What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 190 added, 112 removed, 167 unchanged (64% of the section changed)

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our expectation of manufacturing capacity, timing, production, distribution, and delivery for our coronavirus vaccine candidate (“NVX-CoV2373”) by us and our partners;

our estimate of the number of individuals who may potentially be reached by NVX-CoV2373;

our expectations with respect to the anticipated ongoing development and commercialization or licensure of NVX-CoV2373 and our seasonal quadrivalent influenza vaccine, previously known as NanoFlu;

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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.

Novavax, Inc., together with our wholly-owned subsidiaries, is a biotechnology company that promotes improved health globally through the discovery, development, and commercialization of innovative vaccines to prevent serious infectious diseases around the world.

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

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Our vaccine candidates also incorporate our proprietary saponin-based Matrix-M™ adjuvant to enhance the immune response and stimulate higher levels of functional antibodies and induce a cellular immune response.

We have developed a COVID-19 vaccine (“NVX-CoV2373,” “Nuvaxovid™,” “Covavax”), and are developing an influenza vaccine, a COVID-19-Influenza Combination vaccine, and additional vaccine candidates.

We have developed a COVID-19 vaccine (“NVX-CoV2373,” “Nuvaxovid™,” “Covavax™”), and are developing an influenza vaccine, a COVID-19-Influenza Combination vaccine (“CIC”), and additional vaccine candidates.

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

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We continue to make progress in advancing NVX-CoV2373 toward regulatory approvals.

We have received numerous authorizations globally, which collectively have the potential to reach over six billion individuals.

We have received numerous authorizations globally for primary series, and both homologous and heterologous booster indications, which collectively have the potential to reach over six billion individuals.

To date, we have received approval, interim authorization, provisional approval, CMA, and EUA for both adult and adolescent populations, and we expect to initiate additional rolling submissions worldwide.

We continue to work closely with governments, regulatory authorities, and non-governmental organizations in our commitment to facilitate equitable global access to our COVID-19 vaccine.

For the territories in which our vaccine has gained authorization, NVX-CoV2373 is marketed under the brand name of Nuvaxovid™ COVID-19 Vaccine (SARS-CoV-2 rS [Recombinant, adjuvanted]) or as Covovax™ (manufacturing and commercialization by the Serum Institute of India Pvt.

For the territories in which our vaccine has gained authorization, NVX-CoV2373 is marketed under the brand names (i) Nuvaxovid™ COVID-19 Vaccine (SARS-CoV-2 rS [Recombinant, adjuvanted]), (ii) Covovax™ (manufacturing and commercialization by the Serum Institute of India Pvt.

(“SIIPL”)), or (iii) Novavax’ COVID-19 Vaccine, Adjuvanted.

Through the date of filing this Quarterly Report, the below is a summary of regulatory authorizations for NVX-CoV2373:

(1) Regulatory manufacturing and marketing approval received by partner Takeda Pharmaceutical Company Limited (“Takeda”).

(1) Regulatory approval received in partnership with SIIPL.

In the first quarter of 2022, we have completed additional regulatory submissions in major markets for both adult and adolescent populations.

(2) Regulatory manufacturing and marketing approval received by partner Takeda Pharmaceutical Company Limited (“Takeda”).

During the second quarter of 2022, we completed additional regulatory submissions in major markets for both adult and adolescent populations for primary and booster indications.

We are in active discussions with regulatory authorities and remain focused on seeking additional authorizations for NVX-CoV2373.

Below is a summary and status of our regulatory submissions completed through the date of filing this Quarterly Report.

(1) Regulatory filing submitted in partnership with SIIPL.

(2) Regulatory filing submitted by our partner, SK bioscience, Co., Ltd.

(“SK bioscience”).

(2) Regulatory filing submitted in partnership with SIIPL.

Clinical Pipeline

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

We initiated a trial of a COVID-19-Influenza Combination vaccine (“CIC”) consisting of our influenza vaccine and NVX-CoV2373.

We initiated a trial of a CIC consisting of our influenza vaccine and NVX-CoV2373.

In April 2022, we announced initial results from Phase 1/2 clinical trial of CIC demonstrating that formulating the combination vaccine is well-tolerated and immunogenic.

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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 improve vaccine performance.

We expect to leverage these clinical insights to advance the use and additional regulatory approvals 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.

In April 2022, we announced the initiation of a Phase 3 COVID-19 vaccine booster study in adolescents ages 12-17 years as part of our PREVENT-19 trial, and in May 2022, we announced our participation in University of Oxford’s Com-COV3 booster trial of COVID-19 vaccines in adolescents ages 12-15 years.

