccine Manufacturing, Supply and Distribution

• Built manufacturing and robust supply network to support over 2 billion annual doses of capacity and initiated distribution of NVX-CoV2373 to begin fulfillment of our commitments

◦ Expanded partnership with SIIPL through new supply agreement

◦ Reserved significant additional manufacturing capacity with SK bioscience to produce antigen, and SK bioscience acquired non-exclusive rights to sell to governments in Thailand and Vietnam

◦ Entered into a contract manufacturing agreement with Mabion for the large-scale manufacturing of NVX-CoV2373 through 2026

COVID-19 Vaccine Clinical Development

• Announced data from extended analysis of our UK Phase 3 study demonstrating ongoing durability of protection against infection and disease

◦ 82.5% vaccine efficacy in protection against all COVID-19 infection, both symptomatic and asymptomatic, as measured by PCR+ or anti-N seroconversion

◦ 82.7% overall vaccine efficacy against disease over a 6-month data collection period (median of 101 days of surveillance)

◦ 100% vaccine efficacy against severe disease

• Announced data from PREVENT-19 Phase 3 pediatric expansion in adolescents aged 12 through 17, achieving primary effectiveness endpoint and comparability to adult population

◦ Adolescent neutralization responses ~1.5-fold higher than adults

◦ 82% clinical efficacy against Delta variant

◦ IgG and functional immune responses against variants were higher than in adults

◦ Generally well-tolerated with no safety signals

◦ Expect to supplement global regulatory filings in the first quarter of 2022

◦ Expect to initiate a pediatric study in younger children in the second quarter of 2022

• Initiated PREVENT-19 Phase 3 booster study to evaluate safety and efficacy of a third dose of NVX-CoV2373

• Heterologous boosting data announced in COV-Boost Phase 2 Study, with NVX-CoV2373 demonstrating its ability to serve as a well-tolerated third dose to boost immune levels

• Announced immunologic cross-reactivity data from vaccine booster and adolescent studies to highlight potential utility of NVX-CoV2373 against Omicron variant (B.1.1.529)

◦ Demonstrated broad IgG antibody cross-reactivity against Omicron and other circulating variants with primary 2-dose regimen

◦ Third dose at 6-months produced increased immune response showing 9.3-fold IgG rise and 19.9-fold functional ACE2 inhibition increase

◦ Ongoing PREVENT-19 Phase 3 pediatric expansion showed robust immune response 2-to-4-fold higher than adults against evaluated variants, including Omicron following primary 2-dose regimen

• Developed Omicron-specific vaccine with GMP manufacturing and lab-based assessments underway

◦ Expect delivery toward the end of the first quarter of 2022

COVID-Influenza Combination Vaccine Clinical Development

• Ongoing Phase 1/2 trial for COVID-influenza combination vaccine

◦ Data is expected in April 2022

◦ Expect to initiate Phase 2 clinical trial for COVID-influenza combination vaccine and NanoFlu standalone in the second half of 2022

Publication Highlights

• Final analysis from PREVENT-19 Phase 3 trial in U.S.

and Mexico published in The New England Journal of Medicine

• Final analysis from UK Phase 3 influenza co-administration sub-study published in The Lancet Respiratory Medicine

• Final analysis of COV-Boost study led by University of Southampton NHS published in The Lancet

Sales of Common Stock

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

From January 22 through February 24, 2021, we sold $1.7 million shares of common stock under the January 2021 Sales Agreement resulting in $452.0 million in net proceeds, leaving $42.2 million remaining.

During 2020, we entered into various At Market Issuance Sales Agreements, which allowed us to issue and sell up to $1.0 billion in gross proceeds of our common stock.

During 2020, we sold a total of 25.2 million shares of common stock under such Sales Agreements resulting in $835.6 million in net proceeds (this amount excludes $3.2 million received in the first quarter of 2021 for shares traded in late December 2020).

From January 1, 2021 through January 20, 2021, we sold $0.9 million shares of common stock from our At Market Issuance Sales Agreement entered into in November 2020 (“November 2020 Sales Agreement”) resulting in $113.0 million in net proceeds, leaving $27.2 million remaining under its November 2020 Sales Agreement.

