NOVAVAX INC 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported, within time periods specified in the rules and forms of the Securities and Exchange Commission. “Disclosure controls and 85 Table of Contents procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the chief executive officer and the chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based on that evaluation, the Company’s chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, such controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer and effected by the Company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Such internal control includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and • provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, our management has determined that, as of December 31, 2022, our internal controls over financial reporting are effective based on those criteria. Ernst & Young LLP has issued a report on our internal control over financial reporting. This report is included in the Reports of Independent Registered Public Accounting Firm in Item 15(a)(1). Changes in Internal Control over Financial Reporting Our management, including our chief executive officer and chief financial officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarterly period ended December 31, 2022 and has concluded that there was no change that occurred during the quarterly period ended December 31, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III 86 Table of Contents Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2023 Annual Meeting of Stockholders scheduled to be held in June 2023 (the “2023 Proxy Statement”). We expect to file the 2023 Proxy Statement within 120 days after the close of the fiscal year ended December 31, 2022. Item 11. EXECUTIVE COMPENSATION We incorporate herein by reference the information required by this item concerning executive compensation to be contained in the 2023 Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS We incorporate herein by reference the information required by this item concerning security ownership of certain beneficial owners and management and related stockholder matters to be contained in the 2023 Proxy Statement. The following table provides our equity compensation plan information as of December 31, 2022. Under these plans, our common stock may be issued upon the exercise or vesting of equity awards and purchases under our Employee Stock Purchase Plan (“ESPP”). See also the information regarding our equity awards and ESPP in Note 14 to the consolidated financial statements included herewith. Equity Compensation Plan Information Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity compensation plans approved by security holders (1) 6,151,589 $47.11 4,501,492 Equity compensation plans not approved by security holders N/A N/A N/A (1) Includes our 2015 Stock Incentive Plan, 2005 Stock Incentive Plan, and ESPP. The weighted-average exercise price in column (b) excludes restricted stock units, which are not subject to an exercise price. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE We incorporate herein by reference the information required by this item concerning certain relationships and related transactions and director independence to be contained in the 2023 Proxy Statement. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES We incorporate herein by reference the information required by this item concerning principal accountant fees and services to be contained in the 2023 Proxy Statement. PART IV 87 Table of Contents Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of the Annual Report on Form 10-K: (1) Index to Financial Statements Reports of Independent Registered Public Accounting Firm (PCAOB ID:42) F- 2 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020 F- 5 Consolidated Balance Sheets as of December 31, 2022 and 2021 F- 6 Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2022, 2021 , and 2020 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2 022, 2021 , and 2020 F- 8 Notes to Consolidated Financial Statements F- 9 (2) Financial Statement Schedules Financial statement schedules are omitted because they are not applicable, not required under the instructions or all the information required is set forth in the financial statements or notes thereto. (3) Exhibits Exhibits marked with a single asterisk (*) are filed herewith. Exhibits marked with a double plus sign (††) refer to management contracts, compensatory plans, or arrangements. Confidential treatment has been granted for portions of exhibits marked with a double asterisk (**). Confidential information contained in exhibits marked with a caret (^) has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. All other exhibits listed have previously been filed with the SEC and are incorporated herein by reference. Exhibit Number Description 3.1 Second Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 3.2 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 9, 2019 (File No. 000-26770)) 3.3 Amended and Restated By-Laws of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 24, 2021 (File No. 000-26770)) 3.4 Certificate of Designation of Series A Convertible Preferred Stock of the Registrant (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770)) 4.1 Specimen stock certificate for shares of common stock of the Company, par value $.01 per share (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3, filed on December 31, 2019 (File No. 333-235761)) 4.2 Indenture (including form of Notes) with respect to the Company's 5 . 00 % Convertible Senior Notes due 202 7 , dated as of December 20 , 20 22 , between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on December 21, 2022 (File No. 000-26770)) 4.3 Form of Series A Convertible Preferred Stock Certificate of the Company (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770)) 88 Table of Contents 4.4* Description of the Company's Securities 10.1†† The Company's Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013 (File No. 000-26770)) 10.2†† Amendment to Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Appendix 1 of the Company ’ s Definitive Proxy Statement filed on April 30, 2014 in connection with the Annual Meeting held on June 12, 2014 (File No. 000-26770)) 10.3†† Form of Non-Statutory Stock Option Award Agreement granted under the Company's Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015 (File No. 000-26770)) 10.4†† Form of Incentive Stock Option Award Agreement granted under the Company's Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015 (File No. 000-26770)) 10.5†† Amended and Restated Novavax, I n c. 2 013 Employee Stock Purchase Plan (Incorporated by reference to Appendix D of the C o mpany ’ s Definitive Proxy Statement filed on May 2, 2022 in connection with the A n nual Meeting held on June 16, 2022 (File No. 000-26770)) 10.6†† Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Appendix Appendix C of the Company’s Definitive Proxy Statement filed on May 2, 2022 in connection with the Annual Meeting held on June 16, 2022 (File No. 000-26770)) 10.7†† Form of Non-Statutory Stock Option Award Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 10.8†† Form of Incentive Stock Option Award Agreement granted under the Amended and Restated Novavax, I n c. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 10.9†† Form of Incentive Stock Option Award Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017 (File No. 000-26770)) 10.10†† Form of Incentive Stock Option Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Performance- and Time-Based Vesting) (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 16, 2016 (File No. 000-26770)) 10.11†† Form of Restricted Stock Award Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Company ’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 10.12†† Form of Restricted Stock Unit Agreement granted under the Amended and Restated Novavax, I nc . 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 18, 2019 (File No. 000-26770)) 10.13†† Form of Stock Appreciation Right Award Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 7, 2019 (File No. 000-26770)) 10.14†† Form of Director Deferred Fee Agreement (Incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770)) 10.15†† Novavax, Inc. 2023 Inducement Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 9, 2023 (File No. 000-26770)) 10.16†† Form of Non-Statutory Stock Option Agreement under the Novavax, Inc. 2023 Inducement Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on January 9, 2023 (File No. 000-26770)) 89 Table of Contents 10.17†† Form of Restricted Stock Unit Award Agreement under the Novavax, Inc. 2023 Inducement Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on January 9, 2023 (File No. 000-26770)) 10.18††* Employment Agreement between the Company and John C. Jacobs, dated as of January 5, 2023 10.19†† Employment Agreement between the Company and Stanley C. Erck, dated as of June 22, 2011 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011 (File No. 000-26770)) 10.20††* Consulting and Advisory Agreement between the Company and Stanley C. Erck, dated as of January 5, 2023 10.21†† Employment Agreement between the Company and Gregory M. Glenn dated July 1, 2010 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 6, 2010 (File No. 000-26770)) 10.22†† Employment Agreement between the Company and John A. Herrmann dated April 1, 2012 (Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770)) 10.23†† E mployment Agreement between the Company and John J. Trizzino dated March 3, 2014 (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770)) 10.24†† Employment Agreement between the Company and James P. Kelly dated July 12, 2021 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.25†† Offer letter to James P. Kelly dated July 12, 2021 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.26†† Form of Amendment to Employment Agreement, dated June 17, 2021, between the Company and each of Stanley C. Erck, Gregory M. Glenn, John J. Trizzino and John A. Herrmann, III (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed on August 5, 2021 (File No. 000-26770)) 10.27†† Company Amended and Restated Change in Control Severance Benefit Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed on August 5, 2021 (File No. 000-26770)) 10.28†† Form of Indemnification Agreement entered into between the Company and its directors and officers (Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 (File No. 000-26770)) 10.29 Lease Agreement for space at 22 Firstfield Road between ARE-20/22/1300 Firstfield Quince Orchard, LLC and the Company, dated as of November 18, 2011 (Incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 14, 2012 (File No. 000-26770)) 10.30 Deed of Lease for space at 21 Firstfield Road between Firstfield Holdco, LLC and the Company, dated as of February 4, 2015 (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on August 21, 2015 (File No. 000-26770)) 10.31 First Amendment to Deed of Lease for space at 21 Firstfield Road between Firstfield Holdco, LLC and the Company, dated as of August 17, 2015 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 21, 2015 (File No. 000-26770)) 10.32 Second Amendment to Deed of Lease for space at 21 Firstfield Road between BMR-Firstfield LLC (formerly Firstfield Holdco, LLC) and the Company, dated as of March 31, 2017 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 8, 2017 (File No. 000-26770)) 90 Table of Contents 10.33 Deed of Lease for space at 700 Quince Orchard Road between ARE-MARYLAND NO. 51, LLC and the Company, dated October 22, 2020 (Incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.34 Amendment to Deed of Lease for space at 700 Quince Orchard Road between ARE-MARYLAND NO. 51, LLC and the Company, dated June 22, 2021 (Incorporated by reference to Exhibit 10.33 to the C o mpany ’ s Annual Report on F o rm 10-K for the year ended December 31, 2021, filed on March 1, 2022 (F il e No. 000-26770)) 10.35^ Amended and Restated Supply and License Agreement, dated July 1, 2021, between the Company and Serum Institute of India Private Limited (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.36^ Supply Agreement between the Company, Serum Institute of India Private Limited and Serum Life Sciences Limited, executed as of October 26, 2021 (Incorporated by reference to Exhibit 10.3 7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No. 000-26770)) 10.37^ Contract Development Manufacture Agreement, dated October 21, 2021, between the Company and Serum Life Sciences Limited (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed on August 8, 2022 (File No. 000-26770)) 10.38^ Amendment No. 1 to the Contract Development Manufacture Agreement, executed as of April 29, 2022, between the Company and Serum Life Sciences Limited (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed on August 8, 2022 (File No. 000-26770)) 10.39^ Statement of Work No. 1 to the Contract Development Manufacture Agreement, effective as of April 29, 2022, between the Company and Serum Life Sciences Limited (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed on August 8, 2022 (File No. 000-26770)) 10.40^ Collaboration and Exclusive License Agreement between the Company and SK bioscience Company Limited, dated as of February 12, 2021 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed on May 10, 2021 (File No. 000-26770)) 10.41^ Amendment to Collaboration and Exclusive License Agreement between the Company and SK bioscience Company Limited, dated as of December 23, 2021 (Incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No. 000-26770)) 10.42^ Statement of Work No. 1 to Collaboration and Exclusive License Agreement between the Company and SK bioscience Company Limited, dated as of December 23, 2021 (Incorporated by reference to Exhibit 10. 40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No. 000-26770)) 10.43^ Change Order No. 1 to Statement of Work No. 1 to Collaboration and Exclusive License Agreement between the Company and SK bioscience Company Limited, dated as of March 31, 2022 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed on May 9, 2022 (File No. 000-26770)) 10.44^ Collaboration and Exclusive License Agreement between the Company and Takeda Pharmaceutical Company Limited, dated as of February 24, 2021 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed on May 10, 2021 (File No. 000-26770)) 10.45** Global Access Commitments Agreement between Bill & Melinda Gates Foundation and the Company, dated as of September 25, 2015 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed on November 9, 2015 (File No. 000-26770)) 91 Table of Contents 10.46^ Asset Purchase Agreement between Company and Paragon Bioservices, Inc., dated June 26, 2019 (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 7, 2019 (File No. 000-26770)) 10.47^ Amended and Restated SARS-CoV-2 Vaccine Supply Agreement, dated as of July 1, 2022 , between the Company and 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 (Incorporated by reference to Exhibit 10. 1 to the Company’s Quarterly Report on Form 10- Q for the q uarter ended September 30, 2022 , filed on N o vember 9, 2022 (File No. 000-26770)) 10.48^ Letter of Amendment to the Amended and Restated SARS-CoV-2 Vaccine Supply Agreement, dated as of September 26, 2022, between the Company and 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 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 10.49^ Advance d Purchase Agreement, effective as of December 31, 2020, between the Company and the Commonwealth of Australia as represented by the Department of Health (Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.50^ Amendment to Advance d Purchase Agreement between the Company, and the Commonwealth of Australia as represented by the Department of Health, dated as of December 23, 2021 (Incorporated by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No. 000-26770)) 10.51^ Advance d Purchase Agreement, effective as of January 19, 2021, between the Company and Her Majesty the Queen in Right of Canada, as represented by the Minister of Public Works and Government Services (Incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770) 10.52^ Advance Purchase Agreement, dated August 16, 2021, between the Company, Novavax CZ and the European Commission (Incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.53^ Base Agreement between the Company and Advanced Technology International, dated June 25, 2020 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.54^ Modification No. 01 to Base Agreement between the Company and Advanced Technology International, dated as of March 23, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed on May 9, 2022 (File No. 000-26770)) 10.55^ Modification No. 02 to Base Agreement between the Company and Advanced Technology International, dated as of August 2, 2022 (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 10.56^* Modification No. 03 to Base Agreement between the Company and Advanced Technology International, dated as of November 30, 2022 10.57^ Undefinitized Project Agreement No. 1 between the Company and Advanced Technology International, dated July 6, 2020 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.58^ Modification No. 01 to Undefinitized Project Agreement No. 1 between the Company and Advanced Technology International, dated July 9, 2020 (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.59^ Modification No. 02 to Undefinitized Project Agreement No. 01, entered into September 10, 2020, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.60^ Modification No. 03 to Undefinitized Project Agreement No. 01, entered into September 18, 2020, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 92 Table of Contents 10.61^ Modification No. 04 to Undefinitized Project Agreement No. 01, entered into December 23, 2020, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.62^ Modification No. 05 to Undefinitized Project Agreement No. 01, dated January 12, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.63^ Modification No. 06 to Undefinitized Project Agreement No. 01, entered into January 19, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.64^ Modification No. 07 to Undefinitized Project Agreement No. 01, dated April 23, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed on August 5, 2021 (File No. 000-26770)) 10.65^ Modification No. 08 to Undefinitized Project Agreement No. 01, dated June 4, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed on August 5, 2021 (File No. 000-26770)) 10.66^ Modification No. 09 to Undefinitized Project Agreement No. 01, dated July 16, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.67^ Modification No. 10 to Undefinitized Project Agreement No. 01, dated August 6, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.68^ Modification No. 11 to Undefinitized Project Agreement No. 01, dated August 26, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on November 5, 2021 (File No. 000-26770)) 10.69^ Modification No. 12 to Undefinitized Project Agreement No. 01, dated December 20, 2021, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No. 000-26770)) 10.70^ Modification No. 13 to Undefinitized Project Agreement No. 01, dated February 1, 2022, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.65 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No. 000-26770)) 10.71^ Modification No. 14 to Undefinitized Project Agreement No. 01, dated July 1, 2022, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 10.72^ Modification No. 15 to Undefinitized Project Agreement No. 01, dated August 9, 2022, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 10.73^ Modification No. 16 to Undefinitized Project Agreement No. 01, dated September 9, 2022, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 93 Table of Contents 10.74^ Amendment of Solicitation/Modification of Contract, Modification No. 6 , dated as of July 29, 2022, between the Company and the U.S. Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 10.75 Series A Convertible Preferred Subscription Agreement, dated June 15, 2020, between the Company and RA Capital Healthcare Fund, L.P. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770)) 10.76 Restated Funding Agreement, entered into on May 11, 2020, between the Company and the Coalition for Epidemic Preparedness Innovations (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (File No. 000-26770)) 10.77^ Amendment Number 1 to the iPDP and Budget of the Outbreak Response Funding Agreement (Step 2), entered into on November 2, 2020, between the Company and the Coalition for Epidemic Preparedness Innovations (Incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1, 2021 (File No. 000-26770)) 10.78^ Settlement Agreement, dated September 30, 2022, between the Company and FUJIFILM Diosynth Biotechnologies UK Limited, FUJIFILM Diosynth Biotechnologies Texas, LLC, and FUJIFILM Diosynth Biotechnologies USA, Inc. (Incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 9, 2022 (File No. 000-26770)) 14 Code of Conduct (Incorporated by reference to Exhibit 14 to the Company ’ s Annual Report on Form 10-K for the year ended December 31, 2021, filed on M arch 1, 2022 (File No. 000-26770)) 21* Subsidiaries of the Company 23.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 2022 and 2021, (ii) the Consolidated Statements of Operations for the three years in the period ended December 31, 2022, (iii) the Consolidated Statements of Comprehensive Loss for the three years in the period ended December 31, 2022, (iv) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three years in the period ended December 31, 2022, (v) the Consolidated Statements of Cash Flows for the three years in the period ended December 31, 2022, and (vi) the Notes to Consolidated Financial Statements. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 94 Table of Contents Item 16. FORM 10-K SUMMARY Not applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NOVAVAX, INC. By: /s/ John C. Jacobs John C. Jacobs President and Chief Executive Officer Date: February 28, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: 95 Table of Contents Name Title Date /s/ John C. Jacobs President and Chief Executive Officer and Director (Principal Executive Officer) February 28, 2023 John C. Jacobs /s/ James P. Kelly Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer) February 28, 2023 James P. Kelly /s/ James F. Young Chairman of the Board of Directors February 28, 2023 James F. Young /s/ Gregg H. Alton Director February 28, 2023 Gregg H. Alton /s/ Richard H. Douglas Director February 28, 2023 Richard H. Douglas /s/ Rachel K. King Director February 28, 2023 Rachel K. King /s/ Margaret G. McGlynn Director February 28, 2023 Margaret G. McGlynn /s/ David M. Mott Director February 28, 2023 David M. Mott /s/ Richard J. Rodgers Director February 28, 2023 Richard J. Rodgers 96 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022, 2021, and 2020 Contents Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F- 2 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020 F- 5 Consolidated Balance Sheets as of December 31, 2022 and 2021 F- 6 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2022, 2021, and 2020 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020 F- 8 Notes to Consolidated Financial Statements F- 9 F- 1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Novavax, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Novavax, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2023 expressed an unqualified opinion thereon. The Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. F- 2 Table of Contents Inventory Excess and Obsolescence Reserve Description of the Matter As of December 31, 2022, the Company had $36.7 million of inventory. As disclosed in Note 2, inventories are stated at the lower of cost or net realizable value. The Company assesses its inventory levels each reporting period and writes down inventory that is either expected to be at risk of expiration prior to sale, or for which there are inventory quantities in excess of expected requirements. For the year ended December 31, 2022, inventory write-downs were $447.6 million and losses on firm purchase commitments were $155.9 million. Auditing management's estimates for excess and obsolete inventory involved subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company's control. In particular, the obsolete and excess inventory calculations are sensitive to significant assumptions, including the expected demand for the Company’s products, assumptions about the vaccine’s life cycle, the effect on demand of competitive products and the Company's purchase commitments. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory reserve process including management’s review of the significant assumptions described above and controls over the completeness and accuracy of the information used to develop the estimate. Our substantive audit procedures included, among others, evaluating methodologies, assumptions and data utilized in the analysis for inventory expected to be at risk for expiration or excess. We evaluated purchase commitments or alternative uses, compared forecasted demand to historical trends, compared actual inventory levels to forecasted demand requirements and evaluated the sensitivity of sales forecast assumptions on the amount of inventory reserves recorded. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. Tysons, Virginia February 28, 2023 F- 3 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Novavax, Inc. Opinion on Internal Control over Financial Reporting We have audited Novavax, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Novavax, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 28, 2023 expressed an unqualified opinion that included an explanatory paragraph regarding the Company’s ability to continue as a going concern. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia February 28, 2023 F- 4 Table of Contents NOVAVAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information) Year Ended December 31, 2022 2021 2020 Revenue: Product sales $ 1,554,961 $ — $ — Grants 382,921 948,709 453,210 Royalties and other 43,990 197,581 22,388 Total revenue 1,981,872 1,146,290 475,598 Expenses: Cost of sales 902,639 — — Research and development 1,235,278 2,534,508 747,027 Selling, general, and administrative 488,691 298,358 145,290 Total expenses 2,626,608 2,832,866 892,317 Loss from operations ( 644,736 ) ( 1,686,576 ) ( 416,719 ) Other income (expense): Interest expense ( 19,880 ) ( 21,127 ) ( 15,145 ) Other income (expense) 10,969 ( 6,833 ) 13,605 Loss before income tax expense ( 653,647 ) ( 1,714,536 ) ( 418,259 ) Income tax expense 4,292 29,215 — Net loss $ ( 657,939 ) $ ( 1,743,751 ) $ ( 418,259 ) Net loss per share: Basic and diluted $ ( 8.42 ) $ ( 23.44 ) $ ( 7.27 ) Weighted average number of common shares outstanding: Basic and diluted 78,183 74,400 57,554 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Year Ended December 31, 2022 2021 2020 Net loss $ ( 657,939 ) $ ( 1,743,751 ) $ ( 418,259 ) Other comprehensive income (loss): Net unrealized gains (losses) on marketable securities available-for-sale, net of reclassifications — ( 9 ) 9 Foreign currency translation adjustment ( 5,024 ) ( 8,368 ) 19,523 Other comprehensive income (loss) ( 5,024 ) ( 8,377 ) 19,532 Comprehensive loss $ ( 662,963 ) $ ( 1,752,128 ) $ ( 398,727 ) The accompanying notes are an integral part of these financial statements. F- 5 Table of Contents NOVAVAX, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share information) December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 1,336,883 $ 1,515,116 Restricted cash 10,303 11,490 Accounts receivable 82,375 454,993 Inventory 36,683 8,872 Prepaid expenses and other current assets 237,147 164,648 Total current assets 1,703,391 2,155,119 Property and equipment, net 294,247 225,741 Right of use asset, net 106,241 40,123 Goodwill 126,331 131,479 Other non-current assets 28,469 24,291 Total assets $ 2,258,679 $ 2,576,753 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 216,517 $ 127,050 Accrued expenses 591,158 673,731 Deferred revenue 370,137 1,422,944 Current portion of finance lease liabilities 27,196 130,533 Convertible notes payable 324,881 — Other current liabilities 930,055 36,061 Total current liabilities 2,459,944 2,390,319 Deferred revenue 179,414 172,528 Convertible notes payable 166,466 323,458 Non-current finance lease liabilities 31,238 — Other non-current liabilities 55,695 42,121 Total liabilities 2,892,757 2,928,426 Commitments and contingencies (Note 18) Preferred stock, $ 0.01 par value, 2,000,000 shares authorized at December 31, 2022 and 2021; no shares issued and outstanding at December 31, 2022 and 2021 — — Stockholders’ equity (deficit): Common stock, $ 0.01 par value, 600,000,000 shares authorized at December 31, 2022 and 2021; and 86,806,554 shares issued and 86,039,923 shares outstanding at December 31, 2022 and 76,433,151 shares issued and 75,841,171 shares outstanding at December 31, 2021 868 764 Additional paid-in capital 3,737,979 3,351,967 Accumulated deficit ( 4,275,889 ) ( 3,617,950 ) Treasury stock, 766,631 shares, cost basis at December 31, 2022 and 591,980 shares, cost basis at December 31, 2021 ( 90,659 ) ( 85,101 ) Accumulated other comprehensive loss ( 6,377 ) ( 1,353 ) Total stockholders’ equity (deficit) ( 634,078 ) ( 351,673 ) Total liabilities and stockholders’ equity (deficit) $ 2,258,679 $ 2,576,753 The accompanying notes are an integral part of these financial statements. F- 6 Table of Contents NOVAVAX, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (in thousands, except share information) Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity (Deficit) Shares Amount Balance at December 31, 2019 32,399,352 $ 324 $ 1,260,551 $ ( 1,431,801 ) $ ( 2,583 ) $ ( 12,508 ) $ ( 186,017 ) Preferred stock beneficial conversion feature — — 24,139 ( 24,139 ) — — — Conversion of preferred stock 4,388,850 44 199,778 — — — 199,822 Stock-based compensation — — 128,035 — — — 128,035 Stock issued under incentive programs 2,168,725 22 44,447 — ( 39,223 ) — 5,246 Issuance of common stock, net of issuance costs of $ 11,416 32,393,438 324 878,526 — — — 878,850 Unrealized gain on marketable securities — — — — — 9 9 Foreign currency translation adjustment — — — — — 19,523 19,523 Net loss — — — ( 418,259 ) — — ( 418,259 ) Balance at December 31, 2020 71,350,365 714 2,535,476 ( 1,874,199 ) ( 41,806 ) 7,024 627,209 Stock-based compensation — — 183,626 — — — 183,626 Stock issued under incentive programs 2,503,819 24 68,032 — ( 43,295 ) — 24,761 Issuance of common stock, net of issuance costs of $ 7,292 2,578,967 26 564,833 — — — 564,859 Unrealized gain on marketable securities — — — — — ( 9 ) ( 9 ) Foreign currency translation adjustment — — — — — ( 8,368 ) ( 8,368 ) Net loss — — — ( 1,743,751 ) — — ( 1,743,751 ) Balance at December 31, 2021 76,433,151 764 3,351,967 ( 3,617,950 ) ( 85,101 ) ( 1,353 ) ( 351,673 ) Stock-based compensation — — 131,967 — — — 131,967 Stock issued under incentive programs 701,005 7 4,912 — ( 5,558 ) — ( 639 ) Issuance of common stock, net of issuance costs of $ 7,216 9,672,398 97 249,133 — — — 249,230 Foreign currency translation adjustment — — — — — ( 5,024 ) ( 5,024 ) Net loss — — — ( 657,939 ) — — ( 657,939 ) Balance at December 31, 2022 86,806,554 $ 868 $ 3,737,979 $ ( 4,275,889 ) $ ( 90,659 ) $ ( 6,377 ) $ ( 634,078 ) The accompanying notes are an integral part of these financial statements. F- 7 Table of Contents NOVAVAX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2022 2021 2020 Operating Activities: Net loss $ ( 657,939 ) $ ( 1,743,751 ) $ ( 418,259 ) Reconciliation of net loss to net cash used in operating activities: Depreciation and amortization 29,054 12,661 4,885 Right-of-use assets expensed, net of credits received 18,104 144,433 245,861 Non-cash stock-based compensation 130,300 183,626 128,035 Provision for excess and obsolete inventory 447,597 — — Other items, net ( 21,903 ) ( 7,641 ) ( 15,080 ) Changes in operating assets and liabilities: Inventory ( 477,801 ) ( 8,872 ) — Accounts receivable, prepaid expenses, and other assets 249,166 ( 183,393 ) ( 422,689 ) Accounts payable, accrued expenses, and other liabilities 913,399 600,326 163,161 Deferred revenue ( 1,045,914 ) 1,325,557 271,545 Net cash provided by (used in) operating activities ( 415,937 ) 322,946 ( 42,541 ) Investing Activities: Capital expenditures ( 89,056 ) ( 54,501 ) ( 54,473 ) Internal-use software ( 3,929 ) ( 2,985 ) ( 149 ) Acquisition of Novavax CZ, net of cash acquired — — ( 165,516 ) Purchases of marketable securities — ( 2,167 ) ( 363,202 ) Proceeds from maturities of marketable securities — 159,807 205,562 Net cash provided by (used in) investing activities ( 92,985 ) 100,154 ( 377,778 ) Financing Activities: Net proceeds from sale of preferred stock — — 199,822 Net proceeds from sales of common stock 249,230 564,859 875,623 Proceeds from issuance of convertible notes 175,250 — — Payments of costs related to issuance of convertible notes ( 5,258 ) — — Net proceeds from the exercise of stock-based awards ( 639 ) 24,761 5,382 Finance lease payments ( 93,595 ) ( 127,907 ) ( 96,065 ) Net cash provided by financing activities 324,988 461,713 984,762 Effect of exchange rate on cash, cash equivalents, and restricted cash 4,520 ( 5,292 ) 2,115 Net increase in cash, cash equivalents, and restricted cash ( 179,414 ) 879,521 566,558 Cash, cash equivalents, and restricted cash at beginning of year 1,528,259 648,738 82,180 Cash, cash equivalents, and restricted cash at end of year $ 1,348,845 $ 1,528,259 $ 648,738 Supplemental disclosure of non-cash activities: Sale of common stock under the Sales Agreement not settled at year-end $ — $ — $ 3,227 Capital expenditures included in accounts payable and accrued expenses $ 17,665 $ 10,338 $ 9,255 Right-of-use assets from new lease agreements $ 91,855 $ 179,210 $ 247,599 Supplemental disclosure of cash flow information: Cash interest payments, net of amounts capitalized $ 18,035 $ 19,428 $ 13,705 Cash paid for income taxes $ 17,980 $ 12,606 $ — The accompanying notes are an integral part of these financial statements. F- 8 Table of Contents NOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Organization Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, 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 COVID-19 vaccine NVX-CoV2373 (“Nuvaxovid™,” “Covovax™,” “Novavax COVID-19 Vaccine, Adjuvanted”); influenza vaccine candidate; COVID-19-Influenza Combination (“CIC”) vaccine candidate; and additional vaccine candidates, including for Omicron subvariants and bivalent formulations with prototype vaccine (“NVX-CoV2373”), are genetically engineered nanostructures of conformationally correct recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or other vaccine approaches. NVX-CoV2373 and the Company’s other vaccine candidates incorporate the Company's proprietary Matrix-M TM adjuvant to enhance the immune response and stimulate higher levels of functional antibodies and induce a cellular immune response. The Company has announced data from its ongoing PREVENT-19 study supporting the use of NVX-CoV2373 for homologous boosting in adults and adolescents aged 12 through 17. Additional findings in Phase 3 COVID-19 Omicron (study 311) trial showed utility of the prototype vaccine as a heterologous booster, inducing broad immune responses against contemporary Omicron variants. As of December 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 for both adult and adolescent populations as a primary series and for both homologous and heterologous booster indications. The Company commenced commercial shipments of NVX-CoV2373 doses under the name “Novavax COVID-19 Vaccine, Adjuvanted” and the brand name “Nuvaxovid™” in 2022. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Liquidity and Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern within one year after the date that the financial statements are issued. At December 31, 2022, the Company had $ 1.3 billion in cash and cash equivalents and restricted cash, of which $ 236.2 million was raised in December 2022 through concurrent sales of common stock and issuance of the Company’s convertible senior unsecured notes that will mature on December 15, 2027 (see Notes 11 and 13). On January 31, 2023, the Company funded the outstanding principal amount of $ 325.0 million on the Company’s convertible senior unsecured notes that matured on February 1, 2023. During 2022, the Company incurred a net loss of $ 657.9 million and had net cash flows used in operating activities of $ 415.9 million. While the Company’s current cash flow forecast for the one-year going concern look forward period estimates that there will be sufficient capital available to fund operations, this forecast is subject to significant uncertainty, including as it relates to 2023 revenue, funding from the U.S. government, and pending arbitration. The Company’s 2023 revenue depends on its ability to successfully develop, manufacture, distribute, or market an updated monovalent or bivalent formulation of a vaccine candidate for COVID-19 for the fall 2023 COVID vaccine season, which is inherently uncertain and subject to a number of risks, including regulatory approval. In February 2023, in connection with the execution of Modification 17 to the USG Agreement (as defined in Note 3), the U.S. government indicated to the Company that the award may not be extended past its current period of performance. If the USG Agreement is not amended, as the Company’s management had previously expected, then the Company may not receive all of the remaining $ 416 million in funding that was previously anticipated pursuant to the USG Agreement. On January 24, 2023, Gavi, the Vaccine Alliance (“Gavi”) filed a demand for arbitration with the International Court of Arbitration regarding an alleged material breach by the Company of the Company’s advance purchase agreement with Gavi (“the Gavi APA”). The outcome of that arbitration is inherently uncertain, and it is possible the Company could be required to refund all or a portion of the remaining advance payments of $ 697.4 million (see Note 3 and Note 18). F- 9 Table of Contents Management believes that, given the significance of these uncertainties, substantial doubt exists regarding the Company’s ability to continue as a going concern through one year from the date that these financial statements are issued. The Company’s ability to fund Company operations is dependent upon revenue related to vaccine sales for its products and product candidates, if such product candidates receive marketing approval and are successfully commercialized; the resolution of certain matters, including whether, when, and how the dispute with Gavi is resolved; and management’s plans, which include resolving the dispute with Gavi and may include raising additional capital through a combination of equity and debt financing, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. New financings may not be available to the Company on commercially acceptable terms, or at all. Also, any collaborations, strategic alliances, and marketing, distribution, or licensing arrangements may require the Company to give up some or all of its rights to a product or technology, which in some cases may be at less than the full potential value of such rights. In addition, the regulatory and commercial success of NVX-CoV2373 and the Company’s other vaccine candidates, including an influenza vaccine candidate, CIC vaccine candidate, or a COVID-19 variant strain-containing monovalent or bivalent formulation, remains uncertain. If the Company is unable to obtain additional capital, the Company will assess its capital resources and may be required to delay, reduce the scope of, or eliminate some or all of its operations, or downsize its organization, any of which may have a material adverse effect on its business, financial condition, results of operations, and ability to operate as a going concern. 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 generally accepted accounting principles in the United States (“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. Estimates are used for, but not limited to, revenue recognition, inventory, research and development expenses, stock-based compensation, useful lives of long-lived assets, leases, and income taxes. Actual results could differ materially from those estimates. Revenue Recognition At contract inception, the Company analyzes its revenue arrangements to determine the appropriate accounting under U.S. GAAP. Currently, the Company’s revenue arrangements represent customer contracts within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), or are contributions subject to the guidance in ASC Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”). The Company recognizes revenue from arrangements within the scope of ASC 606 following the five-step model: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) it satisfies a performance obligation. The Company only recognizes revenue under the five-step model when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to its customer. The Company recognizes contribution revenue within the scope of ASC 958-605 when the funder-imposed conditions have been substantially met. Contributions are recorded as deferred revenue until the period in which research and development activities are performed that satisfy the funder-imposed conditions. Product Sales Product sales are associated with the Company’s 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 ASC 606 at the point in time 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. F- 10 Table of Contents Grants Grant revenue includes both revenue from government contracts and grants from organizations such as the Coalition for Epidemic Preparedness Innovations (“CEPI”). The Company performs research and development under government funding, grant, license, and clinical development agreements. The revenue primarily consists of funding under U.S. government contracts and other arrangements to advance the clinical development and manufacturing of NVX-CoV2373. Under the U.S. government contracts, the Company is entitled to receive funding on a cost-reimbursable or cost-reimbursable-plus-fixed-fee basis, to support certain activities related to the development, manufacture, and delivery of NVX-CoV2373 to the U.S. government. The Company analyzed these contracts and determined that they are within the scope of ASC 606. The obligations under each of the contracts are not distinct in the context of the contract as they are highly interdependent or interrelated and, as such, they are accounted for as a single performance obligation. The transaction price under these arrangements is the consideration the Company is expecting to receive and consists of the funded contract amount and the unfunded variable amount to the extent that it is probable that a significant reversal of revenue will not occur. The Company recognizes revenue for these contracts over time as the Company transfers control over the goods and services and satisfies the performance obligation. The Company measures progress toward satisfaction of the performance obligation using an Estimate-at-Completion (“EAC”) process, which is a cost-based input method that reviews and monitors the progress towards the completion of the Company’s performance obligation. Under this process, management considers the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs, and other identified risks. Estimating the total allowable cost at completion of the performance obligation under a contract is subjective and requires the Company to make assumptions about future activity and cost drivers. Changes in these estimates can occur for a variety of reasons and, if significant, may impact the timing of revenue and fee recognition on the Company’s contracts. Allowable contract costs include direct costs incurred on the contract and indirect costs that are applied in the form of rates to the direct costs. Progress billings under the contracts are initially based on provisional indirect billing rates, agreed upon between the Company and the U.S. government. These indirect rates are subject to review on an annual basis. The Company records the impact of changes in the indirect billing rates in the period when such changes are identified. These changes reflect the difference between actual indirect costs incurred compared to the estimated amounts used to determine the provisional indirect billing rates agreed upon with the U.S. government. The Company recognizes revenue on the U.S. government contracts based on reimbursable allowable contract costs incurred in the period up to the transaction price. For cost-reimbursable-plus-fixed-fee contracts, the Company recognizes the fixed-fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the underlying performance obligation as determined under the EAC process. The Company recognizes changes in estimates related to the EAC process in the period when such changes are made on a cumulative catch-up basis. The Company includes the transaction price comprising both funded and unfunded portions of customer contracts in this estimate. The Company’s other funding agreements currently include funding from CEPI in the form of a grant (“CEPI Grant Funding”) and one or more forgivable no interest term loans (“CEPI Forgivable Loan Funding”). Under the Company’s grant funding arrangements, including the CEPI arrangement, the Company is primarily entitled to reimbursement for costs that support development related activities of NVX-CoV2373. The Company analyzed these other funding arrangements and determined that they are not within the scope of ASC 606 as they do not provide a direct economic benefit to the grantor. Payments received under the grant funding arrangements are considered conditional contributions under the scope of ASC 958-605 and are recorded as deferred revenue until the period in which such research and development activities are actually performed in a manner that satisfies the funder-imposed conditions. Payments received under the CEPI Forgivable Loan Funding are only repayable if NVX-CoV2373 manufactured by the contract manufacturing organization (“CMO”) network funded by CEPI is sold to one or more third parties (which would have previously included, but is not limited to, any sales under the Company’s Gavi APA prior to its termination), and such sales cover the Company’s costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI. As the financial risk remains with CEPI, the Company determined that the use of the funds from the CEPI agreement is outside the scope of ASC Topic 470, Debt . The research and development risk was considered substantive, such that it was not probable that the development would be successful at the inception of the contract. Therefore, the Company concluded that ASC Topic 730, Research and Development (“ASC 730”) was considered applicable and most appropriate. Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, the Company has accounted for the obligation under the CEPI Forgivable Loan Funding as a contract to perform research and development for others. The Company has determined that payments received under these agreements should be recorded as revenue under ASC 958-605 rather than a reduction to research and development expenses. This is consistent with the Company’s policy of presenting such amounts as revenue. In reaching this determination, the F- 11 Table of Contents Company considered a number of factors, including whether it is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s core operations. The Company will record revenue as it performs the contractual research and development services. Payments received in advance related to arrangements where revenue is recognized under ASC 958-605 that are related to future performance are deferred and recognized as revenue when the research and development activities are performed. Such cash payments are restricted as to their use and are reflected in Restricted cash until expenditures contemplated in the funding agreements are incurred. Royalties and Other The Company also has various arrangements that include a right for a customer to use the Company's intellectual property as a functional license, where the Company’s performance obligation is satisfied at the point in time at which the license is granted. These licensing arrangements include sales-based royalties, certain development and commercial milestone payments, and the sale of proprietary Matrix-M TM adjuvant. Because development milestone payments are contingent on the achievement of milestones, such as regulatory approvals, that are not within the Company or licensee's control, the payments are not considered probable of being achieved and are excluded from the transaction price until the milestone is achieved, at which point the Company recognizes revenue. For arrangements that include sales-based royalties related to a previously granted license, including milestone payments based upon the achievement of a certain level of product sales, the license is deemed to be the sole or predominant item to which the royalties relate and the Company recognizes revenue when the related sales occur. The Company allocates the transaction price to each performance obligation based on a relative standalone selling price basis. It develops assumptions that require judgment to determine the standalone selling price for each performance obligation in consideration of applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer. 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; idle capacity; and losses on firm purchase commitments to the extent 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 that were expensed prior to regulatory authorization as described under the caption “Inventory.” Research and Development Expenses Research and development expenses include salaries; stock-based compensation; laboratory supplies; consultants and subcontractors, including external contract research organizations (“CROs”), CMOs, and contract development and manufacturing organizations (“CDMOs”); and other expenses associated with the Company’s process development, manufacturing, clinical, regulatory, and quality assurance activities for its clinical development programs. In addition, related indirect costs such as fringe benefits and overhead expenses are also included in research and development expenses. The Company estimates its research and development expense related to services performed under its contracts with external service providers based on an estimate of the level of service performed in the period. Research and development activities are expensed as incurred. Accrued Research and Development Expenses The Company accrues research and development expenses, including clinical trial-related expenses, as the services are performed, which may include estimates of those expenses incurred, but not invoiced. The Company uses information provided by third-party service providers and CRO, CMO, and CDMO invoices and internal estimates to determine the progress of work performed on the Company’s behalf. Assumptions based on clinical trial protocols, contracts, and participant enrollment data are also used to estimate these accruals. F- 12 Table of Contents Advertising Costs Advertising costs are expensed as incurred. The Company had advertising costs of $ 84.0 million and $ 8.9 million during the years ended December 31, 2022 and 2021, respectively. Stock-Based Compensation The Company accounts for stock-based compensation related to grants of stock options, stock appreciation rights (“SARs”), and restricted stock awards (“RSUs”), and purchases under the Company’s Employee Stock Purchase Plan (“ESPP”), at fair value. The Company recognizes compensation expense related to such awards on a straight-line basis over the requisite service period (generally the vesting period) of the equity awards, based on the award's fair value at the grant date. The requisite service period is typically one to four years . Forfeitures for all awards are recognized as incurred. The Company generally settles stock-based awards with newly issued shares. The fair value of stock options and SARs is measured on the date of grant using the Black-Scholes option pricing model. The expected term of stock options and SARs is based on the Company’s historical option exercise experience and post-vesting forfeiture experience using the historical expected term from the vesting date, and the expected term for purchases under the ESPP is based on the purchase periods included in the offering. The expected volatility is determined using historical volatilities based on stock prices over a look-back period corresponding to the expected term. The risk-free interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected term. The Company has never paid a dividend and the Company does not intend to pay dividends in the foreseeable future, and as such, the expected dividend yield is zero. 