NOVAVAX INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Any statements in the discussion below and elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) about expectations, beliefs, plans, objectives, assumptions, or future events or performance of Novavax, Inc. (“Novavax,” together with its wholly owned subsidiaries, the “Company,” “we,” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements about our capabilities, goals, expectations regarding future revenue and expense levels, and capital raising activities; our operating plans and prospects, including our ability to continue as a going concern through one year from the date of our unaudited financial statements for the period ended September 30, 2023 are issued; our global restructuring and cost reduction plan (“Restructuring Plan”), which includes a more focused investment in our COVID-19 program (which currently includes Nuvaxovid prototype COVID-19 vaccine ("NVX-CoV2373” or “prototype vaccine”) and Nuvaxovid updated COVID-19 vaccine (“NVX-CoV2601” or “updated vaccine”) collectively referred to as our (“COVID-19 Program,” or COVID-19 Vaccine”)), reduction to our pipeline spending, the continued rationalization of our manufacturing network, a reduction to our global workforce, as well as the consolidation of facilities, and infrastructure; our new cost reduction plan focused on further reductions to spend on Research & development expenses, Selling, general, & administrative expenses and supply network costs; the amount and timing of the charges and cash expenditures resulting from the size and timing of our workforce reduction; the impact of our decision to progress our COVID-19-Influenza Combination (“CIC”) vaccine candidate toward late-stage development on our workforce requirements; potential market sizes and demand for our product candidates; the efficacy, safety, and intended utilization of our product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies, including NVX-CoV2601; the conduct, timing, and potential results from clinical trials; plans for and potential timing of regulatory filings, including our submission to the U.S. Food and Drug Administration (“U.S. FDA”) for the Biologics License Application (“BLA”) for the full approval of the Novavax COVID-19 Vaccine, Adjuvanted; our expectation of manufacturing capacity, timing, production, distribution, and delivery for NVX-CoV2601 by us and our partners; our expectations with respect to the anticipated ongoing development and commercialization or licensure of our COVID-19 Program, ongoing development of our influenza vaccine candidate, CIC vaccine candidate, high-dose COVID-19 vaccine candidate, and COVID-19 variant strain-containing monovalent formulation, including the Phase 2b/3 Hummingbird™ trial, and the timing of anticipated results from and our efforts for the 2023-2024 vaccination season, efforts to expand the COVID-19 Program label worldwide as a booster, and to various age groups and geographic locations; the expected timing, content, and outcomes of regulatory actions; funding from the U.S. government partnership formerly known as Operation Warp Speed under the USG Agreement (as defined below); funding under our advance purchase agreements (“APAs”) and supply agreements and amendments to, termination of, or legal disputes relating to any such agreement; our available cash resources and usage and the availability of financing generally; plans regarding partnering activities and business development initiatives; and other matters referenced herein. Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” “aim,” or “assume,” the negative of these terms, or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations about the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Forward-looking statements involve estimates, assumptions, risks, and uncertainties that could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, and, therefore, you should not place considerable reliance on any such forward-looking statements. Such risks and uncertainties include, without limitation, our ability to successfully manufacture, distribute, or market NVX-CoV2601 for the 2023-2024 vaccination season, our ability to timely deliver doses; challenges in obtaining commercial adoption and market acceptance of NVX-CoV2601, NVX-CoV2373 or any COVID-19 variant strain containing formulation; challenges satisfying, alone or together with partners, various safety, efficacy, and product characterization requirements, including those related to process qualification, assay validation, and stability testing, necessary to satisfy applicable regulatory authorities, such as the U.S. FDA, the World Health Organization (“WHO”), United Kingdom (“UK”) Medicines and Healthcare Products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”), the Republic of Korea’s Ministry of Food and Drug Safety, or Japan’s Ministry of Health, Labour and Welfare; challenges or delays in conducting clinical trials; or obtaining regulatory authorization for our product candidates, including for NVX-CoV2601 in time for the 2023-2024 vaccination season, or for future COVID variant strain changes manufacturing distribution or export delays or challenges; our exclusive dependence on Serum Institute of India Pvt. Ltd. (“SIIPL”), that markets our prototype vaccine as (“Covovax™”), and Serum Life Sciences Limited (“SLS”) for co-formulation, filling and finishing (other than in Europe), and PCI Pharma Services for finishing our COVID-19 Vaccine in Europe and the impact of any delays or disruptions in these suppliers’ operations on the delivery of customer orders; difficulty obtaining scarce raw materials and supplies; resource constraints, including human capital and manufacturing capacity, constraints on the ability of Novavax to pursue planned regulatory pathways, alone or with partners, in multiple jurisdictions simultaneously, leading to staggered regulatory filings, and potential regulatory actions; the loss of future funding from the U.S. government; the potential for an unfavorable outcome 25 in disputes, including the pending arbitration with Gavi; challenges meeting contractual requirements under agreements with multiple commercial, governmental, and other entities including requirements to deliver doses that may require us to refund portions of upfront and other payments previously received or result in reduced future payments pursuant to such agreements; challenges related to the seasonality of vaccinations against COVID-19; challenges in implementing our global restructuring and cost reduction plan; and other risks and uncertainties identified in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, in Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, in Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, which may be detailed and modified or updated in other documents filed with the SEC from time to time, and are available at www.sec.gov and at www.novavax.com. You are encouraged to read these filings as they are made. We cannot guarantee future results, events, level of activity, performance, or achievement. Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate or materially different from actual results. Further, any forward-looking statement speaks only as of the date when it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Information in this Quarterly Report includes a financial measure that was not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which we refer to as adjusted cost of sales. We are presenting this non-GAAP financial measure to assist an understanding of our business and its performance. Adjusted cost of sales includes an estimate of standard manufacturing costs that were previously expensed to research and development prior to regulatory approvals for our COVID-19 Program that would otherwise have been capitalized to inventory. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP, and may not be comparable to the calculation of similar measures of other companies. Overview We are a biotechnology company that promotes improved health through the discovery, development, and commercialization of innovative vaccines to prevent serious infectious diseases. Our proprietary recombinant technology platform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticle vaccines designed to address global health needs. Our vaccine candidates are nanostructures of conformationally correct recombinant proteins that mimic those found on pathogens. This technology enables the immune system to recognize target proteins and develop protective immune responses. We believe that our vaccine technology may lead to the induction of a differentiated immune response that may be more efficacious than naturally occurring immunity or some other vaccine approaches. Our vaccine candidates also incorporate our proprietary saponin-based Matrix-M™ adjuvant to enhance the immune response, stimulate higher levels of functional antibodies, and induce a cellular immune response. We have developed an updated COVID-19 vaccine for the 2023-2024 vaccination season. In October 2023, the U.S. FDA granted emergency use authorization (“EUA”) for our updated vaccine for active immunization to prevent COVID-19. The updated vaccine is authorized as (1) a single dose in individuals 12 years and older who have been vaccinated with any COVID-19 vaccine at least 2 months after receipt of the last previous dose of COVID-19 vaccine, and (2) a series of 2 doses administered 3 weeks apart to individuals 12 years and older who were not previously vaccinated with any COVID-19 vaccine. Our updated vaccine is available within the U.S. at many major pharmacy retailers. Outside the U.S., in October 2023, we were granted approval by the European Commission (“EC”) for our updated vaccine. We are committed to meeting the full supply of our key target markets through their advanced purchase agreements (“APAs”). We continue to work closely with regulatory authorities for authorization of our updated vaccine globally. We previously developed a prototype COVID-19 vaccine, which has received full marketing authorization (“MA”), marketing approval, interim authorization, provisional approval, conditional marketing authorization (“CMA”), from multiple regulatory authorities in over 40 countries globally. We continue to seek full regulatory authorizations for our prototype vaccine, which we believe will facilitate authorization for our updated strains in the future. Additionally, we are also developing a stand-alone influenza vaccine candidate, high-dose COVID-19 vaccine candidate, and a CIC vaccine candidate. In addition to COVID-19 and seasonal influenza, our other areas of focus include providing Matrix-M™ adjuvant for collaborations, including in R21/Matrix-M™ adjuvant malaria vaccine, which recently 26 received authorization in several countries, as well as other preclinical vaccine research with our Matrix-M™ adjuvant, including a partnership with the Bill & Melinda Gates Medical Research Institute. We intend to focus the organization to align our investments and activities with our top priority of delivering our updated vaccine for the 2023-2024 vaccination season. To maximize our opportunities and mitigate the significant risks and uncertainties of the COVID-19 market, we have progressed our cost restructuring measures to reduce spend, extend our cash runway, and operate efficiently to seek to best position the Company to deliver longer-term growth. We discuss these cost restructuring strategies in greater detail in Note 2 to our consolidated financial statements in this Quarterly Report. Technology Overview We believe our recombinant nanoparticle vaccine technology, together with our proprietary Matrix-M™ adjuvant, is well suited for the development and commercialization of vaccine candidates targeting a broad scope of respiratory and other endemic and emerging infectious diseases. Recombinant Nanoparticle Vaccine Technology Once a target of interest has been identified, the genetic sequence encoding an antigen is selected for developing the vaccine construct. The genetic sequence may be optimized to enhance protein stability or confer resistance to degradation. This genetic construct is inserted into the baculovirus Spodoptera frugiperda (“Sf-/BV”) insect cell-expression system, which enables efficient, large-scale expression of the optimized protein. The Sf-/BV system produces protein-based antigens that are properly folded and modified—which can be critical for functional, protective immunity. Protein antigens are purified and organized around a polysorbate-based nanoparticle core in a configuration that resembles their native presentation. This results in a highly immunogenic nanoparticle that is ready to be formulated with Matrix-M™ adjuvant. Matrix-M™ Adjuvant Our proprietary Matrix-M™ adjuvant is a key differentiator within our platform. This adjuvant has enabled potent, well tolerated, and durable efficacy by stimulating the entry of antigen presenting cells (“APCs”) into the injection site and enhancing antigen presentation in local lymph nodes. This in turn activates APCs, T-cell and B-cell populations, and plasma cells, which promote the production of high affinity antibodies, an immune boosting response. This potent mechanism of action enables a lower dose of antigen to achieve the desired immune response, thereby contributing to increased vaccine supply and manufacturing capacity. These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile. We continue to evaluate commercial opportunities for the use of our Matrix-M™ adjuvant alongside vaccine antigens produced by other manufacturers. Matrix-M™ adjuvant is being evaluated in combination with several partner-led malaria vaccine candidates, including for R21/Matrix-M™ adjuvant, a malaria vaccine candidate created by the Jenner Institute, University of Oxford. The R21/Matrix-M™ adjuvant vaccine has been licensed to SIIPL for commercialization. Additionally, in May 2023, we entered into a 3-year agreement with the Bill & Melinda Gates Medical Research Institute to provide our Matrix-M™ adjuvant for use in preclinical vaccine research. In June 2023, we signed a material transfer agreement with SK bioscience Co., Ltd. (“SK”) for use of our Matrix-M™ adjuvant in preclinical vaccine experiments for shingles, influenza, and pan-COVID-19. Our adjuvant technology is also being used by commercial partners as a key component in veterinary vaccines against equine influenza and Strangles, as well as the manufacture of black-widow anti-venom. COVID-19 Vaccine Regulatory and Licensure In October 2023, we received EUA from the U.S. FDA for our updated vaccine, to prevent COVID-19 in individuals aged 12 and older. Our updated vaccine is marketed in the U.S. under the brand name Novavax COVID-19 Vaccine, Adjuvanted (2023-2024 Formula). In September 2023, the U.S. Centers for Disease Control and Prevention (“CDC”) Advisory Committee on Immunization Practices (“ACIP”) voted in favor of a recommendation for the use of 2023-2024 monovalent XBB containing COVID-19 vaccines authorized under EUA or approved BLA in individuals 6 months and older, which was adopted by the CDC Director. The U.S. FDA’s grant of EUA and CDC’s September 2023 recommendation makes our updated vaccine the only protein-based non-mRNA COVID-19 vaccine available in the U.S. The formulation for our updated vaccine aligns with global harmonized guidance from the U.S. FDA, EMA, and WHO recommendations for the 2023-2024 vaccination season. We continue to progress regulatory authorizations for our updated vaccine globally. In October 2023, we were granted approval by the EC for our updated vaccine in individuals aged 12 and older, which followed the positive opinion for approval from the Committee for Medicinal Products for Human Use of the EMA. We expect to meet the full supply commitment for 27 doses to European countries that requested it through APAs. We have received authorizations for our prototype COVID-19 vaccine in over 40 countries globally including from major regulatory agencies including the WHO, EMA, and MHRA. To date, we have received full MA, approval, interim authorization, provisional approval, CMA, and EUA for the adult population, aged 18 and older, the adolescent population, aged 12 to 17 years, and the pediatric population, aged 7 to 11 years in select territories. The regulatory authorizations for our prototype vaccine include primary series and both homologous and heterologous booster indications within specific countries. For the territories in which our vaccine has received regulatory authorizations, our prototype vaccine is marketed under the brand names (i) Nuvaxovid™ (SARS-CoV-2 rS Recombinant, adjuvanted), (ii) Covovax™ (manufacturing and commercialization by SIIPL), or (iii) Novavax COVID-19 Vaccine, Adjuvanted. In October 2023, for our prototype vaccine we received full marketing authorization in the UK from the MHRA in individuals aged 12 and older, full approval in Singapore from Singapore’s Health Sciences Authority in individuals aged 12 and older, full registration in Australia from Australia’s Therapeutic Goods Administration as a booster in individuals aged 12 and older, and authorization in the EU from EMA for use as a booster in adolescents aged 12 through 17 years. We believe these authorizations for our prototype vaccine enable a pathway for additional authorizations for our updated strains of our COVID-19 vaccine in the future. We are working to continue to expand our label for heterologous boosting in adults and adolescents, for primary and re-vaccination in younger children, and to achieve supportive policy recommendations enabling broad market access. We continue to work closely with governments, regulatory authorities, and non-governmental organizations in our commitment to facilitate global access to our COVID-19 vaccine. Clinical Pipeline Our clinical pipeline is comprised of vaccine candidates for infectious diseases, with