Additionally, in May 2022, we announced the initiation of a Phase 3 clinical trial for use of our Omicron variant strain vaccine as a booster.

We remain in close collaboration with regulatory authorities for providing additional variant data.

We expect to leverage these clinical insights to advance the use and additional regulatory approvals of our COVID-19 vaccine for primary, booster, and pediatric indications globally, amidst the ongoing and evolving COVID-19 pandemic.

The pipeline chart below summarizes the core clinical and preclinical development programs that we are focusing on in the near-term.

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(2) Authorized for provisional approval, CMA, or EUA in select geographies under trade names Nuvaxovid TM and Covovax TM .

Request submitted to the FDA for EUA.

Received EUA from the U.S.

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

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Business Highlights

First Quarter 2022 and Recent Highlights

Expanded Worldwide Authorizations for COVID-19 Primary and Booster Vaccination in Adult Population Aged 18+

• Received manufacturing and marketing approval with our partner Takeda, in Japan for Nuvaxovid™ for primary, heterologous and homologous boosting indications

• Granted authorization (emergency use, provisional, interim or conditional) for Nuvaxovid™ in Great Britain, Canada, Australia, Switzerland, Singapore and New Zealand

• Received full regulatory approval for Nuvaxovid™ in South Korea with our partner SK bioscience, becoming the first protein-based vaccine approved in South Korea

• Granted EUA for Covovax™ with our partner SIIPL in Thailand and Bangladesh

• Submitted request for EUA to the U.S.

FDA and, with SIIPL, filed for EUA in South Africa

◦ FDA scheduled Vaccines and Related Biological Products Advisory Committee (“VRBPAC”) meeting for June 7th, 2022

Progressed COVID-19 Vaccine Regulatory Pathway for Children Aged 12-17 Years

• Granted EUA for adolescents in India with SIIPL for Covovax™

• Submitted requests for authorization for Nuvaxovid™ in adolescents to the European Union, Great Britain, Australia and New Zealand

• Filed for approval of Nuvaxovid™ with SK bioscience, for adolescents in South Korea

• Additional global submissions planned throughout the second quarter of 2022

CIC Vaccine Candidate Clinical Development

• Announced initial results of CIC Phase 1/2 trial, combining NVX-CoV2373 and quadrivalent influenza vaccine candidate

◦ Immune response confirmed in stand-alone influenza vaccine candidate and CIC vaccine candidate with potential path forward for both

◦ Demonstrated combined formulation has potential to reduce total antigen amount by up to 50% overall

◦ Expect to begin CIC Phase 2 trial by the end of 2022

COVID-19 Vaccine Supply and Distribution

• Delivered Nuvaxovid™ globally to European Union, Canada, Australia, Thailand, Singapore and New Zealand and with SK bioscience to South Korea

COVID-19 Vaccine Clinical Development

• UK Phase 3 study demonstrated ongoing durability of protection against infection and disease in long term follow-up (median of 101 days)

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

◦ 82.7% overall efficacy against disease

◦ 100% efficacy against severe disease

• Continued rapid development and assessment of strain change, including Omicron-specific clinical studies with topline readout expected in third quarter of 2022

◦ Evaluating benefit of Omicron-specific (BA.1 and BA.2) or bivalent vaccine compared to current prototype, with first doses expected this month

• Progressed South Africa Phase 2 study with ongoing administration in participants to evaluate a three-dose regimen and different dosing schedules in -immunocompromised participants, providing flexibility to national delivery programs

◦ Topline results expected in fourth quarter of 2022

• Progressed PREVENT-19 Phase 3 study in adolescents aged 12-17 years

◦ Achieved primary effectiveness endpoint and demonstrated comparability to adult population

◦ Demonstrated 80% overall clinical efficacy and 82% efficacy against Delta variant

◦ Vaccine was generally well-tolerated and safety profile was consistent with previous studies

◦ Initiated booster study to evaluate safety and immunogenicity of a third dose

• Continued clinical trials in younger age groups to build on positive pediatric data

◦ Expect to initiate PREVENT-19 Phase 3 trial in younger age groups (5-11 years) by third quarter of 2022

◦ SIIPL generated positive data from Phase 2/3 India study in children ages 2-17 years showing robust immune responses with favorable reactogenicity profiles

• Announced participation in Phase 1/2 heterologous booster study sponsored by National Institute of Allergy and Infectious Diseases

◦ Evaluating safety, reactogenicity and immunogenicity of heterologous boosters in approximately 180 individuals aged 18 years or older

◦ Topline results expected later this year and full results in 2023

• Announced participation in Phase 3 study in the United Arab Emirates evaluating boost with NVX-CoV2373 in participants who were immunized with an inactive COVID-19 vaccine in individuals aged 18 years or older

Second Quarter 2022 and Recent Highlights

Progressed COVID-19 Global Regulatory Strategy

• Received EUA from U.S.