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 equivalents are recorded at cost, which approximate fair value due to their short-term nature. Fair Value Measurements The Company applies ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), for financial and non-financial assets and liabilities. ASC 820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. • Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. Restricted Cash The Company’s current and non-current restricted cash includes payments received under grant agreements and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases. Payments received under grant agreements become unrestricted as the Company incurs expenses for services performed under these agreements. As of December 31, 2022 and 2021, the restricted cash balances (both current and non-current) consisted primarily of payments under the CEPI funding agreements. Accounts Receivable The Company recognizes amounts due from customers as accounts receivable when its right to payment is unconditional. The Company evaluates outstanding receivables to assess collectability, with consideration given to economic conditions, the aging of receivables, and customer-specific risks. F- 13 Table of Contents Concentration of Risk Financial instruments expose the Company to concentration of credit risk and consist primarily of cash and cash equivalents. The Company’s investment policy limits investments to certain types of instruments, including asset-backed securities, high-grade corporate debt securities, and money market funds; places restrictions on maturities and concentrations in certain industries; and requires the Company to maintain a certain level of liquidity. At times, the Company maintains cash balances in financial institutions that may exceed federally insured limits. The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk on its cash and cash equivalents. The Company's accounts receivable arise from revenue arrangements with customers in different countries. The Company's revenue is primarily due to product sales, grants made by government-sponsored and private organizations, and royalties from its collaboration and license partners. The following customers accounted for more than 10% of total revenue or accounts receivable for the periods presented: Percentage of Revenue for Year Ended December 31, Percentage of Accounts Receivable as of December 31, 2022 2021 2020 2022 2021 European Commission 40 % * * 10 % * Government of Australia 21 % * * * * Government of Canada 10 % * * * * Government of Israel * * * 21 % * Gavi, the Vaccine Alliance * * * * 77 % U.S. government (1) 19 % 71 % 46 % 46 % * CEPI * 12 % 47 % * * SK bioscience, Co., Ltd. * 14 % * * * *Amounts represent less than 10% (1) Including the USG Agreement (as defined in Note 3) and Department of Defense. The Company currently depends exclusively on a single supplier for co-formulation, filling, and finishing NVX-CoV2373. The loss of this supplier could prevent or delay the Company’s delivery of customer orders. Inventory Inventory is recorded at the lower of cost or net realizable value under the First In, First Out methodology, taking into consideration the expiration of the inventory item. The Company determines the cost of raw materials using moving average costs and the cost of semi-finished and finished goods using a standard cost method adjusted on a periodic basis to reflect the deviation in the actual cost from the standard cost estimate. Standard costs consist primarily of the cost of manufacturing goods, including direct materials, direct labor, and the services and products of third-party suppliers. Manufacturing overhead costs are applied to semi-finished and finished goods based on expected production levels. The Company utilizes third-party CMOs, 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 sales. At each reporting period, the Company assesses whether there are excess firm, non-cancelable, purchase commitment liabilities, resulting from supply agreements with third-party CMOs and CDMOs. The determination of net realizable value of inventory and firm purchase commitment liabilities requires judgment, including consideration of many factors, such as estimates of future product demand, current and future market conditions, potential product obsolescence, expiration and utilization of raw materials under firm purchase commitments, and contractual minimums. 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. F- 14 Table of Contents Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. and are depreciated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance costs are expensed as incurred. The estimated useful lives of property and equipment are described below: Useful Life Buildings 25 years Machinery and equipment 5 - 7 years Computer hardware 3 years Leasehold improvements Shorter of useful life or remaining term of the lease Lease Accounting The Company enters into manufacturing supply agreements with CMOs and CDMOs to manufacture its vaccine candidates. Certain of these manufacturing supply agreements include the use of identified manufacturing facilities and equipment that are controlled by the Company and for which the Company obtains substantially all the output and may qualify as an embedded lease. The Company treats manufacturing supply agreements that contain an embedded lease as lease arrangements in their entirety. The evaluation of leases that are embedded in the Company’s CMO and CDMO agreements is complex and requires judgment in determining whether the contract, either explicitly or implicitly, is for the use of an identified asset and the Company has the right to direct the use of, and obtain substantially all of the benefit from, the identified asset which generally is the use of a portion of the manufacturing facility of the CMO or CDMO, the term of the lease, and the fixed lease payments under the contract. Depending on the contract, the lease commencement date, defined as the date on which the lessor makes the underlying asset available for use by the lessee and on which the Company is required to accrue lease expenses, may be different than the inception date of the contract. The Company determines the non-cancellable lease term of its embedded leases based on the impact of certain expected milestones on its option to terminate the lease where it is reasonably certain to not exercise that option. The Company evaluates changes to the terms and conditions of a lease contract to determine if they result in a new lease or a modification of an existing lease. For lease modifications, the Company remeasures and reallocates the remaining consideration in the contract and reassesses the lease classification at the effective date of the modification. Leases are classified as either operating or finance leases based on the economic substance of the agreement. The Company also enters into non-cancelable lease agreements for facilities and certain equipment. For leases that have a lease term of more than 12 months at the lease commencement date, the Company recognizes lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, and corresponding right-of-use (“ROU”) assets, which represent the right to use an underlying asset for the lease term, based on the present value of the fixed future payments over the lease term. The Company calculates the present value of future payments using the discount rate implicit in the lease, if available, or the Company’s incremental borrowing rate. For all leases that have a lease term of 12 months or less at the commencement date (referred to as “short-term” leases), the Company has elected to apply the practical expedient in ASC Topic 842, Leases (“ASC 842”), to not recognize a lease liability or ROU asset but, instead, recognize lease payments as an expense on a straight-line basis over the lease term and variable lease payments that do not depend on an index or rate as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements. In determining the lease period, the Company evaluates facts and circumstances that could affect the period over which it is reasonably certain to use the underlying asset while taking into consideration the non-cancelable period over which it has the right to use the underlying asset and any option period to extend or terminate the lease if it is reasonably certain to exercise the option. The Company re-evaluates short-term leases that are modified and if they no longer meet the requirements to be treated as a short-term lease, recognizes and measures the lease liability and ROU asset as if the date of the modification is the lease commencement date. For short-term leases that are modified and continue to meet the requirements to be treated as a short-term lease, the Company remeasures the fixed lease payments under the modified lease and recognize lease payments as an expense on a straight-line basis over the modified lease term. For operating leases, the Company recognizes lease expense related to fixed payments on a straight-line basis from the lease commencement date through the end of the lease term and lease expense related to variable payments as incurred based on performance or usage in accordance with the contractual agreements. For finance leases, the Company recognizes the amortization of the ROU asset over the shorter of the lease term or useful life of the underlying asset. The Company expenses F- 15 Table of Contents ROU assets acquired for research and development activities under ASC 730 if they do not have an alternative future use, in research and development projects or otherwise. The Company uses significant assumptions and judgment in evaluating its lease contracts and other agreements under ASC 842, including the determination of whether an agreement is or contains a lease; whether a change in the terms and conditions of a lease contract represent a new or modified lease; whether a lease represents an operating or finance lease; the discount rate used to determine the present value of lease obligations; the term of a lease embedded in its manufacturing supply agreements; and the Company’s incremental borrowing rate, which is determined using estimates such as the estimated value of the underlying leased asset and financial profile of comparable companies. Impairment of Long-Lived Assets Long-lived assets, including property and equipment, internal-use software, and ROU assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on the criteria for accounting for the impairment or disposal of long-lived assets under ASC Topic 360, Property, Plant and Equipment. The Company calculates the estimated fair value of a long-lived asset or asset group using the income approach. Impairment losses are recognized when the sum of expected future cash flows is less than the asset’s or asset group’s carrying value. Goodwill Goodwill is subject to impairment tests annually or more frequently should indicators of impairment arise. The Company has determined that, because its only business is the development of recombinant vaccines, it operates as a single operating segment and has one reporting unit. The Company primarily utilizes the market approach and, if considered necessary, the income approach to determine if it has an impairment of its goodwill. The market approach is based on market value of invested capital. To ensure that the Company’s capital stock is the appropriate measurement of fair value, the Company considers factors such as its trading volume, diversity of investors, and analyst coverage. If considered necessary, the income approach is used to corroborate the results of the market approach. Goodwill impairment may exist if the carrying value of the reporting unit exceeds its estimated fair value. If the carrying value of the reporting unit exceeds its fair value, step two of the impairment analysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value, should such a circumstance arise. At October 1, 2022 and 2021, the fair value of the Company’s single reporting unit was substantially higher than its carrying value, resulting in no impairment to goodwill as of October 1, 2022 and 2021. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes . Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in income in the period such changes are enacted. A valuation allowance is established when necessary to reduce net deferred tax assets to the amount expected to be realized. The Global Intangible Low-Taxed Income (“GILTI”) provisions under the Tax Cuts and Jobs Act of 2017 impose U.S. tax on certain foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company has elected to treat any potential GILTI inclusions as period costs. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more-likely-than-not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are reversed in the period in which the more-likely-than-not recognition threshold is no longer satisfied. 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 F- 16 Table of Contents in the current reporting period as it is more likely than not that the related benefit will not be realized. The Company is currently subject to examination in all open tax years. During the years ended December 31, 2022 and 2021, the Company recognized $ 4.3 million and $ 29.2 million, respectively, primarily in income tax expense related to foreign withholding tax on royalties. During the year ended December 31, 2020, the Company recognized no income tax expense. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted net loss per share is computed using the treasury stock method by dividing net loss by the weighted-average number of common shares outstanding after giving consideration to the dilutive effect of certain securities outstanding during the period, primarily convertible notes, stock options, SARs, and unvested RSUs. As of December 31, 2022, the Company's 2027 Notes and 2023 Notes (see Note 11) would have been convertible into approximately 16.4 million shares of the Company's common stock assuming the common stock price is equal to or greater than $ 12.50 and $ 136.20 , respectively. These shares, after giving effect to the add back of interest expense and unamortized discounts and 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 under the if-converted method. Foreign Currency The accompanying consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s international subsidiaries is generally the local currency. The financial statements of international subsidiaries are translated to U.S. dollars using the exchange rate in effect at the consolidated balance sheet date for assets and liabilities, historical rates for equity accounts, and average exchange rates for the consolidated statement of operations. Cash flows from operations are translated at the average exchange rate in effect for the period, while cash flows from investing and financing activities are 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 (loss) in the accompanying consolidated balance sheets. The foreign currency translation adjustment balance included in accumulated other comprehensive income (loss) was $( 6.4 ) million and $( 1.4 ) million at December 31, 2022 and 2021, respectively. The aggregate foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency were $( 2.5 ) million, $( 5.3 ) million, and $ 9.6 million for the years ended December 31, 2022, 2021, and 2020 respectively, which are reflected in Other income (expense). Segment Information The Company manages its business as one operating segment: the development of recombinant vaccines. The Company does not operate separate lines of business with respect to its vaccine candidates. Accordingly, the Company does not have separately reportable segments as defined by ASC Topic 280, Segment Reporting . 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, 2020, and 2022. The ASU sets forth a “current expected credit loss” 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 has evaluated the effect of the guidance and its implementation will not have a material impact on the Company’s consolidated financial statements. Adopted 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 F- 17 Table of Contents 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 $ 53.8 million and $ 419.7 million related to amounts that were billed to customers and $ 28.6 million and $ 35.3 million related to amounts which had not yet been billed to customers as of December 31, 2022 and 2021, respectively. During the years ended December 31, 2022 and 2021, changes in the Company's accounts receivables, deferred revenue, and allowance for doubtful accounts balances were as follows (in thousands): Balance, Beginning of Period Additions Deductions Balance, End of Period Accounts receivable: Year ended December 31, 2022 $ 454,993 $ 1,768,457 $ ( 2,127,240 ) $ 96,210 Year ended December 31, 2021 262,012 2,432,268 ( 2,239,287 ) 454,993 Allowance for doubtful accounts: Year ended December 31, 2022 — ( 13,835 ) (1) — ( 13,835 ) Year ended December 31, 2021 — — — — Deferred revenue (2) : Year ended December 31, 2022 1,595,472 46,908 ( 1,092,829 ) (3) 549,551 Year ended December 31, 2021 273,228 1,598,152 ( 275,908 ) 1,595,472 (1) Bad debt expense was $ 13.8 million in the year ended December 31, 2022 and there was no bad debt expense in the years ended December 31, 2021 and 2020. (2) Amount is comprised of $ 0.4 billion, $ 1.4 billion, and $ 0.3 billion current Deferred revenue and $ 179.4 million, $ 172.5 million, and no non-current Deferred revenue as of December 31, 2022, 2021, and 2020 respectively. (3) Deductions from Deferred revenue include the following: $ 273.8 million that was realized in Revenue and $ 819.0 million, including $ 697.4 million related to the Advance Payment Amount (as described below) at issue in the Gavi arbitration and $ 112.5 million related to the Amended and Restated UK Supply Agreement, that was reclassified to Other current liabilities, as described below. In the fourth quarter of 2022, the Company recognized revenue of $ 41.9 million related to a change in estimate attributed to changes in constraint of variable consideration. 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 $ 3 billion as of December 31, 2022, which excludes amounts related to the Company’s APA (“the Gavi APA”) with Gavi, the Vaccine Alliance (“Gavi”) and the reduction in doses related to the Amended and Restated UK Supply Agreement, as defined below. Failure to meet regulatory milestones, obtain timely supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under the Company’s APAs may require the Company to refund portions of upfront payments or result in reduced future payments, which could adversely impact the Company’s ability to realize revenue from its unsatisfied performance obligations. 