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Item 1. Financial Statements

2022-05-10 compared with 2021-11-05 · 294 added, 375 removed, 178 unchanged (79% of the section changed)

1 unchanged sentence

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

For the Three Months Ended

Product sales $ 585,628 $ —

Grants 99,301 446,893

Royalties and other 19,042 336

Total revenue 703,971 447,229

Cost of sales 15,204 —

Research and development 383,483 592,671

Selling, general, and administrative 95,992 63,190

Total expenses 494,679 655,861

Income (loss) from operations 209,292 ( 208,632 )

Other income (expense):

Interest expense ( 4,876 ) ( 4,839 )

Other income (expense) 1,654 ( 6,231 )

Income (loss) before income tax expense 206,070 ( 219,702 )

Income tax expense 2,662 3,017

Net income (loss) $ 203,408 $ ( 222,719 )

Net income (loss) per share:

Basic $ 2.66 $ ( 3.05 )

Diluted $ 2.56 $ ( 3.05 )

Weighted average number of common shares outstanding

Basic 76,457 73,035

Diluted 80,711 73,035

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

For the Three Months Ended

Net income (loss) $ 203,408 $ ( 222,719 )

Other comprehensive income (loss):

Net unrealized losses on marketable securities available-for-sale, net of reclassifications — ( 9 )

Foreign currency translation adjustment 41 ( 7,372 )

Other comprehensive income (loss) 41 ( 7,381 )

Comprehensive income (loss) $ 203,449 $ ( 230,100 )

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

NOVAVAX, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)

September 30,

2022 December 31,

1 unchanged sentence

Cash and cash equivalents $ 1,570,954 $ 1,515,116

Marketable securities — 157,649

Restricted cash 11,492 11,490

Accounts receivable 478,156 454,993

Unbilled receivable

Inventory 106,648 8,872

Prepaid expenses and other current assets 180,155 164,648

Total current assets 2,347,405 2,155,119

Restricted cash 1,653 1,460

Property and equipment, net 247,213 228,696

Right of use asset, net 86,352 40,123

Intangible assets, net 4,535 4,770

2 unchanged sentences

Total assets $ 2,834,875 $ 2,576,753

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

3 unchanged sentences

Current portion of finance lease liabilities 116,684 130,533

Convertible notes payable 323,814 —

Other current liabilities 31,271 36,061

Total current liabilities 2,261,005 2,390,319

Deferred revenue 441,748 172,528

Convertible notes payable — 323,458

Non-current finance lease liabilities — 40,083

Other non-current liabilities 66,798 42,121

Total liabilities 2,769,551 2,928,426

Commitments and contingencies

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

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

Stockholders' equity:

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

and 75,973,523 shares issued and 75,415,774 shares outstanding at September 30, 2021 and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020

Commitments and contingencies (Note 15)

Stockholders' equity (deficit):

Common stock, $ 0.01 par value, 600,000,000 shares authorized at March 31, 2022 and December 31, 2021;

and 78,722,337 shares issued and 78,122,978 shares outstanding at March 31, 2022 and 76,433,151 shares issued and 75,841,171 shares outstanding at December 31, 2021

Additional paid-in capital 3,566,292 3,351,967

Accumulated deficit ( 3,414,542 ) ( 3,617,950 )

Treasury stock, 557,749 shares, cost basis at September 30, 2021 and 396,626 shares, cost basis at December 31, 2020

( 79,132 ) ( 41,806 )

Accumulated other comprehensive income 861 7,024

Total stockholders’ equity 461,336 627,209

Total liabilities and stockholders’ equity $ 2,565,941 $ 1,582,479

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

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

Government contracts $ 97,502 $ 42,938 $ 720,740 $ 43,249

Grant and other 41,401 114,086 139,952 152,690

Royalties 39,941 — 63,398 —

Total revenue 178,844 157,024 924,090 195,939

Research and development 408,195 294,087 1,571,551 345,828

General and administrative 77,793 56,879 214,144 83,977

Total expenses 485,988 350,966 1,785,695 429,805

Loss from operations ( 307,144 ) ( 193,942 ) ( 861,605 ) ( 233,866 )

Other income (expense):

Investment income 330 140 1,061 872

Interest expense ( 5,182 ) ( 4,460 ) ( 15,989 ) ( 11,266 )

Other income (expense) ( 4,394 ) 952 ( 8,328 ) 3,565

Net loss before income tax expense $ ( 316,390 ) $ ( 197,310 ) $ ( 884,861 ) $ ( 240,695 )

Income tax expense 6,041 — 12,606 —

Net loss $ ( 322,431 ) $ ( 197,310 ) $ ( 897,467 ) $ ( 240,695 )

Basic and diluted net loss per share $ ( 4.31 ) $ ( 3.21 ) $ ( 12.13 ) $ ( 4.39 )

Basic and diluted weighted average number of common shares outstanding 74,745 61,554 73,972 54,810

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 322,431 ) $ ( 197,310 ) $ ( 897,467 ) $ ( 240,695 )

Other comprehensive income (loss):

Net unrealized losses on marketable securities available-for-sale, net of reclassifications — ( 26 ) ( 9 ) 18

Foreign currency translation adjustment ( 3,309 ) 8,226 ( 6,154 ) 7,495

Other comprehensive income (loss) ( 3,309 ) 8,200 ( 6,163 ) 7,513

Comprehensive loss $ ( 325,740 ) $ ( 189,110 ) $ ( 903,630 ) $ ( 233,182 )

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

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Three Months Ended September 30, 2021 and 2020

(in thousands, except share information)

Common Stock Additional

Capital Accumulated

Deficit Treasury

Comprehensive

Income (Loss) Stockholders'

Shares Amount

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

Non-cash stock-based compensation — — 45,274 — — — 45,274

Stock issued under incentive programs 1,301,172 13 28,154 — ( 31,927 ) — ( 3,760 )

Foreign currency translation adjustment — — — — — ( 3,309 ) ( 3,309 )

Net loss — — — ( 322,431 ) — — ( 322,431 )

Balance at September 30, 2021 75,973,523 $ 760 $ 3,310,513 $ ( 2,771,666 ) $ ( 79,132 ) $ 861 $ 461,336

