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Item 9A. Controls and Procedures

2024-02-28 compared with 2023-02-28 · 610 added, 432 removed, 1100 unchanged (49% of the section changed)

2 unchanged sentences

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

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.

“Disclosure controls and 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”).

15 unchanged sentences

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.

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 year ended December 31, 2023 and has concluded that there was no change that occurred during the year ended December 31, 2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

Adoption of 10b5-1 Trading Plans by our Officers and Directors

During our fiscal quarter ended December 31, 2023, one of our officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) entered into a contract, instruction or written plan for the purchase or sale of our securities that is intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information.

We refer to this contract, instruction, and written plan as a “Rule 10b5-1 trading plan.” We describe the material terms of this Rule 10b5-1 trading plan below.

Filip Dubovsky, MD, President, Research & Development

On December 12, 2023 , Filip Dubovsky, MD , our President, Research & Development , entered into a Rule 10b5-1 trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) and provides that Dr.

Dubovsky, acting through a broker, may sell up to an aggregate of 13,365 shares of our common stock, subject to adjustments for stock splits, stock combinations, stock dividends and other similar changes to our common stock.

Sales of shares under the plan may only occur from March 15, 2024 to June 14, 2024.

The plan is scheduled to terminate on June 14, 2024, subject to earlier termination upon the sale of all shares subject to the plan or the expiration of all sale orders under the plan, upon termination by Dr.

Dubovsky or the broker, or as otherwise provided in the plan.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

26 unchanged sentences

8,560,187 $39.08 7,412,669

Equity compensation plans not approved by security holders N/A N/A N/A

Equity compensation plans not approved by security holders (Inducement Plan) (2)

786,790 $10.67 213,210

9,346,977 $36.80 7,625,879

(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.

(2) Includes our 2023 Inducement Plan only

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

16 unchanged sentences

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.

2 unchanged sentences

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.

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.

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 April 4, 202 3 (File No.

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.

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.

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.

4.2 Indenture (including form of Notes) with respect to the Company's 5.00% Convertible Senior Notes due 2027, dated as of December 20, 2022, 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.

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.

4 unchanged sentences

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.

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.

10.5†† 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.

2013 Employee Stock Purchase Plan (Incorporated by reference to Appendix D 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.

10.6†† Amended and Restated Novavax, Inc.

2015 Stock Incentive Plan (Incorporated by reference to Appendix B of the Company’s Definitive Proxy Statement filed on April 28, 202 3 in connection with the Annual Meeting held on July 11 , 202 3 (File No.

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.

10.8†† Form of Incentive Stock Option Award Agreement granted under the Amended and Restated Novavax, I n c.

Form of Non-Statutory Stock Option Award Agreement (Non-Employee Director) granted under the Company’s Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 8, 2023 (File No.

Form of Global Non-Statutory Stock Option Award Agreement granted under the Company’s Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 8, 2023 (File No.

Form of Incentive Stock Option Award Agreement granted under the Amended and Restated Novavax, Inc.

2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No.

5 unchanged sentences

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.

10.12†† Form of Restricted Stock Unit Agreement granted under the Amended and Restated Novavax, I nc .

Form of Restricted Stock Unit Agreement granted under the Amended and Restated Novavax, Inc.

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.

Form of Restricted Stock Unit Award Agreement (Non-Employee Director) granted under the Company’s Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 8, 2023 (File No.

Form of Global Restricted Stock Unit Award Agreement granted under the Company’s Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 8, 2023 (File No.

Form of Stock Appreciation Right Award Agreement granted under the Amended and Restated Novavax, Inc.

8 unchanged sentences

Employment Agreement between the Company and John C.

Jacobs, dated as of January 5, 2023

Jacobs, dated as of January 5, 2023 (Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K, filed on February 28, 2023 (File No.

Employment Agreement between the Company and Stanley C.

1 unchanged sentence

Consulting and Advisory Agreement between the Company and Stanley C.

Erck, dated as of January 5, 2023

Erck, dated as of January 5, 2023 (Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed on February 28, 2023 (File No.

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.

Consulting and Advisory Agreement between the Company and Dr.

Glenn, dated as of March 20, 2023 (Incorporated by reference to Exhibit 10.

4 to the Company’s Q ua rterly Report on Form 10- Q filed on Ma y 9 , 20 23 (File No.

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.

10.23†† E mployment Agreement between the Company and John J.

Consulting and Advisory Agreement between the Company and John A.

Herrmann , dated as of November 17 , 2023

Employment 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.

2 unchanged sentences

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.

Kelly dated J u l y 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.

Offer letter to Mark Casey dated N o vember 10 , 202 3

Employment Agreement between the Company and Mark Casey dated November 10 , 202 3

Offer Letter to Elaine O’Hara dated February 4, 2023

Employment Agreement between the Company and Elaine O ’ Hara dated February 4, 2023

Offer Letter to Filip Dubovsky, M.D.

dat ed May 26, 2020

Employment Agreement between the Company and Filip Dubovsky, M.D.

dated May 26, 2 020

Form of Amendment to Employment Agreement, dated June 17, 2021, between the Company and each of Stanley C.

1 unchanged sentence

Glenn, John J.

Trizzino and John A.

Trizzino , Filip Dubovsky, 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.

8 unchanged sentences

10.46 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.

51, LLC and the Company, dated June 22, 2021 (Incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022 (File No.

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.

6 unchanged sentences

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.

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.

Fir st 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.

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.

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.

Change Order No.

4 unchanged sentences

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.

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.

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 quarter ended September 30, 2022, filed on November 9, 2022 (File No.

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.

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.

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.

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.

Advanced 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.

Amendment to Advanced 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.

Amendment No.

2 to Advanced Purchase Agreement, dated as of April 6, 2022, between the Company and the Commonwealth of Australia as Represented by the Department of Health (Incorporated by reference to Exhibit 10.

6 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

Amendment No.

3 to Advanced Purchase Agreement, dated as of April 5, 2023, between the Company and the Commonwealth of Australia as Represented by the Department of Health (Incorporated by reference to Exhibit 10.

7 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

Amendment No.

4 to Advanced Purchase Agreement, dated as of July 5, 2023, between the Company and the Commonwealth of Australia as Represented by the Department of Health (Incorporated by reference to Exhibit 10.

8 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

Advanced 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.

Amendment No.

1 to Advanced Purchase Agreement, effective as of January 26, 2022, between the Company and 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 (Incorporated by reference to Exhibit 10.

2 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

Amendment No.

2 to Advanced Purchase Agreement, effective as of October 18, 2022, between the Company and 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 (Incorporated by reference to Exhibit 10.

3 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

Amendment No.

3 to Advanced Purchase Agreement, effective as of April 25, 2023, between the Company and 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 (Incorporated by reference to Exhibit 10.

4 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

Amendment No.

4 to Advanced Purchase Agreement, effective as of June 30, 2023, between the Company and 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 (Incorporated by reference to Exhibit 10.

5 to the Company’s Quarterly Report on Form 10-Q filed on August, 8 202 3 (File No.

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.

5 unchanged sentences

Modification No.

03 to Base Agreement between the Company and Advanced Technology International, dated as of November 30, 2022

03 to Base Agreement between the Company and Advanced Technology International, dated as of November 30, 2022 (Incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K, filed on February 28, 2023 (File No.

Undefinitized Project Agreement No.

48 unchanged sentences

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.

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.

Modification No.

17 to Undefinitized Project Agreement No.

1, dated February 6, 2023, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May , 9 202 3 (File No.

Modification No.

18 to Undefinitized Project Agreement No.

1, dated May 25, 2023, between the Company and Advanced Technology International (Incorporated by reference to Exhibit 10.

1 to the Company’s Quarterly Report on Form 10-Q filed on August , 8 202 3 (File No.

Series A Convertible Preferred Subscription Agreement, dated June 15, 2020, between the Company and RA Capital Healthcare Fund, L.P.

4 unchanged sentences

(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.

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.

Settlement Agreement and General Release, dated August 8, 2023, between the Company and SK bioscience Co., Ltd.

(Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended Septembe r 30, 2023, filed on November , 9 202 3 (File No.

Securities Subscription Agreement, dated as of August 8, 2023, between the Company and SK bioscience Co., Ltd.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 8, 2023 (File No.

10.101^*

Termination and Settlement Agreement, dated as of February 16, 2024, between the Company and Gavi Alliance

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 March 1, 2022 (File No.

21* Subsidiaries of the Company

6 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

97* Novavax, Inc.

Amended and Restated Recoupment Policy

101 The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Extensible Business Reporting Language (XBRL):

42 unchanged sentences

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.

As discussed in Note 2 to the financial statements, the Company has suffered recurring losses, has negative working capital, and an accumulated deficit 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.

12 unchanged sentences

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.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 matters do 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 matters below, providing a separate opinion on the critical audit matter or on the account or disclosures to which they relate.

Inventory Excess and Obsolescence Reserve

3 unchanged sentences

For the year ended December 31, 2023, inventory write-downs were $72.4 million and losses on firm purchase commitments were $73.5 million.