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

During 2021, we issued and sold 2.6 million of shares of our common stock resulting in net proceeds of approximately $565 million under our various At Market Issuance Sales Agreements.

The most recent At Market Issuance Sales Agreement, which we entered into in June 2021 (the “June 2021 Sales Agreement”) and is currently in effect, allows us to issue and sell up to $500 million in gross proceeds of shares of our common stock.

In January 2022, we sold 0.4 million shares of our common stock resulting in net proceeds of $34.7 million under the June 2021 Sales Agreement, with a remaining balance of $464.9 million available thereafter.

Critical Accounting Policies and Use of Estimates

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

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

These estimates, particularly estimates relating to accounting for revenue, lease accounting and accounting for research and development expenses have a material impact on our consolidated financial statements and are discussed in detail throughout our analysis of the results of operations discussed below.

These estimates, particularly estimates relating to accounting for revenue, lease accounting, pre-launch inventory, and accounting for research and development expenses have a material impact on our consolidated financial statements and are discussed in detail throughout our analysis of the results of operations discussed below.

We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources.

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Our revenue primarily consists of funding under U.S.

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

government contracts and other arrangements to advance the clinical

development and manufacturing of NVX-CoV2373.

government contracts include the DoD Contract and the OWS Agreement.

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

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

Currently, our revenue arrangements represent customer contracts within the scope of ASC Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) or are subject to the contribution guidance in Accounting Standards Codification (ASC) Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”) which applies to business entities that receive contributions within the scope of ASC 958-605.

At contract inception, we analyze our revenue arrangements to determine the appropriate accounting under generally accepted accounting principles in the United States (“U.S.

Currently, our revenue arrangements represent customer contracts within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) or are subject to the contribution guidance in ASC Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”), which applies to business entities that receive contributions within the scope of ASC 958-605.

We recognize revenue from arrangements within the scope of ASC 606 following the five-step model:

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

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

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

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

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We measure progress toward satisfaction of our performance obligation using an Estimate-at-Completion (“EAC”) process, which is a cost-based input method that reviews and monitors the progress towards the completion of our performance obligation.

Under this process, we consider the costs that

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have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs, and other identified risks.

Under this process, we consider the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs, and other identified risks.

Estimating the total allowable cost at completion of our performance obligation under a contract is subjective and requires us to make assumptions about future activity and cost drivers.

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

These indirect rates are subject to audit on an annual basis.

These indirect rates are subject to review on an annual basis.

The impact of changes in the indirect billing rates are recorded in the period when such changes are identified and reflect the difference between actual indirect costs incurred compared to the estimated amounts used to determine the provisional indirect billing rates agreed upon with the U.S.

We recognize revenue on our U.S government contracts based on reimbursable allowable contract costs incurred in the period up to the transaction price.

For our reimbursable-cost-plus fixed fee contracts, we recognize the fixed fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the underlying performance obligation as determined under the EAC process.

For our cost-reimbursable-plus-fixed-fee contracts, we recognize the fixed fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the underlying performance obligation as determined under the EAC process.

Changes in estimates related to the EAC process are recognized in the period when such changes are made on a cumulative catch-up basis.

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

Payments received under the CEPI Forgivable Loan Funding agreements are only repayable if the proceeds of sales to one or more third parties of NVX-CoV2373 cover our costs of manufacturing such vaccine candidate, not including manufacturing costs funded by CEPI.

Payments received under the CEPI Forgivable Loan Funding are only repayable if the proceeds of sales to one or more third parties of NVX-CoV2373 cover our costs of manufacturing such vaccine candidate, not including manufacturing costs funded by CEPI.

As the financial risk remains with CEPI, we have determined that the use of the CEPI Forgivable Loan Funding is outside the scope of ASC Topic 470, Debt.

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

The research and development risk is considered substantive, such that it was not probable that the development would be successful at the inception of the contract.

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

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

Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, we account for our obligation under the CEPI Forgivable

Loan Funding as a contract to perform research and development for others.