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, and delivery of doses. The timing to fulfill performance obligations related to APAs 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 vaccine under certain of the Company’s APAs. The remaining unfilled performance obligations not related to grant agreements or APAs are expected to be fulfilled in less than one year . Under the terms of the Gavi APA and a separate purchase agreement between Gavi and Serum Institute of India Pvt. Ltd. (“SIIPL”), 1.1 billion doses of NVX-CoV2373 were to be made available to countries participating in the COVAX Facility. The Company expected 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 was expected to manufacture and deliver F- 18 Table of Contents the balance of the 1.1 billion doses of NVX-CoV2373 for low- and middle-income countries participating in the COVAX Facility. The Company expected to deliver doses with antigen and adjuvant manufactured at facilities directly funded under the Company's funding agreement with CEPI, with initial doses supplied by SIIPL and Serum Life Sciences Limited (“SLS”) under a supply agreement. The Company expected 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 could prioritize such doses to low- and middle- income countries, at lower prices. Additionally, the Company could provide additional doses of NVX-CoV2373, to the extent available from CEPI funded manufacturing facilities, in the event that SIIPL could not materially deliver expected vaccine doses to the COVAX Facility. Under the agreement, the Company received an upfront payment of $ 350.0 million from Gavi in 2021 and an additional payment of $ 350.0 million in the first quarter of 2022 related to the Company’s achieving EUL for NVX-CoV2373 by the WHO (the “Advance Payment Amount”). On November 18, 2022, the Company delivered written notice to Gavi to terminate the Gavi APA on the basis of Gavi’s failure to procure the purchase of 350 million doses of NVX-CoV2373 from the Company as required by the Gavi APA. As of November 18, 2022, the Company had only received orders under the Gavi APA for approximately 2 million doses. On December 2, 2022, Gavi issued a written notice purporting to terminate the Gavi APA based on Gavi’s contention that the Company repudiated the agreement and, therefore, materially breached the Gavi APA. Gavi also contends that, based on its purported termination of the Gavi APA, it is entitled to a refund of the Advance Payment Amount less any amounts that have been credited against the purchase price for binding orders placed by a buyer participating in the COVAX Facility. As of December 31, 2022, the remaining Gavi Advance Payment Amount of $ 697.4 million, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, was reclassified from Deferred revenue to Other current liabilities in the Company’s consolidated balance sheet. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on the claims described above. The Company’s response is currently due by March 2, 2023. Arbitration is inherently uncertain, and while the Company believes that it is entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that it could be required to refund all or a portion of the remaining Advance Payment Amount from Gavi. Product Revenue Product revenue by the Company’s customer’s geographic location was as follows (in thousands): Year Ended December 31, 2022 North America $ 194,480 Europe 823,542 Rest of the world 536,939 Total product revenue $ 1,554,961 The Company has an APA with the European Commission (“EC”) acting on behalf of various European Union member states to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the EC to purchase an additional 100 million doses up to a maximum aggregate of 200 million doses in one or more tranches, through 2023. Under the terms of the APA, the Company agreed to 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. 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 European Commission under the APA, except with respect to the Company’s obligations under the Gavi APA. In 2022, the Company was notified by the EC that it was cancelling approximately 7 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 approximately 63 million doses. In January 2023, the Company finalized a revised delivery schedule for the remaining 20 million committed doses under the APA that were originally scheduled for delivery during the first and second quarters of 2022 and are expected to be delivered in 2023. In July 2022, the Company entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (as amended on September 26, 2022, the “Amended and Restated UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy (as assigned to the UK Health Security Agency), 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, dated October 22, 2020, between the parties (the “Original UK Supply Agreement”). Under the Original UK Supply Agreement, the Authority agreed to purchase 60 million doses of NVX-CoV2373 and made an F- 19 Table of Contents upfront payment to the Company. Under the terms of 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 (the “Conditional Doses”) of NVX-CoV2373, with the number of Conditional Doses contingent on, and subject to reduction based on, the Company’s timely achievement of supportive recommendations from the Joint Committee on Vaccination and Immunisation (the “JCVI”) that is approved by the UK Secretary of State for Health, with respect to use of the vaccine for (a) the general adult population as part of a SARS-CoV-2 vaccine booster campaign in the United Kingdom or (b) the general adolescent population as part of a SARS-CoV-2 vaccine booster campaign in the United Kingdom or as a primary series SARS-CoV-2 vaccination, excluding where that recommendation relates only to one or more population groups comprising less than one million members in the United Kingdom. If the Authority does not purchase the Conditional Doses or the number of such Conditional Doses is reduced below 15 million doses of NVX-CoV2373, the Company would have to repay up to $ 225.0 million related to the upfront payment previously 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. As of November 30, 2022, the JCVI had not yet made a supportive recommendation with respect to NVX-CoV2373, thereby triggering, under the terms of the Amended and Restated UK Supply Agreement, (i) a reduction of the number of Conditional Doses from 15 million doses to 7.5 million doses, which reduced number of Conditional Doses are contingent on, and subject to further reduction based on, the Company’s timely achievement by November 30, 2023 of a supportive recommendation from JCVI that is approved by the UK Secretary of State for Health as described in the paragraph above, and (ii) an obligation of the Company to repay $ 112.5 million related to the upfront payment previously received from the Authority under the Original UK Supply Agreement, which is reflected in Other current liabilities, with the remaining upfront payment balance of $ 112.5 million reflected in current Deferred revenue. Grants The Company recognized grant revenue as follows (in thousands): Year Ended December 31, 2022 2021 2020 USG Agreement $ 380,996 $ 788,953 $ 204,727 U.S. DoD 1,925 21,683 12,519 CEPI — 135,445 223,158 Other grant revenue — 2,628 12,806 Total grant revenue $ 382,921 $ 948,709 $ 453,210 U.S. Government In July 2020, the Company entered into a Project Agreement (the “Project Agreement”) with Advanced Technology International, Inc. (“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. Operation Warp Speed was a partnership among components of the U.S. Department of Health and Human Services and the U.S. Department of Defense working to accelerate the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics. The Project Agreement relates to the Base Agreement the Company entered into with ATI in June 2020 (the “Base Agreement,” together with the Project Agreement, the “USG Agreement”). The original USG Agreement required the Company to conduct certain clinical, regulatory, and other activities, including a pivotal Phase 3 clinical trial to determine the safety and efficacy of NVX-CoV2373, and to manufacture and deliver to the U.S. government 100 million doses of the vaccine candidate. Funding under the USG Agreement is payable to the Company for various development, clinical trial, manufacturing, regulatory, and other activities. The USG Agreement contains terms and conditions that are customary for U.S. government agreements of this nature, including provisions giving the U.S. government the right to terminate the Base Agreement or the Project Agreement based on a reasonable determination that the funded project will not produce beneficial results commensurate with the expenditure of resources and that termination would be in the U.S. government’s interest. If the Project Agreement is terminated prior to completion, the Company is entitled to be paid for work performed and costs or obligations incurred prior to termination and consistent with the terms of the USG Agreement. In July 2022, the Company entered into a modification to the USG 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 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 USG Agreement (inclusive of the initial batch of F- 20 Table of Contents 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. The 3 million initial doses were delivered in July 2022. The performance period under the Project Agreement extends through 2023 to cover clinical trial activities, subject to early termination by the U.S. government or extension by mutual agreement of the parties. Under the USG Agreement, the Company was originally entitled to funding of up to $ 1.75 billion to support certain activities related to the development of NVX-CoV2373 and the manufacture and delivery of the vaccine candidate to the U.S. government. In subsequent modifications, the Company's USG Agreement was amended to increase the contract funding and ceiling to $ 1.8 billion, which allows the Company to make expenditures or incur obligations of up to $ 1.8 billion for support of the USG Agreement. As of December 31, 2022, the Company had recognized $ 1.4 billion in revenue related to the USG Agreement since the inception of the contract, leaving $ 0.4 billion remaining to spend. U.S. Department of Defense In June 2020, the Company entered into a letter contract that was later amended in January 2021 (the “DoD Contract”) with the DoD Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CRBND-EB”), under which JPEO-CRBND-EB agreed to provide funding of up to $ 45.7 million to the Company to support the manufacture of NVX-CoV2373. The Company is authorized to make expenditures or incur obligations up to the full amount of the funding. Under the DoD Contract, the Company originally expected to deliver 10 million doses of NVX-CoV2373 to the DoD. The 10 million doses of NVX-CoV2373 could be used in Phase 2/3 clinical trials or under an EUA, if approved by the FDA. Pursuant to the DoD Contract, after NVX-CoV2373 is approved by the FDA, the DoD is entitled to most-favored customer status for a period of five years from the award of the DoD Contract, meaning that the Company cannot give any comparable commercial client in the United States more favorable pricing than the DoD under similar transactional circumstances. In July 2022, the Company modified its existing agreement with the DoD and delivered 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. The term of the DoD Contract expired in December 2022. Coalition for Epidemic Preparedness Innovations In May 2020, the Company entered into a restated funding agreement which was amended in November 2020 with CEPI, under which CEPI agreed to provide funding of up to $ 399.5 million to the Company to support the development of NVX-CoV2373. The agreement provides up to $ 257.0 million in CEPI Grant Funding and up to $ 142.5 million in CEPI Forgivable Loan Funding, which are loans in the form of one or more forgivable no-interest term loans in order to prepay certain manufacturing activities and are not subject to restrictive or financial covenants. As of December 31, 2022 and 2021, the Company had recognized total revenue related to CEPI of $ 358.6 million, with the unused amounts primarily related to CEPI Forgivable Loan Funding. Payments received under the CEPI Forgivable Loan Funding are only repayable if NVX-CoV2373 manufactured by the CMO network funded by CEPI is sold to one or more third parties (which would have previously included, but is not limited to, any sales under the Company’s Gavi APA prior to its termination), and such sales cover the Company’s costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI. The timing and amount of any loan repayments is currently uncertain. Royalties and Other For the years ended December 31, 2022 and 2021, the Company recognized $ 9.0 million and $ 178.6 million, respectively, in revenue related to sales-based royalties, which is reflected in Royalties and other revenue. For the years ended December 31, 2022 and 2020, the Company recognized $ 20.0 million upon the sale of NVX-CoV2373 in Japan and $ 20.0 million related to a development milestone payment, respectively. Note 4 – Collaboration and License Agreements Serum Institute The Company has granted 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 F- 21 Table of Contents 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 granted to SIIPL (i) an exclusive license in India during the agreement and (ii) a non-exclusive license (a) during the “Pandemic Period” (as declared by the WHO) in all countries other than specified countries designated by the World Bank as upper-middle or high-income countries, with respect to which the Company retains rights, and (b) after the Pandemic Period, in only those countries designated as low or middle-income by the World Bank. Following the Pandemic Period, the Company may notify SIIPL of any bona fide opportunities for the Company to license NVX-CoV2373 to a third party in such low and middle-income countries and SIIPL would have an opportunity to match or improve such third-party terms, failing which, the Company would have the discretion to remove one or more non-exclusive countries from SIIPL’s license. The Company also has a supply agreement with SIIPL and SLS under which SIIPL and SLS supply the Company with NVX-CoV2373 for commercialization and sale in certain territories, as well as a contract development manufacture agreement with SLS, under which SLS manufactures and supplies finished vaccine product to the Company using antigen drug substance and Matrix-M™ adjuvant supplied by the Company. In May and August 2022, the Company expanded its license and supply arrangements with SIIPL to include its proprietary COVID-19 variant antigen candidate(s), its quadrivalent influenza vaccine candidate, and its CIC vaccine candidate, so that SIIPL can manufacture and commercialize a vaccine targeting COVID-19 variants, including the Omicron subvariants, a quadrivalent influenza vaccine, and CIC vaccine, and supply such vaccines to the Company. In March 2020, the Company granted SIIPL a non-exclusive license for the use of Matrix-M™ adjuvant supplied by the Company to develop, manufacture, and commercialize R21, a malaria candidate developed by the Jenner Institute, University of Oxford. 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 Matrix-M™ adjuvant from the Company to manufacture doses of 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 September 2021, Takeda finalized an agreement with the Government of Japan’s Ministry of Health, Labour and Welfare ("MHLW") for the purchase of 150 million doses of NVX-CoV2373. In February 2023, MHLW cancelled the remainder of doses under its agreement with Takeda. As a result, it is uncertain whether the Company will receive future payments from Takeda under the terms and conditions of their current collaboration and licensing agreement. For the years ended December 31, 2022 and 2020, the Company recognized $ 20.0 million upon the sale of NVX-CoV2373 in Japan and $ 20.0 million related to a development and commercial milestone payment, respectively, which are included in Royalties and other revenue on the consolidated statements of operations. 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 South Korea, Thailand, and Vietnam. SK bioscience finalized an APA with the Korean government to supply 40 million doses of NVX-CoV2373 to the Republic of Korea beginning in 2021. 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. In July 2022, the Company signed an additional agreement with SK bioscience for the technology transfer of the Company’s proprietary COVID-19 variant antigen materials so that SK bioscience can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants. The companies also signed an agreement to manufacture and supply NVX-CoV2373 in a prefilled syringe. Other Supply Agreements On September 30, 2022, the Company, FUJIFILM Diosynth Biotechnologies UK Limited (“FDBK”), FUJIFILM Diosynth Biotechnologies Texas, LLC (“FDBT”), and FUJIFILM Diosynth Biotechnologies USA, Inc. (“FDBU” and together with FDBK and FDBT, “Fujifilm”) entered into a Confidential Settlement Agreement and Release (the “Fujifilm Settlement Agreement”) regarding amounts due to Fujifilm in connection with the termination of manufacturing activity at FDBT under the Commercial Supply Agreement (the “Fujifilm CSA”) dated August 20, 2021 and Master Services Agreement dated June 30, 2020 and associated statements of work (the “Fujifilm MSA”) by and between the Company and Fujifilm. The Fujifilm MSA F- 22 Table of Contents and Fujifilm CSA established the general terms and conditions applicable to Fujifilm’s manufacturing and supply activities related to NVX-CoV2373 under the associated statements of work. Pursuant to the Fujifilm Settlement Agreement, the Company is responsible for payment of up to $ 185.0 million (the “Settlement Payment”) to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the Fujifilm CSA, of which (i) $ 47.8 million, constituting the initial reservation fee under the Fujifilm CSA, was credited against the Settlement Payment on September 30, 2022 and (ii) the remaining balance is to be paid in four equal quarterly installments of $ 34.3 million each beginning March 31, 2023. As of December 31, 2022, the remaining payment of $ 137.2 million was reflected in Accrued expenses. Under the Fujifilm Settlement Agreement, Fujifilm is required to use commercially reasonable efforts to mitigate the losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT under the Fujifilm CSA, and the final two quarterly installments will be mitigated by any replacement revenue achieved by Fujifilm between July 1, 2023 and December 31, 2023. The Settlement Payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expense from FDBT manufacturing activity under the Fujifilm CSA prior to the Fujifilm Settlement Agreement and accordingly, during the year ended December 31, 2022, the Company recorded a benefit of $ 98.3 million as Research and development expense (see Note 10). Except with respect to certain limited activities agreed upon by the parties, the Fujifilm MSA terminated with respect to all activities in FDBU and FDBT on October 21, 2022 and the impact of the termination was determined in accordance with the provisions of the Fujifilm MSA. The terms and conditions of the Fujifilm MSA and Fujifilm CSA will remain in full force and effect with respect to the ongoing activities at FDBK. In addition, the Company and Fujifilm mutually released all claims relating to (i) the cancellation of batches to be manufactured at FDBT under the Fujifilm MSA or Fujifilm CSA, (ii) FDBT facility idle time in 2022, (iii) failure to complete product performance qualification testing of batches manufactured by Fujifilm by December 2021, and (iv) any obligation by Fujifilm to reserve capacity or manufacture batches at FDBT for the benefit of the Company under the Fujifilm MSA or Fujifilm CSA. The Company continues to assess its manufacturing needs and intends to modify its global manufacturing footprint consistent with its contractual obligations to supply, and anticipated demand for, NVX-CoV2373, and, as a result, significant costs may be incurred. Note 5 – 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 sum to the total of the same such amounts shown in the statement of cash flows (in thousands): December 31, 2022 2021 2020 Cash and cash equivalents $ 1,336,883 $ 1,515,116 $ 553,398 Restricted cash current 10,303 11,490 93,880 Restricted cash non-current (1) 1,659 1,653 1,460 Cash, cash equivalents, and restricted cash $ 1,348,845 $ 1,528,259 $ 648,738 (1) Classified as Other non-current assets as of December 31, 2022 and 2021 . F- 23 Table of Contents Note 6 – Fair Value Measurements The following table represents the estimated fair value of the Company’s financial assets and liabilities (in thousands): Fair Value at December 31, 2022 Fair Value at December 31, 2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Money market funds (1) $ 398,834 $ — $ — $ 361,822 $ — $ — Government-backed securities (1) — 296,000 — — 266,250 — Corporate debt securities (1) — — — — 790,672 — Agency securities (1) — 104,536 — — — — Total cash equivalents $ 398,834 $ 400,536 $ — $ 361,822 $ 1,056,922 $ — Liabilities 3.75 % Convertible notes due 2023 $ — $ 322,111 $ — $ — $ 447,509 $ — 5.00 % Convertible notes due 2027 — 172,789 — — — — Total convertible notes payable $ — $ 494,900 $ — $ — $ 447,509 $ — (1) All investments are classified as Cash and cash equivalents as of December 31, 2022 and 2021, on the consolidated balance sheets. Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor’s valuation models that use verifiable observable market data, such as interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers, or quoted prices of securities with similar characteristics. Pricing of the Company’s convertible notes has been estimated using observable inputs, including the price of the Company’s common stock, implied volatility, interest rates, and credit spreads. During the years ended December 31, 2022 and 2021, the Company did not have any transfers between Levels. The amount in the Company’s consolidated balance sheets for accounts payable and accrued expenses approximates its fair value due to its short-term nature. Note 7 – Inventory Inventory consisted of the following (in thousands): December 31, 2022 2021 Raw materials $ 13,912 $ 8,872 Semi-finished goods 21,410 — Finished goods 1,361 — Total inventory $ 36,683 $ 8,872 Inventory write-downs as a result of excess, obsolescence, expiry, or other reasons, and losses on firm purchase commitments are recorded as a component of Cost of sales in the consolidated statements of operations. For the year ended December 31, 2022, inventory write-downs were $ 447.6 million and losses on firm purchase commitments were $ 155.9 million. There were no inventory write-downs or losses on firm purchase commitments during 2021 or 2020. Inventory F- 24 Table of Contents reserves for write-downs are relieved when the inventory is disposed of through scrap or sale. Activity in the reserve for excess and obsolete inventory was as follows (in thousands): Year Ended December 31, 2022 Balance at January 1, 2022 $ — Charged to Cost of sales, including impairments 447,597 Other additions — Deductions ( 79,214 ) Balance at December 31, 2022 $ 368,383 Note 8 – Goodwill The change in the carrying amounts of goodwill was as follows (in thousands): Year Ended December 31, 2022 2021 Beginning balance $ 131,479 $ 135,379 Currency translation adjustments ( 5,148 ) ( 3,900 ) Ending balance $ 126,331 $ 131,479 Note 9 – Acquisition of Novavax CZ On May 27, 2020 (the “Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Deed”) by and among Novavax AB, the Company’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V. and, solely as guarantors, each of Serum International B.V. and the Company. Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Novavax CZ (formerly, Praha Vaccines a.s.), a vaccine manufacturing company (the “Acquisition”). The assets of Novavax CZ acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity. Allocation of Purchase Price to Assets Acquired and Liabilities Assumed The Company has accounted for the Acquisition as a business combination using the acquisition method of accounting, with the Company as the acquirer. The acquisition method requires the Company to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of net assets acquired is recorded as goodwill. The Company completed the appraisal process necessary to assess the fair values of the assets acquired and liabilities assumed to determine the amount of goodwill to be recognized as of the Acquisition Date. The final determination of the fair value of all assets and liabilities was completed in 2020 and is presented in the table below. The table below summarizes the final allocation of the purchase price based upon the fair values of assets acquired and liabilities assumed (in thousands): May 27, 2020 Prepaid expense and other current assets $ 326 Property and equipment 96,739 Goodwill 70,662 Accounts payable ( 1,193 ) Accrued expenses ( 205 ) Other non-current liabilities ( 813 ) Purchase price, net of cash acquired $ 165,516 The fair value of the assets acquired and liabilities assumed was determined using market and cost valuation methodologies. The fair value measurements were based on significant unobservable inputs that were developed by the F- 25 Table of Contents Company using publicly available information, market participant assumptions, and cost and development assumptions. Because of the use of significant unobservable inputs, the fair value measurements represent a Level 3 measurement as defined in ASC 820. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets or liabilities. The cost approach estimates value by determining the current cost of replacing an asset with another of equivalent utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The cost approach was the primary approach used to value fixed assets, including the real property. Fixed assets are depreciated on a straight-line basis over their expected remaining useful lives, ranging from four years to 25 years. The Company recorded $ 70.7 million in goodwill related to the Acquisition representing the purchase price that was in excess of the fair value of the assets acquired and liabilities assumed. The goodwill generated from the Acquisition is not expected to be deductible for U.S. federal income tax purposes. The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition, such as the assembled workforce of Novavax CZ. Current assets and current liabilities were recorded at their contractual or historical acquisition amounts, which approximate their fair value. Impact to Financial Results for the Year Ended December 31, 2020 The results of operations from Novavax CZ have been included in the consolidated financial statements since the Acquisition Date. As a result, the consolidated financial results for the year ended December 31, 2020 does not reflect a full twelve months of Novavax CZ results. From the Acquisition Date through December 31, 2020, Novavax CZ did not recognize any revenue and recorded a net loss from operations of $ 11.3 million. The Company incurred approximately $ 2.7 million of costs related to the Acquisition in the year ended December 31, 2020, which are included within general and administrative expenses in the consolidated statements of operations. Supplemental Pro Forma Financial Information (Unaudited) The unaudited pro forma financial information below gives effect to the Acquisition as if it had occurred as of January 1, 2019. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the Acquisition been consummated as of that time. The unaudited pro forma financial information combines the historical results of operations of the Company and Novavax CZ and reflects the application of certain pro forma adjustments (in thousands, except per share amounts): Year Ended December 31, 2020 Revenue $ 475,598 Net loss ( 419,896 ) Basic and diluted net loss per share $ ( 7.04 ) Pro forma adjustments include the recognition of depreciation expense based on the Acquisition Date fair value and remaining useful lives of Novavax CZ fixed assets (net of historical depreciation expense) and the elimination of costs related to the Acquisition, which are non-recurring in nature. Note 10 – Leases The Company has embedded leases related to multiple manufacturing supply agreements with CMOs and CDMOs to manufacture NVX-CoV2373, as well as operating leases for its research and development and manufacturing facilities, corporate headquarters and offices, and certain equipment. During the years ended December 31, 2022 and 2021, the Company modified certain of its CMO and CDMO agreements that had previously been determined to represent embedded leases and, in accordance with its policy, the Company remeasured and reallocated the remaining consideration under the contracts and reassessed the lease classification as of the effective dates of the respective modifications. During the year ended December 31, 2022, the Company recognized ROU assets and a corresponding long-term operating lease liability on the remeasurement of modified supply agreements. During the F- 26 Table of Contents year ended December 31, 2021, for leases that were previously determined to represent short-term embedded leases, modifications did not result in a change in lease classification. During 2022 and 2021, as a result of new or modified leases, the Company recognized ROU assets, net of credits on modifications, of $ 18.6 million and $ 144.4 million, respectively, for its finance leases and long-term operating leases embedded in CMO and CDMO manufacturing supply agreements. The Company expensed the ROU assets since they related to research and development activities for the development of NVX-CoV2373 for which the Company did not have an alternative future use. During 2022 and 2021, the Company entered into and extended various facility lease agreements related to research and development facilities and office space. 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 that have not been recognized in the ROU asset. 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 year ended December 31, 2022, the Company obtained the right to direct the use of, and obtain substantially all of the benefit from, certain floors located at the premises and recognized an ROU asset and related lease obligation of $ 73.2 million as lease commencement for accounting purposes had occurred. As of December 31, 2022 and 2021, the Company had incurred $ 49.0 million and $ 36.4 million, respectively, related to tenant improvement costs to be recognized as a ROU asset. The Company anticipates that it will incur additional tenant improvement costs, net of a landlord contribution of $ 9.8 million, through 2023 to bring the remainder of the building to the condition necessary for its intended use. As of December 31, 2022, facility leases, excluding the 700QO lease, have expirations that range from approximately three to nine years , some of which include options to extend the lease term. The facility leases contain provisions for future rent increases and obligate the Company to pay building operating costs. Supplemental balance sheet information related to leases as of December 31, 2022 and 2021 was as follows (in thousands, except weighted-average remaining lease term and discount rate): December 31, Lease Assets and Liabilities Classification 2022 2021 Assets: ROU assets, operating, net Right of use asset, net $ 36,384 $ 40,123 ROU assets, finance, net Right of use asset, net 69,857 — Total non-current ROU assets $ 106,241 $ 40,123 Liabilities: Current portion of operating lease liabilities Other current liabilities $ 16,867 $ 30,983 Current portion of finance lease liabilities Current portion of finance lease liabilities 27,196 130,533 Total current lease liabilities $ 44,063 $ 161,516 Non-current portion of operating lease liabilities Other non-current liabilities $ 50,085 $ 39,116 Non-current portion of finance lease liabilities Non-current finance lease liabilities 31,238 — Total non-current lease liabilities $ 81,323 $ 39,116 Weighted-average remaining lease term (years): Operating leases 4.6 5.0 Finance leases 8.3 3.7 Weighted-average discount rate: Operating leases 6.4 % 6.0 % Finance leases 5.4 % 5.2 % F- 27 Table of Contents Lease expense for the operating and short-term leases for the years ended December 31, 2022, 2021, and 2020 was as follows (in thousands): Year Ended December 31, 2022 2021 2020 Operating lease expense $ 6,903 $ 37,027 $ 2,462 Short-term lease expense 94,726 468,210 66,805 Variable lease expense 6,836 116,435 4,854 Finance lease expense: ROU assets expensed $ 7,759 $ 112,528 $ 242,009 Interest expense 1,472 7,241 3,097 Total finance lease expense $ 9,231 $ 119,769 $ 245,106 Supplemental cash flow information related to leases for the year ended December 31, 2022, 2021, and 2020 was as follows (in thousands): Year Ended December 31, 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in operating leases $ 190,158 $ 203,991 $ 63,634 Operating cash flows used in finance leases 1,472 7,241 3,097 Financing cash flows used in finance leases 93,595 127,907 96,065 ROU assets obtained in exchange for operating lease obligations $ 30,675 $ 66,682 $ 5,590 ROU assets obtained in exchange for finance lease obligations 73,240 112,528 242,009 As of December 31, 2022, maturities of lease liabilities were as follows (in thousands): Year Amount 2023 $ 47,335 2024 24,589 2025 10,446 2026 10,509 2027 10,250 Thereafter 46,562 Total minimum lease payments 149,691 Less: imputed interest ( 24,305 ) Total lease liabilities $ 125,386 F- 28 Table of Contents Note 11 – Long-Term Debt The Company’s long-term debt consisted of the following (in thousands): December 31, 2022 2021 Current portion: 3.75 % Convertible notes due 2023 $ 325,000 $ — Unamortized debt issuance costs ( 119 ) — Total current convertible notes payable $ 324,881 $ — Non-current portion: 5.00 % Convertible notes due 2027 $ 175,250 $ — 3.75 % Convertible notes due 2023 — 325,000 Unamortized debt issuance costs ( 8,784 ) ( 1,542 ) Total non-current convertible notes payable $ 166,466 $ 323,458 Interest expense incurred in connection with the convertible notes payable consisted of the following (in thousands): Year Ended December 31, 2022 2021 2020 Coupon interest $ 12,542 $ 12,188 $ 12,188 Amortization of debt issuance costs 1,497 1,424 1,424 Total interest expense on convertible notes payable $ 14,039 $ 13,612 $ 13,612 2027 Convertible Notes In December 2022, the Company issued $ 175.3 million aggregate principal amount of convertible senior unsecured notes that will mature on December 15, 2027 (the “2027 Notes”), unless earlier converted, redeemed, or repurchased. The 2027 Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and pursuant to an indenture dated December 20, 2022 (the “2027 Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Concurrently with the issuance of the 2027 Notes, the Company completed a public offering of shares of its common stock (see Note 13). The Company received $ 166.4 million in net proceeds from the issuance of the 2027 Notes after deducting the initial purchasers’ fees and the Company’s offering expenses. The 2027 Notes bear cash interest at a rate of 5.00 % per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. The 2027 Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding September 15, 2027, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2027 Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the 2027 Indenture) per $1,000 principal amount of the 2027 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate for the 2027 Notes on each such trading day; (3) if the Company calls such 2027 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2027 Notes called (or deemed called) for redemption; and (4) upon the occurrence of specified corporate events as set forth in the 2027 Indenture. On or after September 15, 2027, until the close of business on the business day immediately preceding the maturity date (December 15, 2027), holders of the 2027 Notes may convert all or any portion of their 2027 Notes at any time, regardless of the foregoing conditions. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the 2027 Indenture. F- 29 Table of Contents The conversion rate for the 2027 Notes will initially be 80.0000 shares of the Company’s common stock per $1,000 principal amount of 2027 Notes, which is equivalent to an initial conversion price of $ 12.50 per share of common stock. The initial conversion price of the 2027 Notes represents a conversion premium of 25 % of the public offering price in the Company’s concurrent common stock offering that closed on December 20, 2022 (see Note 13). The conversion rate for the 2027 Notes is subject to adjustment under certain circumstances in accordance with the terms of the 2027 Indenture. In addition, following certain corporate events that occur prior to the maturity date of the 2027 Notes or if the Company delivers a notice of redemption in respect of the 2027 Notes, the Company will, under certain circumstances, increase the conversion rate of the 2027 Notes for a holder who elects to convert its 2027 Notes (or any portion thereof) in connection with such a corporate event or convert its 2027 Notes called (or deemed called) for redemption during the related redemption period (as defined in the 2027 Indenture), as the case may be. The Company may not redeem the 2027 Notes prior to December 22, 2025. The Company may redeem for cash all or any portion of the 2027 Notes, at its option, on or after December 22, 2025, if the last reported sale price of the common stock has been at least 130 % of the conversion price for the 2027 Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest, to, but excluding, the redemption date. If the Company redeems less than all the outstanding 2027 Notes, at least $ 50 million aggregate principal amount of 2027 Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for the 2027 Notes. If the Company undergoes a Fundamental Change (as defined in the 2027 Indenture), holders may require, subject to certain conditions and exceptions as set forth in the 2027 Indenture, the Company to repurchase for cash all or any portion of their 2027 Notes at a Fundamental Change repurchase price equal to 100 % of the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the Fundamental Change repurchase date. If a holder of the 2027 Notes converted upon a Make-Whole Fundamental Change (as described in the 2027 Indenture), they may be eligible to receive a make-whole premium through an increase to the conversion rate up to a maximum of 20.0000 shares per $1,000 principal amount of 2027 Notes (subject to other adjustments as described in the 2027 Indenture). In accounting for the issuance of the 2027 Notes, the Company determined that the scope exceptions provided under ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”) apply to all but one of the conversion features embedded in the 2027 Notes. This remaining conversion feature, which is associated with a Fundamental Change of the Company, was determined to have a de minimis value as of December 31, 2022. The initial purchasers’ fees and the Company’s issuance costs related to the 2027 Notes totaled $ 8.8 million, which were recorded as a reduction to the 2027 Notes on the consolidated balance sheet. The $ 8.8 million of debt issuance costs is being amortized and recognized as additional interest expense over the five-year contractual term of the 2027 Notes using an effective interest rate of 6.2 %. 2023 Convertible Notes In 2016, the Company issued $ 325 million aggregate principal amount of convertible senior unsecured notes that matured on February 1, 2023 (the “2023 Notes”). The 2023 Notes were senior unsecured debt obligations and were issued at par. The Company repaid the outstanding principal amount of $ 325 million together with accrued but unpaid interest on the maturity date. The repayment was funded by the issuance of the 2027 Notes and the concurrent common stock offering, as well as cash on hand. The 2023 Notes were issued pursuant to an indenture dated January 29, 2016 (the “2023 Indenture”) between the Company and the trustee. The Company received $ 315.0 million in net proceeds from the offering after deducting underwriting fees and offering expenses. The 2023 Notes bore cash interest at a rate of 3.75 %, payable on February 1 and August 1 of each year. The 2023 Notes were not redeemable prior to maturity and were convertible into shares of the Company’s common stock. As a result of the Company’s one-for-twenty reverse stock split in 2019 and pursuant to Section 14.04(a) of the 2023 Indenture, the 2023 Notes were initially convertible into approximately 2,385,800 shares of the Company’s common stock based on the initial conversion rate of 7.3411 shares of the Company’s common stock per $1,000 principal amount of the 2023 Notes. This represents an initial conversion price of approximately $ 136.20 per share of the Company’s common stock, representing an approximate 22.5 % conversion premium based on the last reported sale price of the Company’s common stock of $ 111.20 per share on January 25, 2016. In addition, the holders of the 2023 Notes may have required the Company to repurchase the 2023 F- 30 Table of Contents Notes at par value plus accrued and unpaid interest following the occurrence of a Fundamental Change (as described in the 2023 Indenture). If a holder of the 2023 Notes converted upon a Make-Whole Adjustment Event (as described in the 2023 Indenture), they may have been eligible to receive a make-whole premium through an increase to the conversion rate up to a maximum of 8.9928 shares per $1,000 principal amount of 2023 Notes (subject to other adjustments as described in the 2023 Indenture). The 2023 Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40. Under ASC 815-40, to qualify for equity classification (or non-bifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the 2023 Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope exception from derivative accounting, and also since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the proceeds received from the issuance of the convertible debt were recorded as a liability on the consolidated balance sheets. In connection with the issuance of the 2023 Notes, the Company also paid $ 38.5 million, including expenses, to enter into privately negotiated capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions expired by their terms on January 27, 2023. The capped call transactions were generally expected to reduce the potential dilution upon conversion of the 2023 Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, was greater than the strike price of the capped call transactions, which initially corresponded to the conversion price of the 2023 Notes, and was subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the 2023 Notes. The cap price of the capped call transactions was initially $ 194.60 per share, which represented a premium of approximately 75 % based on the last reported sale price of the Company’s common stock of $ 111.20 per share on January 25, 2016, and was subject to certain adjustments under the terms of the capped call transactions. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeded the cap price, there would nevertheless have been dilution upon conversion of the 2023 Notes to the extent that such market price exceeded the cap price. The Company evaluated the capped call transactions under ASC 815-10, Derivatives and Hedging – Overall and determined that they should be accounted for as a separate transaction and that the capped call transactions would be classified as an equity instrument. The Company incurred approximately $ 10.0 million of debt issuance costs in 2016 relating to the issuance of the 2023 Notes, which were recorded as a reduction to the 2023 Notes on the consolidated balance sheet. The $ 10.0 million of debt issuance costs was amortized and recognized as additional interest expense over the seven-year contractual term of the 2023 Notes on a straight-line basis, which approximated the effective interest rate method. The Company also incurred $ 0.9 million of expenses related to the capped call transactions, which were recorded as a reduction to additional paid-in-capital. Note 12 – Preferred Stock In June 2020, the Company entered into a redeemable Series A Convertible Preferred Stock Subscription Agreement, pursuant to which the Company agreed to issue and sell in a private placement 438,885 shares of its newly designated redeemable Series A Convertible Preferred Stock, par value $ 0.01 per share (“Preferred Stock”), at a purchase price of $ 455.70 per share, for total gross proceeds of $ 200.0 million. During the fourth quarter of 2020, all outstanding shares of Preferred Stock were converted and the Company issued 4,388,850 shares of common stock, par value $ 0.01 per share, and reclassified $ 199.8 million from Preferred stock to Additional paid-in capital. The Company recognized a beneficial conversion feature of approximately $ 24.1 million at the time of issuance of the Preferred Stock that was recorded in Additional paid-in capital and Accumulated deficit as the Preferred Stock issuance was contingently redeemable and convertible at any time at the option of the holder. Note 13 – Stockholders’ Equity In December 2022, the Company completed a public offering of 7,475,000 shares of its common stock, including 975,000 shares of common stock that were issued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $ 10.00 per share resulting in net proceeds, net of offering costs of $ 4.9 million, of approximately $ 70 million. The Company completed this public offering concurrent with the issuance of the 2027 Notes (see Note 11). F- 31 Table of Contents 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 then-existing At Market Issuance Sales Agreement. As of December 31, 2022, the remaining balance available under the June 2021 Sales Agreement was approximately $ 318 million. During the years ended December 31, 2022, 2021, and 2020, the Company sold 2.2 million, 2.6 million, and 32.4 million, respectively, of shares of its common stock resulting in net proceeds of approximately $ 179 million, $ 565 million, and $ 877 million, respectively, under its various At Market Issuance Sales Agreements. Note 14 – Stock-Based Compensation Equity Plans The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company’s annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees, and consultants of and advisors to the Company and any present or future subsidiary. The 2015 Plan authorizes the issuance of up to 14.8 million shares of common stock under equity awards granted under the 2015 Plan, which includes an increase of 2.4 million shares approved for issuance under the 2015 Plan at the Company’s 2022 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025. As of December 31, 2022, there were 3.8 million shares available for issuance under the 2015 Plan. 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. In addition, under the 2015 Plan, unrestricted stock, stock units, and performance awards may be granted. Stock options and SARs generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100 % of the fair market value of the Company’s common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years . The Company recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands): Year Ended December 31, 2022 2021 2020 Cost of sales $ 1,032 $ — $ — Research and development 66,565 86,928 55,955 Selling, general, and administrative 62,703 96,698 72,080 Total stock-based compensation expense $ 130,300 $ 183,626 $ 128,035 Total stock-based compensation capitalized and included in inventory as of December 31, 2022 was $ 1.7 million. There was no stock-based compensation capitalized and included in inventory as of December 31, 2021. As of December 31, 2022, there was approximately $ 171 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 1.1 years and will be allocated between cost of sales, 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. 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 SARs holders exercised their stock options and SARs on December 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 years ending December 31, 2022, 2021, and 2020 was $ 21.4 million, $ 453.8 million, and $ 187.3 million, respectively. F- 32 Table of Contents Stock Options and Stock Appreciation Rights The following is a summary of stock options and SARs activity under the 2015 Plan and the 2005 Plan for the year ended December 31, 2022: 2015 Plan 2005 Plan Stock Options Weighted- Average Exercise Price Stock Options Weighted- Average Exercise Price Outstanding at January 1, 2022 3,635,837 $ 42.60 68,225 $ 109.52 Granted 633,626 $ 65.32 — $ — Exercised ( 134,222 ) $ 15.64 ( 3,000 ) $ 31.10 Canceled ( 81,951 ) $ 90.83 ( 1,500 ) $ 121.00 Outstanding at December 31, 2022 4,053,290 $ 46.07 63,725 $ 112.94 Shares exercisable at December 31, 2022 2,892,161 $ 39.58 63,725 $ 112.94 The fair value of stock options granted under the 2015 Plan was estimated at the date of grant or the date upon which the 2015 Plan was approved by the Company’s stockholders for certain stock options granted in 2020 and 2019 using the Black-Scholes option-pricing model with the following assumptions: Year Ended December 31, 2022 2021 2020 Weighted average Black-Scholes fair value of stock options and SARs granted $ 55.32 $ 158.02 $ 80.48 Risk-free interest rate 1.4 %- 4.3 % 0.5 %- 1.3 % 0.2 %- 1.5 % Dividend yield — % — % — % Volatility 120.5 %- 140.1 % 124.7 %- 142.0 % 116.0 %- 152.2 % Expected term (in years) 4.0 - 6.3 4.1 - 6.1 3.9 - 7.6 The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of December 31, 2022 was approximately $ 3 million and 7.1 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of December 31, 2022 was approximately $ 2 million and 6.6 years, respectively. Restricted Stock Units The following is a summary of RSU activity for the year ended December 31, 2022: Number of Shares Per Share Weighted- Average Fair Value Outstanding and unvested at January 1, 2022 819,828 $ 116.70 Restricted stock units granted 1,882,987 $ 48.51 Restricted stock units vested ( 505,009 ) $ 89.77 Restricted stock units forfeited ( 163,232 ) $ 99.58 Outstanding and unvested at December 31, 2022 2,034,574 $ 61.65 F- 33 Table of Contents Employee Stock Purchase Plan The ESPP was approved at the Company’s annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 1.1 million shares of common stock to be purchased, and the aggregate amount of shares will continue to increase 5 % on each anniversary of its adoption up to a maximum of 1.65 million shares. 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). At December 31, 2022, there were 0.7 million shares available for issuance under the ESPP. The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: Year Ended December 31, 2022 2021 2020 Range of Black-Scholes fair values of ESPP shares granted $ 23.59 -$ 79.74 $ 83.47 -$ 238.85 $ 2.57 -$ 92.67 Risk-free interest rate 0.6 %- 3.3 % 0.1 %- 0.2 % 0.2 %- 2.6 % Dividend yield — % — % — % Volatility 103.0 %- 142.9 % 114.9 %- 159.4 % 66.6 %- 189.7 % Expected term (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Note 15 – Employee Benefits The Company maintains a defined contribution 401(k) retirement plan, pursuant to which employees may elect to contribute up to 100 % of their compensation on a tax deferred basis up to the maximum amount permitted by the Internal Revenue Code of 1986, as amended. The Company matches 100 % of the first 3 % of the participants’ deferral, and 50 % on the next 2 % of the participants’ deferral, up to a potential 4 % Company match. The Company’s matching contributions to the 401(k) plan vest immediately. Under its 401(k) plan, the Company has recorded expense of $ 6.0 million, $ 3.4 million, and $ 0.9 million in 2022, 2021, and 2020, respectively. The Company’s foreign subsidiaries have pension plans under local tax and labor laws and are obligated to make contributions to the plan. Contributions and other expenses related to this plan were $ 2.4 million, $ 1.7 million, and $ 1.0 million in 2022, 2021, and 2020, respectively. Note 16 – Other Financial Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following at December 31 (in thousands): December 31, 2022 2021 Prepaid expenses $ 160,773 $ 120,029 Other current assets 76,374 44,619 Prepaid expenses and other current assets $ 237,147 $ 164,648 F- 34 Table of Contents Property and Equipment, net Property and equipment is comprised of the following at December 31 (in thousands): December 31, 2022 2021 Land and buildings $ 101,342 $ 83,534 Machinery and equipment 134,809 119,998 Leasehold improvements 18,895 10,282 Computer hardware 4,927 2,612 Construction in progress 81,566 35,114 341,539 251,540 Less: accumulated depreciation ( 47,292 ) ( 25,799 ) Property and equipment, net $ 294,247 $ 225,741 As of December 31, 2022 and 2021, approximately $ 170.0 million and $ 164.0 million, respectively, of net assets used in operations were located in the Czech Republic. Depreciation expense was approximately $ 29.1 million, $ 12.5 million, and $ 4.3 million for the years ended December 31, 2022, 2021, and 2020, respectively. Accrued Expenses Accrued expenses consist of the following at December 31 (in thousands): December 31, 2022 2021 Employee benefits and compensation $ 52,569 $ 38,419 Research and development accruals 468,214 577,100 Other accrued expenses 70,375 58,212 Accrued expenses $ 591,158 $ 673,731 Other Current Liabilities Other current liabilities consist of the following at December 31 (in thousands): December 31, 2022 2021 Refunds to customers $ 210,362 $ — Other current liability related to Gavi (see Note 3 and Note 18) 697,384 — Other current liabilities 22,309 36,061 Total other current liabilities $ 930,055 $ 36,061 F- 35 Table of Contents Note 17 – Income Taxes The Company’s income (loss) from operations before income tax provision (benefit) by jurisdiction for the years ended December 31 are as follows (in thousands): Year Ended December 31, 2022 2021 2020 Domestic $ ( 712,183 ) $ ( 1,633,016 ) $ ( 455,253 ) Foreign 58,536 ( 81,520 ) 36,994 Loss before income tax expense $ ( 653,647 ) $ ( 1,714,536 ) $ ( 418,259 ) Significant components of the current income tax provision (benefit) are as follows (in thousands): Year Ended December 31, 2022 2021 2020 Domestic $ 1,300 $ — $ — State and local 503 — — Foreign 2,489 29,215 — Total current income tax expense $ 4,292 $ 29,215 $ — During the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 4.3 million, $ 29.2 million, and no federal, state, and foreign current income tax expense. The foreign income tax expense is primarily related to foreign withholding tax on royalties. The Company recognized no deferred income tax expense during the years listed above due to a full valuation allowance. A reconciliation of the provision for income tax to the amount computed by applying the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows: Year Ended December 31, 2022 2021 2020 Statutory federal tax rate 21 % 21 % 21 % State income taxes, net of federal