In addition, for the year ended December 31, 2023, the Company recorded recoveries on firm purchase commitments of $40.2 million related primarily to negotiated reductions to previously recognized firm purchase commitments.

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.

2 unchanged sentences

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.

We evaluated and 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.

Product Return Reserve Estimate- U.S.

Commercial Sales

Description of the Matter As of December 31, 2023, the Company recorded a liability for product returns related to US commercial sales of $82.5 million.

As disclosed in Note 2, the Company offers U.S.

commercial customers the right to return its product.

These return rights include the right of wholesale distributors to return unsold and expired doses and indirect customers the right to return any partial or unused vials upon expiry.

The Company estimates variable consideration resulting from these product returns based on quantitative and qualitative data from various internal and external sources.

Auditing management’s estimate of product returns was complex and judgmental given the Company’s limited history of US commercial sales, and management considers the level of inventory in the distribution channel, projected market demand, utilization data, returns claims received, and product shelf life.

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 product return reserve estimation process for U.S.

commercial sales, including management’s review of the level of inventory in the distribution channel, as well as inputs and assumptions used to develop the estimate of the product returns reserve.

Our substantive audit procedures included, among others, testing the level of product in the channel held by a sample of wholesale distributors at December 31, 2023.

For indirect customers, we obtained and reviewed the Company’s estimated channel mix, and compared relevant inputs to underlying actual sales data.

In addition, we assessed management’s estimate of projected market demand for the product through the expiration dates, by analyzing available internal and third party utilization data for the product for the current vaccination season, and we also assessed management’s estimate of total U.S.

commercial market size for the season by analyzing available third party data.

We also evaluated the sensitivities of changes in projected demand on the product return reserve estimate recorded.

/s/ Ernst & Young LLP

47 unchanged sentences

Loss before income tax expense

( 543,031 ) ( 653,647 ) ( 1,714,536 )

Income tax expense

( 2,031 ) ( 4,292 ) ( 29,215 )

Net loss $ ( 545,062 ) $ ( 657,939 ) $ ( 1,743,751 )

29 unchanged sentences

Total assets $ 1,797,490 $ 2,258,679

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

14 unchanged sentences

no shares issued and outstanding at December 31, 2023 and 2022

Stockholders’ equity (deficit):

Stockholders’ deficit:

Common stock, $ 0.01 par value, 600,000,000 shares authorized at December 31, 2023 and 2022;

4 unchanged sentences

( 92,267 ) ( 90,659 )

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

Accumulated other comprehensive income (loss)

2,722 ( 6,377 )

Total stockholders’ deficit

( 716,927 ) ( 634,078 )

Total liabilities and stockholders’ deficit

$ 1,797,490 $ 2,258,679

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

11 unchanged sentences

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

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

Conversion of preferred stock 4,388,850 44 199,778 — — — 199,822

Stock-based compensation — — 183,626 — — — 183,626

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9,672,398 97 249,133 — — — 249,230

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

Foreign currency translation adjustment — — — — — ( 5,024 ) ( 5,024 )

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Provision for excess and obsolete inventory 72,197 447,597 —

Impairment of long-lived assets 10,081 — —

Other items, net ( 7,042 ) ( 21,903 ) ( 7,641 )

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Internal-use software ( 5,035 ) ( 3,929 ) ( 2,985 )

Acquisition of Novavax CZ, net of cash acquired — — ( 165,516 )

Purchases of marketable securities — — ( 2,167 )

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Financing Activities:

Net proceeds from sale of preferred stock

Net proceeds from sales of common stock 360,243 249,230 564,859

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Payments of costs related to issuance of 2027 Convertible notes

( 3,591 ) ( 5,258 ) —

Net proceeds from the exercise of stock-based awards 159 ( 639 ) 24,761

Repayment of 2023 Convertible notes ( 325,000 ) — —

Finance lease payments ( 27,345 ) ( 93,595 ) ( 127,907 )

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Effect of exchange rate on cash, cash equivalents, and restricted cash 3,272 4,520 ( 5,292 )

Net increase in cash, cash equivalents, and restricted cash ( 179,414 ) 879,521 566,558

Net (decrease) increase in cash, cash equivalents, and restricted cash

( 765,035 ) ( 179,414 ) 879,521

Cash, cash equivalents, and restricted cash at beginning of year 1,348,845 1,528,259 648,738

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization

Note 1 – Organization & Business

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.

(“Novavax,” and together with its wholly owned subsidiaries, the “Company”) is a biotechnology company that promotes improved health by discovering, developing, and commercializing innovative vaccines to prevent serious infectious diseases.

Novavax offers a differentiated vaccine platform that combines a recombinant protein approach, innovative nanoparticle technology and patented Matrix-M™ adjuvant to enhance the immune response.

Novavax currently has one commercial program, for vaccines to prevent COVID-19, which includes Nuvaxovid™ prototype COVID-19 vaccine ("NVX-CoV2373,” or “prototype vaccine”) and Nuvaxovid™ updated COVID-19 vaccine (“NVX-CoV2601,” or “updated vaccine”) (collectively, “COVID-19 Vaccine”).

Local regulatory authorities have also specified nomenclature for the prototype and updated vaccines within their territories (e.g., “Novavax COVID-19 Vaccine, Adjuvanted” and “Novavax COVID-19, Adjuvanted (2023-2024 Formula)”, respectively, for the U.S.).

The Company’s partner, Serum Institute of India Pvt.

(“SIIPL”), markets NVX-CoV2373 as “Covovax™.”

Beginning in 2022, the Company received approval, interim authorization, provisional approval, conditional marketing authorization, and emergency use authorization (“EUA”) from multiple regulatory authorities globally for its prototype vaccine for both adult and adolescent populations as a primary series and for both homologous and heterologous booster indications in select territories.

In October 2023, the U.S.

Food and Drug Administration (“U.S.

FDA”) amended the EUA for its prototype vaccine to include its updated vaccine.

The amended EUA authorizes use of the Company’s updated vaccine in individuals 12 years and older.

In October 2023, the European Commission (“EC”) granted approval for the Company’s updated vaccine for active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals aged 12 and older.

Currently, the Company significantly depends on its supply agreement with SIIPL and its subsidiary, Serum Life Sciences Limited (“SLS”), for co-formulation, filling and finishing (other than in Europe) and on its service agreement with PCI Pharma Services for finishing in Europe.

Novavax is advancing development of other vaccine candidates, including its COVID19-Influenza Combination (“CIC”) vaccine candidate and additional vaccine candidates.

The Company’s COVID-19 Vaccine and its other vaccine candidates incorporate the Company’s proprietary Matrix-M™ adjuvant to enhance the immune response and stimulate higher levels of functional antibodies and induce a cellular immune response.

Note 2 – Summary of Significant Accounting Policies

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Liquidity and Going Concern

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).

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.

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 and contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainty described below.

As of December 31, 2023, the Company had $ 568.5 million in cash and cash equivalents and had a working capital deficiency.

In January 2024, pursuant to the June 2023 Amendment to the advance purchase agreement between the Company and the Canadian government (the “Canada APA”), the Company received the second installment of $ 174.8 million from the Canadian government that was contingent and payable upon the Company’s delivery of vaccine doses (see Note 3).

During the year ended December 31, 2023, the Company incurred a net loss of $ 545.1 million and had net cash flows used in operating activities of $ 714.0 million.

In accordance with Accounting Standards Codification (“ASC”) Topic 205-40 , Presentation of Financial Statements - Going Concern , the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these consolidated financial

statements are issued.

The Company’s revenue projections depend on its ability to successfully develop, manufacture, distribute and market its updated vaccine for the 2024-2025 vaccination season, which is inherently uncertain and subject to a number of risks, including the Company’s ability to obtain regulatory authorizations, introduce a single-dose vial or pre-filled syringe product presentation for the U.S.

commercial and certain other markets, the incidence of COVID-19 during the 2024-2025 vaccination season, the Company’s ability to timely deliver doses and achieve commercial adoption and market acceptance of its updated vaccine.

Failure to meet regulatory milestones or achieve product volume or delivery timing obligations under the Company’s advance purchase agreements (“APAs”) may require the Company to refund portions of upfront and other payments or result in reduced future payments which would adversely affect the Company’s ability to continue as a going concern.

Management believes that, given the history of recurring losses, negative working capital and accumulated deficit, conditions or events exist that raise 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.

Management’s plans to alleviate the conditions that exist include restructuring and cost reduction measures and successful execution of its commercial plans.

In May 2023, the Company announced a global restructuring and cost reduction plan (the “Restructuring Plan”), which includes a more focused investment in its COVID-19 Vaccine, reduction to its pipeline spending, the continued rationalization of its manufacturing network, a reduction to the Company’s global workforce, as well as the consolidation of facilities, and infrastructure.

In January 2024, as part of reducing combined research and development and selling, general and administrative expenses, the Company announced further reductions in its global workforce (the “2024 Cost Reduction Plan”) (see Note 18).

The Company intends to prioritize improvements to its long-term supply chain efficiency.