our COVID-19 vaccines, our prototype vaccine (NVX-CoV2373) and our updated vaccine (NVX-CoV2601), as our lead products. Our prototype has received authorizations for both adult and adolescent populations globally. We advanced our prototype vaccine, through two pivotal Phase 3 clinical trials that demonstrated high efficacy against both the original COVID-19 strain and commonly circulating COVID-19 variants during the conduct of the trials, while maintaining a favorable safety profile. Our updated vaccine has received authorization from the U.S. FDA, and the EC. We advanced our updated vaccine through a Phase 3 strain-change trial and the EUA was based on non-clinical data presented in June 2023, at the U.S. Vaccines and Related Biological Products Advisory Committee's meeting. Beyond COVID-19, our clinical pipeline includes seasonal influenza and CIC vaccines, in addition to our Matrix-M™ adjuvant being used for collaboration in R21/Matrix-M™ adjuvant malaria vaccine. The pipeline chart below summarizes the core clinical development programs that we are focusing on in the near-term. (1) Authorized in select geographies under trade names Novavax COVID-19 Vaccine, Adjuvanted; Covovax™; and Nuvaxovid™. (2) Authorized in the U.S. under trade name, Novavax COVID-19 Vaccine, Adjuvanted (2023-2024 Formula); Ongoing post-authorization Phase 3 strain-change trial. (3) Authorized in Ghana, Nigeria, and Burkina Faso; Commercialized by SIIPL; Recommended by the WHO. Coronavirus Vaccine Clinical Development We continue to evaluate vaccine effectiveness and safety through ongoing and planned booster studies, as well as 28 collect real-world evidence for our updated vaccine. While these studies were not required ahead of our EUA receipt from the U.S., they will generate data to support continued use of our vaccine in subsequent seasons. We expect to leverage these studies to pursue additional regulatory authorizations of our COVID-19 vaccine for primary, re-vaccination, and pediatric indications globally. Phase 3 Strain-Change and Re-vaccination Studies Study 311 Part 2: In August 2023, we announced topline results that achieved all three co-primary endpoints demonstrating immunologic superiority for the Omicron BA.5 variant of a bivalent prototype and Omicron BA.5 vaccine compared to our prototype vaccine (NVX-CoV2373). This study design was developed in consultation with regulatory agencies to support the strain-change request for our updated vaccine (NVX-CoV2601) and demonstrated that our protein-based vaccine can be successfully adapted to new variant strains. Study 312: In May 2023, we completed enrollment of 147 adults aged 18 and older who received 2 or 3 doses of mRNA and boosted with our prototype vaccine (NVX-CoV2373). The trial compared the prototype vaccine (NVX-CoV2373) booster on top of mRNA primed individuals compared to those primed and boosted with our prototype vaccine (NVX-CoV2373). Topline results are expected in the fourth quarter of 2023. This trial is intended to support the use of our vaccine as a second or subsequent re-vaccination. Study 313: In September 2023, we fully enrolled 332 adults aged 18 and older in Part 1 of the study to evaluate the immunogenicity and safety of our updated vaccine (NVX-CoV2601) in previously mRNA vaccinated individuals. Part 1 topline results are expected in the fourth quarter of 2023. Part 2 of the study is in the process of enrollment and will aim to evaluate the immunogenicity of our updated vaccine (NVX-CoV2601) in previously unvaccinated adults aged 18 and older. This study is intended to support sBLA for future variant vaccine products. Study 314: In September 2023, we fully enrolled 401 adolescents aged 12 to 17 years who were previously vaccinated with mRNA vaccines to evaluate the immunogenicity of boosting with our updated vaccine (NVX-CoV2601) and with a bivalent format vaccine containing our updated vaccine (NVX-CoV2373 + NVX-CoV2601). This data is intended to support adolescent heterologous label expansion in some territories with topline results expected in the first quarter of 2024. Phase 2b/3 Pediatric Hummingbird™ Study In August 2023, we announced topline results from our Phase 2b/3 Hummingbird™ trial that met its primary endpoints in children aged 6 through 11 years demonstrating immunologic effectiveness. We remain on track to submit data for this cohort to the U.S. FDA in the first quarter of 2024. This ongoing trial is evaluating the safety, effectiveness (immunogenicity), and efficacy of two doses of our prototype vaccine (NVX-CoV2373), followed by a booster 6 months after the primary vaccination series. The trial includes three age de-escalation cohorts of 1,200 children each. The next cohort aged 2 through 5 years is fully enrolled, with topline results expected in the fourth quarter of 2023. The last cohort aged 6 to 23 months is fully enrolled and topline results are expected in first quarter of 2024. COVID-Influenza Combination and Stand-alone Influenza Program We continue to make strategic investments to prepare our CIC vaccine for advanced development. We have selected the CIC dose formulation and we remain on track to initiate the next study in the second half of 2024. Pending regulatory concurrence, we have designed this study to evaluate immunogenicity endpoints for accelerated approval while simultaneously expanding our safety database. We have updated the study’s designation to a Phase 3 study. While our focus remains on the combination product, our development plans will maintain optionality to advance our stand-alone influenza vaccine, creating a pathway to potentially seek licensure. For our stand-alone influenza vaccine we have generated positive data through our previous Phase 2 trial and continue to believe this asset may be attractive from a pandemic preparedness perspective. The neutralization responses were more than double seen with Fluzone® HD for the A strains and similar performance may be expected for A/H5N1 pandemic strains. In May 2023, we announced preliminary topline data from our Phase 2 trial for CIC, stand-alone influenza and high-dose COVID-19 vaccine candidates. All three vaccine candidates contain our Matrix-M™ adjuvant, showed preliminary robust immune responses, reassuring safety profiles, and reactogenicity that was comparable to the licensed influenza vaccine comparator arms. 29 High-dose COVID-19 Vaccine Study Study 205: In October 2023, we initiated a Phase 2 trial to evaluate our high-dose COVID-19 vaccine for annual vaccination in older adults. The trial will compare immunogenicity levels of 5 micrograms of our prototype vaccine (NVX-CoV2373) against 5 micrograms, 35 micrograms, and 50 micrograms of our updated vaccine (NVX-CoV2601) that are matched with different levels of adjuvant. Data from this trial is intended to potentially support further development of a higher dose formulation for older adults, similar to that of influenza vaccines. R21/Matrix-M™ Adjuvant Malaria Vaccine Our partner-led malaria candidates present strong opportunities for future development. An ongoing Phase 3 clinical trial is being conducted for R21/Matrix-M™ adjuvant malaria vaccine, developed by our partner, the Jenner Institute, University of Oxford and manufactured by SIIPL, which is formulated with our Matrix-M™ adjuvant. We have an agreement with SIIPL related to its manufacture of R21/Matrix-M™ adjuvant malaria vaccine under which SIIPL purchases our Matrix-M™ adjuvant for use in development activities at cost and for commercial purposes at a tiered commercial supply price, and pays a royalty in the single- to low- double digit range based on vaccine sales for a period of 15 years after the first commercial sale of the vaccine in each country. In October 2023, the WHO announced its recommendation of R21/Matrix-M™ adjuvant malaria vaccine to prevent malaria in children following advice from its Strategic Advisory Group of Experts and Malaria Policy Advisory Group. The WHO recommended that the R21/Matrix-M™ adjuvant malaria vaccine be administered in a 4-dose schedule from five months of age. This recommendation is a required step on the pathway to the WHO’s prequalification (“PQ”) of the vaccine. PQ designation is necessary for United Nations agencies and partners, for example UNICEF and Gavi, to procure the vaccine for eligible countries. This is the first recommendation from WHO to support the use of a vaccine containing our Matrix-M™ adjuvant in children as young as five months of age and it is based on the results from the Phase 3 clinical trial. In September 2023, results from the Phase 3 clinical trial conducted in four African countries with 4,800 children aged 36 months to five years were published in a preprint manuscript in The Lancet. The preprint manuscript reported that R21/Matrix-M™ adjuvant malaria vaccine is well-tolerated and offers high-level efficacy against clinical malaria in African children at sites of both seasonal and perennial transmission. In July 