FDA with label expansion underway, marking first protein-based COVID-19 vaccine available for use domestically

◦ Authorized for primary series in adults 18 and older with unanimous recommendation received from U.S Centers for Disease Control and Prevention (“CDC”)

◦ Planned submission for boosting data from PREVENT-19 Phase 3 trial in August of 2022

• Nuvaxovid or Covovax authorized in 43 countries for primary series in adults 18 and older, with additional label expansions received and underway in several geographies

◦ Authorized for boosting in adults 18 and older in Japan, Australia and New Zealand

▪ Nuvaxovid filings completed in the European Union (“EU”), Great Britain and Switzerland

◦ Authorized for primary series in adolescents aged 12 through 17 in the EU, India, Australia, Japan and Thailand

▪ Nuvaxovid filings completed to the WHO, Great Britain, Canada, Switzerland, New Zealand and Taiwan

• Expect to file for authorization of Omicron-containing vaccine with U.S.

FDA in the fourth quarter of 2022

COVID-19 Vaccine Manufacturing and Distribution

• Delivered over 73 million doses of Nuvaxovid and Covovax globally to date, including 23 million doses since the start of the third quarter 2022, reflecting strong momentum for the remainder of 2022

• Secured order from U.S government for 3.2 million initial doses under existing agreements, with distribution underway

• Received approval from EMA for SK bioscience to manufacture and supply the active substance in the Nuvaxovid COVID-19 vaccine to the EU

• Expanded partnership with SK bioscience to support manufacturing of Omicron-containing vaccine and to manufacture vaccine in prefilled syringes for commercial supply in 2023

COVID-19 Clinical Development Program

• Ongoing development of Omicron BA.1 specific vaccine (“NVX-CoV2515”), Omicron BA.5 specific vaccine and bivalent format with prototype vaccine (“NVX-CoV2373”)

◦ Announced positive preclinical boosting data for NVX-CoV2373, NVX-CoV2515, or bivalent formulation, demonstrating strong antibody levels

◦ Ongoing Phase 3 strain change trial to assess safety and antibody responses following primary vaccination with mRNA vaccines;

initial results expected near the end of the third quarter of 2022

• Initiated Phase 2b/3 Hummingbird global clinical trial in younger children aged six months through 11 years with initial results expected in the first quarter of 2023

◦ Expected to enroll total 3,600 participants across nine countries, evaluating safety, effectiveness (immunogenicity) and efficacy of two doses of NVX-CoV2373, followed by a booster at least six months after primary vaccination in three age cohorts

• Advanced multiple studies evaluating homologous and heterologous boosting in adolescents for NVX-CoV2373

◦ Completed administration of homologous third-dose booster for select participants in PREVENT-19 Phase 3 booster study in adolescents aged 12 through 17

◦ Ongoing participation in University of Oxford’s Com-COV3 Booster trial in adolescents aged 12 through 15 to evaluate heterologous boosting

COVID-19-Influenza Combination (CIC) Vaccine Candidate Clinical Development

• Announced initial results of CIC Phase 1/2 trial demonstrating robust immune response with both stand-alone influenza and CIC vaccine candidates

◦ Phase 3 trial to evaluate efficacy on-track to be initiated in 2023

Sales of Common Stock

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

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

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

As of June 30, 2022, the remaining balance under our June 2021 Sales Agreement was approximately $318 million.

During the six months ended June 30, 2021, we sold 2.6 million shares of our common stock resulting in net proceeds of approximately $565 million, under our various At Market Issuance Sales agreements then in effect.

Critical Accounting Policies and Use of Estimates

There are no material changes to our critical accounting policies as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements (unaudited) and the accompanying notes, 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Our critical accounting policies and estimates are included under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC, and are updated for inventory valuation below.

Inventory Valuation

We periodically analyze our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to its estimated net realizable value based on assumptions about expected future demand and market conditions.

Our assumptions about expected future demand are inherently uncertain and if we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory write down that we report in a particular period.

Expense incurred related to excess inventory and obsolete inventory is recorded as a component of cost of sales in the consolidated statement of operations.

Recent Accounting Pronouncements Not Yet Adopted

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Results of Operations

The following is a discussion of the historical financial condition and results of the Company’s operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report.

Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31,

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

Three Months Ended June 30, 2022 and 2021

Three Months Ended June 30,

2022 2021 Change

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Total revenue $ 185,925 $ 298,017 $ (112,092)

Revenue for the three months ended March 31, 2022 was $704.0 million as compared to $447.2 million for the same period in 2021, an increase of $256.7 million.