The Company expects the full annual impact of the Restructuring Plan to be realized in 2024 and the full annual impact of the 2024 Cost Reduction Plan to be realized in 2025 and approximately 85 % of the annual impact, excluding one-time charges, to be realized in 2024.

During the year ended December 31, 2023, the Company recorded a charge of $ 4.5 million related to one-time employee severance and benefit costs and recorded an impairment charge of $ 10.1 million related to the consolidation of facilities and infrastructure (see Note 17) and expects to record an additional charge of approximately $ 4 million to $ 7 million related to one-time employee severance and benefit costs, the majority of which is expected to be incurred in the first quarter of 2024.

Management’s plans may also include raising additional capital through a combination of equity and debt financing, collaborations, strategic alliances, asset sales, 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.

Also, any collaborations, strategic alliances, asset sales 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.

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 further 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.

Due to the uncertainties associated with management’s plans, there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that these financial statements are issued.

Use of Estimates

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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.

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At contract inception, the Company analyzes its revenue arrangements to determine the appropriate accounting under U.S.

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:

Currently, the Company’s revenue arrangements represent customer contracts within the scope of ASC Topic 606, Revenue from Contracts with Customers (“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;

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

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.

Product Sales - Advance Purchase Agreements

Product sales include sales associated with COVID-19 Vaccine supply agreements, sometimes referred to as APAs, with various international governments.

The Company recognizes revenue from product sales related to these APA’s 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.

The APAs typically contain terms that include upfront payments which are reflected in Deferred revenue.

The Company constrains the transaction price for APA’s until it is probable that a significant reversal in revenue recognized will not occur.

Specifically, if an APA includes a provision whereby the customer may request a discount, return, or refund, or includes a term that may have the effect of decreasing the price per dose of previously delivered shipments, revenue is constrained based on an estimate of the impact of the transaction price until it is probable that a significant reversal in revenue recognized will not occur.

Product Sales - U.S.

In the fourth quarter of 2023, the Company commenced sales of COVID-19 Vaccine to the U.S.

commercial market.

Product sales in the U.S.

are primarily made through large pharmaceutical wholesale distributors at the wholesale acquisition cost (“WAC”).

The Company recognizes revenue upon title transfer (which is typically at time of delivery), provided all other revenue recognition criteria have been met.

The transaction price includes estimates of variable consideration for which reserves are established that primarily result from invoice discounts for prompt payment, wholesale distributor fees, chargebacks, and product returns (collectively, “gross-to-net deductions”).

These estimates are based on the amounts earned or to be claimed for related sales and are classified as either reductions of gross accounts receivable or a current liability based on the nature of the estimate, the expected settlement method, and net position by individual customer.

Where appropriate, these estimates are based on factors such as industry data and forecasted customer buying and payment patterns, the Company’s experience, current contractual and statutory requirements, specific known market events, and trends.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

If actual results vary from estimates, the Company will adjust the estimates, which would affect product sales in the period such variances become known.

Gross-to-net deductions include the following:

• Wholesale distributor fees, discounts, and chargebacks:

The Company has arrangements under which indirect customers such as retailers, healthcare providers, and others receive discounts to the WAC.

The chargeback represents the difference between the WAC and this negotiated discounted price.

For distribution and related services, the Company incurs service fees to its wholesale distributors.

In addition, the Company typically offers wholesale distributor customers invoice discounts on product sales for prompt payments.

The Company estimates chargebacks, discounts, and fees it will owe and deducts these amounts from gross product sales at the time the revenue is recognized based on the contractual terms and the Company’s expectations regarding future customer behaviors.

• Product returns:

The Company offers U.S.

customers the right to return COVID-19 Vaccine.

These return rights include the right of wholesale distributors to return unsold and expired doses and the right of indirect customers to return any partial or unused vials upon expiry.

Estimated returns for COVID-19 Vaccine are determined considering levels of inventory in the distribution channel, projected market demand, utilization data, returns claims received, and product shelf life.

The estimated amount for product returns is deducted from gross product sales in the period the related product sales are recognized.

Fees payable to retailers, healthcare providers, and buying groups, including certain patient assistance programs, are deducted from gross product sales in the period the related product sales are recognized.

Grant revenue includes both revenue from government contracts and grants from organizations such as the Coalition for Epidemic Preparedness Innovations (“CEPI”).

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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 contracts and other arrangements to advance the clinical development and manufacturing of COVID-19 Vaccine.

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

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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.

Payments received under the CEPI Forgivable Loan Funding are only repayable if project vaccine, as defined under the CEPI funding agreement, manufactured by the contract manufacturing organization (“CMO”) network funded by CEPI is sold to one or more third parties (which could include sales credited under the Gavi Settlement Agreement), 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 .

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This is consistent with the Company’s policy of presenting such amounts as revenue.

In reaching this determination, the

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.

In reaching this determination, the 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.

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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.

The Company had advertising costs of $ 91.5 million, $ 84.0 million and $ 8.9 million during the years ended December 31, 2023, 2022 and 2021, respectively.

Stock-Based Compensation

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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.

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

Fair Value Measurements

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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.

As of December 31, 2023 and 2022, restricted cash balances (both current and non-current) consisted primarily of payments under the CEPI funding agreements and letter of credits.

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.

Gross-to-net deductions are classified as reductions of gross accounts receivable if settlement is expected to occur through a reduction in the amount paid to Novavax by its customer.

Account receivables are recorded net of any

allowance for credit losses.

The Company’s estimate for the allowance for credit losses, which has not been significant to date, is determined based on the credit risk of its customers based on historical loss experience, economic conditions, the aging of receivables, and customer-specific risks.

Concentration of Risk

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Government of Israel * * * * 21 %

Gavi, the Vaccine Alliance * * * * 77 %

government (1)

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*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.

(1) Including the USG Agreement (as defined in Note 3) and the U.S.

Department of Defense.

The Company currently depends significantly on one supplier for co-formulation, filling, and finishing of COVID-19 Vaccine.

The loss of this supplier could prevent or delay the Company’s delivery of customer orders.

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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.

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.

Property and Equipment

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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

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 expenses 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;

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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.

If such events or changes in circumstances occur, the Company assesses the recoverability of the long-lived assets (or asset group) by comparing their projected future undiscounted net cash flows over their remaining lives against their respective carrying amounts.

If the cash flows are not expected to be sufficient to recover the carrying amount of the assets (or asset group), they are written down to their estimated fair values.

Restructuring

The Company recognizes restructuring charges when such costs are incurred.

The Company’s restructuring charges consist of employee severance and other termination benefits related to the reduction of its workforce, the consolidation of facilities and infrastructure and other costs.

Termination benefits are expensed on the date the Company notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period.

Ongoing benefits are expensed when restructuring activities are probable and the benefit estimable.

See Note 17 for additional information on the severance and employee benefit costs for terminated employees and impairment of long-lived assets in connection with the Company’s Restructuring Plan and Note 18 for information on the expected severance and employee benefit costs as a result of the Company’s workforce reduction announced on January 31, 2024.

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.

The Company has determined that, because its only business is the development and commercialization of innovative vaccines, it operates as a single operating segment and has one reporting unit.

The one-step impairment test, which requires a comparison of the fair value of a reporting unit to its carrying value, including goodwill, is required to be applied to all reporting units including reporting units with zero or negative carrying value.

A reporting unit with a zero or negative carrying value likely will not have an impairment.

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.

As of December 31, 2023 and 2022, the Company had a negative carrying value and did not have any impairment of goodwill.

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

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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.

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.

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

Management has fully reserved the related deferred tax assets with a valuation allowance

in the current reporting period as it is more likely than not that the related benefit will not be realized.

Management has fully reserved the related deferred tax assets with a valuation allowance 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.

As of December 31, 2023, the Company's 2027 Notes (see Note 10) would have been convertible into approximately 14 million shares of the Company's common stock assuming the common stock price is equal to or greater than $ 12.50 .

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.

In addition, all stock options, SARs, and unvested RSUs are excluded from the computation as their effect is antidilutive.

Foreign Currency

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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).

The foreign currency translation adjustment balance included in accumulated other comprehensive income (loss) was $ 2.7 million of income and $ 6.4 million losses at December 31, 2023 and 2022, respectively.

The aggregate foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency were $ 7.9 million of gains, $ 2.5 million of losses, and $ 5.3 million of losses for the years ended December 31, 2023, 2022, and 2021, 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.

The Company manages its business as one operating segment, the development and commercialization of innovative vaccines.

The Company does not operate separate lines of business with respect to its vaccine or vaccine candidates.

Accordingly, the Company does not have separately reportable segments as defined by ASC Topic 280, Segment Reporting .

1 unchanged sentence

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):

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, Disclosure Improvements (“ASU 2023-06”), to clarify or improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB ASC with the SEC's regulations.

The Company is currently evaluating ASU 2023-06 to determine its impact on the Company's consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

The standard enhances transparency in income tax disclosures by requiring, on an annual basis, certain disaggregated information about a reporting entity’s effective tax rate reconciliation and income taxes paid.