2023, R21/Matrix-M™ adjuvant malaria vaccine received authorization in Burkina Faso and in April 2023, received authorizations in Ghana and Nigeria. Business Highlights Third Quarter 2023 and Recent Highlights U.S. Market: Novavax received EUA from the U.S. FDA in October for its updated vaccine and is executing its commercial strategy to maximize access for consumers who want a protein-based non-mRNA vaccine option. • Expect U.S. 2023-2024 season COVID-19 vaccine demand of between 30 and 50 million doses, with potential for significant November and December vaccinations given current trends and later start as compared to 2022 • Secured broad access to the Company’s updated vaccine through major pharmacies, clinics and government programs ◦ Novavax’s vaccine is available at approximately 14,000 pharmacy locations, including Costco, CVS Pharmacy, Giant, Publix, Rite Aid and Stop & Shop Global Markets: Received approval in Europe for the Company’s updated vaccine in individuals aged 12 and older • Advancing regulatory filings against existing APAs for Australia, New Zealand, Singapore and Taiwan Clinical development and technology platform updates • Expect to initiate a pivotal Phase 3 trial for CIC vaccine candidate in the second half of 2024, with potential for accelerated approval and launch as early as 2026 • Advanced partnerships with Matrix-M™ adjuvant technology ◦ R21/Matrix-M™ adjuvant vaccine received recommendation from the WHO; launch expected in 2024 30 Novavax is prepared to initiate a new cost reduction program to reduce 2024 expenses by over $300 million. Intend to further reshape the size and scope of global business operations beyond previously announced 2024 targets to align with the COVID-19 market opportunity. • Anticipate reducing 2024 Research & development expenses and Selling, general, & administrative expenses by over $200 million compared to prior targets to reflect $750 million or lower spend for 2024, representing a greater than 50% reduction compared to 2022 • In addition, anticipate reducing supply network costs by over $100 million as we continue to rationalize our manufacturing footprint Sales of Common Stock In August 2023, we entered into an At Market Issuance Sales Agreement (the “August 2023 Sales Agreement”), which allows us to issue and sell up to $500 million in gross proceeds of shares of our common stock, and terminated our then-existing At Market Issuance Sales agreement entered in June 2021 (the "June 2021 Sales Agreement"). During the three months ended September 30, 2023, we sold 17.8 million shares of our common stock under our August 2023 Sales Agreement resulting in net proceeds of approximately $143 million. During the nine months ended September 30, 2023, we sold 25.7 million shares of our common stock under our June 2021 and August 2023 Sales Agreement resulting in net proceeds of approximately $211 million. As of September 30, 2023, the remaining balance available under the August 2023 Sales Agreement was approximately $354 million. During the nine months ended September 30, 2022, we sold 2.2 million shares of our common stock resulting in net proceeds of approximately $179 million, under our June 2021 Sales Agreement. There was no sale of shares of common stock recorded during the three months ended September 30, 2022. In August 2023, we entered into a Securities Subscription Agreement (the “Subscription Agreement”) with SK, pursuant to which we agreed to sell and issue to SK, in a private placement (the “Private Placement”), 6.5 million shares of the Company’s common stock, par value $0.01 per share (the “Shares”) at a price of $13.00 per share for aggregate gross proceeds to us of approximately $84.5 million. We recognized the Shares at the settlement date fair value of $46.5 million (see Note 4 to our consolidated financial statements in this Quarterly Report). The closing of the Private Placement occurred on August 10, 2023. Critical Accounting Policies and Use of Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements (unaudited) and the accompanying notes, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our critical accounting policies and estimates are included under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC. Recent Accounting Pronouncements Not Yet Adopted See “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (under the caption “ Recent Accounting Pronouncements ”). Results of Operations The following is a discussion of the historical financial condition and results of our operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report. 31 Three Months Ended September 30, 2023 and 2022 Revenue Three Months Ended September 30, 2023 2022 Change Revenue (in thousands): Product sales $ 2,231 $ 626,091 $ (623,860) Grants 164,922 106,273 58,649 Royalties and other 19,833 2,213 17,620 Total revenue $ 186,986 $ 734,577 $ (547,591) Revenue for the three months ended September 30, 2023 was $187.0 million as compared to $734.6 million for the same period in 2022, a decrease of $547.6 million. Revenue for the three months ended September 30, 2023 and 2022 was primarily comprised of revenue from product sales of COVID-19 Vaccine and services performed under our U.S. government agreement with Advanced Technology International (“USG Agreement”), the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed. The decrease in revenue is primarily due to a decreased quantity of dose sales of COVID-19 Vaccine during the three months ended September 30, 2023 as compared to the same period in 2022, partially offset by increased support activities under the USG Agreement, a $43.8 million increase to cumulative revenue under the USG Agreement, and additional Royalties and other revenue related to sales-based royalties and sales of Matrix-M™ adjuvant. Product sales Product sales for the three months ended September 30, 2023 were $2.2 million as compared to $626.1 million during the three months ended September 30, 2022. Our product sales related to sales of COVID-19 Vaccine under our APA agreements. The geographic distribution of product sales was as follows: Three Months Ended September 30, 2023 2022 Change North America $ 2,231 $ 129,718 $ (127,487) Europe — 347,005 (347,005) Rest of the world — 149,368 (149,368) Total product sales $ 2,231 $ 626,091 $ (623,860) Grants Grant revenue during the three months ended September 30, 2023 was $164.9 million as compared to $106.3 million during the same period in 2022, an increase of $58.6 million. Grant revenue comprised revenue for services performed under our USG Agreement. The increase was primarily due to increased support activities and achievement of certain milestones under the USG Agreement during the three months ended September 30, 2023. Royalties and other Royalties and other includes royalty milestone payments, sales-based royalties, and Matrix-M™ adjuvant sales. Royalties and other revenue during the three months ended September 30, 2023 was $19.8 million as compared to $2.2 million during the same period in 2022, an increase of $17.6 million. The increase was primarily due to increased revenue related to a Matrix-M™ adjuvant sales and sales-based royalties. 32 Expenses Three Months Ended September 30, 2023 2022 Change Expenses (in thousands): Cost of sales $ 98,929 $ 434,593 $ (335,664) Research and development 106,229 304,297 (198,068) Selling, general, and administrative 107,460 122,876 (15,416) Total expenses $ 312,618 $ 861,766 $ (549,148) Cost of Sales Cost of sales was $98.9 million for the three months ended September 30, 2023, including expenses of $81.6 million related to excess, obsolete, or expired inventory and losses on certain firm purchase commitments, $14.3 million related to unutilized manufacturing capacity, and a credit of $21.5 million related to certain negotiated reductions to previously recognized firm purchase commitments. Cost of sales was $434.6 million for the three months ended September 30, 2022, including expense of $249.0 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments. Prior to receiving regulatory approval, we expensed manufacturing costs as research and development expenses. After receiving regulatory approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. However, based on our expectations for future manufacturing costs to produce our vaccine product and components inventory, we estimate at September 30, 2023, we had approximately $24.3 million of salable commercial inventory that was expensed prior to approval. We expect to utilize the majority of our reduced-cost inventory through 2024. If inventory sold for the three months ended September 30, 2023 was valued at expected standard cost, including expenses related to excess and obsolete inventory, adjusted cost of sales for the period would have been approximately $103.2 million, an adjustment of $4.3 million as compared to cost of sales recognized. If inventory sold for the three months ended September 30, 2022 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $444.0 million, an adjustment of $9.4 million. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer pricing mix or standard costs. Research and Development Expenses Research and development expenses were $106.2 million for the three months ended September 30, 2023 as compared to $304.3 million for the three months ended September 30, 2022, a decrease of $198.1 million. The decrease was primarily due to a reduction in overall expenditures relating to development activities on coronavirus vaccines, including our COVID-19 Program, and CIC, as summarized in the table below (in thousands): Three Months Ended September 30, 2023 2022 Coronavirus vaccines $ 41,263 $ 208,004 Influenza vaccine 662 3,011 Other vaccine development programs 91 843 Total direct external research and development expense 42,016 211,858 Employee expenses 33,957 45,150 Stock-based compensation expense 10,022 16,107 Facility expenses 12,360 16,770 Other expenses 7,874 14,412 Total research and development expenses $ 106,229 $ 304,297 Research and development expenses for coronavirus vaccines for the three months ended September 30, 2023 and 2022 decreased from $208.0 million to $41.3 million primarily as a result of a reduction in manufacturing and support costs due, in part, to a reduction in our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, COVID-19 Vaccine, including embedded lease costs, under manufacturing supply agreements with 33 Contract Manufacturing Organizations (“CMOs”) and contract manufacturing and development organizations (“CDMOs”). The decrease was also due to a benefit of $57.7 million for the three months ended September 30, 2023 resulting from our settlement agreement and Private Placement with SK (see Note 4 to our consolidated financial statements in this Quarterly Report). The decrease was partially offset by a benefit $80.5 million for the three months ended September 30, 2022 related to previously accelerated manufacturing costs for leases that we determined were embedded in manufacturing supply agreements with CMOs and CDMOs. Selling, General, and Administrative Expenses Selling, general, and administrative expenses were $107.5 million for the three months ended September 30, 2023 as compared to $122.9 million for the same period in 2022, a decrease of $15.4 million. The decrease in selling, general, and administrative expenses is primarily due to certain cost containment measures to reduce our operating spend. For the remainder of 2023, we expect a reduction in our annual combined research and development, and selling, general, and administrative spend as a result of our Restructuring Plan announced during the three months ended June 30, 2023. Other Income (Expense) Three Months Ended September 30, 2023 2022 Change Other income (expense): Interest expense $ (2,859) $ (4,169) $ 1,310 Other income (expense) (2,982) (34,783) 31,801 Total other income (expense), net $ (5,841) $ (38,952) $ 33,111 Total other expense, net was $5.8 million for the three months ended September 30, 2023 as compared to a total other expense, net of $39.0 million for the same period in 2022. The decrease in other expense, net is due to the favorable impact in 2023 as compared to 2022 of exchange rates on foreign currency denominated balances, including an intercompany loan with Novavax CZ, and an increase in interest income due to higher interest rates. Income Tax Expense During the three months ended September 30, 2023, we recognized an income tax benefit of $0.7 million related to federal, state, and foreign income taxes. During the three months ended September 30, 2022, we recognized an income tax expense of $2.5 million related to federal, state, and foreign income taxes. Net Income (Loss) Three Months Ended September 30, 2023 2022 Change Net Loss (in thousands, except per share information): Net loss $ (130,776) $ (168,613) $ 37,837 Net loss per share, basic and diluted $ (1.26) $ (2.15) $ 0.89 Weighted average shares outstanding, basic and diluted 103,429 78,274 25,155 Net loss for the three months ended September 30, 2023 was $130.8 million, or $1.26 per share, as compared to net loss of $168.6 million, or $2.15 per share, for the same period in 2022. The decrease in net loss during the three months ended September 30, 2023, was primarily due to a decrease in excess, obsolete, or expired inventory and losses on firm purchase commitments, research and development expenses, and selling, general and administrative expenses as a result of the implementation of our Restructuring Plan, partially offset by a decrease in product sales. The increase in weighted average shares outstanding for the three months ended September 30, 2023 was primarily a result of sales of our common stock. 34 Nine Months Ended September 30, 2023 and 2022 Revenue Nine Months Ended September 30, 2023 2022 Change Revenue (in thousands): Product sales $ 279,937 $ 1,267,174 $ (987,237) Grants 389,380 313,348 76,032 Royalties and other 23,046 43,951 (20,905) Total revenue $ 692,363 $ 1,624,473 $ (932,110) Revenue for the nine months ended September 30, 2023 was $692.4 million as compared to $1.6 billion for the same period in 2022, a decrease of $932.1 million. Revenue for the nine months ended September 30, 2023 was primarily comprised of revenue from product sales of COVID-19 Vaccine and services performed under our USG Agreement. The decrease in revenue was primarily due to a decrease in quantity of doses sold of COVID-19 Vaccine during the nine months ended September 30, 2023 as compared to the same period in 2022. Product sales Product sales for the nine months ended September 30, 2023 were $279.9 million as compared to $1.3 billion during the nine months ended September 30, 2022. Our product sales related to sales of COVID-19 Vaccine under our APA agreements. The geographic distribution of product sales was as follows: Nine Months Ended September 30, 2023 2022 Change North America $ 2,231 $ 194,480 $ (192,249) Europe 59,322 760,750 (701,428) Rest of the world 218,384 311,944 (93,560) Total product sales $ 279,937 $ 1,267,174 $ (987,237) Grants Grant revenue during the nine months ended September 30, 2023 was $389.4 million as compared to $313.3 million during the same period in 2022, an increase of $76.0 million. Grant revenue comprised revenue for services performed under our USG Agreement. The increase was primarily due to increased support activities under the USG Agreement during the nine months ended September 30, 2023. Royalties and other Royalties and other includes royalty milestone payments, sales-based royalties, and Matrix-M™ adjuvant sales. Royalties and other revenue during the nine months ended September 30, 2023 was $23.0 million as compared to $44.0 million during the same period in 2022, a decrease of $20.9 million. The decrease was primarily due to decreased revenue related to milestone payments. 35 Expenses Nine Months Ended September 30, 2023 2022 Change Expenses (in thousands): Cost of sales $ 188,792 $ 720,874 $ (532,082) Research and development 572,805 977,428 (404,623) Selling, general, and administrative 313,709 327,028 (13,319) Total expenses $ 1,075,306 $ 2,025,330 $ (950,024) Cost of Sales Cost of sales was $188.8 million for the nine months ended September 30, 2023, including expense of $121.6 million related to excess, obsolete, or expired inventory and losses on certain firm purchase commitments, $30.1 million related to unutilized manufacturing capacity, and a credit of $40.3 million related to negotiated reductions to certain previously recognized firm purchase commitments. Cost of sales was $720.9 million for the nine months ended September 30, 2022, including expense of $504.3 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments. Prior to receiving approval, we expensed manufacturing costs as research and development expenses. After receiving approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. However, based on our expectations for future manufacturing costs to produce our vaccine product and components inventory, we estimate at September 30, 2023 we had approximately $24.3 million of commercial inventory that was expensed prior to approval. We expect to utilize the majority of our reduced-cost inventory through 2024. If inventory sold for the nine months ended September 30, 2023 was valued at expected standard cost, including expenses related to excess and obsolete inventory, adjusted cost of sales for the period would have been approximately $224.0 million, an adjustment of $35.2 million as compared to cost of sales recognized. If inventory sold for the nine months ended September 30, 2022 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $883.5 million, an adjustment of $162.6 million. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer mix or standard costs. Research and Development Expenses Research and development expenses decreased to $572.8 million for the nine months ended September 30, 2023 from $977.4 million for the same period in 2022, a decrease of $404.6 million. The decrease was primarily due to a reduction in overall expenditures relating to development activities on coronavirus vaccines, including our COVID-19 Program, and CIC, as summarized in the table below (in thousands): Nine Months Ended September 30, 2023 2022 Coronavirus vaccines $ 321,132 $ 697,952 Influenza vaccine 1,929 6,581 Other vaccine development programs 857 1,156 Total direct external research and development expense 323,918 705,689 Employee expenses 133,502 132,069 Stock-based compensation expense 33,826 52,692 Facility expenses 45,920 40,842 Other expenses 35,639 46,136 Total research and development expenses $ 572,805 $ 977,428 36 Research and development expenses for coronavirus vaccines for the nine months ended September 30, 2023 and 2022 decreased from $698.0 million to $321.1 million primarily as a result of a reduction in manufacturing and support costs due, in part, to a reduction in our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, COVID-19 Vaccine, including under manufacturing supply agreements with CMO and CDMO, and a reduction in clinical study costs and the commercialization of internal manufacturing capabilities. The decrease was also due to a benefit of $57.7 million for the nine months ended September 30, 2023 resulting from our settlement agreement and Private Placement with SK (see Note 4 to our consolidated financial statements in this Quarterly Report). The decrease was partially offset by a benefit of $31.8 million and $147.8 million for the nine months ended September 30, 2023 and 2022, respectively, related to previously accelerated manufacturing costs for leases that we determined were embedded in manufacturing supply agreements with CMOs and CDMOs. Selling, General, and Administrative Expenses Selling, general, and administrative expenses decreased to $313.7 million for the nine months ended September 30, 2023 from $327.0 million for the same period in 2022, an decrease of $13.3 million. The decrease in selling, general, and administrative expenses is primarily due to cost containment measures to reduce our operating spend including a decrease in professional fees and marketing costs in support of our COVID-19 Program, partially offset by restructuring expenses. Other Income (Expense) Nine Months Ended September 30, 2023 2022 Change Other income (expense) (in thousands): Interest expense $ (10,299) $ (15,279) $ 4,980 Other income (expense) 26,912 (53,002) 79,914 Total other income (expense), net $ 16,613 $ (68,281) $ 84,894 We had total other income, net of $16.6 million for the nine months ended September 30, 2023 as compared to total other expense, net of $68.3 million for the same period in 2022, an increase of $84.9 million. During the nine months ended September 30, 2023, other income, net increased due to the favorable impact in 2023 as compared to 2022 of exchange rates on foreign currency denominated balances, including an intercompany loan with Novavax CZ, and an increase in investment income due to higher interest rates. Income Tax Expense During the nine months ended September 30, 2023 and 2022, we recognized $0.3 million and $6.6 million, respectively, of income tax expense related to federal, state and foreign income taxes and foreign withholding tax on royalties. Net Loss Nine Months Ended September 30, 2023 2022 Change Net Loss (in thousands, except per share information): Net loss $ (366,673) $ (475,690) $ 109,017 Net loss per share, basic and diluted $ (3.94) $ (6.13) $ 2.19 Weighted average shares outstanding, basic and diluted 93,046 77,631 15,415 Net loss for the nine months ended September 30, 2023 was $366.7 million, or $3.94 per share, as compared to $475.7 million, or $6.13 per share, for the same period in 2022. The decrease in net loss during the nine months ended September 30, 2023 was primarily due to the decline in cost of sales and research and development expenses associated with our COVID-19 Program, partially offset by a decrease in revenue from product sales. The increase in weighted average shares outstanding for the nine months ended September 30, 2023 is primarily a result of sales of our common stock. 37 Liquidity Matters and Capital Resources Our future capital requirements depend on numerous factors including, but not limited to, revenue from our product sales and royalties under licensing arrangements with our strategic partners; funding and repayments under our grant agreements; our projected activities related to the manufacturing and commercial support of our COVID-19 Program, including significant commitments under various CMO, and CDMO agreements; the progress of preclinical studies and clinical trials; the time and costs involved in obtaining regulatory approvals; the costs of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights; and other manufacturing, sales, and distribution costs. We plan to continue developing other vaccines and product candidates, such as our influenza vaccine candidate and potential combination vaccines candidates, which are in various stages of development. We have entered into supply agreements, sometimes referred to as APAs, with Gavi, the Vaccine Alliance (“Gavi”); the EC; and various countries globally. We also have grant and license agreements. As of September 30, 2023, the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties under the license agreements, our advance purchase agreement with Gavi (the “Gavi APA”) and the reduction in doses related to the Amended and Restated UK Supply Agreement (as defined below), was approximately $2 billion, of which $801.0 million is included in Deferred revenue in our consolidated balance sheet. Failure to meet regulatory milestones, timely obtain supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under our APAs may require us to refund portions of upfront or other payments or result in reduced future payments, which could adversely impact our ability to realize revenue from our unsatisfied performance obligations. The timing to fulfill performance obligations related to grant agreements will depend on the results of our research and development activities, including clinical trials. The timing to fulfill performance obligations related to supply agreements will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype NVX-CoV2373 vaccine under certain of our APAs. The supply agreements typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment, and are applied to billings upon delivery of COVID-19 Vaccine. Such upfront payments generally become non-refundable upon our achievement of certain development, regulatory, and commercial milestones. On October 3, 2023, our updated vaccine received EUA from the U.S. FDA for active immunization to prevent COVID-19 in individuals aged 12 and older. Immediately upon authorization, our updated vaccine has also been included in the recommendations issued by the CDC on September 12, 2023. Doses became available within the U.S. at many major pharmacy retailers, following the Center for Biologics Evaluation and Research release of vaccine batches. Pursuant to the Fujifilm Settlement Agreement (see Note 4 to our consolidated financial statements in this Quarterly Report), we agreed to pay up to $185 million (the “Settlement Payment”) to Fujifilm in connection with the cancellation of manufacturing activity at FDBT under the Fujifilm CSA, of which (i) $47.8 million, constituting the initial reservation fee under the 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, which began on March 31, 2023. Under the Fujifilm Settlement Agreement, the final two quarterly installments due to Fujifilm were subject to Fujifilm’s obligation to use commercially reasonable efforts to mitigate losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT under the CSA. Any replacement revenue achieved by Fujifilm’s mitigation efforts between July 1, 2023 and December 31, 2023 would offset the final two settlement payments owed by the Company. On October 2, 2023, we sent a notice of breach under the Fujifilm Settlement Agreement to Fujifilm setting forth the Company’s position that Fujifilm had not used commercially reasonable efforts to mitigate losses. We withheld the $34.3 million installment payment due to Fujifilm on September 30, 2023, pending resolution of the issues identified in the notice of breach. We paid the first two installments of $68.6 million during the nine months ended September 30, 2023, and the remaining balance of $68.6 million is reflected in Accrued expenses in our consolidated balance sheet. On October 30, 2023, FDBT filed a demand for arbitration with Judicial Arbitration and Mediation Services (“JAMS”) seeking payment of the third quarter installment of the Settlement Payment. In August 2023, we entered into a Settlement Agreement and General Release (the “Settlement Agreement”) with SK regarding the mutual release by the parties of all claims arising from or in relation to certain statements of work (“SOWs”) under the Development and