We have determined that payments received under these agreements should be recorded as revenue under ASC 958-605 rather than a reduction to research and development expenses.

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We have manufacturing and supply arrangements that include a license to use our intellectual property.

The 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 milestone payments and sales-based royalties relate.

The fulfillment of our obligation for the license is subject to a constraint, the achievement of the development and commercial milestone or the royalty-related sales under the arrangement.

For milestone payments, the constraint is overcome and we recognize revenue, when the development and commercial milestone is achieved.

The licensing arrangements include sales-based royalties, certain development and commercial milestone payments, and the sale of proprietary Matrix-M TM adjuvant.

T he license is deemed to be the predominant item to which the milestone payments and sales-based royalties relate.

Because development milestone payments are contingent on the achievement of milestones that are not within our control or the control of the licensee, such as regulatory approvals, the payments are not considered probable of being achieved and are excluded from the transaction price until the milestone is achieved.

We recognize revenue when the development milestone is achieved.

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, we recognize revenue on the satisfaction (or partial satisfaction) of the performance obligation to which some or all of the payment has been allocated, which is normally when the related sales occur.

We generally allocate the transaction price to each performance obligation based on a relative standalone selling price basis.

We develop assumptions that require judgment to determine the standalone selling price for each performance obligation in consideration of applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer.

Lease Accounting

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

In determining if a contract contains a lease, we evaluate whether the contract, either explicitly or implicitly, is for the use of an identified asset and whether we have the right to direct the use of, and obtain substantially all of the benefit from, the identified asset.

We enter into manufacturing supply agreements with CMOs and CDMOs to manufacture our vaccine candidates.

Certain of these manufacturing supply agreements include the use of identified manufacturing facilities and equipment that are controlled by us and for which we obtain substantially all the output and may qualify as an embedded lease.

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

The evaluation of leases that are embedded in our CMO and CDMO agreements is complex and requires judgment in determining whether the contract, either explicitly or implicitly, is for the use of an identified asset, which generally is the use of a portion of the manufacturing facility, whether we have the right to direct the use of, and obtain substantially all of the benefit from, the identified asset, the term of the lease and the fixed lease payments under the contract.

Depending on the contract, the lease commencement date, defined as the date on which the lessor makes the underlying asset available for use by the lessee and is the date on which the Company is required to accrue lease expenses, may be different than the inception date of the contract.

We determine the non-cancellable lease term of our embedded leases based on the impact of certain expected milestones on our option to terminate the lease where we are reasonably certain to not exercise that option.

We evaluate changes to the terms and conditions of a lease contract to determine if they result in a new lease or a modification of an existing lease.

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

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

We also enter into manufacturing supply agreements with CMOs and CDMOs to manufacture our vaccine candidates.

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

We also enter into non-cancelable lease agreements for facilities and certain equipment.

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

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In determining the lease period, we evaluate facts and circumstances that could affect the period over which we are reasonably certain to use the underlying asset while taking into consideration the non-cancelable period over which we have the right to use the underlying asset and any option period to extend or terminate the lease if we are reasonably certain to exercise the option.

We re-evaluate short-term leases that are modified and if they no longer meets the requirements to be treated as short-term leases, we recognize and measure the lease liability and ROU asset as if the date of the modification is the lease commencement date (see Note 7 to the accompanying consolidated financial statements).

We re-evaluate short-term leases that are modified and if they no longer meet the requirements to be treated as a short-term lease, we recognize and measure the lease liability and ROU asset as if the date of the modification is the lease commencement date (see Note 7 to the accompanying consolidated financial statements).

For short-term leases that are modified and continue to meet the requirements to be treated as a short-term lease, we remeasure the fixed lease payments under the modified lease, and recognize lease payments as an expense on a straight-line basis over the modified lease term.

For operating leases, we recognize lease expense related to fixed payments on a straight-line basis over the lease term and lease expense related to variable payments as incurred based on performance or usage in accordance with the contractual agreements.

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

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

of the underlying asset.