The ASU also requires disaggregated disclosure related to pre-tax income (or loss) and income tax expense (or benefit) and eliminates certain disclosures related to the balance of an entity’s unrecognized tax benefit and the cumulative amount of certain temporary differences.

The ASU is effective for the Company beginning on January 1, 2025.

The Company is currently evaluating ASU 2023-09 to determine its impact on the Company's disclosures.

In June 2016, the FASB issued ASU 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.

1 unchanged sentence

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.

In August 2020, the FASB issued ASU No.

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

Accounting for Convertible

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

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

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

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

The Company adopted ASU 2020-06 on January 1, 2023, using a modified retrospective approach, and it 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.

The Company's accounts receivable, net, included $ 286.4 million and $ 53.8 million related to amounts that were billed to customers and $ 10.8 million and $ 28.6 million related to amounts which had not yet been billed to customers as of December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023 and 2022, changes in the Company's accounts receivables, deferred revenue, and allowance for doubtful accounts balances were as follows (in thousands):

9 unchanged sentences

Year ended December 31, 2022

— ( 13,835 ) — ( 13,835 )

Deferred revenue (2) :

3 unchanged sentences

1,595,472 46,908 ( 1,092,829 ) 549,551

(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.

(1) Bad debt expense was $ 13.8 million in the year ended 2022.

There was no bad debt expense in the year ended December 31, 2023 or 2021.

There was a $ 6.2 million reversal of a bad debt expense during the year ended December 31, 2023 due to the collection of a previously recognized allowance for doubtful accounts.

To estimate the allowance for doubtful accounts, the Company evaluates the credit risk related to its customers based on historical loss experience, economic conditions, the aging of receivables, and customer-specific risks.

(2) Deductions from Deferred revenue generally related to the recognition of revenue once performance obligations on a contract with a customer are met.

Amount is comprised of $ 241.3 million, $ 0.4 billion, and $ 1.4 billion current Deferred

revenue and $ 622.2 million, $ 179.4 million, and $ 172.5 million non-current Deferred revenue as of December 31, 2023, 2022, and 2021 respectively.

(3) In 2023, deductions from Deferred revenue included $ 151.1 million that was realized in Revenue and $ 112.5 million related to the Amended and Restated UK Supply Agreement (as described below), that was reclassified to Other current liabilities, as described below.

In 2022, deduction from Deferred revenue included $ 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) related to 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.

As of December 31, 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, the Gavi APA, and the reduction in doses related to the Amended and Restated SARS-CoV-2 Vaccine Supply Agreement, dated as of July 1, 2022 (as amended on September 26, 2022, the “Amended and Restated UK Supply Agreement”) between the Company and 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 the Original UK Supply Agreement, was approximately $ 2 billion of which $ 863.5 million was included in Deferred revenue.

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.

(“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

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 remaining unfilled performance obligations not related to 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 SIIPL, 1.1 billion doses of the prototype vaccine were to be made available to countries participating in the COVAX Facility.

The Company expected to manufacture and distribute 350 million doses of the prototype vaccine to countries participating under the COVAX Facility.

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

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.

Additionally, the Company could provide additional doses of prototype vaccine, 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 2022 related to the Company’s achieving an emergency use license for the Company’s prototype vaccine by the World Health Organization (“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 the Company’s prototype vaccine 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.

Gavi also contended that, based on its purported termination of the Gavi APA, it was 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, 2023 and 2022, the remaining Gavi Advance Payment was $ 696.4 million and $ 697.4 million, respectively, pending resolution of the dispute with Gavi related to the return of the remaining Advance Payment Amount, and was classified within 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.

The Company filed its Answer and Counterclaims on March 2, 2023.

On April 5, 2023, Gavi filed its Reply to the Company’s Counterclaims.

On February 16, 2024, the Company and Gavi entered into a Termination and Settlement Agreement (the “Gavi Settlement Agreement”) terminating the Gavi APA, settling the arbitration proceedings and releasing both parties of all claims arising from, under or otherwise in connection with the Gavi APA.

Pursuant to the Gavi Settlement Agreement, the Company is responsible for payment to Gavi of (i) an initial settlement payment of $ 75 million, which the Company paid on February 20,

2024, and (ii) deferred payments, in equal annual amounts of $ 80 million payable each calendar year through a deferred payment term ending December 31, 2028.

The deferred payments are due in variable quarterly installments beginning in the first quarter of 2024 and total $ 400 million during the deferred payment term.

Such deferred payments may be reduced through Gavi’s use of an annual vaccine credit equivalent to the unpaid balance of such deferred payments each year, which may be applied to qualifying sales of any of the Company’s vaccines for supply to certain low-income and lower-middle income countries.

The Company has the right to price the vaccines offered to such low-income and lower-middle income countries in its discretion, and, when utilized by Gavi, the Company will credit the actual price per vaccine paid against the applicable credit.

The Company intends to price vaccines offered via the tender process, consistent with its shared goal with Gavi to provide equitable access to those countries.

Also, pursuant to the Gavi Settlement Agreement, the Company granted Gavi an additional credit of up to $ 225 million that may be applied against qualifying sales of any of the Company’s vaccines for supply to such low-income and lower-middle income countries that exceed the $ 80 million deferred payment amount in any calendar year during the deferred payment term.

In addition, the Company and Gavi entered into a security agreement pursuant to which Novavax granted Gavi a security interest in accounts receivable from SIIPL under the SIIPL R21 Agreement (see Note 4), which will continue for the deferred payment term of the Gavi Settlement Agreement.

On February 22, 2024, the claims and counterclaims were dismissed with prejudice.

Product Revenue

Product revenue by the Company’s customer’s geographic location was as follows (in thousands):

December 31, 2022

December 31, 2023 December 31, 2022

North America

$ 29,959 194,480

Europe 268,361 823,542

Rest of the world

233,069 536,939

Total product revenue $ 531,389 $ 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.

In the fourth quarter of 2023, the Company commenced sales of COVID-19 Vaccine to the U.S.

commercial market, in addition to continuing sales to various international governments.

Product sales in the U.S.

are primarily made through large pharmaceutical wholesale distributors at the WAC.

Product sales in the U.S.

are recorded net of gross-to-net deductions, as described in Note 2.

During the year ended December 31, 2023, changes in the Company’s gross-to-net deductions balances were as follows (in thousands):

Wholesale Distributor Fees, Discounts, and Chargebacks

Product Returns

Balance as of December 31, 2022 $ — $ — $ —

Amounts charged against product sales

47,028 $ 84,688 $ 131,716

$ ( 25,956 ) $ ( 72 ) $ ( 26,028 )

Balance as of December 31, 2023 $ 21,072 $ 84,616 $ 105,688

As of December 31, 2023, $ 103.1 million of gross-to-net deductions were included in Accrued expenses and $ 2.6 million were included in Accounts receivable on the consolidated balance sheet.

The Company has an APA with the Commonwealth of Australia for the purchase of doses of COVID-19 Vaccine (the “Australia APA”).

In May 2023, the Company extended a credit for certain doses delivered and recognized within product revenue in 2022 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 and, during the year ended December 31, 2023, the Company recorded a reduction of $ 64.7 million in product sales, with a corresponding increase to Deferred revenue, non-current.

In July 2023, the Company amended the Australia APA to provide for replacement doses and to extend the delivery schedule through 2025.

As of February 2024, the Company had not yet received Therapeutic Goods Administration (“TGA”) authorization or delivered doses as contemplated in the July 2023

amendment and is in active discussions with the Australian government on both the TGA authorization and delivery of the doses previously scheduled for the fourth quarter of 2023.

In February 2024, the Company received notice from the Australian government purporting to cancel its order for such prototype vaccine doses.

The Company believes the cancellation was not proper under the amended Australia APA.

However, if such a cancellation were determined to be allowable, $ 6.0 million of the deferred revenue would become a credit towards future deliveries of doses and approximately $ 48 million of the contract value related to future deliverables would no longer be available.

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 prototype vaccine, 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.

Pursuant to the terms of the APA, the Company is prohibited from supplying prototype vaccine to any third party if such delivery would impede or limit the fulfillment of the Company’s obligations to the EC 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

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.

The APA expired in August 2023 and required that any open and outstanding orders from European Union member states be satisfied by February 2024.

Since August 2023, any additional doses have been managed by amending outstanding orders with deliveries made by February 2024.

The Company has 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, the Company amended the “Canada APA”, pursuant to which the Canadian government forfeited certain doses originally scheduled for delivery in 2022 for a payment of $ 100.4 million, which the Company received in the second quarter of 2023.

In June 2023, the Company entered into an additional amendment (the “June 2023 Amendment”) to the Canada APA.

Pursuant to the June 2023 Amendment, (i) the Canadian government forfeited certain doses of COVID-19 Vaccine previously scheduled for delivery and agreed to pay a total amount of $ 349.6 million to the Company in two equal installments, which total amount equaled the remaining balance owed by the Canadian government with respect to such forfeited vaccine doses, (ii) the amount of doses of COVID-19 Vaccine due for delivery was reduced, (iii) the delivery schedule for the remaining doses of COVID-19 Vaccine to be delivered was revised, and (iv) the parties agreed Novavax would use the Biologics Manufacturing Centre (“BMC”) Inc.

to produce bulk antigen for doses in 2024 and 2025.