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

Non-cash stock-based compensation — — 65,705 — — — 65,705

Stock issued under incentive programs 1,534,345 16 26,682 — ( 38,569 ) — ( 11,871 )

Issuance of common stock, net of issuance costs of $ 725

Treasury stock, cost basis, 599,359 shares at March 31, 2022 and 591,980 shares at December 31, 2021

( 85,901 ) ( 85,101 )

Unrealized loss on marketable securities — — — — — ( 26 ) ( 26 )

Foreign currency translation adjustment — — — — — 8,226 8,226

Net loss — — — ( 197,310 ) — — ( 197,310 )

Balance at September 30, 2020 63,318,888 $ 633 $ 1,848,644 $ ( 1,696,635 ) $ ( 41,207 ) $ ( 4,995 ) $ 106,440

Accumulated other comprehensive loss ( 1,312 ) ( 1,353 )

Total stockholders’ equity (deficit) 65,324 ( 351,673 )

Total liabilities and stockholders’ equity (deficit) $ 2,834,875 $ 2,576,753

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

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Nine Months Ended September 30, 2021 and 2020

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Three Months Ended March 31, 2022 and 2021

(in thousands, except share information)

2 unchanged sentences

Deficit Treasury

Stock Accumulated Other

Comprehensive

Income (Loss) Stockholders'

Income (Loss) Total Stockholders'

Equity (Deficit)

Shares Amount

Balance at December 31, 2021 76,433,151 $ 764 $ 3,351,967 $ ( 3,617,950 ) $ ( 85,101 ) $ ( 1,353 ) $ ( 351,673 )

Non-cash stock-based compensation — — 151,457 — — — 151,457

Stock-based compensation — — 32,933 — — — 32,933

Stock issued under incentive programs 91,788 1 2,029 — ( 800 ) — 1,230

1 unchanged sentence

2,197,398 22 179,363 — — — 179,385

Unrealized loss on marketable securities — — — — — ( 9 ) ( 9 )

Foreign currency translation adjustment — — — — — 41 41

Net loss — — — ( 897,467 ) — — ( 897,467 )

Balance at September 30, 2021 75,973,523 $ 760 $ 3,310,513 $ ( 2,771,666 ) $ ( 79,132 ) $ 861 $ 461,336

Net income — — — 203,408 — 203,408

Balance at March 31, 2022 78,722,337 $ 787 $ 3,566,292 $ ( 3,414,542 ) $ ( 85,901 ) $ ( 1,312 ) $ 65,324

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

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

Non-cash stock-based compensation — — 77,602 — — — 77,602

Stock-based compensation — — 53,060 — — — 53,060

Stock issued under incentive programs 541,251 5 26,745 — ( 2,651 ) — 24,099

4 unchanged sentences

Net loss — — — ( 222,719 ) — — ( 222,719 )

Balance at September 30, 2020 63,318,888 $ 633 $ 1,848,644 $ ( 1,696,635 ) $ ( 41,207 ) $ ( 4,995 ) $ 106,440

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

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

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating Activities:

Net loss $ ( 897,467 ) $ ( 240,695 )

Reconciliation of net loss to net cash used in operating activities:

Net income (loss) $ 203,408 $ ( 222,719 )

Reconciliation of net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 6,765 2,317

Non-cash stock-based compensation 32,933 53,060

Right-of-use assets written off 17,117 187,193

Right-of-use assets expensed 214 951

Other items, net 634 6,362

Changes in operating assets and liabilities:

Inventory ( 99,557 ) —

Receivables, prepaid expenses, and other assets ( 56,016 ) 220,205

1 unchanged sentence

Deferred revenue ( 61,391 ) 549,584

Net cash provided by operating activities 665,354 86,027

Net cash provided by (used in) operating activities ( 88,510 ) 663,085

Investing Activities:

Capital expenditures ( 16,826 ) ( 13,781 )

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

Purchases of marketable securities — ( 2,167 )

2 unchanged sentences

Financing Activities:

Net proceeds from sale of preferred stock — 199,822

Net proceeds from sales of common stock 179,385 564,859

7 unchanged sentences

Supplemental disclosure of non-cash activities:

Sale of common stock under the Sales Agreement not settled at quarter-end $ — $ 3,883

Right-of-use assets from new lease agreements $ 58,352 $ 9,770

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

Note 1 – Organization

March 31, 2022

Note 1 – Organization and Business

Novavax, Inc.

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

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

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

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

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

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

As of March 31, 2022, the Company had received approval, interim authorization, provisional approval, conditional marketing authorization, and emergency use authorization (“EUA”) from multiple regulatory authorities globally for NVX-CoV2373, including by the World Health Organization (“WHO”), as well as the European Medicines Agency's (“EMA”) and the United Kingdom's Medicines and Healthcare products Regulatory Agency (“MHRA”), both of which are considered regulatory authorities that apply stringent standards and meet the WHO standards for quality, safety, and efficacy in their regulatory review process.

During the three months ended March 31, 2022, the Company commenced commercial shipments of NVX-CoV2373 doses, under the brand name, Nuvaxovid™.

Note 2 – Summary of Significant Accounting Policies

2 unchanged sentences

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

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

GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

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

Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

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

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

and its wholly owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in U.S.

The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona), and the functional currency of Novavax CZ, which is located in the Czech Republic, is the local currency (Czech Koruna).

The translation of assets and liabilities of these subsidiaries to U.S.

dollars is made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates.

The translation of the statement of operations data is made at the average exchange rate in effect for the period.

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

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

Accumulated other comprehensive income included a foreign currency translation balance of $ 0.9 million and $ 7.0 million as of September 30, 2021 and December 31, 2020, respectively.

Accumulated other comprehensive income included a foreign currency translation loss of $ 1.3 million and $ 1.4 million as of March 31, 2022 and December 31, 2021, respectively.

The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

1 unchanged sentence

The Company operates in one business segment.

Reclassifications

Certain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation.

These reclassifications have no material effect on previously reported financial position, cash flows, or results of operations.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase.

Cash and cash equivalents consist of the following at (in thousands):

September 30,

2021 December 31,

Cash $ 113,781 $ 122,312

Money market funds 366,242 96,116

Government-backed securities 197,250 44,250

Treasury securities 99,996 44,052

Corporate debt securities 1,159,729 246,668

Cash and cash equivalents $ 1,936,998 $ 553,398

Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature.