Revenue for the three months ended March 31, 2022 was primarily comprised of revenue from product sales of NVX-CoV2373 and, to a lesser extent, revenue for services performed under the agreement with the U.S.

government partnership formerly known as OWS (“OWS Agreement”).

Revenue for the three months ended March 31, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and our funding agreements with CEPI.

The increase in revenue was due to the commencement of product sales of NVX-CoV2373, partially offset by decreased development activities under the OWS Agreement as we approach anticipated commercialization of NVX-CoV2373.

We expect revenue in 2022 to significantly increase as compared to 2021 due to product sales of NVX-CoV2373 under various supply agreements, sometimes referred to as advance purchase agreements (“APAs”), as a result of multiple global regulatory approvals, royalties from the sale of NVX-CoV2373 under our supply and license agreements with strategic partners to supply NVX-CoV2373 in their specified territories where we are entitled to receive royalties from such sales, and our NVX-CoV2373 program, which we anticipate will continue to be funded by OWS and other revenue sources.

Three Months Ended March 31,

Revenue for the three months ended June 30, 2022 was $185.9 million as compared to $298.0 million for the same period in 2021, a decrease of $112.1 million.

Revenue for the three months ended June 30, 2022 was primarily comprised of revenue for services performed under the agreement with the U.S.

government partnership formerly known as OWS (“OWS Agreement”) and revenue from product sales of NVX-CoV2373.

Revenue for the three months ended June 30, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and our funding agreements with CEPI.

The decrease in revenue was due to decreased development activities under the OWS Agreement as we began commercial sales of NVX-CoV2373, partially offset by an increase in revenue due to the commencement of product sales of NVX-CoV2373.

Certain revenue from product sales of NVX-CoV2373 that was originally planned for the three months ended June 30, 2022 is now planned for the second half of 2022 based on requested and revised customer delivery plans.

Revenue in 2022 is also expected to increase due to royalties from the sale of NVX-CoV2373 under our supply and license agreements with strategic partners to supply NVX-CoV2373 in their specified territories where we are entitled to receive royalties from such sales, and our NVX-CoV2373 program, which we anticipate will continue to be funded by OWS and other revenue sources.

Three Months Ended June 30,

2022 2021 Change

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Cost of Sales

Cost of sales was $15.2 million, or 3% of product sales, for the three months ended March 31, 2022.

Prior to receiving approval, we expensed manufacturing costs as research and development expenses.

After receiving approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product.

Cost of sales was $271.1 million, or 489% of product sales, for the three months ended June 30, 2022, including expense of $255.3 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments.

Prior to receiving regulatory approval, we expensed manufacturing costs as research and development expenses.

After receiving regulatory approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product.

While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable.

However, based on our expectations for future manufacturing costs to produce our vaccine product and components inventory, we estimate that approximately $0.7 billion of commercial inventory was expensed prior to approval.

We expect to utilize the majority of our reduced-cost inventory during 2022.

If inventory sold for the three months ended March 31, 2022 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $160 million, or 27% of product sales, an adjustment of $145 million.

However, based on our expectations for future manufacturing costs to produce our vaccine product and components inventory, we estimate at June 30, 2022 we had approximately $0.3 billion of commercial inventory that was expensed prior to approval.

We expect to utilize all of our reduced-cost inventory during 2022.

If inventory sold for the three months ended June 30, 2022 was valued at expected standard cost, including expenses related to excess and obsolete inventory, adjusted cost of sales for the period would have been approximately $279.5 million, or 504% of product sales, an adjustment of $8.4 million as compared to cost of sales recognized.

The cost of sales to high income countries is expected to be between 15% and 30% of product sales based on our standard cost.

The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer mix or standard costs.

Research and Development Expenses

Research and development expenses decreased to $383.5 million for the three months ended March 31, 2022 as compared to $592.7 million for the three months ended March 31, 2021, a decrease of $209.2 million primarily due to research and development of NVX-CoV2373, as summarized in the table below (in millions):

Three Months Ended March 31,

Research and development expenses decreased to $289.6 million for the three months ended June 30, 2022 as compared to $570.7 million for the three months ended June 30, 2021, a decrease of $281.0 million primarily due to research and development of NVX-CoV2373, as summarized in the table below (in thousands):

Three Months Ended June 30,

NVX-CoV2373 $ 201,015 $ 497,196

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Total research and development expenses $ 289,648 $ 570,685

Research and development expenses for NVX-CoV2373 for the three months ended March 31, 2022, and March 31, 2021 included approximately $21.0 million and $22.8 million, respectively, related to the acceleration of manufacturing costs for leases that we determined were embedded in multiple manufacturing supply agreements with Contract Manufacturing Organizations (“CMOs”) and contract manufacturing and development organizations (“CDMOs”).