Supply Agreement entered into in August 2020 and the Collaboration and License Agreement, entered into in February 2021 as amended in December 2021 and July 2022 in connection with the cessation of all drug substance and drug product manufacturing activity at SK for supply to us. Pursuant to the Settlement Agreement, we agreed to pay $149.8 million, of which (i) $130.4 million was paid in August 2023 and (ii) the remaining balance is to be paid on or before November 15, 2023. Under the Settlement Agreement, we also agreed with SK to a wind down plan with respect to the 38 remaining products, materials and equipment under the SOWs (see Note 4 to our consolidated financial statements in this Quarterly Report). In August 2023, we entered into a Securities Subscription Agreement (the “Subscription Agreement”) with SK, pursuant to which we agreed to sell and issue to SK, in a private placement (the “Private Placement”), 6.5 million shares of our common stock, par value $0.01 per share at a price of $13.00 per share for aggregate gross proceeds to us of approximately $84.5 million. The closing of the Private Placement occurred on August 10, 2023 (see Note 4 to our consolidated financial statements in this Quarterly Report). In addition, we continue to assess our manufacturing needs and modify our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, COVID-19 Vaccine, and in doing so recognize that significant costs may be incurred. We currently depend exclusively on SIIPL and SLS for co-formulation and filling (other than in Europe), and PCI Pharma Services for finishing COVID-19 Vaccine in Europe and any delays or disruptions in these suppliers’ operations could prevent or delay the delivery of customer orders. We have an APA with the Commonwealth of Australia for the purchase of doses of COVID-19 Vaccine (the “Australia APA”). In April 2023, we amended the Australia APA to reduce the number of doses to be delivered with a commensurate increase in the per-dose price, such that the total contract value of the Australia APA is maintained with doses to be delivered through 2024. In May 2023, we extended a credit for certain doses delivered in 2022 to Australia that qualified for replacement under the Australia APA. This credit is the result of a single lot sold to the Australian government that upon pre-planned 6-month stability testing was found to have fallen below the defined specifications and the lot therefore was removed from the market. The credit will be applied against the future sale of doses to Australia. In July 2023, we amended the Australia APA to provide for replacement doses and to extend the delivery schedule through 2025. We have an APA with His Majesty the King in Right of Canada as represented by the Minister of Public Works and Government Services, as successor in interest to Her Majesty the Queen in Right of Canada, as represented by the Minister of Public Works and Government Services (the “Canadian government”), for the purchase of doses of COVID-19 Vaccine (the “Canada APA”). In April 2023, we amended the Canada APA to forfeit certain doses originally scheduled for delivery in 2022 for a payment of $100.4 million received in the second quarter of 2023. In June 2023, we entered into an additional amendment (the “June 2023 Amendment”) to the Canada APA. Pursuant to the June 2023 Amendment, the parties revised the Canadian government’s previous commitment by (i) forfeiting certain doses of COVID-19 Vaccine previously scheduled for delivery, (ii) reducing the amount of doses of COVID-19 Vaccine due for delivery, (iii) revising the delivery schedule for the remaining doses of COVID-19 Vaccine to be delivered, and (iv) requiring use of the Biologics Manufacturing Centre (“BMC”) Inc. to produce bulk antigen for doses in 2024 and 2025. In connection with the forfeiture of doses of COVID-19 Vaccine, the Canadian government agreed to pay a total payment amount of $349.6 million to the Company in two equal installments in 2023, which total amount equals the remaining balance owed by the Canadian government with respect to such forfeited vaccine doses. The first installment was payable upon execution of the June 2023 Amendment and the second installment is contingent and payable upon our delivery of vaccine doses in the second half of 2023. The first installment of $174.8 million was received from the Canadian government in July 2023. If the Company fails to deliver COVID-19 vaccine doses to the Canadian government in the fourth quarter of 2023, the second installment of $174.8 million will be terminated and not be payable to the Company. The Canadian government may terminate the Canada APA, as amended, if we fail to achieve regulatory approval for use of BMC for COVID-19 Vaccine production on or before December 31, 2024. The June 2023 Amendment maintained the total contract value of the original Canada APA. Pursuant to the June 2023 Amendment, we and the Canadian government will endeavor to expand our previously agreed in-country commitment to Canada and to partner to provide health, economic, and future pandemic preparedness benefits to Canada, which value may be provided through a number of activities, including without limitation, capital investments, the performance of activities or services, or the provision of technology or intellectual property licenses. Further, the parties will endeavor to enter into a memorandum of understanding (the “MOU”) to illustrate our ability to deliver such benefits over a 15-year period with an aggregate value of not less than 100% of the amount remaining to be paid under the June 2023 Amendment and ultimately received by us. As of September 30, 2023, we are in the process of negotiating the MOU. We agreed to hold $20.0 million in escrow for the benefit of the Canadian government, which amount is the sole recourse available to the Canadian government in the event of non-performance under the MOU. 39 In July 2022, we 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 prototype vaccine and made an upfront payment to us. 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 prototype vaccine, with the number of Conditional Doses contingent on, and subject to reduction based on, our 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 prototype vaccine, we would have to repay up to $225 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 our prototype vaccine, 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, our 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 for us to repay $112.5 million related to the upfront payment previously received from the Authority under the Original UK Supply Agreement. In April 2023, we repaid the $112.5 million related to the November 30, 2022 triggering event. If we are unable to timely achieve a supportive recommendation from the JCVI by November 30, 2023, a reduction in the number of Conditional Doses from 7.5 million doses to zero will be triggered and we may be required to repay an additional $112.5 million in 2024. Under the terms of the Gavi APA, we received an upfront payment of $350.0 million from Gavi in 2021 and an additional payment of $350.0 million in 2022 related to our achieving an emergency use license for our prototype vaccine by the WHO (the “Advance Payment Amount”). On November 18, 2022, we 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 prototype vaccine from us as required by the Gavi APA. As of November 18, 2022, we 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. Since December 31, 2022, the remaining Gavi Advance Payment Amount, which is $696.4 million as of September 30, 2023, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, has been classified within Other current liabilities in our 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. We filed our Answer and Counterclaims on March 2, 2023. On April 5, 2023, Gavi filed its Reply to our Counterclaims. The arbitration hearing is scheduled for July 2024, with a written decision to follow. Arbitration is inherently uncertain, and while we believe that we are entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that we will be required to refund all or a portion of the remaining Advance Payment Amount from Gavi. In February 2023, the execution of Modification 17 to the USG Agreement included provisions requiring that the payment of $60.0 million of consideration associated with manufacturing work now be contingent upon meeting certain milestones, including the delivery of up to 1.5 million doses of prototype vaccine and development and regulatory milestones related to commercial readiness, expansion of the EUA and development of multiple vial presentations. We expect to substantially meet milestones and other performance requirements under the USG Agreement by December 31, 2023. Our funding agreements currently include funding from the Coalition for Epidemic Preparedness Innovations (“CEPI”) in the form of one or more forgivable no interest term loans (“CEPI Forgivable Loan Funding”). Payments