Marketable Securities

The Company invests in marketable securities that generally consist of debt securities with maturities greater than three months from the date of purchase that include commercial paper, government-backed securities, treasury securities, corporate notes and agency securities.

Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company's ability and intent to hold the investment to maturity.

Interest and dividend income are recorded when earned and included in investment income in the consolidated statements of operations.

Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations.

The specific identification method is used in computing realized gains and losses on the sale of the Company's securities.

The Company classifies its marketable securities with readily determinable fair values as “available-for-sale.” Investments in securities that are classified as available-for-sale are measured at fair market value in the consolidated balance sheets, and unrealized gains and losses on marketable securities are reported as a separate component of stockholders' equity until realized.

Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value.

Rather, it means that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security.

Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company's ability to hold the securities, including whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer's financial condition and business outlook to predict whether the loss in value is other-than-temporary.

Realized gains and losses and declines in value determined to be other-than-temporary are recorded as other income (expense) in the consolidated statements of operations.

Restricted Cash

The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements, payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreements and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases.

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

As of September 30, 2021, the restricted cash balances (both current and non-current) consisted of $ 1.2 million for payments received from BMGF, $ 7.0 million of payments under the CEPI funding agreements and $ 1.5 million of security

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

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

September 30,

2021 December 31,

Revenue Recognition - Product Sales

Product sales are associated with our NVX-CoV2373 supply agreements, sometimes referred to as advance purchase agreements (“APAs”), with various international governments.

The Company recognizes revenue from product sales based on the transaction price per dose calculated in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) when control of the product transfers to the customer and customer acceptance has occurred, unless such acceptance provisions are deemed perfunctory.

If an APA includes a term that may have the effect of decreasing the price per dose of previously delivered shipments, the Company constrains the price until it is probable that a significant reversal in revenue recognized will not occur.

Cost of Sales

Cost of sales includes cost of raw materials, production, and manufacturing overhead costs associated with the Company’s product sales during the period.

Cost of sales also includes adjustments for excess, obsolete, or expired inventory to the extent management determines that the cost cannot be recovered based on estimates about future demand.

Cost of sales does not include certain expenses related to raw materials, production, and manufacturing overhead costs which were expensed as described under the caption “Inventory” below.

Inventory is recorded at the lower of lease-adjusted standard cost or net realizable value under the First In, First Out (“FIFO”) methodology, taking into consideration the expiration of the inventory item.

The Company determines cost using a standard cost method, which approximates average cost.

Average cost consists primarily of costs associated with the purchase of raw materials, the cost of manufacturing goods, including the services and products of third-party suppliers, and the application of manufacturing overhead.

The Company utilizes third-party contract manufacturing organizations (“CMOs”), contract development and manufacturing organizations (“CDMOs”) and other suppliers and service organizations to support the procurement and processing of raw materials, management of inventory, packaging, and the delivery process.

Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolete, or expired inventory through cost of goods sold.

Prior to initial regulatory authorization for its product candidates, the Company expenses costs relating to raw materials, production, and manufacturing overhead costs as research and development expenses in the consolidated statements of operations, in the period incurred.

Subsequent to initial regulatory authorization for a product candidate, the Company capitalizes the costs of production for a particular supply chain as inventory when the Company determines that it has a present right to the economic benefit associated with the product.

Recent Accounting Pronouncements

Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), with amendments in 2018, 2019, and 2020.

The ASU sets forth a “current expected credit loss” (“CECL”) model that requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions.

The ASU is effective for the Company beginning on January 1, 2023.

Management is currently evaluating the effect of the guidance and does expect it to have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU No.

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

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplified the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts in an entity’s own equity.

Specifically, the new standard removed the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features.

It also removed certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and simplified the diluted earnings per share calculation for convertible instruments.

The Company adopted ASU 2020-06 on January 1, 2022 using a modified retrospective approach, which did not have a material impact on the Company’s consolidated financial statements.

Note 3 – Revenue

The Company's accounts receivable included $ 425.9 million and $ 419.7 million related to amounts that were billed to customers and $ 52.3 million and $ 35.3 million related to amounts which had not yet been billed to customers as of March 31, 2022 and December 31, 2021, respectively.

During the three months ended March 31, 2022, changes in the Company's accounts receivables and deferred revenue balances were as follows (in thousands):

December 31, 2021 Additions Deductions March 31, 2022

Contract receivables:

Accounts receivable $ 454,993 625,124 ( 601,961 ) $ 478,156

Contract liabilities:

Deferred revenue (1)

$ 1,595,472 49,094 ( 108,586 ) $ 1,535,980

(1) Amount is comprised of $ 1.1 billion and $ 1.4 billion of current Deferred revenue and $ 441.7 million and $ 172.5 million of non-current Deferred revenue as of March 31, 2022 and December 31, 2021, respectively.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties, was approximately $ 7 billion as of March 31, 2022.

The timing to fulfill performance obligations related to grant agreements will depend on the results of the Company's 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 12 months.

The Company recognized grant revenue as follows (in thousands):

Three Months Ended

government partnership (“OWS”) $ 99,301 $ 363,560

Department of Defense (“DoD”) — 19,144

Coalition for Epidemic Preparedness Innovations (“CEPI”) — 61,561

Bill & Melinda Gates Foundation (“BMGF”)

Total $ 99,301 $ 446,893

Royalties and Other

For the three months ended March 31, 2022, the Company recognized $ 7.4 million in revenue related to sales-based royalties.

For the three months ended March 31, 2021, the Company did no t recognize any revenue related to sales-based royalties.

Note 4 – Collaboration and License Agreements

Serum Institute

The Company previously granted Serum Institute of India Private Limited (“SIIPL”) exclusive and non-exclusive licenses for the development, co-formulation, filling and finishing, registration, and commercialization of NVX-CoV2373.

SIIPL agreed to purchase the Company's Matrix-M TM adjuvant and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373.

The Company and SIIPL equally split the revenue from SIIPL’s sale of NVX-CoV2373 in its licensed territory, net of agreed costs.