Research and development expenses for NVX-CoV2373 for the three months ended June 30, 2022 and 2021, included a benefit of $87.2 million related to previously accelerated manufacturing costs and an expense of $20.0 million related to the acceleration of manufacturing costs, respectively, for leases that we determined were embedded in multiple manufacturing supply agreements with Contract Manufacturing Organizations (“CMOs”) and contract manufacturing and development organizations (“CDMOs”).

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

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Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased to $96.0 million for the three months ended March 31, 2022 from $63.2 million for the same period in 2021, an increase of $32.8 million.

Selling, general, and administrative expenses increased to $108.2 million for the three months ended June 30, 2022 from $73.2 million for the same period in 2021, an increase of $35.0 million.

The increase in selling, general, and administrative expenses is primarily due to an increase in professional fees in support of our NVX-CoV2373 program.

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

For 2022, we expect selling, 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.

Other Income (Expense)

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Change

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Total other expense, net $ (26,107) $ (2,940) $ (23,167)

We had total other expense, net, of $3.2 million for the three months ended March 31, 2022 as compared to $11.1 million for the same period in 2021.

In the three months ended March 31, 2021, we recorded a $5.9 million loss on the intercompany loan with Novavax CZ due to changes in the foreign exchange rates.

We had total other expense, net, of $26.1 million for the three months ended June 30, 2022 as compared to $2.9 million for the same period in 2021.

During the three months ended June 30, 2022 and 2021, other income (expense) included a loss of $20.1 million and $2.7 million, respectively, incurred by our foreign subsidiaries, primarily related to the impact of foreign exchange rate differences on an intercompany loan with Novavax CZ.

Income Tax Expense

We recognized federal and state income tax expense of $0.6 million, in total, for the three months ended March 31, 2022 and did not 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, we recognized $2.1 million and $3.0 million, respectively, of income tax expense related to foreign withholding tax on royalties.

Net Income (Loss)

Three Months Ended March 31,

During the three months ended June 30, 2022 and 2021, we recognized $1.4 million and $3.5 million, respectively, of income tax expense related to federal and state income taxes and foreign withholding tax on royalties.

Three Months Ended June 30,

2022 2021 Change

Net Income (Loss) (in thousands, except per share information):

Net income (loss) $ 203,408 $ (222,719) $ 426,127

Net income (loss) per share, basic $ 2.66 $ (3.05) $ 5.71

Net income (loss) per share, dilutive $ 2.56 $ (3.05) $ 5.61

Net Loss (in thousands, except per share information):

Net loss $ (510,485) $ (352,317) $ (158,168)

Net loss per share, basic $ (6.53) $ (4.75) $ (1.78)

Weighted average shares outstanding, basic 78,143 74,118 4,025

Weighted average shares outstanding, dilutive 80,711 73,035 7,676

Net income for the three months ended March 31, 2021 was $203.4 million, or $2.66 per share, basic, as compared to a net loss of $222.7 million, or $3.05 per share, basic, for the same period in 2021.

The change in net income (loss) was primarily due to the commencement of commercial sales of NVX-CoV2373, partially offset by decreased revenue under the OWS Agreement.

The increase in weighted average shares outstanding for the three months ended March 31, 2022 is primarily a result of sales of our common stock and exercises of stock-based awards in 2022 and 2021.

Net loss for the three months ended June 30, 2022 was $510.5 million, or $6.53 per share, basic, as compared to a net loss of $352.3 million, or $4.75 per share, basic, for the same period in 2021.

The change in net loss during the three months ended June 30, 2022, was primarily due to decreased revenue under the OWS Agreement and the write-down of excess, obsolete, or expired inventory and losses on firm purchase commitments, partially offset by revenue from commercial sales of NVX-CoV2373 and a decrease in research and development expense.

The increase in weighted average shares outstanding for the three months ended June 30, 2022 is primarily a result of sales of our common stock and exercises of stock-based awards in 2022 and 2021.

Six Months Ended June 30, 2022 and 2021

Six Months Ended June 30,

2022 2021 Change

Revenue (in thousands):

Product sales $ 641,083 $ — $ 641,083

Grants 207,075 719,382 (512,307)

Royalties and other 41,738 25,864 15,874

Total revenue $ 889,896 $ 745,246 $ 144,650

Revenue for the six months ended June 30, 2022 was $889.9 million as compared to $745.2 million for the same period in 2021, an increase of $144.7 million.

Revenue for the six months ended June 30, 2022 was primarily comprised of revenue from product sales of NVX-CoV2373 and, to a lesser extent, revenue for services performed under the OWS Agreement.