We expense ROU assets acquired for research and development activities under ASC Topic 730, Research and Development , if they do not have an alternative future use, in research and development projects or otherwise.

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

Pre-Launch Inventory

Prior to an initial regulatory authorization for our product candidates, we expense costs relating to raw materials and inventory production as research and development expenses in our consolidated statements of operations in the period incurred.

We capitalize the costs of production as inventory when we believe regulatory authorization and subsequent commercialization is considered probable and we expect to realize future economic benefit from the sales of the product candidate.

Upon the authorization of distribution and use of NVX-CoV2373 following regulatory authorization by EMA and the WHO in December 2021, we began to capitalize inventory costs associated with the related supply of NVX-CoV2373, as it was determined that inventory costs subsequently incurred had a probable future economic benefit.

Accounting for Research and Development Expenses

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Historically, we have not experienced any material differences in prior periods.

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Recent Accounting Pronouncements

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Results of Operations for Fiscal Years 2021 and 2020

The following is a discussion of our historical consolidated financial condition and results of operations, and should be read in conjunction with the consolidated financial statements and notes thereto set forth in this Annual Report.

Additional information concerning factors that could cause actual results to differ materially from those in our forward-looking statements is described under Part I, Item 1A, “Risk Factors” of this Annual Report.

For our discussion of the year ended December 31, 2020, compared to the year ended December 31, 2019, please read Item 7.

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Revenue (in thousands):

Government contracts $ 217,246 7,500 $ 209,746

Grants and other 258,352 11,162 250,852

Grants $ 948,709 $ 453,210 $ 495,499

Royalties and other 197,581 22,388 175,193

Total revenue $ 1,146,290 $ 475,598 $ 670,692

Revenue for 2020 was $475.6 million as compared to $18.7 million for 2019, an increase of $460.6 million.

The significant increase in revenue in 2020 was a result of our development activities related to NVX-CoV2373 and was primarily comprised of revenue for services performed under the OWS Agreement and the CEPI Funding Agreement.

Revenue for the year ended December 31, 2019 was primarily comprised of revenue for services performed under the BMGF Grant Agreement and recovery of costs on the close-out of our contract with HHS BARDA.

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

Further, we anticipate bringing our NVXCoV2373 vaccine candidate to market following global regulatory approvals which, if achieved, should significantly impact revenue (also see below under Liquidity and Capital Resources in this Management's Discussion and Analysis).

In anticipation, we have entered into various APAs with government customers that are expected to result in the delivery of approximately 200 million doses of NVX-CoV2373 throughout 2021 and into the first half of 2022.

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

The Company recognized grant revenue as follows:

2021 2020 Change

Grant Revenue (in thousands)

Government Partnership (a)

$ 788,953 $ 204,727 $ 584,226

21,683 12,519 9,164

135,445 223,158 (87,713)

2,628 12,806 (10,178)

Total grant revenue $ 948,709 $ 453,210 $ 495,499

government partnership formerly known as Operation Warp Speed

Grant revenue for 2021 was $948.7 million as compared to $453.2 million for 2020, an increase of $495.5 million.

Grant revenue for 2021 and 2020 primarily comprised revenue for services performed under the OWS Agreement and CEPI Funding Agreement.

The increase in revenue was primarily due to increased development activities related to NVX-CoV2373 under the OWS Agreement.

Royalties and Other

Royalties and other revenue for 2021 was $197.6 million as compared to $22.4 million for 2020, an increase of $175.2 million.

Royalties and other revenue primarily comprised royalties under our licensing arrangements, and the increase in revenue was due to increased sales-based royalties by our license partners to South Korea and Indonesia.

We expect revenue in 2022 to significantly increase as compared to 2021 due to our NVX-CoV2373 program, which we anticipate will continue to be funded by OWS and/or other revenue sources.

Further, we anticipate bringing our NVX-CoV2373 vaccine candidate to market following receipt of global regulatory authorizations, and potential approvals that should significantly increase revenue (also see below under Liquidity and Capital Resources in this Management's Discussion and Analysis).