The June 2023 Amendment maintained the total contract value of the original Canada APA.

The first Installment of $ 174.8 million was payable upon execution of the June 2023 Amendment and received by Novavax in July 2023, and the second installment of $ 174.8 million was contingent and payable upon the delivery of vaccine doses in the second half of 2023 and received by Novavax in January 2024.

The Canadian government may terminate the Canada APA, as amended, if the Company fails to receive regulatory approval for its COVID-19 Vaccine using bulk antigen produced at BMC on or before December 31, 2024.

The Company’s 2024 plans do not currently anticipate the submission for regulatory approval of its COVID-19 Vaccine using bulk antigen produced at BMC, and it plans to work with the Canadian government on an amendment that addresses possible alternatives, which may not be achievable.

As of December 31, 2023, $ 102.8 million was classified as short-term Deferred revenue and $ 485.3 million was classified as long-term Deferred revenue with respect to the Canadian APA in the Company’s consolidated balance sheet.

If the Canadian government terminates the Canada APA, $ 28.0 million of the deferred revenue would become refundable and approximately $ 224 million of the contract value related to future deliverables would no longer be available.

Pursuant to the June 2023 Amendment, Novavax and the Canadian government will endeavor to expand the previously agreed in-country commitment to Canada and to further 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 the Company’s 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 the Company.

As of December 31, 2023, discussions regarding the MOU were ongoing.

The Company agreed to hold, when received, $ 20.0 million of the second installment payment 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.

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 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 prototype vaccine, 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 did not purchase the Conditional Doses or the number of such Conditional Doses was reduced below 15 million doses of prototype vaccine, 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.

As of November 30, 2022, the JCVI had not made a supportive recommendation with respect to 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, 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 for the Company to repay $ 112.5 million related to the upfront payment previously received from the Authority under the Original UK Supply Agreement.

In April 2023, the Company repaid the $ 112.5 million related to the November 30, 2022 triggering event.

As of November 30, 2023, the JCVI had not made a supportive recommendation with respect to the prototype vaccine, thereby triggering a reduction in the number of Conditional Doses from 7.5 million doses to zero .

As of February 2024, the Company is in discussions with the Authority regarding the treatment of the remaining upfront payment previously received of $ 112.5 million, which is reflected in Other current liabilities.

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

4 unchanged sentences

— 1,925 21,683

— 135,445 223,158

Other grant revenue

— 2,628 12,806

Total grant revenue $ 427,323 $ 382,921 $ 948,709

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.

The Company’s U.S.

government agreement consists of a Project Agreement (the “Project Agreement”) and a Base Agreement with Advanced Technology International, 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 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 prototype vaccine, and to manufacture and deliver to the U.S.

government 100 million doses of the vaccine candidate.

2 unchanged sentences

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.

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

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.

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.

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.

As of December 31, 2023, the Company has recognized the full $ 1.8 billion funding under the USG Agreement in revenue.

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.

The agreement provided 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 to fund certain manufacturing activities and are not subject to restrictive or financial covenants.

As of December 31, 2023 and 2022, 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.

Payments received under the CEPI Forgivable Loan Funding are only repayable if project vaccine, as defined under the CEPI funding agreement, manufactured by the CMO network funded by CEPI is sold to one or more third parties (which could include sales credited under the Gavi Settlement Agreement), 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

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.

Royalties and other includes royalty milestone payments, sales-based royalties, and Matrix-M™ adjuvant sales.

During the year ended December 31, 2023, the Company recognized $ 8.5 million in revenue related to license fees, and $ 16.5 million in revenue related to a Matrix-M™ adjuvant sales.

During the year ended December 31, 2023, the Company did no t recognize revenue related to milestone payments.

During the year ended December 31, 2022, the Company recognized $ 9.0 million in revenue related to sales-based royalties, $ 20.0 million related to milestone payments, and $ 15.0 million in revenue related to a Matrix-M™ adjuvant sales.

During the year ended December 31, 2021, the Company recognized $ 178.6 million in revenue related to sales-based royalties and $ 20.0 million related to milestone payments.

Note 4 – Collaboration, License, and Supply Agreements

The Company previously granted SIIPL exclusive and non-exclusive licenses for the development, co-formulation, filling and finishing, registration, and commercialization of its prototype vaccine, its proprietary COVID-19 variant antigen candidate(s), and its CIC vaccine candidate.

SIIPL agreed to purchase the Company's Matrix-M™ adjuvant and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of the Company’s COVID-19 Vaccine in SIIPL’s licensed territory solely for use in the manufacture of COVID-19 Vaccine.

The Company and SIIPL equally split the revenue from SIIPL’s sale of COVID-19 Vaccine in its licensed territory, net of agreed costs.

The Company also has a supply agreement with SIIPL and SLS under which SIIPL and SLS supply the Company with prototype vaccine, its proprietary COVID-19 variant antigen candidate(s), and its CIC vaccine candidate 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 March 2020, the Company entered into an agreement with SIIPL that granted SIIPL a non-exclusive license for the use of Matrix-M™ adjuvant supplied by the Company to develop, manufacture, and commercialize R21/Matrix-M™ adjuvant (“SIIPL R21 Agreement”), a malaria vaccine created by the Jenner Institute, University of Oxford (“R21/Matrix-M™”).

In December 2023 received prequalification by the WHO.

Under the SIIPL R21 Agreement, SIIPL purchases the Company's 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.

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.

Under the agreement, Takeda purchases Matrix-M™ adjuvant from the Company to manufacture doses of COVID-19 Vaccine, and the Company is entitled to receive milestone and sales-based royalty 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 COVID-19 Vaccine.

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 its prototype vaccine.

In February 2023, MHLW canceled the remainder of doses under its agreement with Takeda.

As a result, it is uncertain whether the Company will receive future sales-based royalty payments from Takeda under the terms and conditions of their current collaboration and licensing agreement.

For the year ended December 31, 2023, the Company recognized $ 6.0 million of revenue as consideration for changes to certain terms of the license agreement which is included in Royalties and other revenue on the consolidated statements of operations.

For the year ended December 31, 2022, the Company recognized $ 20.0 million, upon the sale of prototype vaccine in Japan , which is included in Royalties and other revenue on the consolidated statements of operations.

Bill & Melinda Gates Medical Research Institute

In May 2023, the Company entered into a 3-year agreement with the Bill & Melinda Gates Medical Research Institute to provide the Company’s Matrix-M™ adjuvant for use in preclinical vaccine research.

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.

In February 2021, the Company entered into a Collaboration and License Agreement (“CLA”) with SK bioscience, Co., Ltd.

(“SK”) to manufacture and commercialize its prototype vaccine for sale to the government of South Korea.

The CLA was amended in December 2021 and July 2022 to include the sale of its prototype vaccine to Thailand and Vietnam and to supply the Company with the antigen component of prototype vaccine for use in the final drug product globally, including product to be distributed by the COVAX Facility.

Under the CLA, as amended, SK agreed to pay the Company a royalty on the sale of its prototype vaccine in the low to middle double-digit range.

The CLA was in addition to the Company's existing manufacturing arrangement with SK under a Development and Supply Agreement (“DSA”) entered into in August 2020.

In July 2022, the Company signed an additional agreement with SK for the technology transfer of the Company’s proprietary COVID-19 variant antigen materials so that SK can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants.

The companies also signed an agreement to manufacture and supply its prototype vaccine in a prefilled syringe.

In June 2023, the Company entered into a material transfer agreement with SK for the use by SK of the Company’s Matrix-M™ adjuvant in preclinical vaccine experiments for shingles, influenza, and pan-sarbecovirus vaccine.

In August 2023, the Company and SK entered into a Settlement Agreement and General Release (the “Settlement Agreement”) regarding mutual release by the parties of all claims arising from or in relation to statements of work (“SOWs”) canceled by the Company under the DSA and the CLA (collectively the “Business Agreements”), and other SOWs under the Business Agreements (collectively, the “Subject SOWs”), in each case, in connection with the cessation of all drug substance and drug product manufacturing activity at SK for supply to the Company.

Subject SOWs canceled by the Company under the Settlement Agreement included (i) Statement of Work No.

1 dated as of December 23, 2021 as amended to date under the CLA;

(ii) Statement of Work No.

5 dated as of July 18, 2022 under the DSA;

and (iii) Statement of Work No.

6 dated as of July 18, 2022, and as amended as of December 28, 2022 under the DSA.

Pursuant to the Settlement Agreement, the Company is responsible for payment of $ 149.8 million to SK in connection with the cancellation of manufacturing activity for the SOWs under the Business Agreements, of which (i) $ 130.4 million was paid in August 2023 and (ii) the remaining balance was paid in November 2023.

Under the Settlement Agreement, the Company and SK agreed to a wind down plan with respect to the remaining products, materials and equipment under the SOWs.

Under the Settlement Agreement, the Company and SK agreed to remove certain restrictions under the CLA that have been triggered by the launch of SK’s competing vaccine SKYCovione™ in the Republic of Korea.