Revenue for the six months ended June 30, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and our funding agreements with CEPI.

The increase in revenue was due to the commencement of product sales of NVX-CoV2373 and, to a lesser extent, royalties under our licensing arrangements, partially offset by decreased development activities under the OWS Agreement and our funding agreements with CEPI as we began commercial sales of NVX-CoV2373.

Six Months Ended June 30,

2022 2021 Change

Expenses (in thousands):

Cost of sales $ 286,281 $ — $ 286,281

Research and development 673,131 1,163,356 (490,225)

Selling, general, and administrative 204,152 136,351 67,801

Total expenses $ 1,163,564 $ 1,299,707 $ (136,143)

Cost of Sales

Cost of sales was $286.3 million, or 45% of product sales, for the six months ended June 30, 2022, including expense of $255.3 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments.

Prior to receiving approval, we expensed manufacturing costs as research and development expenses.

After receiving approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product.

We expect to utilize all of our reduced-cost inventory during 2022.

If inventory sold for the six months ended June 30, 2022 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $439.5 million, or 69% of product sales, an adjustment of $153.2 million as compared to cost of sales recognized.

The cost of sales to high income countries is expected to be between 15% and 30% of product sales based on our standard cost.

The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer mix or standard costs.

Research and Development Expenses

Research and development expenses decreased to $673.1 million for the six months ended June 30, 2022 from $1.2 billion for the same period in 2021, a decrease of $490.2 million, primarily due to decreased development activities relating to NVX-CoV2373, as summarized in the table below (in thousands):

Six Months Ended June 30,

NVX-CoV2373 $ 489,948 $ 1,035,320

Influenza vaccine

Other vaccine development programs 1,027 514

Total direct external research and development expense 494,545 1,040,128

Employee expenses 86,919 49,511

Stock-based compensation expense 36,582 48,569

Facility expenses 24,072 6,405

Other expenses 31,013 18,743

Total research and development expenses $ 673,131 $ 1,163,356

Research and development expenses for NVX-CoV2373 for the six months ended June 30, 2022 and 2021, included a benefit of $67.4 million related to previously accelerated manufacturing costs and an expense of $43.0 million related to the acceleration of manufacturing costs, respectively, for leases that we determined were embedded in multiple manufacturing supply agreements with CMOs and CDMOs.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased to $204.2 million for the six months ended June 30, 2022 from $136.4 million for the same period in 2021, an increase of $67.8 million.

The increase in selling, general, and administrative expenses is primarily due to an increase in professional fees in support of our NVX-CoV2373 program.

Other Expense

Six Months Ended June 30,

2022 2021 Change

Other Expense (in thousands):

Interest expense $ (11,110) $ (10,807) $ (303)

Other income (expense) (18,219) (3,203) (15,016)

Total other expense, net $ (29,329) $ (14,010) $ (15,319)

We had total other expense, net of $29.3 million for the six months ended June 30, 2022 as compared to $14.0 million for the same period in 2021.

In the six months ended June 30, 2022 and 2021, we also recorded interest expense of $3.4 million and $4.0 million, respectively, for finance leases.

During the six months ended June 30, 2022 and 2021, other income (expense) included a loss of $21.5 million and $3.9 million, respectively, incurred by our foreign subsidiaries, primarily related to the impact of foreign exchange rate differences on an intercompany loan with Novavax CZ.

Income Tax Expense

During the six months ended June 30, 2022 and 2021, we recognized $4.1 million and $6.6 million, respectively, of income tax expense related to federal and state income taxes and foreign withholding tax on royalties.

Six Months Ended June 30,

2022 2021 Change

Net Loss (in thousands, except per share information):

Net loss $ (307,077) $ (575,036) $ 267,959

Net loss per share, basic $ (3.97) $ (7.82) $ 3.85

Weighted average shares outstanding, basic 77,305 73,580 3,725

Net loss for the six months ended June 30, 2022 was $307.1 million, or $3.97 per share, as compared to $575.0 million, or $7.82 per share, for the same period in 2021.

The change in net loss during the six months ended June 30, 2022 was primarily due to the commencement of commercial sales of NVX-CoV2373, partially offset by decreased revenue under the OWS Agreement, and a decrease in research and development expense, partially offset by the write-down of excess, obsolete, or expired inventory and losses on firm purchase commitments.

The increase in weighted average shares outstanding for the six months ended June 30, 2022 is primarily a result of sales of our common stock in 2022 and 2021.

Liquidity Matters and Capital Resources

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We have entered into supply agreements, sometimes referred to as APAs, with Gavi, the Vaccine Alliance (“Gavi”);

the European Commission;

the European Commission (“EC”);

and various countries globally.