benefit 2 % 6 % 3 % Research and development and other tax credits 1 % 1 % — % Non-deductible expenses ( 1 ) % ( 2 ) % ( 4 ) % Non-cash stock-based compensation ( 1 ) % 4 % 7 % U.S. taxation of foreign operations ( 3 ) % — % — % Foreign tax expense — % ( 1 ) % — % Other 2 % ( 1 ) % ( 1 ) % Change in tax rate ( 20 ) % — % 5 % Change in valuation allowance ( 2 ) % ( 30 ) % ( 31 ) % Income tax provision ( 1 ) % ( 2 ) % — % As of December 31, 2022, the Company has available federal, state, and foreign net operating losses of $ 2.0 billion, $ 0.9 billion, and $ 29.1 million, respectively, that may be applied against future taxable income in the respective jurisdiction. The federal net operating losses of $ 2.0 billion can be carried forward indefinitely, although limited to 80% of annual taxable income. State net operating losses of $ 0.4 billion have various expiration dates between 2028 and 2042. The remaining state net operating losses of $ 0.5 billion can be carried forward indefinitely. Approximately $ 15.1 million of the foreign net operating losses will begin to expire in 2024 through 2027. The remaining $ 14.0 million of foreign net operating losses can be carried forward indefinitely. The Company also has research tax credits of $ 46.0 million that will begin to expire in 2030 through 2052. Utilization of the domestic net operating loss carryforwards and research tax credits may be subject to an annual limitation due to potential ownership changes of the Company. As of December 31, 2022, the Company does not expect such limitation, if any, to impact the use of these domestic net operating losses and research tax credits. F- 36 Table of Contents The Company files income tax returns in the U.S. federal jurisdiction and in various states, as well as in foreign jurisdictions such as Sweden and the Czech Republic. The Company has U.S. federal and state net operating losses and credit carryforwards that are subject to examination from 2002 through 2022. The returns in Sweden are subject to examination from 2016 through 2022 and the returns for the Czech Republic are subject to examination from 2019 through 2022. The significant components of the Company’s deferred tax assets and liabilities as of December 31 were as follows (in thousands): December 31, 2022 2021 Deferred tax assets: Federal and state net operating loss carryforward $ 479,134 $ 845,731 Foreign net operating loss carryforward 5,752 25,625 Research tax credits 45,560 44,618 Lease liability 27,625 52,852 Deferred revenue 195,049 20,262 Inventory reserve 213,076 — Non-cash stock-based compensation 27,599 24,698 Original discount interest — 1,729 Capitalized research costs 49,309 — Other 13,695 11,801 Gross deferred tax assets 1,056,799 1,027,316 Valuation allowance ( 1,020,123 ) ( 1,015,333 ) Total deferred tax assets $ 36,676 $ 11,983 Deferred tax liabilities: ROU assets ( 23,330 ) ( 10,071 ) Fixed assets ( 11,587 ) — Intangibles ( 1,055 ) ( 1,034 ) Other ( 704 ) ( 878 ) Total deferred tax liabilities $ ( 36,676 ) $ ( 11,983 ) Net deferred tax assets (liabilities) $ — $ — The Company has evaluated the positive and negative evidence bearing upon the realization of its deferred tax assets, including its history of significant losses in every year since inception and, in accordance with U.S GAAP, has fully reserved the net deferred tax asset. The Company concluded that realization of its net deferred tax assets is not more-likely-than-not to be realized as of December 31, 2022 and 2021. The valuation allowance increased by $ 4.8 million and $ 510.5 million for the years ended December 31, 2022 and 2021, respectively. On a periodic basis, the Company reassesses the valuation allowance on its deferred income tax assets, weighing positive and negative evidence to assess the recoverability. In 2022, the Company reassessed the valuation allowance and considered negative evidence, including its cumulative losses over the three years ended December 31, 2022 and the substantial doubt about the Company’s ability to continue as a going concern through one year from the date that these financial statements are issued, and positive evidence, including its regulatory authorizations for and commercial sales of NVX-CoV2373. After assessing both the negative and positive evidence, the Company concluded that it should maintain the valuation allowance on its net operating losses, credits, and its other deferred tax assets as of December 31, 2022. The release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, the Company's level of profitability, revenue growth, clinical program progression, and expectations regarding future profitability. The Company's total net deferred tax asset balance subject to the valuation allowance was $ 1.1 billion and $ 1.0 billion as of December 31, 2022 and 2021, respectively. F- 37 Table of Contents The Company recognizes the effect of an income tax position when it is more likely than not, based on the technical merits, that the income tax position will be sustained upon examination. A reconciliation of the beginning and ending amounts of unrecognized tax benefits in the year ended December 31, 2022, 2021, and 2020 is as follows (in thousands): Year Ended December 31, 2022 2021 2020 Unrecognized tax benefits balance at January 1, $ 11,154 $ 8,766 $ — Additions for tax positions of current year 1,260 4,158 1,413 Additions for tax positions of prior years 807 — 7,353 Reductions for tax positions of prior year ( 8,027 ) ( 1,770 ) — Settlements of tax positions of prior years — — — Unrecognized tax benefits balance at December 31, $ 5,194 $ 11,154 $ 8,766 The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2022 and 2021, the Company had no accruals for interest or penalties related to income tax matters. The total amount of unrecognized tax benefits that, if recognized, could affect the effective tax rate was $ 5.2 million and $ 11.2 million as of December 31, 2022 and 2021, respectively. However, the Company maintains a full valuation allowance as of December 31, 2022 and 2021 and the recognition of any unrecognized tax benefits would be offset with a change in the valuation allowance and therefore there would be no income statement impact. As of December 31, 2022, the Company does not expect a significant change in the recorded unrecognized tax benefits reserve balance during the next twelve months. The unrecognized tax benefits are presented in the financial statements as a reduction to the deferred tax assets for all periods. Note 18 – Commitment 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 (the “Maryland Court”) 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 Maryland 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 NVX-CoV2373’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. On December 12, 2022, the Maryland Court issued a ruling granting in part and denying in part defendants’ motion to dismiss. The Maryland Court dismissed all claims against two individual defendants and claims based on certain public statements challenged in the consolidated amended complaint. The Maryland Court denied the motion to dismiss as to the remaining claims and defendants, and directed the Company and other remaining defendants to answer within fourteen days . On December 27, 2022, the Company filed its answer and affirmative defenses. After the Sinnathurai Action was filed, seven derivative lawsuits were filed: (i) Robert E. Meyer v. Stanley C. Erck, et al. , No. 8:21-cv-02996-TDC (the “Meyer Action”), (ii) Shui Shing Yung v. Stanley C. Erck, et al. , No. 8:21-cv-03248-TDC (the “Yung Action”), (iii) William Kirst, et al. v. Stanley C. Erck, et al. , No. 8:22-cv-00024-TDC (the “Kirst Action”), (iv) Amy Snyder v. Stanley C. Erck , et al., No. 8:22-cv-01415-TDC (the “Snyder Action”), (v) Charles R. Blackburn, et al. v. Stanley C. Erck, et al. , No. 1:22-cv-01417-TDC (the “Blackburn Action”), (vi) Diego J. Mesa v. Stanley C. Erck, et al. (the “Mesa Action”), and (vii) Sean Acosta v. Stanley C. Erck, et al. (the “Acosta Action”). The Meyer, Yung, Snyder, and Blackburn Actions were filed in the Maryland Court. The Kirst Action was filed in the Circuit Court for Montgomery County, Maryland, and shortly thereafter removed to the Maryland Court by the defendants. The Mesa and Acosta Actions were filed in the Delaware Court of Chancery (the “Delaware Court”). The derivative lawsuits name members of the Company’s 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. F- 38 Table of Contents On February 7, 2022, the Maryland Court entered an order consolidating the Meyer and Yung Actions (the “First Consolidated Derivative Action”). The plaintiffs in the First Consolidated Derivative Action filed their consolidated derivative complaint on April 25, 2022. On May 10, 2022, the Maryland Court entered an order granting the parties’ request to stay all proceedings and deadlines pending the earlier of dismissal or the filing of an answer in the Sinnathurai Action. On June 10, 2022, the Snyder and Blackburn Actions were filed. On October 5, 2022, the Maryland Court entered an order granting a request by the plaintiffs in the First Consolidated Derivative Action and the Snyder and Blackburn Actions to consolidate all three actions and appoint co-lead plaintiffs and co-lead and liaison counsel (the “Second Consolidated Derivative Action”). The co-lead plaintiffs in the Second Consolidated Derivative Action filed a consolidated amended complaint on November 21, 2022. On February 10, 2023, defendants filed a motion to dismiss the Second Consolidated Derivative Action. On July 21, 2022, the Maryland Court issued a memorandum opinion and order remanding the Kirst Action to state court. On December 6, 2022, the parties to the Kirst Action filed a stipulated schedule pursuant to which the plaintiffs were expected to file an amended complaint on December 22, 2022, and either (i) the parties would file a stipulated stay of the Kirst Action or (ii) the defendants would file a motion to stay the case by January 23, 2023. The plaintiffs filed an amended complaint on December 30, 2022. On January 23, 2023, defendants filed a motion to stay the Kirst action. On February 22, 2023, the parties in the Kirst Action filed for the Court’s approval of a stipulation staying the Kirst Action pending the resolution of defendants’ motion to dismiss in the Second Consolidated Derivative Action. On February 24, 2023, the Court entered an order staying the Kirst Action until a final judgment in the Second Consolidated Derivative Action. The Company takes no position on whether the broader stay entered by the Court in the Kirst Action is likely to be modified to align with the parties’ stipulation. On August 30, 2022, the Mesa Action was filed. On October 3, 2022, the Delaware Court entered an order granting the parties’ request to stay all proceedings and deadlines in the Mesa Action pending the earlier of dismissal of the Sinnathurai Action or the filing of an answer to the operative complaint in the Sinnathurai Action. On January 9, 2023, the court entered an order granting the parties’ request to set a briefing schedule in connection with a motion to stay that defendants intended to file. Pursuant to the order, defendants filed a motion to stay on January 18, 2023. The plaintiff filed his opposition on February 8, 2023. Defendants filed their reply on February 22, 2023. On February 28, 2023, the court granted Defendants’ motion to stay. On December 7, 2022, the Acosta Action was filed. On February 6, 2023, defendants accepted service of the complaint and summons in the Acosta action. The financial impact of this claim, as well as the claims discussed above, is not estimable. On February 26, 2021, a Company stockholder named Thomas Golubinski filed a derivative complaint against members of the Company’s board of directors and members of senior management in the Delaware Court, captioned Thomas Golubinski v. Richard H. Douglas, et al., No. 2021-0172-JRS. The Company is deemed a nominal defendant. Golubinski challenged equity awards made in April 2020 and in June 2020 on the ground that they were “spring-loaded,” that is, made at a time when such board members or members of senior management allegedly possessed undisclosed positive material information concerning the Company. The complaint asserted claims for breach of fiduciary duty, waste, and unjust enrichment. The plaintiff sought an award of damages to the Company, an order rescinding both awards or requiring disgorgement, and an award of attorneys’ fees incurred in connection with the litigation. On May 10, 2021, the defendants moved to dismiss the complaint in its entirety. On June 17, 2021, the Company’s stockholders voted FOR ratification of the April 2020 awards and ratification of the June 2020 awards. Details of the ratification proposals are set forth in the Company’s Definitive Proxy Statement filed on May 3, 2021. The results of the vote were disclosed in the Company’s Current Report on Form 8-K filed on June 24, 2021. Thereafter, the plaintiff stipulated that, as a result of the outcome of the June 17, 2021 vote, the plaintiff no longer intends to pursue the lawsuit or any claim arising from the April 2020 and June 2020 awards. On August 23, 2021, the plaintiff filed a motion seeking an award of attorneys’ fees and expenses for $ 1.5 million, to which the defendants filed an opposition. On October 18, 2022, the Delaware Court denied the plaintiff’s fee application in its entirety. Under a prior Delaware Court order, the case was automatically dismissed with prejudice upon denial of the plaintiff’s fee application. On November 14, 2022, Golubinski filed a Notice of Appeal in the Supreme Court of the State of Delaware. The plaintiff / appellant filed his opening appellate brief on December 30, 2022. The Company filed its responsive brief on January 30, 2023 and the appellant filed his reply brief on February 14, 2023. 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 (the “Par 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. The parties are engaged in discovery and arbitration is scheduled for July 2023. While the Company maintains that no breach of the Par MSA has occurred and intends to vigorously defend the matter, if the final resolution of the F- 39 Table of Contents matter is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows. On November 18, 2022, the Company delivered written notice to Gavi to terminate the Gavi APA based on Gavi’s failure to procure the purchase of 350 million doses of NVX-CoV2373 from the Company as required by the Gavi APA. As of November 18, 2022, the Company had only received orders under the Gavi APA for approximately 2 million doses. On December 2, 2022, Gavi issued a written notice purporting to terminate the Gavi APA based on Gavi’s contention that the Company repudiated the agreement and, therefore, materially breached the Gavi APA. Gavi also contends that, based on its purported termination of the Gavi APA, it is entitled to a refund of the Advance Payment Amount less any amounts that have been credited against the purchase price for binding orders placed by a buyer participating in the COVAX Facility. As of December 31, 2022, the remaining Gavi Advance Payment Amount of $ 697.4 million, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, was reclassified from Deferred revenue to Other current liabilities in the consolidated balance sheet. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on the claims described above. The Company’s response is currently due by March 2, 2023. Arbitration is inherently uncertain, and while the Company believes that it is entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that the Company could be required to refund all or a portion of the remaining Advance Payment Amount from Gavi. 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. Purchase Commitments The Company has entered into agreements in the normal course of business with CMOs and CDMOs supplying the Company with production capabilities, and with vendors for preclinical studies, clinical trials, and other goods or services. A number of these arrangements are within the scope of lease accounting (see Note 10). Certain agreements provide for termination rights subject to termination fees. Under such agreements, the Company is contractually obligated to make payments to vendors, mainly to reimburse them for their estimated unrecoverable expenses. The exact amount of such obligations are dependent on the timing of termination and the terms of the relevant agreement, and cannot be reasonably estimated. As of December 31, 2022, most of these agreements were active ongoing arrangements and the Company expects to receive value from these arrangements in the future. The Company recognizes fees related to obligations for terminated contracts where such fees are reasonably estimable. The Company did not accrue obligations that were not reasonably estimable. As of December 31, 2022, the Company had no non-cancelable purchase commitments with a remaining term of more than one year. Note 19 – Subsequent Events On January 5, 2023, the Board of Directors of the Company approved the appointment of John C. Jacobs, as President and Chief Executive Officer and a member of the Board, effective as of January 23, 2023. Mr. Jacobs succeeded Stanley C. Erck, who provided the Board with notice on January 5, 2023 of his decision to retire as President and Chief Executive Officer and as a member of the Board, in each case effective as of January 23, 2023. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on claims stemming from the Gavi APA. Arbitration is inherently uncertain, and while the Company believes that it is entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that it could be required to refund all or a portion of the remaining Advance Payment Amount from Gavi (see Note 3 and Note 18). On January 31, 2023, the Company funded the outstanding principal amount of $ 325.0 million on the 2023 Notes, due February 1, 2023 and the indenture governing the 2023 Notes was subsequently satisfied and discharged in accordance with its terms. The Company’s related “capped call transactions” expired by their terms on January 27, 2023. F- 40