In addition, the Company agreed to extend the term of an exclusive license to SK under the CLA for the exploitation of antigen and vaccine products

utilizing Company’s proprietary coronavirus vaccine antigens and Matrix-M adjuvant in certain territories.

The Company recorded $ 4.0 million to Deferred revenue related to the extended licenses granted to SK under the Settlement Agreement.

In August 2023, the Company also entered into a Securities Subscription Agreement (the “Subscription Agreement”) with SK, pursuant to which the Company 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 the Company of approximately $ 84.5 million.

The closing of the Private Placement occurred on August 10, 2023.

The fair value of the Company’s common stock on the date of closing, based on the quoted market price, was $ 46.5 million, which results in a premium paid by SK of approximately $ 38 million.

The Settlement Agreement and the Subscription Agreement were negotiated concurrently between the parties, and therefore were combined for accounting purposes and analyzed as a single arrangement.

As a result, the Company recorded the $ 46.5 million fair value of common stock issued to SK, based on the quoted market price on the date of close, as an equity transaction.

The remaining elements of the arrangement were deemed to relate to the settlement of the Company’s outstanding liabilities due to SK.

These elements consist primarily of the cash payable to SK of $ 149.8 million, offset by the premium paid on the common stock purchase by SK of $ 38.0 million, which resulted in a net gain upon derecognition of the liabilities due to SK of $ 79.2 million in connection with the settlement.

As a result, during the year ended December 31, 2023, the Company recorded this net gain of $ 79.2 million between research and development expense, for $ 57.7 million, and cost of sales, for $ 21.5 million, proportionally based on the where the underlying costs were originally recorded.

Other Supply Agreements

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(“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

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.

The Fujifilm MSA and Fujifilm CSA established the general terms and conditions applicable to Fujifilm’s manufacturing and supply activities related to prototype vaccine under the associated statements of work.

Pursuant to the Fujifilm Settlement Agreement, the Company agreed to pay up to $ 185.0 million (the “Settlement Payment”) to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the 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 was 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, the Company 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.

The Company withheld two installments of $ 34.3 million due to Fujifilm on September 30, 2023 and December 31, 2023, pending resolution of the issues identified in the notice of breach.

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.

As of December 31, 2023, the remaining payment of $ 68.6 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.

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, its COVID-19 Vaccine, and in doing so, recognizes that 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):

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

2023 2022 2021

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For the year ended December 31, 2023, inventory write-downs were $ 72.4 million and losses on firm purchase commitments were $ 73.5 million.

There were no inventory write-downs or losses on firm purchase commitments during 2021 or 2020.

reserves for write-downs are relieved when the inventory is disposed of through scrap or sale.

In addition, for the year ended December 31, 2023, the Company recorded recoveries on firm purchase commitments of $ 40.2 million related primarily to negotiated reductions to previously recognized firm purchase commitments.

Also, during the year ended December 31, 2023, the Company recorded an impairment charge of $ 6.1 million in Cost of sales related to an embedded lease agreement with a CMO for production capacity in excess of production needs.

For the year ended December 31, 2022, inventory write-downs and losses on firm purchase commitments were $ 447.6 million and $ 155.9 million respectively.

There were no inventory write-downs or losses on firm purchase commitments during 2021.

Inventory 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):

December 31, 2022

Year Ended December 31,

Balance at January 1,

$ 368,383 $ —

Charged to Cost of sales, including impairments 72,441 447,597

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Balance at December 31,

$ 266,059 $ 368,383

Other additions include receipts of inventory previously recorded as losses on firm purchase commitments.

Note 8 – Goodwill

The change in the carrying amounts of goodwill was as follows (in thousands):

The Company has one reporting unit, which has a negative carrying amount as of December 31, 2023 and 2022, The change in the carrying amounts of goodwill was as follows (in thousands):

Year Ended December 31,

2 unchanged sentences

Ending balance $ 127,454 $ 126,331

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):

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

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):

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 9 – 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.

The Company has embedded leases related to multiple manufacturing supply agreements with CMOs and CMOS to manufacture COVID-19 Vaccine, as well as operating and finance leases for its research and development and manufacturing facilities, corporate headquarters and offices.

During the year ended December 31, 2023, the Company continued to align its global manufacturing footprint as a result of its ongoing assessment of manufacturing needs consistent with its contractual obligations related to the supply, and anticipated demand for, its COVID-19 Vaccine.

During the years ended December 31, 2023 and 2022, 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.

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 the year ended December 31, 2023 and 2022, as a result of new or modified leases, the Company recognized ROU assets, net of credits on modifications, and a corresponding lease liability of $ 6.8 million and $ 18.6 million, respectively, for its long-term finance and operating leases embedded in CMO and CDMO manufacturing supply agreements.

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 is for approximately 170,000 square feet of space that the Company is using for manufacturing, research and development, and offices.

The term of the lease expires in 2035 with options to extend the lease.

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

During the 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.

During the year ended December 31, 2023, the Company obtained the right to direct the use of, and obtain substantially all of the benefit from, the remaining floors located at the premises and recognized a ROU asset and related lease obligation of $ 96.5 million as the lease commencement dates for accounting purposes had occurred for such remaining floors.

The lease obligation was reduced by $ 73.4 million for prepaid rent and prior costs incurred on behalf of the landlord during 2023.

As of December 31, 2023, facility leases, including the 700QO lease, have expirations that range from approximately two to thirteen 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.

During the year ended December 31, 2023, the Company recorded an impairment charge of $ 5.9 million related to ROU facility leases used for research and development, manufacturing and offices space that are impacted by the Restructuring Plan (see Note 17).

Supplemental balance sheet information related to leases as of December 31, 2023 and 2022 was as follows (in thousands, except weighted-average remaining lease term and discount rate):

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Operating lease expense $ 6,929 $ 6,903 $ 37,027

Short-term lease expense 94,726 468,210 66,805

Short-term lease expense (benefit (1) )

( 48,009 ) 94,726 468,210

Variable lease expense 10,292 6,836 116,435

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Total finance lease expense $ 15,481 $ 9,231 $ 119,769

(1) During the year ended December 31, 2023, the Company recognized a short-term lease benefit of $ 48.0 million due to gains on the settlement of manufacturing supply agreements with CMOs and CDMOs that included embedded leases.

Supplemental cash flow information related to leases for the year ended December 31, 2023, 2022, and 2021 was as follows (in thousands):

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$ 175,250 $ 175,250

3.75 % Convertible notes due 2023

Unamortized debt issuance costs ( 7,234 ) ( 8,784 )

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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.

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 Topic 815-40, Derivatives and Hedging – 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, 2023, and 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.

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The 2023 Notes were senior unsecured debt obligations and were issued at par.

On January 31, 2023, the Company funded the outstanding principal amount of $ 325 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.

The Company repaid the outstanding principal amount of $ 325 million together with accrued but unpaid interest on the maturity date.

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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

Notes at par value plus accrued and unpaid interest following the occurrence of a Fundamental Change (as described in the 2023 Indenture).

In addition, the holders of the 2023 Notes may have required the Company to repurchase the 2023 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).

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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.

Based upon the Company’s analysis, it was determined the 2023 Notes did contain embedded features indexed to its own stock, but did 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 met the equity scope exception from derivative accounting, and also since the embedded conversion option did 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”).

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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.

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 evaluated the capped call transactions under ASC Topic 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 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.

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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

Note 11 – Stockholders’ Deficit

In August 2023, the Company entered into an At Market Issuance Sales Agreement (the "August 2023 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 entered in June 2021 (the “June 2021 Sales Agreement”).

During the year ended December 31, 2023, the Company sold 38.3 million shares of its common stock under its August 2023 Sales Agreement and 7.9 million shares of its common stock under its June 2021 Sales Agreement, resulting in net proceeds of approximately $ 321 million, of which $ 6.9 million was included in Prepaid expenses and other current assets as of December 31, 2023 and received in cash in January 2024.

As of December 31, 2023, the remaining balance available under the August 2023 Sales Agreement was approximately $ 242 million.

During the year ended December 31, 2022, the Company sold 2.2 million shares of its common stock resulting in net proceeds of approximately $ 179 million , under its June 2021 Sales Agreement.

In August 2023, pursuant to the Securities Subscription Agreement with SK, the Company agreed to sell and issue to SK 6.5 million shares of the Company’s common stock at a price of $ 13.00 per share (the “Shares”) in a Private Placement for aggregate gross proceeds to the Company of approximately $ 84.5 million.

The Company recognized the Shares at the settlement date fair value of $ 46.5 million (see Note 4 for additional discussion of the Securities Subscription Agreement with SK).

The closing of the Private Placement occurred on August 10, 2023.

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 10).

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 12 – Stock-Based Compensation

In January 2023, the Company established the 2023 Inducement Plan (the “2023 Inducement Plan”), which provides for the granting of share-based awards to individuals who were not previously employees, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company.

The Company reserved 1.0 million shares of common stock for grants under the 2023 Inducement Plan.