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

2021 2020 Change

Expenses (in thousands):

Research and development $ 2,534,508 $ 747,027 $ 1,787,481

Gain on sale of assets — (9,016) 9,016

General and administrative 298,358 145,290 153,068

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Research and Development Expenses

During 2020, our research and development activities were primarily focused on the development of NVX-CoV2373.

During 2020, direct external research and development expenses related to NVX-CoV2373 were $609.4 million and 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;

• 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;

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

In 2020, we also incurred significant costs related to developing our NVX-CoV2373 manufacturing and supply network, including the immediate expense recognition of $245.9 million of ROU assets associated with such manufacturing supply agreements.

Research and development expenses increased to $747.0 million for 2020 as compared to $113.8 million for 2019, an increase of $633.2 million primarily due to the development of NVX-CoV2373, as shown in the table below.

The following summarizes our research and development expenses for the years ended December 31, 2020 and 2019 (in millions):

Research and development expenses increased to approximately $2.5 billion for 2021 as compared to $747.0 million for 2020, an increase of $1.8 billion, due to increased development activities relating to NVX-CoV2373, as summarized in the table below.

Research and Development Expenses (in thousands)

NVX-CoV2373 $ 2,245,935 $ 609,401

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Total research and development expenses $ 2,534,508 $ 747,027

Research and development expenses for NVX-CoV2373 for 2021 and 2020 included approximately $239 million and $217 million, respectively, related to the acceleration of manufacturing costs for leases that we determined were embedded in multiple manufacturing supply agreements with CMOs and CDMOs.

During 2021 and 2020, 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 $2.2 billion and $609.4 million, respectively, 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 ™ adjuvant 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;

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

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.

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

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

Following regulatory approval of NVX-CoV2373, we expect products sales will result in certain types of costs recorded as research and development in 2020 being capitalized as inventory and expensed as cost of goods sold when product is delivered in 2021 and beyond.

Cost of goods sold expenses could be significant depending on our commercial shipment levels.

Gain on Sale of Assets

As a result of the sale of assets transaction in 2019, we recorded a gain of $9.0 million.

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For 2022, we expect total research and development expenses to decrease significantly as compared to 2021.

The decline in 2022 is anticipated to result from expected capitalization of manufacturing costs during 2022 that were previously recognized as research and development expenses in prior periods, partially offset by research and development expenses related to increased clinical activities as we continue to develop our NVX-CoV2373 and other programs.

Our cost of goods sold expenses could be significant depending on our commercial shipment levels and timing of deliveries.

However, we anticipate initially recognizing a lower cost of goods sold expense as a result of pre-launch inventory previously recognized as research and development expenses.

General and Administrative Expenses

General and administrative expenses increased to $145.3 million for 2020 from $34.4 million for 2019, a increase of $110.9 million.

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

As of December 31, 2020, we had 116 employees dedicated to general and administrative functions versus 41 employees as of December 31, 2019.

For 2021, we expect general and administrative expenses to increase significantly over 2020 expenses due to increased activities related to supporting our NVX-CoV2373 program and increases in employee-related costs.

General and administrative expenses increased to $298.4 million for 2021 from $145.3 million for 2020, an increase of $153.1 million.

The increase in general and administrative expenses is primarily due to increased employee-related costs, including stock-based compensation expense, and an increase in professional fees in support of our NVX-CoV2373 program.

For 2022, we expect general and administrative expenses to increase significantly as compared to 2021 due to increased activities related to supporting our NVX-CoV2373 program and increases in employee-related costs and professional fees.

We also expect to incur selling and marketing expenses following regulatory authorizations, and potential approvals, of NVX-CoV2373.

Other Income (Expense):

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We had total other expense, net of $28.0 million for 2021 compared to total other expense, net of $1.5 million for 2020, an increase of $26.4 million.

In the year ended December 31, 2020, we recorded a $12.6 million gain on the intercompany loan with Novavax CZ due to changes in the exchange rates, and additional net interest expense of $1.5 million attributable to finance leases.

In 2021 and 2020, interest expense included $7.2 million and $3.1 million, respectively, related to finance leases.