The Company also has a supply agreement with SIIPL and Serum Life Sciences Limited (“SLS”) under which SIIPL and SLS supply the Company with NVX-CoV2373 for commercialization and sale in certain territories.

Takeda Pharmaceutical Company Limited

The Company has a collaboration and license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) under which the Company granted Takeda an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in Japan.

Under the agreement, Takeda purchases the Company's Matrix-M™ adjuvant to manufacture NVX-CoV2373 and the Company is 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 in the low to middle double-digit range.

The Company is eligible for a future milestone payment of $ 20.0 million upon the first sale in Japan.

Regulatory approval in Japan was received in April 2022 (see Note 16).

SK bioscience, Co., Ltd.

The Company has a collaboration and license agreement with SK bioscience, Co., Ltd.

(“SK bioscience”) to manufacture and commercialize NVX-CoV2373 for sale to the governments of Korea, Thailand, and Vietnam.

SK bioscience pays a royalty in the low to middle double-digit range.

Additionally, the Company has a manufacturing supply arrangement with SK bioscience under which SK bioscience supplies the Company with the antigen component of NVX-CoV2373 for use in the final drug product globally, including product to be distributed by the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies.

Note 5 – Earnings (Loss) per Share

Basic and diluted net income (loss) per share were calculated as follows (in thousands, except per share data):

Three Months Ended

Net income (loss), basic $ 203,408 $ ( 222,719 )

Interest on convertible notes, net 3,403 —

Net income (loss), dilutive 206,811 ( 222,719 )

Weighted average number of common shares outstanding, basic 76,457 73,035

Effect of dilutive securities 4,254 —

Weighted average number of common shares outstanding, dilutive 80,711 73,035

Net income (loss) per share:

Basic $ 2.66 $ ( 3.05 )

Diluted $ 2.56 $ ( 3.05 )

Anti-dilutive securities excluded from calculations of diluted net income (loss) per share 1,474 8,659

Note 6 – Cash, Cash Equivalents, and Restricted Cash

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

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 1,570,954 $ 1,515,116

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Cash, cash equivalents, and restricted cash $ 1,584,100 $ 1,528,259

Pre-Launch Inventory

Prior to an emergency use authorization ("EUA") or regulatory approval of NVX-CoV2373, the Company's policy is to recognize the cost associated with acquiring raw materials and production for preclinical studies, clinical trials and pre-launch inventory, including both internal manufacturing and third-party Contract Manufacturing Organizations ("CMO"), as research and development expense in its consolidated statements of operations, in the period in which the costs are incurred.

When the Company believes EUA or regulatory approval and subsequent commercialization of NVX-CoV2373 is probable, and expects future economic benefit from the sales of NVX-CoV2373 to be realized, the Company will then start capitalizing the costs of production as inventory.

Revenue Recognition

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

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

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

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

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

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

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

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

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

During the three and nine months ended September 30, 2021, the Company recognized sales-based royalties of $ 39.9 million and $ 63.4 million, respectively.

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

Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards.

The Company has historically generated significant federal, state and foreign tax net operating losses, which may be subject to limitation in future periods.

Management has fully reserved the related deferred tax assets with a valuation allowance in the current reporting period as more likely than not the related benefit will not be realized.

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

During the three and nine months ended September 30, 2021, the Company recognized $ 6.0 million and $ 12.6 million, respectively, of income tax expense related to foreign withholding tax on royalties.

Net Loss per Share

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

As of September 30, 2021 and 2020, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 4,911,656 and 6,623,466 , respectively.

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

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

Recent Accounting Pronouncements

Not Yet Adopted

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

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

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts in an entity’s own equity.

Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features.

It will also remove certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and will simplify the diluted earnings per share calculation for convertible instruments.

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

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

(1) Classified as Other non-current assets as of March 31, 2022 and December 31, 2021, on the consolidated balance sheets.

Note 7 – Fair Value Measurements

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

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

Fair Value at March 31, 2022 Fair Value at December 31, 2021

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

Money market funds (1)

$ 500,411 $ — $ — $ 361,822 $ — $ —

Government-backed securities (1)

— 179,500 — — 266,250 —

Treasury securities (1)

— 54,009 — — — —

Corporate debt securities (1)

— 672,208 — — 790,672 —

Agency securities (1)

Total cash equivalents and marketable securities $ 366,242 $ 1,456,975 $ — $ 96,116 $ 492,619 $ —

— 62,739 — — — —

Total cash equivalents $ 500,411 $ 968,456 $ — $ 361,822 $ 1,056,922 $ —

Convertible notes payable $ — $ 348,098 $ — $ — $ 447,509 $ —

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

(2) Includes $ 99,996 and $ 44,052 classified as cash and cash equivalents as of September 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

(3) Includes $ 1,159,729 and $ 246,668 classified as cash and cash equivalents as of September 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.

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

(1) All investments are classified as cash and cash equivalents as of March 31, 2022 and December 31, 2021, on the consolidated balance sheets.

Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature.

Pricing of the Company's Notes (see Note 11) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates, and credit spreads among others.

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

Note 4 – Marketable Securities

The Company had no marketable securities classified as available-for-sale as of September 30, 2021 as all of the Company's investments were in securities classified as cash and cash equivalents.

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

December 31, 2020

Losses Fair Value

Treasury securities $ 10,038 $ — $ ( 2 ) $ 10,036

Corporate debt securities 127,003 13 ( 3 ) 127,013

Agency securities 20,599 1 — 20,600

Total marketable securities $ 157,640 $ 14 $ ( 5 ) $ 157,649

The primary objective of the Company's investment policy is the preservation of capital;

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

During the three months ended March 31, 2022 and 2021, the Company did not have any transfers between levels .

Note 8 – Inventory

Inventory consisted of the following (in thousands):

March 31, 2022 December 31, 2021

Raw materials $ 34,664 $ 8,872

Semi-finished goods 66,101 —

Finished goods 5,883 —

Total inventory $ 106,648 $ 8,872

Note 9 – Goodwill and Other Intangible Assets

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

The change in the carrying amounts of goodwill for the three months ended March 31, 2022 was as follows (in thousands):

Balance at December 31, 2021 $ 131,479

Currency translation adjustments ( 723 )

Balance at September 30, 2021 $ 131,989

Balance at March 31, 2022 $ 130,756

Identifiable Intangible Assets

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

September 30, 2021 December 31, 2020

Purchased intangible assets consisted of the following (in thousands):

March 31, 2022 December 31, 2021

Amount Accumulated

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Total identifiable intangible assets $ 11,618 $ ( 7,083 ) $ 4,535 $ 11,961 $ ( 7,191 ) $ 4,770

Amortization expense for the nine months ended September 30, 2021 and 2020 was $ 0.3 million and $ 0.5 million, respectively.