As of December 31, 2023, there were 0.2 million shares available for issuance under the 2023 Inducement Plan.

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company’s annual meeting of stockholders in June 2015.

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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.

Stock options and SARs generally have a maximum term of ten 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 .

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Total stock-based compensation expense $ 85,357 $ 130,300 $ 183,626

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.

During the year ended December 31, 2023 and 2022, total stock-based compensation capitalized in inventory was $ 0.5 million and $ 1.7 million, respectively.

No stock-based compensation was capitalized in inventory during the year ended December 31, 2021.

As of December 31, 2023, there was approximately $ 81.4 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 unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of approximately 1.0 year 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.

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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.

The aggregate intrinsic value of stock options and SARs exercises and vesting of RSUs for the years ending December 31, 2023, 2022, and 2021 was approximately $ 5 million, $ 21 million, and $ 454 million, respectively.

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

The following is a summary of stock options and SARs activity under the 2023 Inducement Plan, 2015 Plan and the 2005 Plan for the year ended December 31, 2023:

2023 Inducement Plan 2015 Plan 2005 Plan

Stock Options Weighted-

Price Stock Options & SARs

Options Weighted-

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Shares exercisable at December 31, 2023 — $ — 3,436,339 $ 41.51 58,275 $ 119.79

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:

The fair value of stock options granted under the 2023 Inducement Plan and the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Year Ended December 31,

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Expected term (in years) 3.9 - 6.4

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.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2023 Inducement Plan, 2015 Plan and 2005 Plan as of December 31, 2023 was less than $ 0.1 million and 6.9 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2023 Inducement Plan, 2015 Plan and 2005 Plan as of December 31, 2023 was less than $ 0.1 million and 5.9 years, respectively.

Restricted Stock Units

The following is a summary of RSU activity for the year ended December 31, 2023:

2023 Inducement Plan 2015 Plan

Shares Per Share

Fair Value Number of

Shares Per Share

Outstanding and unvested at January 1, 2022 — $ — 2,034,574 $ 61.65

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At December 31, 2023, there were 0.5 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 %

Dividend yield — % — % — %

Volatility 103.0 %- 142.9 %

114.9 %- 159.4 %

66.6 %- 189.7 %

Expected term (in years) 0.5 - 2.0

Note 13 – Employee Benefits

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Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following at December 31 (in thousands):

Prepaid expenses and other current assets consist of the following as of (in thousands):

Prepaid expenses $ 70,297 $ 160,773

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Property and Equipment, net

Property and equipment is comprised of the following at December 31 (in thousands):

Property and equipment is comprised of the following as of (in thousands):

Land and buildings $ 102,916 $ 101,342

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Accrued Expenses

Accrued expenses consist of the following at December 31 (in thousands):

Accrued expenses consist of the following as of (in thousands):

Employee benefits and compensation $ 55,952 $ 52,569

Gross-to-net deductions

product sales returns accrual

Research and development accruals 131,027 468,214

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Other Current Liabilities

Other current liabilities consist of the following at December 31 (in thousands):

Refunds to customers $ 210,362 $ —

Other current liability related to Gavi (see Note 3 and Note 18) 697,384 —

Other current liabilities consist of the following as of (in thousands):

Refunds due to APA customers

$ 142,165 $ 210,362

Other current liability related to Gavi (see Note 3)

696,390 697,384

Other current liabilities 22,853 22,309

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Note 15 – 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):

The Company’s loss before income tax expense by jurisdiction is as follows (in thousands):

Year Ended December 31,

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Loss before income tax expense $ ( 543,031 ) $ ( 653,647 ) $ ( 1,714,536 )

Significant components of the current income tax provision (benefit) are as follows (in thousands):

Significant components of the current and deferred income tax expense (benefit) are as follows (in thousands):

Year Ended December 31,

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Foreign 1,445 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.

Total current income tax expense (benefit)

( 12 ) 4,292 29,215

Total income tax expense $ 2,031 $ 4,292 $ 29,215

A reconciliation of income tax expense to the amount computed by applying the U.S.

federal statutory tax rate to the Company’s effective tax rate is as follows:

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taxation of foreign operations ( 4 ) % ( 3 ) % — %

Foreign tax expense — % ( 1 ) % — %

Cancellation of Indebtedness

( 1 ) % — % ( 1 ) %

Non-US tax credits

Other — % 2 % ( 1 ) %

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Change in valuation allowance ( 20 ) % ( 2 ) % ( 30 ) %

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.

Income tax expense

— % ( 1 ) % ( 2 ) %

As of December 31, 2023, the Company has available federal and state net operating losses of $ 2.4 billion, $ 877.6 million, respectively, that may be applied against future taxable income in the respective jurisdiction.

The federal net operating losses of $ 2.4 billion can be carried forward indefinitely, with all but $ 11.3 million, which expires in 2037, limited to 80% of annual taxable income.

State net operating losses of $ 457.4 million have various expiration dates between 2028 and 2042.

The remaining state net operating losses of $ 420.2 million can be carried forward indefinitely.

The Company also has research tax credits of $ 51.9 million that will begin to expire in 2024 through 2043 and a foreign tax credit carryforward of $ 18.7 million that will expire in 2030.

Utilization of the federal and state 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, 2023, the Company does not expect such limitation, if any, to impact the use of its net operating losses and research tax credits.

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.

federal jurisdiction and in various states, as well as in multiple foreign jurisdictions including Sweden and the Czech Republic.

The Company has U.S.

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Inventory reserve 79,386 213,076

Allowance for sales returns

Non-cash stock-based compensation 30,727 27,599

Original discount interest — 1,729

Capitalized research costs 132,500 49,309

Foreign tax credit carryforward

Other 10,996 13,695

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The valuation allowance increased by $ 108.8 million and $ 4.8 million for the years ended December 31, 2023 and 2022, 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.

The net deferred tax liability of $ 2.0 million at December 31, 2023 is included within other non-current liabilities on the accompanying consolidated balance sheet.

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.

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Unrecognized tax benefits balance at January 1

$ 5,194 $ 11,154 $ 8,766

Additions for tax positions of current year 271 1,260 4,158

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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.

As of December 31, 2023 and 2022, the Company had no accruals for interest or penalties.

The total amount of unrecognized tax benefits that, if recognized, could affect the effective tax rate was $ 4.2 million and $ 5.2 million as of December 31, 2023 and 2022, respectively.

However, the Company maintains a full valuation allowance as of December 31, 2023 and 2022 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.

As of December 31, 2023, the Company does not expect a significant change in the recorded unrecognized tax benefits liability 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.

In 2021 the Organization for Economic Cooperation and Development (“OECD”) developed guidance on Base Erosion and Profit Shifting (“BEPS”) Pillar Two Model Rules (“Pillar Two”), which addresses corporate tax planning strategies used by some large multinational corporations to shift profits from higher-tax jurisdictions to lower-tax jurisdictions or zero-tax locations.

This guidance imposes a 15% minimum tax on the earnings of large multinational corporations.

Pillar Two is expected to be effective in 2024 for the jurisdictions in which the Company operates.

The Company is currently evaluating the application of Pillar Two and does not expect these rules to have a significant impact on its effective tax rate or its consolidated financial statements.

Note 16 – Commitment and Contingencies

Legal Matters

Stockholder Litigation

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.

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 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 prototype vaccine on a commercial scale and to secure the prototype vaccine’s regulatory approval.

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

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

On April 25, 2022, the 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.

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On December 27, 2022, the Company filed its answer and affirmative defenses.

After the Sinnathurai Action was filed, seven derivative lawsuits were filed:

On March 16, 2023, the plaintiffs filed a motion for class certification and to appoint class representatives and counsel.

Due to the Maryland Court’s ruling on the dismissal motion, the motion sought to certify a class of stockholders who purchased the Company’s securities between May 11, 2021, and October 19, 2021.

The Company filed its opposition to the plaintiffs’ motion on September 22, 2023.

On December 4, 2023, the parties agreed to a binding settlement in principle (the “Proposed Settlement”) to fully resolve the surviving claims in the Sinnathurai Action.

Under the Proposed Settlement’s terms, the Company agreed to pay $47 million into a settlement fund, which will be funded by the Company’s directors and officers’ liability insurance and paid to members of a putative settlement class.

On January 12, 2024, after the parties negotiated and executed a written agreement governing the Proposed Settlement, plaintiffs filed an unopposed motion for the Proposed Settlement’s preliminary approval.

On January 23, 2024, the Maryland Court granted the motion for preliminary approval and, as requested by the parties, preliminarily certified, for the purposes of settlement only, the settlement class.

The court also scheduled a settlement hearing to consider final approval of the settlement for May 23, 2024.

After the Sinnathurai Action was filed, eight derivative lawsuits were filed:

(i) Robert E.

Erck, et al., No.

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

Erck, et al., No.

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

8:22-cv-00024-TDC (the “Kirst Action”), (iv) Amy Snyder v.

Erck, et al., No.

C-15-CV-21-000618 (the “Kirst Action”), (iv) Amy Snyder v.

Erck, et al., No.