received under the CEPI Forgivable Loan Funding are only repayable if COVID-19 Vaccine 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 our 40 Gavi APA prior to its termination), and such sales cover our costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI. The timing and amount of any loan repayments is currently uncertain. As of September 30, 2023, we had $666.4 million in cash and cash equivalents and restricted cash as compared to $1.3 billion as of December 31, 2022. We funded our operations for the nine months ended September 30, 2023 primarily with cash and cash equivalents, revenue from product sales, together with revenue under the USG Agreement that support our COVID-19 Vaccine development activities and the sale of our common stock under our June 2021 and August 2023 Sales Agreements. In May 2023, we announced our plan to restructure our global footprint to reduce our planned expenditures. We anticipate our future operations to be funded primarily by revenue from product sales, revenue under our USG Agreement, our cash and cash equivalents, and other potential funding sources including equity financings, which may include at-the-market offerings under our August 2023 Sales Agreement, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements. The following table summarizes cash flows for the nine months ended September 30, 2023 and 2022 (in thousands): Nine Months Ended September 30, 2023 2022 Change Net cash provided by (used in): Operating activities $ (537,186) $ (298,121) $ (239,065) Investing activities (49,728) (70,921) 21,193 Financing activities (95,923) 133,548 (229,471) Effect on exchange rate on cash, cash equivalents, and restricted cash 355 257 98 Net decrease in cash, cash equivalents, and restricted cash (682,482) (235,237) (447,245) Cash, cash equivalents, and restricted cash at beginning of period 1,348,845 1,528,259 (179,414) Cash, cash equivalents, and restricted cash at end of period $ 666,363 $ 1,293,022 $ (626,659) Net cash used in operating activities was $537.2 million for the nine months ended September 30, 2023, as compared to $298.1 million for the same period in 2022. The increase in cash used in operating activities is primarily due to a decrease in upfront payments received under our APAs, partially offset by the timing of payments to vendors. Net cash used in investing activities was $49.7 million for the nine months ended September 30, 2023, as compared to $70.9 million for the same period in 2022. The decrease in cash used in investing activities is primarily due to lower expenditures on equipment and leasehold improvements. Net cash used in financing activities was $95.9 million for the nine months ended September 30, 2023, as compared to net cash provided by finance activities of $133.5 million for the same period in 2022. The increase in cash used in financing activities in 2023 as compared with 2022, is primarily due to the $325 million repayment of our 3.75% Convertible notes during 2023, partially offset by an increase in net proceeds from the sales of our common stock under our June 2021 and August 2023 Sales Agreements and the Private Placement with SK. Going Concern The accompanying unaudited consolidated financial statements in Part I, Item 1, “Consolidated Financial Statements” of this Quarterly Report have been prepared assuming that we will continue as a going concern within one year after the date that the financial statements are issued. At September 30, 2023, we had $666.4 million in cash and cash equivalents and restricted cash. During the nine months ended September 30, 2023, we incurred a net loss of $366.7 million and had net cash flows used in operating activities of $537.2 million. In accordance with Accounting Standards Codification 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that these unaudited consolidated financial statements are issued. While our current cash flow forecast for the one-year going concern look forward period estimates that we have sufficient capital available to fund operations, this forecast is subject to significant uncertainty, including as it relates to revenue for the next twelve months, our ability to execute on certain cost-cutting initiatives and a pending matter subject to arbitration proceedings. Our revenue projections depend on our ability to successfully manufacture, distribute, or market our COVID-19 Vaccine for the 2023-2024 41 vaccination season, which is inherently uncertain and subject to a number of risks, including our ability to obtain regulatory authorization, the incidence of COVID-19 during the 2023-2024 vaccination season, our ability to timely deliver doses and commercial adoption and market acceptance of our updated vaccine. Further, failure to meet regulatory milestones, timely obtain supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under the Company’s advance purchase agreements may require the Company to refund portions of upfront and other payments or result in reduced future payments which could adversely affect our ability to continue as a going concern. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration regarding an alleged material breach by us of the Gavi APA. The outcome of that arbitration is inherently uncertain, and it is possible we could be required to refund all or a portion of the remaining Advance Payment Amount of $696.4 million as of September 30, 2023. See Note 3 and Note 14 to our consolidated financial statements in this Quarterly Report for additional information related to the arbitration with Gavi. Management believes that, given the significance of these uncertainties, substantial doubt exists regarding our ability to continue as a going concern through one year from the date that these financial statements are issued. In May 2023, we announced our Restructuring Plan, which includes a more focused investment in our COVID-19 Program, reduction to our pipeline spending, the continued rationalization of our manufacturing network, a reduction to our global workforce, as well as the consolidation of facilities, and infrastructure. The workforce reduction plan included an approximately 25% reduction in the Company’s global workforce, comprised of an approximately 20% reduction in full-time Company employees and the remainder comprised of contractors and consultants. We have decided to progress CIC toward late-stage development and, as such, we are assessing the impact on our workforce requirements and ability to meet our future needs. We incurred one time restructuring expenses of $14.6 million during the nine months ended September 30, 2023. See Note 15 to our unaudited consolidated financial statements in Part I for more details on restructuring. We expect the full annual impact of the cost savings to be realized in 2024 and approximately half of the annual impact to be realized in 2023 due to timing of implementing the measures, and the applicable laws, regulations, and other factors in the jurisdictions in which we operate. Our ability to fund our operations is dependent upon revenue related to vaccine sales for our products and product candidates, if such product candidates receive marketing authorization and are successfully commercialized, and in particular our 2023-2024 vaccination season, which is inherently uncertain and subject to a number of risks, including the incidence of COVID-19 during the 2023-2024 vaccination season, regulatory authorization, ability to timely deliver doses and achieve commercial adoption and market acceptance of our updated vaccine; the resolution of certain matters, including whether, when, and how the dispute with Gavi is resolved; and management’s plans, which include completing cost reductions associated with our global restructuring and cost reduction plan. Our plans may include raising additional capital through a combination of equity and debt financings, collaborations, strategic alliances, asset sales and marketing, distribution, or licensing arrangements. New financings may not be available to us on commercially acceptable terms, or at all. Also, any collaborations, strategic alliances, asset sales and marketing, distribution, or licensing arrangements may require us to give up some or all of our 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 our COVID-19 Program and our other vaccine candidates, including an influenza vaccine candidate and a CIC vaccine candidate, remains uncertain. Also, the impact of our more focused investment in our COVID-19 Program, reduction to our pipeline spending, continued rationalization of our manufacturing network, reduction to our global workforce, and consolidation of our facilities and infrastructure remain uncertain. If we are unable to obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate some or all of our operations, or further downsize our organization, any of which may have a material adverse effect on our business, financial condition, results of operations, and ability to operate as a going concern.