Amortization expense was $ 0.1 million for each of the three months ended March 31, 2022 and 2021.

Estimated amortization expense for existing intangible assets for the remainder of 2022 and for each of the five succeeding years ending December 31 will be as follows (in thousands):

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Note 10 - Leases

During the third quarter of 2021, the Company entered into a supply agreement with a CMO that modified existing short-term embedded leases under ASC Topic 842, Leases (“ASC 842”) as the Company continues to have the exclusive use of, and control over, a portion of manufacturing facilities and equipment of the supplier during the contractual term of the new arrangement.

The modifications did not result in a change in lease classification and, in accordance with the Company's election to apply the practical expedient in ASC 842, it did not recognize a Right-Of-Use ("ROU") asset or lease liability but instead, will recognize lease payments as an expense on a straight-line basis over the modified lease term and variable lease payments that do not depend on an index or rate, are recognized as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements.

During the second quarter of 2021, the Company evaluated the impact of changes in facts and circumstances on its CMOs and contract development and manufacturing organizations agreements that had previously been determined to represent embedded lease arrangements.

During the first quarter of 2022, the Company evaluated the impact of changes in facts and circumstances on its CMOs and CDMOs agreements that had previously been determined to represent embedded lease arrangements.

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

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

As a result, the Company recognized a Right-Of-Use (“ROU”) asset and a corresponding long-term operating lease liability of $ 10.4 million on the remeasurement of one of its long-term supply agreements using an incremental borrowing rate of 2.4 %.

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

Modifications to leases with a lease term of 12 months or less at the commencement date did not result in a change in lease classification and in accordance with the Company's election, it applied the practical expedient in ASC 842, as described above.

During the three and nine months ended September 30, 2021, the Company recognized a short-term lease expense of $ 111.3 million and $ 325.5 million, respectively, related to its embedded leases and expensed $ 4.4 million and $ 17.1 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement of lease.

The Company recognized a short-term lease expense of $ 19.4 million related to embedded leases and expensed $ 187.2 million of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement of lease during the three and nine months ended September 30, 2020.

During the three and nine months ended September 30, 2021, the Company recognized $ 1.6 million and $ 5.6 million of interest expenses, respectively, on its finance lease liabilities.

The Company recognized $ 1.0 million of interest expense related to finance lease liabilities during the three and nine months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company entered into or extended the term of certain of its existing research and development facility and offices leases, giving rise to additional ROU assets and related operating lease liabilities of $ 17.8 million.

Note 7 – Long-Term Debt

During the three months ended March 31, 2022 and 2021, the Company recognized a short-term lease expense of $ 78.1 million and $ 127.6 million, respectively, related to its embedded leases and expensed $ 10.4 million and $ 1.0 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement or modification of the lease.

During the three months ended March 31, 2022 and 2021, the Company recognized $ 1.1 million and $ 2.1 million of interest expense, respectively, on its finance lease liabilities.

During 2020, the Company entered into a lease agreement for the premises located at 700 Quince Orchard Road, Gaithersburg, Maryland (“700QO”).

The lease is for approximately 170,000 square feet of space that the Company intends to use for manufacturing, research and development, and offices.

The term of the lease is 15 years with options to extend the lease.

The lease provides for an annual base rent of $ 5.8 million that is subject to future rent increases and obligates the Company to pay building operating costs.

During the three months ended March 31, 2022, the Company obtained the right to direct the use of, and obtain substantially all of the benefit from, the third floor of the premises and recognized a ROU asset of $ 47.8 million and related lease obligation for the combined third floor and land lease as the lease commencement date for accounting purposes had occurred.

Note 11 – Debt

Convertible Notes

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

September 30,

2021 December 31,

March 31, 2022 December 31, 2021

Principal amount of Notes $ 325,000 $ 325,000

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Total convertible notes payable (1)

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

Three Months Ended September 30, Nine Months Ended September 30,

$ 323,814 $ 323,458

(1) Convertible notes are classified as current liabilities and as non-current liabilities in the Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021, respectively.

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

Three Months Ended March 31,

Coupon interest at 3.75 %

2 unchanged sentences

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

Note 8 – Stockholders' Equity

During the nine months ended September 30, 2021 and 2020, the Company sold 2.6 million and 29.1 million, respectively, of shares of its common stock resulting in net proceeds of approximately $ 565 million and $ 446 million, respectively, under its various At Market Issuance Sales agreements.

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

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

Note 12 – Stockholders' Equity (Deficit)

During the three months ended March 31, 2022, the Company sold 2.2 million of shares of its common stock resulting in net proceeds of approximately $ 179 million, under its most recent At Market Issuance Sales agreement entered in June 2021 (the “June 2021 Sales Agreement”), which allows it to issue and sell up to $ 500 million in gross proceeds of shares of its common stock.

As of March 31, 2022, the remaining balance under the June 2021 Sales Agreement was approximately $ 318 million.

During the three months ended March 31, 2021, the Company sold 2.6 million shares of its common stock resulting in net proceeds of approximately $ 565 million, under its various At Market Issuance Sales agreements.

Note 13 – Stock-Based Compensation

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

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

The 2015 Plan authorizes the issuance of up to 12.4 million shares of common stock under equity awards granted under the 2015 Plan.

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

1 unchanged sentence

The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.

The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, SARs and RSUs.

The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights, and restricted stock units.

In addition, under the 2015 Plan, unrestricted stock, stock units, and performance awards may be granted.

1 unchanged sentence

Grants of stock options are generally subject to vesting over periods ranging from one to four years .

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

Three Months Ended

Research and development $ 16,887 $ 23,790

General and administrative 16,046 29,270

Total stock-based compensation expense $ 32,933 $ 53,060

As of March 31, 2022, there was approximately $ 239 million of total unrecognized compensation expense related to unvested stock options, SARs, RSUs, and the ESPP.

This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of approximately one year .

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

The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and SARs) that would have been received by the holders had all stock option and SAR holders exercised their stock options and SARs on March 31, 2022.

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

The aggregate intrinsic value of stock options and SARs exercises and vesting of RSUs for the three months ended March 31, 2022 and 2021 was approximately $ 5.6 million and $ 81.5 million, respectively.

Stock Options and Stock Appreciation Rights

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

The following is a summary of stock options and SARs activity under the 2015 Plan and 2005 Plan for the three months ended March 31, 2022:

2015 Plan 2005 Plan

Options and SARs Weighted-Average

Options Weighted-Average

Outstanding at January 1, 2021 5,420,463 $ 38.05 214,186 $ 88.11

Options Weighted-Average

Outstanding at December 31, 2021 3,635,837 $ 42.60 68,225 $ 109.52

Granted 433,774 77.98 — —

1 unchanged sentence

Canceled ( 11,368 ) 66.71 ( 1,500 ) 121.00

Outstanding at September 30, 2021 3,992,205 $ 40.92 73,606 $ 103.56

Shares exercisable at September 30, 2021 1,286,515 $ 48.62 73,606 $ 103.56

Shares available for grant at September 30, 2021 3,788,799

Outstanding at March 31, 2022 4,017,374 $ 46.62 63,725 $ 112.94

Shares exercisable at March 31, 2022 1,296,368 $ 55.96 63,725 $ 112.94

Shares available for grant at March 31, 2022 2,666,535

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Weighted average Black-Scholes fair value of stock options granted $ 65.78

3 unchanged sentences

124.7 %- 140.3 %

124.7 %- 142.0 %

116.0 %- 152.2 %

Expected term (in years) 4.1 - 5.3

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of September 30, 2021 was approximately $ 673 million and 7.9 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of September 30, 2021 was approximately $ 212 million and 7.0 years, respectively.

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

The aggregate intrinsic value of stock options and SARs exercises and vesting of RSUs for the nine months ended September 30, 2021 and 2020 was approximately $ 381 million and $ 164 million, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of March 31, 2022 was approximately $ 154 million and 7.7 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of March 31, 2022 was approximately $ 47 million and 6.6 years, respectively.

Restricted Stock Units

The following is a summary of RSU activity for the three months ended March 31, 2022:

Shares Per Share

Outstanding and unvested at December 31, 2021 819,828 $ 116.70

Restricted stock units granted 659,189 79.97

Restricted stock units vested ( 20,386 ) 174.64

Restricted stock units forfeited ( 31,444 ) 97.85

Outstanding and unvested at March 31, 2022 1,427,187 $ 99.32

Employee Stock Purchase Plan

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

As of September 30, 2021, there were 164,495 shares available for issuance under the ESPP.

As of March 31, 2022, there were 137,139 shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Range of Black-Scholes fair values of ESPP shares granted $ 44.67 -$ 79.74

$ 128.70 -$ 238.85

$ 83.47 -$ 238.85

$ 2.57 -$ 92.67

Risk-free interest rate 0.6 %- 1.4 %

2 unchanged sentences

120.4 %- 159.4 %

114.9 %- 159.4 %

66.6 %- 189.7 %

Expected term (in years) 0.5 - 2.0

Restricted Stock Units

The following is a summary of RSUs activity for the nine months ended September 30, 2021:

Shares Per Share

Outstanding and Unvested at January 1, 2020 1,044,980 $ 72.59

Restricted stock units granted 225,424 $ 196.93

Restricted stock units vested ( 391,960 ) $ 57.81

Restricted stock units forfeited ( 32,599 ) $ 131.95

Outstanding and Unvested at September 30, 2021 845,845 $ 110.68

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Research and development $ 21,860 $ 28,730 $ 70,429 $ 34,735

General and administrative 23,414 36,975 81,028 42,867

Total stock-based compensation expense $ 45,274 $ 65,705 $ 151,457 $ 77,602

As of September 30, 2021, there was approximately $ 209 million of total unrecognized compensation expense related to unvested stock options, SARs, RSUs and the ESPP.

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

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

Note 10 – Revenue

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

The Company's revenue

primarily consisted of funding under U.S.

government contracts and the Company's funding arrangement with CEPI to advance the clinical development and manufacturing of NVX-CoV2373, and royalties under its licensing arrangements.

The Company recorded revenue as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Government contracts

OWS $ 96,215 $ 39,370 $ 699,268 $ 39,370

DoD 1,287 3,568 21,472 3,879

Grants and other

CEPI 37,505 111,266 131,022 147,770

— 2,316 2,628 2,731

Other 3,896 504 6,302 2,189

Royalties 39,941 — 63,398 —

Total $ 178,844 $ 157,024 $ 924,090 $ 195,939

Government Contracts and Grants

The Company’s U.S.

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

Department of Defense (the “DoD”).

As of 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 original scope of work 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.

In July 2021, the U.S.

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

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

manufacturing and further indicated that the U.S.

government will not fund additional U.S.

manufacturing until such agreement has been made.

In the third quarter of 2021, the Company updated its estimate-at-completion to reflect the impact of the change to the recognition of the fixed-fee under the contract.

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

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

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

Collaboration and License Agreements

In February 2021, the Company finalized an expanded collaboration and license agreement with SK bioscience, Co., Ltd.

("SK bioscience") to manufacture and commercialize NVX-CoV2373 for sale to the government of Korea.

Concurrently, SK bioscience finalized an advance purchase agreement ("APA") with the Korean government to supply 40 million doses of NVX-CoV2373 to the Republic of Korea beginning in 2021.

The agreement is in addition to the Company's existing manufacturing arrangement with SK bioscience entered into in August 2020.

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

SK bioscience expanded its capacity to manufacture the antigen component of NVX-CoV2373 for use in the final drug product globally, including product distributed by the COVAX Facility.

SK bioscience will also purchase a certain quantity of NVX-CoV2373 directly from the Company, subject to approval by relevant regulatory authority, and sufficient doses of Matrix-M ™ adjuvant to manufacture the remainder of the 40 million doses of NVX-CoV2373 it expects to sell to the Korean government.

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

The Company recognized royalties of $ 39.9 million and $ 63.4 million during the three and nine months ended September 30, 2021, respectively, related to SK bioscience's sale of the antigen component of NVX-CoV2373 to the Korean government.

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

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

In February 2021, the Company finalized a collaboration and license agreement previously announced in August 2020, with Takeda Pharmaceutical Company Limited (“Takeda”), under which the Company granted Takeda an exclusive license to develop, manufacture and commercialize NVX-CoV2373 in Japan.

Under the agreement, Takeda purchases Matrix-M™ adjuvant from the Company to manufacture doses of finished NVX-CoV2373.

Takeda is receiving funding from the Government of Japan’s Ministry of Health, Labour and Welfare ("MHLW") to support the technology transfer, establishment of infrastructure and scale-up of manufacturing and, in September 2021, Takeda finalized an agreement with the MHLW for the purchase of 150 million doses of NVX-CoV2373.

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

In July 2020, the Company entered into a supply and license agreement with Serum Institute of India Private Limited (“SIIPL”), which was amended and restated in July 2021, under which it granted exclusive (in India) and non-exclusive (in designated other countries) licenses to SIIPL for the development, co-formulation, filling and finishing, registration and commercialization of NVX-CoV2373.

SIIPL agreed to purchase Matrix-M™ adjuvant from the Company and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373 under the terms of the agreement.

The parties will equally split the revenue from SIIPL’s sale of NVX-CoV2373 in its licensed territory, net of agreed costs.

In partnership with SIIPL, in August 2021, for the Company's COVID-19 vaccine that will be manufactured and commercialized with SIIPL, the Company filed regulatory submissions for EUA with the Drugs Controller General of India, regulatory agencies in Indonesia, the Philippines and emergency use listing ("EUL") for the World Health Organization ("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.

EUA was granted by Indonesia on October 31, 2021.

Vaccine Supply Agreements

During the nine months ended September 30, 2021, the Company entered into various APA, including an agreement with Her Majesty the Queen in Right of Canada as represented by the Minister of Public Works and Government Services to supply 52 million doses of NVX-CoV2373.

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

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

The Company plans to produce NVX-CoV2373 at the National Research Council’s Biologics Manufacturing Centre in Montreal once both the vaccine candidate and the facility receive Health Canada approvals.

On November 1, 2021, the Company submitted an application for regulatory approval in Canada.

In May 2021, the Company entered into an APA with Gavi, the Vaccine Alliance ("Gavi") building upon its MOU previously announced in February 2021.

Under the terms of the agreement, 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility.

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

Under a separate purchase agreement with Gavi, SIIPL is expected to manufacture and deliver the balance of the 1.1 billion doses of NVX-CoV2373 for low- and middle-income countries participating in the COVAX Facility.

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

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

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

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

Under the agreement, the Company received an upfront payment from Gavi of $ 350 million during the second quarter of 2021 and expects

to receive an additional payment of $ 350 million if the Company secures emergency use listing for NVX-CoV2373 by the WHO.

In August 2021, the Company executed an APA with the European Commission acting on behalf of various European Union member states (the "Commission"), to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the Commission to purchase up to a maximum aggregate of 100 million additional doses in one or more tranches, through 2023.

Under the terms of the APA, the Company agreed to use reasonable best efforts to seek European marketing authorization for NVX-CoV2373, manufacture the vaccine in facilities located in the European Union and ensure continued efficacy of the vaccine against variants of the SARS-CoV-2 virus.

Furthermore, if European marketing authorization is obtained, the Company agreed to commence delivering shipments of the vaccine to participating European Union member states as soon as possible thereafter pursuant to order forms to be entered into with such European Union member states based on an allocation determined by the Commission.

Pursuant to the terms of the APA, the Company is prohibited from supplying NVX-CoV2373 to any third party if such delivery would impede or limit the fulfillment of the Company’s obligations to the Commission under the APA, except with respect to the Company’s obligations under its APA with Gavi.

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

December 31, 2020 Additions Deductions September 30, 2021

Accounts receivable $ 262,012 $ 1,601,385 $ ( 1,788,114 ) $ 75,283

Unbilled receivable

— 635,975 ( 601,297 ) 34,678

Deferred revenue 273,228 1,277,247 ( 288,115 ) 1,262,360

As of September 30, 2021, the deferred revenue of $ 1.3 billion primarily comprised of approximately $ 1.2 billion related to upfront payments under APAs.

The upfront payments are intended to assist the Company in funding investments related to building out and operating its manufacturing and distribution network, among other expenses, in support of its global supply commitment.

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

However, certain of the APAs may be terminated by the counterparty if the Company does 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.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied) was $ 7.2 billion as on September 30, 2021.

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

Note 14 – Income Taxes

The Company evaluates the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

A significant piece of objective evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2022 and that the Company has historically generated pretax losses.

Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth.

On the basis of this evaluation, as of March 31, 2022, the Company continued to maintain a full valuation allowance against its deferred tax assets, except to the extent Net Operating Losses (“NOLs”) were used to reduce taxable income during the quarter.

The Company’s remaining U.S.

Federal NOLs are subject to limitation in accordance with the 2017 Tax Cuts and Jobs Act, which limits allowable NOL deductions to 80% of federal taxable income.

The Company recognized federal and state income tax expense of $ 0.6 million, in total, for the three months ended March 31, 2022 and did no t recognize federal or state income tax expense for the three months ended March 31, 2021.

During the three months ended March 31, 2022 and 2021, the Company recognized $ 2.1 million and $ 3.0 million, respectively, of income tax expense related to foreign withholding tax on royalties.

Note 15 – Commitments and Contingencies

Legal Matters

On November 12, 2021, Sothinathan Sinnathurai filed a purported securities class action in the U.S.

District Court for the District of Maryland against the Company and certain members of senior management, captioned Sothinathan Sinnathurai v.

Novavax, Inc., et al., No.

8:21-cv-02910-TDC (the “Sinnathurai Action”).

On January 26, 2022, the court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs in the Sinnathurai Action.

The co-lead plaintiffs filed a consolidated amended complaint on March 11, 2022, alleging that the defendants made certain purportedly false and misleading statements concerning the Company’s ability to manufacture NVX-CoV2373 on a commercial scale and to secure the vaccine’s regulatory approval.

The amended complaint defines the purported class as those stockholders who purchased the Company’s securities between February 24, 2021 and October 19, 2021.

On April 25, 2022, defendants filed a motion to dismiss the consolidated amended complaint.

After the Sinnathurai Action was filed, three derivative lawsuits were filed and are currently pending in the U.S.

District Court for the District of Maryland:

Erck, et al., No.

8:21-cv-02996-TDC (the “Meyer Action”), Shui Shing Yung v.

Erck, et al., No.

8:21-cv-03248-TDC (the “Yung Action”), and William Kirst, et al.

Erck, et al., No.

8:22-cv-00024-TDC (the “Kirst Action”).

The derivative lawsuits name members of the board of directors and certain members of senior management as defendants.

The company is deemed a nominal defendant.

The plaintiffs assert derivative claims arising out of substantially the same alleged facts and circumstances as the Sinnathurai Action.

Collectively, the derivative complaints assert claims for breach of fiduciary duty, insider selling, unjust enrichment, violation of federal securities law, abuse of control, waste, and mismanagement.

Plaintiffs seek declaratory and injunctive relief, as well as an award of monetary damages and attorneys’ fees.

The Company removed the Kirst Action from the Circuit Court for Montgomery County, Maryland, shortly after the case was filed.

On February 7, 2022, the plaintiffs in the Kirst Action filed a motion to remand the case to state court.

The Company has opposed the remand motion.

The parties finished briefing the remand motion on March 8, 2022, and await the Court’s decision.

On February 4, 2022, the Court entered an order consolidating the Meyer and Yung Actions (the “Consolidated Derivative Action”).

The plaintiffs in the Consolidated Derivative Action filed their consolidated derivative complaint on April 25, 2022.

The parties to the Consolidated Derivative Action intend to file a stipulation and proposed order to temporarily stay all proceedings and deadlines in the Consolidated Derivative Action.

On March 29, 2022, Par Sterile Products, LLC (“Par”) submitted a demand for arbitration against the Company with the American Arbitration Association, alleging that the Company breached certain provisions of the Manufacturing and Services Agreement (“MSA”) that the Company entered into with Par in September 2020 to provide fill-finish manufacturing services for NVX-CoV2373.

The matter is at a preliminary stage and therefore the potential loss is not reasonably estimable.

While the Company maintains that no breach of the MSA has occurred and intends to vigorously defend the matter, if the final resolution of the matter is adverse to the Company, it could have a material impact on the Company's financial position, results of operations, or cash flows.

The Company is also involved in various legal proceedings arising in the normal course of business.

Although the outcomes of these legal proceedings are inherently difficult to predict, management does not expect the resolution of these legal proceedings to have a material adverse effect on the Company's financial position, results of operations, or cash flows.

Note 16 – Subsequent Events

In November 2021, in partnership with SIIPL, the Company received 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 support from the Company.

EUA was granted for the Company's recombinant nanoparticle protein-based vaccine with its Matrix-M TM adjuvant, which will be manufactured and marketed in Indonesia by SIIPL under the brand name COVOVAX TM .

Indonesia contracted with SIIPL for the purchase of 50 million doses of COVOVAX TM .

In November 2021, the Company completed the rolling submission of all modules required by the European Medicines Agency ("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.

In October and November 2021, the Company completed rolling regulatory submissions in key markets for NVX-CoV2373.

The Company filed for conditional marketing authorization with the United Kingdom Medicines and Healthcare products Regulatory Agency, leveraging its manufacturing partnership with SIIPL.

Additionally, the Company filed for provisional approval with Australia’s Therapeutic Goods Administration, authorization with Health Canada, provisional approval with New Zealand Medicines and Medical Devices Authority and the WHO for EUL.

In October 2021, the Company 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, the Company also entered into a contract development manufacture agreement with SLS, where SLS will manufacture and supply finished vaccine product to the Company using antigen drug substance and Matrix-M™ adjuvant supplied by the Company.

In October 2021, the Company entered into a CMO agreement with Mabion S.A.

(“Mabion”) for the large-scale manufacturing of NVX-CoV2373 through 2026 at the Mabion facility located near Warsaw, Poland.

In October 2021, the Company entered into a lease for approximately 63,000 square feet of space for premises located in Germantown, MD.

The Company intends to use the premises for manufacturing, research and development and offices.

The term of the lease is approximately eight years with options to extend the lease.

The lease provides for an annual base rent of $ 1.9 million that is subject to future rent increases, and obligates the Company to pay building operating costs.

In April 2022, the Company was granted conditional marketing authorization for NVX-CoV2373 by Swissmedic, the regulatory authority in Switzerland.

In April 2022, Takeda received marketing and manufacturing approval for NVX-CoV2373 from the Japan Ministry of Health, Labour and Welfare.

In April 2022, SIIPL was granted EUA by the Thailand Food and Drug Administration for NVX-CoV2373, to be manufactured and marketed by SIIPL under the brand name Covovax™, and EUA by the Drugs Controller General of India for the use of NVX-CoV2373 in adolescents aged 12 to 17 years, to be manufactured and marketed in India as Covovax™.

In April 2022, the U.S.

government extended the prescribed time to meet its July 2021 instructions related to the Company’s agreement under the U.S.

government partnership formerly known as Operation Warp Speed (“OWS”) requiring that the Company align with the U.S.

Food and Drug Administration (“FDA”) on analytic methods before conducting additional U.S.

manufacturing, to July 2022.

In April 2022, the Company announced initial results from the Phase 1/2 clinical trial of its COVID-Influenza Combination Vaccine (“CIC”).

The CIC combines NVX-CoV2373 and its quadrivalent influenza vaccine candidate.

The CIC trial demonstrated that formulating the combination vaccine is feasible, well-tolerated, and immunogenic.

In April 2022, the Company announced that the FDA’s Vaccines and Related Biological Products Advisory Committee (“VRBPAC”) will review NVX-CoV2373 at a meeting scheduled for June 7, 2022.

VRBPAC reviews and evaluates data regarding the safety and efficacy of vaccines and related biological products that are intended for use in the prevention, treatment, or diagnosis of human diseases.

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

What changed 10-Q

Item 1. Financial Statements