In 2021 and 2020, other income included a loss of $7.2 million and a gain of $12.6 million, respectively, due to changes in the foreign exchange rates, primarily on an intercompany loan with Novavax CZ.

Income Tax Expense:

During the year ended December 31, 2021, we recognized $29.2 million of income tax expense related to foreign withholding tax on royalties.

We did not recognize any income tax expense for the year ended December 31, 2020.

2021 2020 Change

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Weighted average shares outstanding 74,400 57,554 16,846

Net loss for 2020 was $418.3 million, or $7.27 per share, as compared to $132.7 million, or $5.51 per share, for 2019, an increase of $285.6 million.

The increase in net loss was primarily due to increased development activities relating to NVX-CoV2373, including the immediate expense recognition of $245.9 million of ROU assets associated with our manufacturing supply agreements for NVX-CoV2373 and increased employee-related costs, primarily stock-based compensation expense, partially offset by increased revenue under the CEPI Funding Agreement and the OWS Agreement.

The increase in weighted average shares outstanding for 2020 is primarily a result of the sale of 32.4 million shares of common stock in 2020 and, to a lesser degree, the conversion of our Series A Convertible Preferred Stock to 4.4 million shares of our common stock in the fourth quarter of 2020, weighted for the period the shares were outstanding during the year.

Net loss for 2021 was $1.7 billion, or $23.44 per share, as compared to $418.3 million, or $7.27 per share, for 2020, an increase of $1.3 billion.

The increase in net loss was primarily due to increased development activities relating to NVX-CoV2373, 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 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 NanoFlu and potential combination vaccines candidates, which are in various stages of development.

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

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 various countries globally that, if our product candidate is approved, are expected to result in the delivery of approximately 200 million doses of NVX-CoV2373 throughout 2021 and

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into the first half of 2022.

We have entered into APAs or supply agreements with Gavi, the EC, and various countries globally.

We also have grant and license agreements.

As of December 31, 2021, the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties under the licensing agreements, was approximately $8 billion.

The timing to fulfill performance obligations related to grant agreements will depend on the results of our research and development activities, including clinical trials.

The timing to fulfill performance obligations related to APAs will depend on timing of product manufacturing, delivery, and receipt of marketing authorizations.

The remaining unfilled performance obligations are expected to be fulfilled in less than one year.

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

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

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.

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

We funded our operations in 2020 with proceeds from the sale of common stock and preferred stock in equity offerings together with revenue under our CEPI Funding Agreement and the OWS 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, revenue under our OWS, CEPI, DoD agreements, upfront payments under our APAs, and following any potential global regulatory approvals, revenue from product sales, royalty arrangements with our strategic partners and/or other potential funding sources.

As of December 31, 2020, we had $806.4 million in cash and cash equivalents, marketable securities and restricted cash as compared to $82.2 million as of December 31, 2019.

These amounts consisted of $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 as compared to $78.8 million in cash and cash equivalents and $3.4 million in restricted cash as of December 31, 2019.

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.

In October 2021, we entered into a supply agreement and a contract development manufacturing agreement with SIIPL and SLS under which SIIPL and SLS will supply us with NVX-CoV2373.

We expect to deliver doses with antigen and adjuvant manufactured at facilities directly funded under the funding agreement with CEPI, with initial doses supplied by SIIPL and SLS under the supply agreement.

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 APA, we received an upfront payment of $350 million from Gavi in 2021 and recorded a receivable as of December 31, 2021, for an additional $350 million because the Company secured EUL for NVX-CoV2373 by the WHO in December 2021, which are recorded as deferred revenue.

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 2021, we received royalties of $195.8 million under these licensing arrangements.

We funded our operations in 2021 with cash and marketable securities on hand, upfront payments under APAs, and 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 and revenue under our OWS Agreement, and, following receipt of global regulatory authorizations, and potential approvals, revenue from product sales, royalties under licensing arrangements with our strategic partners, and/or other potential funding sources.