8:22-cv-01415-TDC (the “Snyder Action”), (v) Charles R.

Blackburn, et al.

Erck, et al., No.

1:22-cv-01417-TDC (the “Blackburn Action”), (vi) Diego J.

(the “Mesa Action”), and (vii) Sean Acosta v.

(the “Acosta Action”).

Erck, et al., No.

2022-0770-NAC (the “Mesa Action”), (vii) Sean Acosta v.

Erck, et al., No.

2022-1133-NAC (the “Acosta Action”), and (viii) Jared Needelman v.

Erck, et al., No.

C-15-CV-23-001550 (the “Needelman 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 Kirst and Needelman Actions were filed in the Circuit Court for Montgomery County, Maryland.

The Mesa and Acosta Actions were filed in the Delaware Court of Chancery (the “Delaware Court”).

1 unchanged sentence

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.

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.

7 unchanged sentences

On February 10, 2023, defendants filed a motion to dismiss the Second Consolidated Derivative Action.

The plaintiffs filed their opposition to the motion to dismiss on April 11, 2023.

Defendants filed their reply brief in further support of their motion to dismiss on May 11, 2023.

On August 21, 2023, the court entered an order granting in part and denying in part the motion to dismiss;

the court allowed claims for alleged insider selling under Brophy v.

Cities Service Co., et al., 70 A.2d 5 (Del.

1949) and unjust enrichment claims to proceed, but dismissed the remaining claims in the second consolidated amended complaint.

On September 5, 2023, the Company filed an Answer to the consolidated amended complaint.

On September 6, 2023, the court entered an order granting the individual defendants an extension of time to file their answer until November 6, 2023.

On October 6, 2023, the Board of Directors of the Company formed a Special Litigation Committee (“SLC”) with full and exclusive power and authority of the Board to, among other things, investigate, review, and analyze the facts and circumstances surrounding the claims asserted in the pending derivative actions, including the claims that remain following the court’s order on the motion to dismiss in the Second Consolidated Derivative Action.

On November 7, 2023, the court entered an order granting the parties’ request to stay the Second Consolidated Derivative Action for up to six months from the date of entry of the order.

This includes staying the deadline for the individual defendants to respond to the consolidated amended complaint.

The Kirst Action was filed on December 28, 2021, and the defendants immediately removed the case to the Maryland Court.

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.

1 unchanged sentence

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 March 22, 2023, the Court entered the parties’ stipulated stay of the Kirst Action pending resolution of the motion to dismiss in the Second Consolidated Derivative Action.

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.

On January 18, 2023, defendants filed a motion to stay the Mesa Action pending a final judgment in the Second Consolidated Derivative Action.

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 February 28, 2023, the court granted the defendants’ motion to stay.

On August 31, 2023, the plaintiff filed a motion to lift the stay.

On October 6, 2023, the Company filed an opposition to plaintiff’s motion to lift the stay.

Plaintiff filed his reply on October 17, 2023.

On December 27, 2023, the parties filed a letter informing the Court that the Second Consolidated Derivative Action had been stayed for a period of six months and asked the Court to stay further proceedings in the Mesa Action until expiration of that 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.

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

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.

On March 9, 2023, the court entered an order granting the parties’ request to stay the Acosta Action pending the entry of a final, non-appealable judgment in the Second Consolidated Derivative Action.

On October 13, 2023, the parties filed, and the Delaware Court entered, a stipulated order providing that (i) if the Delaware Court declines to lift the stay in the Mesa Action, the Acosta Action will also remain stayed, and (ii) if the Delaware Court lifts the stay in the Mesa Action, the stay in the Acosta Action will also be lifted.

On April 17, 2023, the Needelman Action was filed.

On July 12, 2023, the parties filed a stipulation and proposed order to stay the Needelman Action pending the Maryland Court’s decision on the motion to dismiss in the Second Consolidated Derivative Action.

The court entered that order on July 17, 2023.

The parties continue to discuss next steps in the litigation following the Maryland Court’s ruling on the motion to dismiss the Second Consolidated Derivative Action.

The court entered that order on July 17, 2023.

On November 30, 2023, the court entered an order consolidating the Kirst and Needelman Actions.

On December 14, 2023, the parties filed a stipulation (i) extending the plaintiffs’ deadline to file a consolidated complaint until January 29, 2024, and (ii) otherwise staying all other proceedings in the case (including the defendants’ deadline to respond to the consolidated complaint) until February 12, 2024.

The stipulation entered by the court instructs the parties to discuss whether the stay should be further extended in light of the then-current status of the SLC’s investigation.

The financial impact of the derivative claims is not estimable.

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 prototype vaccine 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.

Since December 31, 2022, the remaining Gavi Advance Payment Amount, which is $ 696.4 million as of December 31, 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 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 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.

The Company filed its Answer and Counterclaims on March 2, 2023.

On April 5, 2023, Gavi filed its Reply to the Company’s Counterclaims.

Pursuant to the Gavi Settlement Agreement, the Company is responsible for payment to Gavi of (i) an initial settlement payment of $ 75 million, which the Company paid on February 20, 2024, and (ii) deferred payments, in equal annual amounts of $ 80 million payable each calendar year through a deferred payment term ending December 31, 2028.

The deferred payments are due in variable quarterly installments beginning in the first quarter of 2024 and total $ 400 million during the deferred payment term.

Such deferred payments may be reduced through Gavi’s use of an annual vaccine credit equivalent to the unpaid balance of such deferred payments each year, which may be applied to qualifying sales of any of the Company’s vaccines funded by Gavi for supply to certain low-income and lower-middle income countries.

The Company has the right to price the vaccines offered to such low-income and lower-middle income countries at its discretion, and, when utilized by Gavi, the Company will credit the actual price per vaccine paid against the applicable credit.

The Company intends to price vaccines offered via the tender process, consistent with its shared goal with Gavi to provide equitable access to those countries.

On February 22, 2024, the claims and counterclaims were dismissed with prejudice.

On September 30, 2022, the Company and Fujifilm entered into the Fujifilm Settlement Agreement regarding amounts due to Fujifilm in connection with the termination of manufacturing activity at FDBT under the CSA dated August 20, 2021 and the MSA by and between the Company and Fujifilm.

The MSA and CSA established the general terms and conditions applicable to Fujifilm’s manufacturing and supply activities related to the Company’s prototype vaccine under the associated statements of work.

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.

The Company withheld two installments of $ 34.3 million due to Fujifilm on September 30, 2023 and December 31, 2023, pending resolution of the issues identified in the notice of breach.

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.

An arbitration hearing has been scheduled for May 2024.

As of December 31, 2023, the remaining payment of $ 68.6 million was reflected in Accrued expenses.

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

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

Purchase Commitments

8 unchanged sentences

As of December 31, 2023, the Company had no non-cancelable purchase commitments with a remaining term of more than one year.

Note 17 – Restructuring

As of December 31, 2023, the restructuring charge recorded by the Company comprised (in thousands):

Severance and employee benefit costs $ 4,503

Impairment of assets $ 10,081

Total Restructuring charge (1)

(1) Restructuring charges of $ 0.5 million, $ 2.3 million and $ 11.5 million are included in Cost of sales, Research and development and Selling, general, and administrative expenses, respectively, in the Consolidated Statements of Operations for the period ended December 31, 2023.

These charges reflect substantially all expected restructuring charges under the Restructuring Plan.

Severance and employee benefit costs

Employees affected by the reduction in force under the Restructuring Plan are entitled to receive severance payments and certain termination benefits.

The Company recorded a severance and termination benefit cost in full for employees who were notified of their termination during the year ended December 31, 2023 and had no requirements for future service.

The Company fully paid $ 4.5 million for severance and employee benefit costs during the year ended December 31, 2023 and no remaining liability for the severance and employee benefit costs is included in the Company’s consolidated balance sheet as of December 31, 2023.

There were no severance and employee benefit costs during the year ended December 31, 2022 and 2021.

Impairment of long-lived assets

In connection with the Restructuring Plan, the Company evaluated its long-lived assets for impairment including certain leased laboratory and office spaces located in Gaithersburg, Maryland.

The evaluation is subject to judgment and actual results may vary from the estimates, resulting in potential future adjustments to amounts recorded.

During the year ended December 31, 2023, the Company recorded an impairment charge of $ 10.1 million related to the impairment of long-lived assets, including $ 5.9 million related to ROU assets for facility leases.

There were no impairment charges recorded during the year ended December 31, 2022 and 2021.

Note 18 – 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.

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.

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.

On January 31, 2024, the Company announced that the Board of Directors of the Company approved an approximately 12 % reduction of its global workforce, comprised of an approximately 9 % reduction in the Company’s full-time employees and the remainder comprised of contractors and consultants.

On February 16, 2024, the Company and Gavi entered into the Gavi Settlement Agreement terminating the Gavi APA, settling the arbitration proceedings and releasing both parties of all claims arising from, under or otherwise in connection with the Gavi APA.

The terms of the Gavi Settlement Agreement are outlined in Note 3 and Note 16.

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

What changed 10-K

Item 9A. Controls and Procedures