We also have grant and license agreements.

As of March 31, 2022, 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 license agreements, was approximately $7 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, receipt of US marketing authorization, and delivery of doses.

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

As of June 30, 2022, 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 license agreements, was approximately $5 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, and delivery of doses.

The timing to fulfill performance obligations related to supply agreements will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype NVX-CoV2373 under certain of our APAs.

The 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, and are applied to billings upon delivery of NVX-CoV2373.

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

Certain of the supply agreements may be terminated by the counterparty in the event we fail to achieve requisite regulatory approval for NVX-CoV2373 in relevant jurisdictions within established time periods.

Failure to successfully develop and commercialize NVX-CoV2373 and failure to meet regulatory milestones or product volume or delivery timing obligations under our supply agreements may require us to refund significant portions of the prepayments or reduce payments, which could have a material and adverse effect on our financial condition.

Such upfront payments under our supply agreements generally become non-refundable upon our achievement of certain development, regulatory, and commercial milestones.

Failure to meet regulatory milestones, product volume, or delivery timing obligations under our supply agreements may require us to refund portions of upfront payments or result in reduced future payments, which could result in a material and adverse effect on our financial condition.

In addition, we continue to assess our manufacturing needs and intend to modify our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, NVX-CoV2373, and in doing so recognize that significant costs may be incurred.

1 unchanged sentence

The Novavax portion is a supply agreement that contemplates that we will manufacture and distribute 350 million doses.

Under that agreement with Gavi, we received an upfront payment of $350 million from Gavi in 2021 and an additional payment of $350 million in the first quarter of 2022 related to our achieving WHO EUL.

Although Novavax is prepared to deliver the quantities of NVX-CoV2373 doses to Gavi under the terms of our supply agreement, we were recently notified by Gavi of their intent to seek to revise the number and timing of doses of NVX-CoV2373 supplied by Novavax under such agreement.

Although Novavax is prepared to deliver the quantities of NVX-CoV2373 doses to Gavi under the terms of our supply agreement, we were notified by Gavi of its intent to seek to revise the number and timing of doses of NVX-CoV2373 supplied by Novavax under such agreement.

Furthermore, Gavi may seek partial or full recovery of the prior nonrefundable payments it has made to Novavax.

Our position is that Gavi has no contractual right to recover prior nonrefundable payments.

To date, Novavax has not received an order from Gavi and the timing and quantities of future orders to deliver NVX-CoV2373 to the COVAX facility are unclear.

We have also entered into supply and license agreements with strategic partners, such as SIIPL in India, Takeda in Japan, and SK bioscience in the Republic of Korea, that allow them to supply NVX-CoV2373 in their specified territories and under which we are entitled to receive royalties primarily from their sales of NVX-CoV2373.

During the three months ended March 31, 2022, we recognized royalties of $7.4 million under these licensing arrangements.

In the three months ended March 31, 2022, we primarily funded our operations with cash and cash equivalents, upfront payments under APAs, revenue from product sales, royalties under licensing arrangements with our strategic partners, and proceeds from the sale of common stock together with revenue under the OWS Agreement that supports our NVX-CoV2373 vaccine development activities.

We anticipate our future operations to be funded by revenue from product sales, royalties under licensing arrangements with our strategic partners, our cash and cash equivalents, upfront payments under our APAs, revenue under our OWS Agreement, and other potential funding sources.

As of March 31, 2022, we had $1.6 billion in cash and cash equivalents and restricted cash as compared to $1.5 billion as of December 31, 2021.

The following table summarizes cash flows for the three months ended March 31, 2022 and 2021 (in thousands):

In July 2022, we entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (the “Amended and Restated UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland (the “Authority”), which amended and restated in its entirety the SARS-CoV-2 Vaccine Supply Agreement originally entered into in October 2020 (the “Original UK Supply Agreement”).

Pursuant to the Original UK Supply Agreement, the Authority agreed to purchase 60 million doses of NVX-CoV2373.

Under the Amended and Restated UK Supply Agreement, the Authority agreed to purchase a minimum of 1 million doses and up to an additional 15 million doses of NVX-CoV2373, with the number of additional doses contingent on our timely achievement of supportive recommendations from the United Kingdom’s Joint Committee on Vaccination and Immunisation (the “JCVI”).

In the event that we are unable to achieve the JCVI supportive recommendations, we may have to repay up to $225.0 million related to the upfront payment we received from the Authority under the Original UK Supply Agreement.

Under the Amended and Restated UK Supply Agreement, the Authority also has the option to purchase up to an additional 44 million doses, in one or more tranches, through 2024.

We have an APA with the EC acting on behalf of various EU member states 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 an additional 100 million doses up to a maximum aggregate of 200 million doses in one or more tranches, through 2023.

We are in the process of finalizing a revised delivery schedule for the remaining 42 million doses of the 70 million previously committed doses under our APA with the EC that were originally scheduled for delivery during the first and second quarters of 2022.

In July and August 2022, we were notified by the EC that it was cancelling 5 million doses of its prior commitment originally scheduled for delivery in the first and second quarters of 2022, in accordance with the APA, and reducing the order to 65 million doses.

In July 2022, we entered into a modification to the OWS Agreement that amended the terms of such agreement to provide for (i) an initial delivery to the U.S.

government of approximately 3 million doses of NVX-CoV2373, contingent on the timing of EUA approval by the FDA, as well as the timing of label language and artwork approvals by the FDA and the recommendation of the Advisory Committee on Immunization Practices within the CDC, and (ii) any additional manufacture and delivery to the U.S.

government up to an aggregate of 100 million doses of NVX-CoV2373 contemplated by the original OWS Agreement (inclusive of the initial batch of approximately 3 million doses) dependent on U.S.

government demand, FDA guidance on strain selection, agreement between the parties on the price of such doses, and available funding.

Additionally, in July 2022, we entered into a modification to our existing agreement with the DoD that amended the terms of such agreement to provide for the initial delivery of 0.2 million doses of NVX-CoV2373 after receipt of EUA approval from the FDA, with delivery of the remaining 9.8 million doses of NVX-CoV2373 contemplated by the original agreement subject to DoD demand and available funding.

In the six months ended June 30, 2022, we primarily funded our operations with cash and cash equivalents, upfront payments under APAs, revenue from product sales, royalties under licensing arrangements with our strategic partners, and proceeds from the sale of common stock together with revenue under the OWS Agreement that supports our NVX-CoV2373 vaccine development activities.

We anticipate our future operations to be funded by revenue from product sales, royalties under licensing arrangements with our strategic partners, revenue under our OWS Agreement, our cash and cash equivalents, and other potential funding sources.

As of June 30, 2022, we had $1.4 billion in cash and cash equivalents and restricted cash as compared to $1.5 billion as of December 31, 2021.

The following table summarizes cash flows for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended June 30,

2022 2021 Change

4 unchanged sentences

Effect on exchange rate on cash, cash equivalents, and restricted cash (4,453) (348) (4,105)

Net increase in cash, cash equivalents, and restricted cash 55,841 1,380,332 (1,324,491)

Net increase (decrease) in cash, cash equivalents, and restricted cash (140,744) 1,474,001 (1,614,745)

Cash, cash equivalents, and restricted cash at beginning of period 1,528,259 648,738 879,521

Cash, cash equivalents, and restricted cash at end of period $ 1,387,515 $ 2,122,739 $ (735,224)

Net cash used in operating activities was $88.5 million for the three months ended March 31, 2022, as compared to net cash provided by operating activities of $663.1 million for the same period in 2021.

The decrease in cash provided is primarily due to the application of upfront payments under APAs resulting from sales of NVX-CoV2373 during the three months ended March 31, 2022 as compared to an increase in cash due to the receipt of upfront payments under APAs during the three months ended March 31, 2021.

During the three months ended March 31, 2022 and 2021, our investing activities consisted primarily of capital expenditures and maturities and sale of marketable securities, net of purchases.

Capital expenditures for the three months ended March 31, 2022 and 2021 were $16.8 million and $13.8 million, respectively.

Net cash used in operating activities was $259.4 million for the six months ended June 30, 2022, as compared to net cash provided by operating activities of $807.5 million for the same period in 2021.

The decrease in cash provided is primarily due to the application of upfront payments under APAs resulting from sales of NVX-CoV2373 during the six months ended June 30, 2022 as compared to an increase in cash due to the receipt of upfront payments under APAs during the six months ended June 30, 2021.

During the six months ended June 30, 2022 and 2021, our investing activities consisted primarily of capital expenditures and maturities and sale of marketable securities, net of purchases.

Capital expenditures for the six months ended June 30, 2022 and 2021 were $41.4 million and $28.9 million, respectively.

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

Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements, payments of finance lease liabilities, and exercise of stock-based awards.

In the three months ended March 31, 2022 and 2021, we received net proceeds of approximately $179 million and $565 million, respectively, from selling shares of common stock through our At Market Issuance Sales Agreements.

In the six months ended June 30, 2022 and 2021, we received net proceeds of approximately $179 million and $565 million, respectively, from selling shares of common stock through our At Market Issuance Sales Agreements.

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 2. Management’s Discussion and Analysis