As of December 31, 2021, we had $1.5 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 $1.5 billion in cash and cash equivalents,

no marketable securities, and $13.1 million in restricted cash as of December 31, 2021 as compared to $553.4 million in cash and cash equivalents, $157.6 million in marketable securities, and $95.3 million in restricted cash as of December 31, 2020.

The following table summarizes cash flows for 2021 and 2020:

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Cash, cash equivalents and restricted cash at end of year $ 1,528,259 $ 648,738 $ 879,521

Net cash used in operating activities decreased to $42.5 million for 2020, as compared to $136.6 million for 2019.

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

Net cash provided by operating activities increased to $322.9 million for 2021, as compared to $42.5 million used 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.

During 2021, our investing activities primarily consisted of capital expenditures and purchases and maturities of marketable securities.

During 2020, our investing activities primarily consisted of capital expenditures, purchases and maturities of marketable securities, and our acquisition of Novavax CZ.

During 2019, our investing activities primarily consisted of purchases and maturities of marketable securities and proceeds from the sale of assets.

Capital expenditures for the year ended December 31, 2020 and 2019 were $54.6 million and $1.9 million, respectively, and the increase was primarily due to the build out of our facilities and related capital expenditures to support NVX-CoV2373.

Capital expenditures for the years ended December 31, 2021 and 2020 were $57.5 million and $54.6 million, respectively.

For 2022, we expect an increase in our capital expenditures due to further development activities for our NVX-CoV2373 program, including the additional build out of research and development and manufacturing facilities and related equipment, and the build-out of our new corporate office facility to accommodate anticipated increases in headcount.

Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements and, to a much lesser extent, stock option exercises and purchases under our employee stock purchase plan.

In 2020, we received net proceeds of $874.1 million (this amount excludes $3.2 million received in the first quarter of 2021 for shares traded in late December 2020) from the sale of shares of common stock through our At Market Issuance Sales Agreements and $200.0 million through the issuance of preferred stock in a private placement.

In 2019, we received net proceeds of $97.5 million from selling shares of common stock through our At Market Issuance Sales Agreements.

Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements, finance lease payments related to embedded leases and, to a much lesser extent, exercises of stock-based awards and purchases under our employee stock purchase plan.

In 2021, we received net proceeds of approximately $565 million from the sale of shares of common stock through our At Market Issuance Sales Agreements.

In 2020, we received net proceeds of approximately $877 million (this amount excludes $3.2 million received in the first quarter of 2021 for shares traded in late December 2020) from selling shares of common stock through our various At Market Issuance Sales Agreements and approximately $200 million through the issuance of preferred stock in a private placement.

Contractual Obligations

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The following table summarizes our contractual obligations as of December 31, 2021 (in thousands):

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Total contractual obligations $ 1,469,838 $ 998,171 $ 351,409 $ 27,383 $ 92,875

(a) See Note 11 to the consolidated financial statements included in this Annual Report regarding our Notes, which will mature on February 1, 2023, and bear cash interest of 3.75%, payable February 1 and August 1 of each year.

(b) This amount represents our non-cancelable fixed payment obligations under certain CMO and CDMO agreements that we are not contractually able to terminate for convenience.

(a) See Note 8 to the consolidated financial statements included in this Annual Report on Form 10-K regarding our Notes, which will mature on February 1, 2023, and bear cash interest of 3.75%, payable February 1 and August 1 of each year.

(b) This amount primarily represents our non-cancelable fixed payment obligations under certain CMO, CDMO, and lab supply agreements that we are not contractually able to terminate for convenience.

Certain agreements provide for termination rights subject to termination fees.

Under such agreements, we are contractually obligated to make payments to vendors, mainly to reimburse them for their estimated unrecoverable expenses incurred.

As of December 31, 2020, these agreements are active ongoing arrangements and the Company expects to receive value from these arrangements in the future.

As of December 31, 2021, these agreements are active

ongoing arrangements and the Company expects to receive value from these arrangements in the future.

The exact amount of such obligations is dependent on the timing of termination, and the exact terms of the relevant agreement, and cannot be reasonably estimated.

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It is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement.

Off-Balance Sheet Arrangements

We are not involved in any off-balance sheet agreements that have or are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis