NOVAVAX INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Any statements in the discussion below and elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) about expectations, beliefs, plans, objectives, assumptions, or future events or performance of Novavax, Inc. (“Novavax,” together with its wholly owned subsidiaries, the “Company,” “we,” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements about our capabilities, goals, expectations regarding future revenue and expense levels, and capital raising activities; our operating plans and prospects, including our ability to continue as a going concern through one year from the date of our unaudited financial statements for the period ended September 30, 2024 are issued; our global restructuring and cost reduction plan (“Restructuring Plan”), which includes a more focused investment in our COVID-19 program (which currently includes our prototype COVID-19 vaccine ("NVX-CoV2373” or “prototype vaccine”), our XBB COVID-19 vaccine (“NVX-CoV2601”) and our updated vaccine for the 2024-2025 vaccination season (“NVX-CoV2705,” or “updated vaccine” and, collectively with NVX-CoV2373 and NVX-CoV2601, our “COVID-19 Vaccine” or “COVID-19 Program”), local regulatory authorities have also specified nomenclature for the labeling of NVX-CoV2373 and NVX-CoV2601 within their territories (e.g., “Novavax COVID-19 Vaccine, Adjuvanted”, “Novavax COVID-19, Adjuvanted (2023-2024 Formula),” respectively, for the U.S., and “Nuvaxovid ™ ” for ex-US territories)); our cash flow forecast and projected revenue, including potential royalties and milestones pursuant to our collaboration and license agreement (the “Sanofi CLA”) with Sanofi Pasteur Inc. (“Sanofi”); potential market sizes and demand for our products and product candidates; the efficacy, safety, and intended utilization of our products and product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the development of our preclinical product candidates; our expectations related to enrollment in our clinical trials; the conduct, timing, and potential results from clinical trials and other preclinical studies; plans for and potential timing of regulatory filings; our expectation of manufacturing capacity, timing, production, distribution, and delivery for our COVID-19 Vaccine by us and our partners; our expectations with respect to the anticipated ongoing development and commercialization or licensure of the COVID-19 Vaccine; our expectations with respect to the anticipated ongoing development of COVID-19 variant strain-containing monovalent or bivalent formulations, including the Phase 2b/3 Hummingbird™ trial, and our CIC vaccine candidate and our stand-alone influenza vaccine candidate including partnership efforts for our CIC vaccine candidate and stand-alone influenza vaccine candidate to advance towards a Biologics License Application ("BLA") filing and commercialization; efforts to expand the COVID-19 Vaccine label worldwide as a booster, and to various age groups and geographic locations; the expected timing, content, and outcomes of regulatory actions; funding under our advance purchase agreements (“APAs”) and supply agreements and amendments to, termination of, discussion regarding, or legal disputes relating to any such agreement; our available cash resources and usage and the availability of financing generally; plans regarding partnering activities and business development initiatives; our plans regarding APA amendments; and other matters referenced herein. Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” “aim,” or “assume,” the negative of these terms, or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations about the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Forward-looking statements involve estimates, assumptions, risks, and uncertainties that could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, and, therefore, you should not place considerable reliance on any such forward-looking statements. Such risks and uncertainties include, without limitation, our ability to successfully and timely manufacture, market, distribute, or deliver our COVID-19 Vaccine and the impact of our not having received a BLA from the U.S. Food and Drug Administration (“U.S. FDA”) for the 2024-2025 vaccination season; challenges related to our partnership with Sanofi and in pursuing additional partnership opportunities; challenges satisfying, alone or together with partners, various safety, efficacy, and product characterization requirements, including those related to process qualification, assay validation, and stability testing, necessary to satisfy applicable regulatory authorities; challenges or delays in conducting clinical trials or studies for our product candidates; challenges or delays in obtaining regulatory authorization for our product candidates, including for future COVID-19 variant strain changes, our COVID-19-Influenza (“CIC”) vaccine candidate, our stand-alone influenza vaccine candidate or other product candidates; manufacturing, distribution or export delays or challenges; our substantial dependence on Serum Institute of India Pvt. Ltd. (“SII”) and Serum Life Sciences Limited (“SLS” and together with SII, “Serum”) for co-formulation and filling our COVID-19 Vaccine and the impact of any delays or disruptions in their operations; difficulty obtaining scarce raw materials and supplies, including for our proprietary adjuvant; resource constraints, including human capital and manufacturing capacity, constraints on our ability to pursue planned regulatory pathways, alone or with partners, in multiple jurisdictions simultaneously, leading to staggering of regulatory filings, and potential regulatory actions; challenges in implementing the Restructuring Plan; our ability to timely deliver doses; challenges in obtaining commercial adoption and market acceptance of our COVID-19 Vaccine or any COVID-19 variant strain containing formulation, or our CIC vaccine candidates, stand-alone influenza vaccine candidates or other candidates; challenges meeting contractual requirements under 25 agreements with multiple commercial, governmental, and other entities including requirements to deliver doses that may require us to refund portions of upfront and other payments previously received or result in reduced future payments pursuant to such agreements; challenges related to the seasonality of vaccinations against COVID-19; challenges related to the demand for vaccinations against COVID-19 or influenza; challenges in identifying and successfully pursuing innovation expansion opportunities; our expectation as to expenses and cash needs may prove not to be correct for reasons such as changes in plans or actual events being different than our assumptions and other risks and uncertainties identified in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 and this Quarterly Report on Form 10-Q, which may be detailed and modified or updated in other documents filed with the SEC from time to time, and are available at www.sec.gov and at www.novavax.com. You are encouraged to read these filings as they are made. We cannot guarantee future results, events, level of activity, performance, or achievement. Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate or materially different from actual results. Further, any forward-looking statement speaks only as of the date when it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Information in this Quarterly Report includes a financial measure that was not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which we refer to as adjusted cost of sales. We are presenting this non-GAAP financial measure to assist an understanding of our business and its performance. Adjusted cost of sales includes an estimate of standard manufacturing costs that were previously expensed to research and development prior to regulatory approvals for our COVID-19 Vaccine that would otherwise have been capitalized to inventory. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP, and may not be comparable to the calculation of similar measures of other companies. Overview We are a global company focused on driving value via our proven technology platform (which includes a combination of a recombinant protein approach, innovative nanoparticle technology, and patented Matrix-M™ adjuvant) through partnerships and research and development. We continue to evolve our operating model to leverage four key drivers of value: a partnership with Sanofi announced in May 2024, a late-stage pipeline focuses on our CIC and standalone influenza vaccine candidates, leveraging our Matrix-M technology, and a new early-stage pipeline. Our proprietary recombinant technology platform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticle vaccines designed to address global health needs. Our vaccine candidates are nanostructures of conformationally correct recombinant proteins that mimic those found on pathogens. This technology enables the immune system to recognize target proteins and develop protective immune responses. We believe that our vaccine technology may lead to the induction of a differentiated immune response that may be more efficacious than naturally occurring immunity or some other vaccine approaches. Our vaccine candidates also incorporate our proprietary saponin-based Matrix-M™ adjuvant to enhance the immune response, stimulate higher levels of functional antibodies, and induce a cellular immune response. We have developed and manufactured our updated vaccine for the 2024-2025 vaccination season for use in individuals aged 12 and older. Our updated vaccine received Emergency Use Authorization (“EUA”) from the U.S. FDA in August 2024, Marketing Authorization in the European Union (“EU”) in September 2024 and approval from the Taiwan Food and Drug Administration in October 2024. In the U.S., we were notified by the U.S. FDA that our BLA for our prototype vaccine and for NVX-CoV2601 was accepted for review with a Prescription Drug User Fee Act (“PDUFA”) date of April 2025. 26 In May 2024, we entered into the Sanofi CLA with Sanofi, to co-commercialize our COVID-19 Vaccine, including future updated versions that address seasonal COVID-19 variants. We will continue commercialization of our updated vaccine for the 2024-2025 vaccination season. Beginning in 2025 and continuing during the term of the Sanofi CLA, we and Sanofi will commercialize the COVID-19 Vaccine worldwide in accordance with a commercialization plan agreed by us and Sanofi, under which we will continue to supply its existing APA customers and strategic partners, including Takeda and SII. Upon completion of the existing APAs, we and Sanofi will jointly agree on commercialization activities of each party in each jurisdiction. Additionally, Sanofi has the right to develop novel influenza-COVID-19 combination vaccines utilizing our COVID-19 Vaccine and Sanofi’s seasonal influenza vaccine, combination products containing our COVID-19 Vaccine and one or more non-influenza vaccines, and multiple new vaccines utilizing our Matrix-M TM adjuvant. We are eligible to receive royalties and milestones associated with the ongoing sales of our COVID-19 Vaccine and Sanofi’s influenza-COVID-19 combination vaccine and any other combination vaccines Sanofi may develop, as well as ongoing product royalties for vaccines developed with our Matrix-M TM adjuvant. This partnership provides the opportunity for us to focus more on research and development and pipeline expansion. We discuss this agreement in further detail in Note 6 to our accompanying unaudited consolidated financial statements. Additionally, our near-term focus is on developing a CIC vaccine candidate, as well as a stand-alone influenza vaccine candidate. We intend to begin enrolling our Phase 3 immunogenicity trial as soon as possible. We intend to explore opportunities to engage in strategic partnerships to advance the candidates to a BLA filing and commercialization. Furthermore, we provide our Matrix-M™ adjuvant for collaborations, including in R21/Matrix-M™ adjuvant malaria vaccine, which is authorized in several countries, as well as other preclinical vaccine research with our Matrix-M™ adjuvant, including through a partnership with the Bill & Melinda Gates Medical Research Institute. We intend to focus our organization to align our investments and activities with our top priorities of prioritizing the successful transition to our new partnership with Sanofi, executing our Phase 3 programs for the CIC and stand-alone influenza vaccine candidates, and delivering our updated vaccine. To maximize our opportunities and mitigate the significant risks and uncertainties of the COVID-19 market, we have progressed our cost restructuring measures to reduce spend, extend our cash runway, and operate efficiently to seek the best position for us to deliver longer-term growth. We discuss these cost restructuring strategies in greater detail in Note 15 to our accompanying unaudited consolidated financial statements. Technology Overview We believe our recombinant nanoparticle vaccine technology and our proprietary Matrix-M™ adjuvant are well suited for the development and commercialization of vaccine candidates targeting areas both within and beyond the infectious disease space. Recombinant Nanoparticle Vaccine Technology Once a target of interest has been identified, the genetic sequence encoding an antigen is selected for developing the vaccine construct. The genetic sequence may be optimized to enhance protein stability or confer resistance to degradation. This genetic construct is inserted into the baculovirus Spodoptera frugiperda (“Sf-/BV”) insect cell-expression system, which enables efficient, large-scale expression of the optimized protein. The Sf-/BV system produces protein-based antigens that are properly folded and modified, which can be critical for functional, protective immunity. Protein antigens are purified and organized around a polysorbate-based nanoparticle core in a configuration that resembles their native presentation. This results in a highly immunogenic nanoparticle that is ready to be formulated with Matrix-M™ adjuvant. Matrix-M™ Adjuvant Our proprietary Matrix-M™ adjuvant is a key differentiator within our platform. This adjuvant has enabled potent, well tolerated, and durable efficacy by stimulating the entry of antigen presenting cells (“APCs”) into the injection site and enhancing antigen presentation in local lymph nodes. This in turn activates APCs, T-cell and B-cell populations, and plasma cells, which promote the production of high affinity antibodies, an immune boosting response. This potent mechanism of action enables a lower dose of antigen to achieve the desired immune response, thereby contributing to increased vaccine supply and manufacturing capacity. These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile. We continue to evaluate commercial opportunities for the use of our Matrix-M™ adjuvant alongside vaccine antigens produced by other manufacturers. Matrix-M™ adjuvant is being evaluated in combination with several partner-led malaria vaccine candidates, including for R21/Matrix-M™ adjuvant, a malaria vaccine candidate created by the Jenner Institute, University of Oxford. The R21/Matrix-M™ adjuvant vaccine has been licensed to SII for commercialization, and in December 27 2023, received prequalification by the World Health Organization (“WHO”). In July 2024, first commercial doses of the R21/Matrix-M™ adjuvant malaria vaccine were administered to children in Cote d’Ivoire and South Sudan. Additionally, in May 2023, we entered into a three-year agreement with the Bill & Melinda Gates Medical Research Institute to provide our Matrix-M™ adjuvant for use in preclinical vaccine research. In June 2023, we signed a material transfer agreement with SK bioscience Co., Ltd. (“SK”) for use of our Matrix-M™ adjuvant in preclinical vaccine experiments for shingles, influenza, and pan-COVID-19. Our adjuvant technology is also being used by commercial partners as a key component in veterinary vaccines against equine influenza and Strangles, as well as the manufacture of black-widow anti-venom. In May 2024, pursuant to the Sanofi CLA, Sanofi received a non-exclusive license to develop and commercialize other vaccine products that include our Matrix-M™ adjuvant. COVID-19 Vaccine Regulatory and Licensure For our updated vaccine for the 2024-2025 vaccination season, in August 2024, we received EUA from the U.S. FDA for active immunization to prevent COVID-19 in individuals aged 12 and older. Our updated vaccine is included in the recommendations issued by the U.S. Centers for Disease Control and Prevention in June 2024. In October 2024, we were granted Marketing Authorization by the European Commission for our updated vaccine for use in individuals aged 12 and older for the prevention of COVID-19 in the EU. This decision followed the positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency (“EMA”). Additionally, in October 2024, we received approval by the Taiwan Food and Drug Administration for our updated vaccine for use in individuals aged 12 and older. We are working to continue to expand our label for primary and re-vaccination in younger children, and to achieve supportive policy recommendations enabling broad market access. We continue to work closely with governments, regulatory authorities, and non-governmental organizations in our commitment to facilitate global access to our COVID-19 vaccine. Product Pipeline Our clinical pipeline encompasses vaccine candidates for infectious diseases. Our COVID-19 vaccine, partnered with Sanofi, is our most advanced product. We will continue to commercialize our JN.1 COVID vaccine through the end of the 2024-2025 vaccination season. Beyond our COVID-19 vaccine, our clinical pipeline includes a CIC vaccine candidate and a stand-alone influenza vaccine candidate. Additionally, we intend to develop an early-stage pipeline based on our proven technology platform, moving forward with pandemic influenza and respiratory syncytial virus (“RSV”) combinations. Beyond our own pipeline, our Matrix-M™ adjuvant is being used for collaboration in R21/Matrix-M™ adjuvant malaria vaccine as well as, licensing rights to Sanofi for development of vaccines using our Matrix-M™ adjuvant or in combination with our existing COVID-19 product. 28 (1) Authorized in select geographies under trade names Novavax COVID-19 Vaccine, Adjuvanted; Covovax™; and Nuvaxovid™, and authorized in the U.S. under trade name, Novavax COVID-19 Vaccine, Adjuvanted (2024-2025 Formula); Ongoing post-authorization Phase 3 strain change trial. (2) Commercialized by SII; Granted prequalification by the WHO and distributed by UNICEF to endemic countries in Africa. Coronavirus Vaccine Clinical Development We continue efforts to expand our COVID-19 vaccine label within the adolescent and pediatric indications. Additionally, we continue to evaluate vaccine safety, immunogenicity, and effectiveness through ongoing clinical trials and collaborative evidence-generating real-world studies. Phase 3 Strain-Change and Re-vaccination Studies In October 2024, we initiated and fully enrolled Study 315 to evaluate safety and immunogenicity of a single dose of the JN.1 subvariant vaccine NVX-CoV2705 in previously vaccinated adults. Topline data is expected in the first quarter of 2025 and is expected to support regulatory submissions in the U.S. and other territories for this and future variant strain formulations. In July 2024, we locked the database for 338 participants aged 18 and older in Part 2 of the Study 313, which will evaluate the immunogenicity of a single dose of the XBB.1.5 subvariant vaccine NVX-CoV2601 in previously unvaccinated individuals. Data from Study 313 are intended to support BLA supplements and similar regulatory submissions in other territories for future variant strain formulations. Phase 2b/3 Pediatric Hummingbird™ Study In August 2023, we announced topline results from our Phase 2b/3 Hummingbird™ trial that met its primary endpoints in children aged 6 through 11 years demonstrating both tolerability and immunologic responses. This ongoing trial is evaluating the safety, effectiveness (immunogenicity), and efficacy of two doses of our prototype vaccine (NVX-CoV2373), followed by a booster 6 months after the primary vaccination series. The trial completed enrollment in September 2023 and includes three age de-escalation cohorts of 1,200 children each. In previous consultations with the U.S. FDA, the filing strategy included filing a supplemental BLA for children in these age cohorts once the initial BLA is approved. We are in discussion with the U.S. FDA regarding additional immunogenicity studies in light of the progressive increase in the number of children with baseline COVID-19 natural immunity during the enrollment period, which began in August 2022. 29 COVID-Influenza Combination and Stand-alone Influenza Program In October 2024, the U.S. FDA placed a clinical hold on the Investigational New Drug (“IND”) for our CIC and stand-alone influenza vaccine candidates. The U.S. FDA’s clinical hold resulted from a spontaneous report of a serious adverse event in a participant who received the CIC vaccine in a Phase 2 trial that completed in 2023. The U.S. FDA had requested additional information on this event, initially reported as motor neuropathy. The additional information included a change in the event term to amyotrophic lateral sclerosis, a condition that is not known to be immune-mediated or associated with vaccination, which in this event was assessed as not related to vaccination. In November 2024, the U.S. FDA removed the clinical hold on the IND for our CIC and stand-alone influenza vaccine candidates following the determination that we satisfactorily addressed all clinical hold issues. The information provided to the FDA supported our assessment that the serious adverse event was not related to our vaccine. We intend to begin enrolling our Phase 3 immunogenicity trial as soon as possible. We continue to invest in development of our pipeline that uses our recombinant nanoparticle technology platform and Matrix-M adjuvant. We continue to believe these assets are key value drivers and intend to partner these assets towards a BLA filing. In addition, they may also be attractive from a pandemic preparedness perspective, and similar performance in terms of comparative immunogenicity may be expected for influenza pandemic strains. High-dose COVID-19 Vaccine Study In August 2024, we locked the database for a Phase 2 trial to evaluate our high-dose COVID-19 vaccine for annual vaccination in 994 adults ages 50 years and older. The trial measured immunogenicity levels of 5 micrograms of NVX-CoV2373 and of 5 micrograms, 35 micrograms, and 50 micrograms of NVX-CoV2601 matched with different levels of Matrix-M TM adjuvant. Analysis of the complete dataset is ongoing to determine the utility of pursuing a high dose formulation. R21/Matrix-M™ Adjuvant Malaria Vaccine R21/Matrix-M™ adjuvant malaria vaccine, formulated with our Matrix-M™ adjuvant is developed by our partner, the Jenner Institute, University of Oxford, and manufactured by SII. We have an agreement with SII related to its manufacture of R21/Matrix-M™ adjuvant malaria vaccine under which SII purchases our Matrix-M™ adjuvant for use in development activities at cost and for commercial purposes at a tiered commercial supply price, and pays a royalty in the single- to low-double digit range based on vaccine sales for a period of 15 years after the first commercial sale of the vaccine in each country. In December 2023, the WHO announced it prequalified the R21/Matrix-M TM adjuvant malaria vaccine to prevent malaria disease in children caused by the P. falciparum parasite in endemic areas. In July 2024, first commercial doses of R21/Matrix-M™ adjuvant malaria vaccine have been administered to children in Cote d’Ivoire and South Sudan. As part of the WHO malaria program, at their discretion, the vaccine is expected to be included in countries such as Central African Republic, Chad, Democratic Republic of Congo, Mozambique, Nigeria and Uganda. Business Highlights Successful Execution of Sanofi Partnership • Advanced preparation for Sanofi to assume lead commercial responsibility of Nuvaxovid™ COVID-19 vaccine for 2025-2026 vaccination season in the U.S., Europe and select major markets not currently subject to our APAs or existing partnership agreements. • On track for our pediatric clinical trial database lock for the first cohort in the fourth quarter of 2024, achievement triggers a $50 million milestone payment. Drive Incremental Value from our Proven Technology Platform • In November 2024, the U.S. FDA removed the clinical hold on our IND application for our CIC and stand-alone influenza vaccine candidates. We are working to initiate the Phase 3 immunogenicity clinical trial for CIC and stand-alone influenza candidates as soon as possible. • Signed a Matrix-M™ adjuvant related agreement with a leading pharmaceutical company to enable exploration of our technology for the potential advancement of their pipeline candidates. • Outlined guiding principles of new Research & Development (“R&D”) strategy based on its proven technology platform and announced the appointment of Ruxandra Draghia-Akli, MD, PhD as Executive Vice President and Head 30 of R&D. • Continued to advance pandemic influenza and RSV pre-clinical programs towards IND readiness, with a focus on RSV-combination options. Continue Evolution of our Company and Reduce Operating Expenses • On track with cost structure improvements, including an approximate 26% reduction in combined R&D and Selling, General and Administrative expenses in the third quarter of 2024 compared to the same period for 2023. Deliver an Updated COVID-19 Vaccine for the 2024-2025 Vaccination Season U.S. Market: • Received EUA from the U.S. FDA in individuals aged 12 and older. • Entered the market with an improved product presentation and broader access - Nuvaxovid™ available in pre-filled syringe presentation in over 30,000 locations across major pharmacy retailers and regional grocers in the U.S. • Our COVID-19 vaccine BLA PDUFA with an action date of April 2025 and updated to include both JN.1 variant and pre-filled syringe presentation. Achievement of BLA approval triggers a $175 million milestone payment from Sanofi. Global Markets: • Received global authorizations including in the European Union, Canada, and Taiwan. Sales of Common Stock In August 2023, we entered into an At Market Issuance Sales Agreement (the “August 2023 Sales Agreement”), which allows us to issue and sell up to $500 million in gross proceeds of shares of our common stock, and terminated our then-existing At Market Issuance Sales agreement entered into in June 2021 (the “June 2021 Sales Agreement”). During the nine months ended September 30, 2024, we sold 12.2 million shares of our common stock under the August 2023 Sales Agreement, resulting in net proceeds of approximately $188 million. There were no sales recorded under the August 2023 Sales Agreement during the three months ended September 30, 2024. As of September 30, 2024, the remaining balance available under the August 2023 Sales Agreement was approximately $51 million. During the nine months ended September 30, 2023, we sold 25.7 million shares of our common stock under our June 2021 Sales Agreement and August 2023 Sales Agreement resulting in net proceeds of approximately $211 million. During the three months ended September 30, 2023, we sold 17.8 million shares of our common stock under our August 2023 Sales Agreement resulting in net proceeds of approximately $143 million . In May 2024, we also entered into a securities subscription agreement (the “Subscription Agreement”) with Sanofi, pursuant to which we sold and issued to Sanofi, in a private placement, 6.9 million shares of our common stock at a price of $10.00 per share for aggregate gross proceeds to us of $68.8 million. In August 2023, we entered into a Securities Subscription Agreement with SK, pursuant to which the we agreed to sell and issue to SK 6.5 million shares of our common stock at a price of $13.00 per share (the “SK Shares”) in a private placement (the “Private Placement”) for aggregate gross proceeds of approximately $84.5 million . We recognized the SK Shares at the settlement date fair value of $46.5 million . The closing of the Private Placement occurred on August 10, 2023. Critical Accounting Policies and Use of Estimates The discussion and analysis of our financial condition and results of operations are based upon our accompanying unaudited financial statements and the unaudited accompanying notes, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our critical accounting policies and estimates are included under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC and are updated below to incorporate revenue recognition from licensing and transition services 31 included in Licensing, royalties and other in our accompanying unaudited consolidated financial statements. Revenue Recognition, Licensing and Transition Services The terms of licensing agreements may contain multiple performance obligations, which may include licenses and transition services. We evaluate licensing agreements under ASC 606, Revenue from Contracts with Customers (“ ASC 606”), to determine the distinct performance obligations. Prior to recognizing revenue, we estimate the transaction price, including variable consideration that is subject to a constraint. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. Total consideration may include nonrefundable upfront license fees, transition service fees, other payments based upon the achievement of specified milestones, and royalty payments based on product sales from licensed products. For multiple distinct performance obligation arrangements, we allocate the transaction price to each distinct performance obligation based on its relative stand-alone selling price. The stand-alone selling price is generally determined for each performance obligation based on the prices charged to customers, discounted cash flows, or using expected cost-plus margin. For stand-alone selling prices determined using discounted cash flows, we consider discounted, probability-weighted cash flows related to the performance obligation transferred. In developing such estimates, we apply judgment in determining the forecasted revenues expected margins, and the discount rate. These estimates are subjective and require us any to make assumptions about future cash flows. Revenue related to performance obligations satisfied at a point in time is recognized when the customer obtains control of the promised asset. For performance obligations recognized over time, we recognize revenue using an input method to measure progress by utilizing costs incurred to-date relative to total expected costs. Under this process, we consider the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs, and other identified risks. Estimating the total cost at completion of our performance obligation under a contract is subjective and requires us to make assumptions about future activity and cost drivers. Changes in these estimates can occur for a variety of reasons and may impact the timing of revenue recognition on our contracts. Changes in estimates related to the process are recognized in the period when such changes are made on a cumulative catch-up basis. We have not experienced any material adjustments as a result of changes in estimates arising from this process. Recent Accounting Pronouncements Not Yet Adopted See “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (Unaudited) (under the caption “ Recent Accounting Pronouncements ”). Results of Operations The following is a discussion of the historical financial condition and results of our operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report. Three Months Ended September 30, 2024 and 2023 Revenue Three Months Ended September 30, 2024 2023 Change Revenue (in thousands): Product sales $ 38,210 $ 2,231 $ 35,979 Licensing, royalties, and other 46,302 19,833 26,469 Grants — 164,922 (164,922) Total revenue $ 84,512 $ 186,986 $ (102,474) Revenue for the three months ended September 30, 2024 was $84.5 million as compared to $187.0 million for the same period in 2023, a decrease of $102.5 million. Revenue for the three months ended September 30, 2024 was primarily comprised of revenue from product sales of COVID-19 Vaccine and revenue from transition services and technology transfer under the Sanofi Collaboration and Licensing Agreement (“Sanofi CLA”). Revenue for the three months ended September 30, 2023 was primarily comprised of services performed under our U.S. government agreement with Advanced Technology 32 International (“USG Agreement”), the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed. The decrease in revenue is primarily due to a decrease in revenue under the USG Agreement during the three months ended September 30, 2024 because we recognized the full contract funding in revenue by the end of 2023, partially offset by an increase in the quantity of dose sales of COVID-19 Vaccine and licensing, royalties, and other revenue from the Sanofi CLA. Product sales Product sales for the three months ended September 30, 2024 were $38.2 million as compared to $2.2 million during the three months ended September 30, 2023. Our product sales related to revenue from commercial sales of COVID-19 Vaccine, which commenced in 2022. The geographic distribution of product sales was as follows: Three Months Ended September 30, 2024 2023 Change North America $ 33,969 $ 2,231 $ 31,738 Europe 1,167 — 1,167 Rest of the world 3,074 — 3,074 Total product sales $ 38,210 $ 2,231 $ 35,979 Licensing, royalties, and other Licensing, royalties, and other includes licensing payments, transition services and technology transfer revenue under the Sanofi CLA; royalty milestone payments; sales-based royalties; and Matrix-M™ adjuvant sales. Licensing, royalties, and other revenue during the three months ended September 30, 2024 was $46.3 million as compared to $19.8 million during the same period in 2023, an increase of $26.5 million. The increase was primarily due to $32.7 million of revenue from transition services and technology transfer under the Sanofi CLA, partially offset by a decrease of Matrix-M™ adjuvant sales and sales-based royalties. Grants We did not have any Grant revenue during the three months ended September 30, 2024, as compared to $164.9 million during the same period in 2023, a decrease of $164.9 million. Grant revenue for the three months ended September 30, 2023 was comprised of revenue for services performed under our USG Agreement. As of December 31, 2023, we had recognized the full contract funding under the USG Agreement in revenue. Expenses Three Months Ended September 30, 2024 2023 Change Expenses (in thousands): Cost of sales $ 60,619 $ 98,929 $ (38,310) Research and development 87,164 106,229 (19,065) Selling, general, and administrative 70,747 107,460 (36,713) Total expenses $ 218,530 $ 312,618 $ (94,088) Cost of Sales Cost of sales was $60.6 million for the three months ended September 30, 2024, including expenses of $6.2 million related to excess, obsolete, or expired inventory and losses on certain firm purchase commitments, $3.8 million ROU asset impairment charges for Contract Manufacturing Organization ("CMO") manufacturing capacity of excess quantities, $18.2 million related to unutilized manufacturing capacity, and a credit of $0.7 million related to certain negotiated reductions to previously recognized firm purchase commitments. Cost of sales was $98.9 million for the three months ended September 30, 2023, including expense of $81.6 million related to excess, obsolete, or expired inventory and losses on firm purchase 33 commitments and $14.3 million related to unutilized manufacturing capacity, partially offset by $21.5 million of negotiated reductions to certain previously recognized firm purchase commitments. Prior to receiving regulatory approval, we expensed manufacturing costs as research and development expenses. After receiving regulatory approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. If inventory sold for the three months ended September 30, 2024 was valued at expected standard cost, including expenses related to excess and obsolete inventory, adjusted cost of sales for the period would have been approximately $60.9 million, an adjustment of $0.3 million as compared to cost of sales recognized. If inventory sold for the three months ended September 30, 2023 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $103.2 million, an adjustment of $4.3 million. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer pricing mix or standard costs. Research and Development Expenses Research and development expenses were $87.2 million for the three months ended September 30, 2024 as compared to $106.2 million for the three months ended September 30, 2023, a decrease of $19.1 million. The decrease was primarily due to a reduction in overall expenditures relating to development activities on coronavirus vaccines, including our COVID-19 Program, and CIC, as summarized in the table below (in thousands): Three Months Ended September 30, 2024 2023 Coronavirus vaccines $ 21,798 $ 41,263 Other vaccine development programs 2,660 753 Total direct external research and development expense 24,458 42,016 Employee expenses 33,504 33,957 Stock-based compensation expense 5,166 10,022 Facility expenses 13,855 12,360 Other expenses 10,181 7,874 Total research and development expenses $ 87,164 $ 106,229 Research and development expenses for coronavirus vaccines for the three months ended September 30, 2024 and 2023 decreased from $41.3 million to $21.8 million primarily as a result of a reduction in manufacturing and support costs due, in part, to a reduction in our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, COVID-19 Vaccine, including embedded lease costs, under manufacturing supply agreements with CMOs and contract manufacturing and development organizations (“CDMOs”). Selling, General, and Administrative Expenses Selling, general, and administrative expenses were $70.7 million for the three months ended September 30, 2024 as compared to $107.5 million for the same period in 2023, a decrease of $36.7 million. The decrease in selling, general, and administrative expenses is primarily due to certain cost containment measures to reduce our operating spend. For the remainder of 2024, we expect a reduction in our annual combined research and development, and selling, general, and administrative spend as a result of our Restructuring Plan as discussed in Note 15 to our accompanying unaudited consolidated financial statements. Other Income (Expense) Three Months Ended September 30, 2024 2023 Change Other income (expense), net (in thousands): Interest expense $ (4,236) $ (2,859) $ (1,377) Other income (expense) 15,922 (2,982) 18,904 Total other income (expense), net $ 11,686 $ (5,841) $ 17,527 34 Total other income (expense), net was $11.7 million of income for the three months ended September 30, 2024 as compared to a total other income (expense), net of $5.8 million of expense for the same period in 2023. The increase in other income (expense), net is primarily due to the favorable impact in 2024 as compared to 2023 of exchange rates on foreign currency denominated balances, including an intercompany loan with Novavax CZ, additional interest income from higher Cash and cash equivalents and Marketable securities balances, and a gain on insurance recoveries. Income Tax Expense (Benefit) During the three months ended September 30, 2024, we recognized an income tax benefit of $1.3 million related to federal, state, and foreign income taxes, partially offset by foreign withholding tax expense of $0.3 million. During the three months ended September 30, 2023, we recognized an income tax benefit of $0.7 million related to federal, state, and foreign income taxes. Net Loss Three Months Ended September 30, 2024 2023 Change Net Loss (in thousands, except per share information): Net loss $ (121,300) $ (130,776) $ 9,476 Net loss per share, basic and dilutive $ (0.76) (1.26) $ 0.50 Weighted average shares outstanding, basic and dilutive 160,049 103,429 56,620 Net loss for the three months ended September 30, 2024 was $121.3 million, or $0.76 per share, basic and dilutive, as compared to net loss of $130.8 million, or $1.26 per share, basic and dilutive, for the same period in 2023. The increase in net loss during the three months ended September 30, 2024, was primarily due to a decrease in total revenue, partially offset by a decrease in total expenses. The increase in weighted average shares outstanding for the three months ended September 30, 2024 was primarily a result of sales of our common stock. Nine Months Ended September 30, 2024 and 2023 Revenue Nine Months Ended September 30, 2024 2023 Change Revenue (in thousands): Product sales $ 140,438 $ 279,937 $ (139,499) Licensing, royalties, and other 453,413 23,046 430,367 Grants — 389,380 (389,380) Total revenue $ 593,851 $ 692,363 $ (98,512) Revenue for the nine months ended September 30, 2024 was $593.9 million as compared to $692.4 million for the same period in 2023, a decrease of $98.5 million. Revenue for the nine months ended September 30, 2024 was primarily comprised of revenue from licensing and product sales of COVID-19 Vaccine. Revenue for the nine months ended September 30, 2023 was primarily comprised of revenue from product sales of COVID-19 Vaccine and services performed under our USG Agreement. The decrease in revenue is due to a decrease in revenue under the USG Agreement and in the quantity of dose sales of COVID-19 Vaccine, partially offset by licensing, royalties, and other revenue from the Sanofi CLA. Product sales Product sales for the nine months ended September 30, 2024 were $140.4 million as compared to $279.9 million during the nine months ended September 30, 2023. Our product sales related to revenue from commercial sales of COVID-19 Vaccine, which commenced in 2022. Our product sales primarily related to sales of COVID-19 Vaccine under our APA 35 agreements. The geographic distribution of product sales was as follows: Nine Months Ended September 30, 2024 2023 Change North America $ 29,214 $ 2,231 $ 26,983 Europe 91,753 59,322 32,431 Rest of the world 19,471 218,384 (198,913) Total product sales $ 140,438 $ 279,937 $ (139,499) Licensing, royalties, and other Licensing, royalties, and other includes licensing payments, transition services revenue, and technology transfer revenue under the Sanofi CLA; royalty milestone payments; sales-based royalties; and Matrix-M™ adjuvant sales. Licensing, royalties, and other revenue during the nine months ended September 30, 2024 was $453.4 million as compared to $23.0 million during the same period in 2023, an increase of $430.4 million. The increase was primarily due to $389.6 million of licensing revenue from the Sanofi CLA, which represents the amount of the $500 million upfront payment recognized at a point-in-time. The remaining amount of the upfront payment will be recognized in revenue as transition services and technology transfer are performed over time. During the nine months ended September 30, 2024, we recognized $39.4 million of transition services and technology transfer revenue based on progress completed. Grants We did not have any Grant revenue during the nine months ended September 30, 2024 as compared to $389.4 million during the same period in 2023, a decrease of $389.4 million. Grant revenue for the nine months ended September 30, 2023, was comprised of revenue for services performed under our USG Agreement. As of December 31, 2023, we had recognized the full contract funding under the USG Agreement in revenue. Expenses Nine Months Ended September 30, 2024 2023 Change Expenses (in thousands): Cost of sales $ 166,070 $ 188,792 $ (22,722) Research and development 286,789 572,805 (286,016) Selling, general, and administrative 258,843 313,709 (54,866) Total expenses $ 711,702 $ 1,075,306 $ (363,604) 36 Cost of Sales Cost of sales was $166.1 million for the nine months ended September 30, 2024, including expenses of $26.4 million related to excess, obsolete, or expired inventory and losses on certain firm purchase commitments, $3.8 million ROU asset impairment charges for CMO manufacturing capacity of excess quantities, $37.1 million related to unutilized manufacturing capacity, and a credit of $0.7 million related to certain negotiated reductions to previously recognized firm purchase commitments. Cost of sales was $188.8 million for the nine months ended September 30, 2023, including expense of $121.6 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments, $30.1 million related to unutilized manufacturing capacity, and a credit of $40.3 million related to negotiated reductions to certain previously recognized firm purchase commitments. Prior to receiving regulatory approval, we expensed manufacturing costs as research and development expenses. After receiving regulatory approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. If inventory sold for the nine months ended September 30, 2024 was valued at expected standard cost, including expenses related to excess and obsolete inventory, adjusted cost of sales for the period would have been approximately $167.9 million, an adjustment of $1.8 million as compared to cost of sales recognized. If inventory sold for the nine months ended September 30, 2023 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $224 million, an adjustment of $35.2 million. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer pricing mix or standard costs. Research and Development Expenses Research and development expenses decreased to $286.8 million for the nine months ended September 30, 2024 from $572.8 million for the same period in 2023, a decrease of $286.0 million. The decrease was primarily due to a reduction in overall expenditures relating to development activities on coronavirus vaccines, including our COVID-19 Program, and CIC, as summarized in the table below (in thousands): Nine Months Ended September 30, 2024 2023 Coronavirus vaccines $ 87,759 $ 321,132 Other vaccine development programs 3,395 2,786 Total direct external research and development expense 91,154 323,918 Employee expenses 107,696 133,502 Stock-based compensation expense 16,848 33,826 Facility expenses 38,551 45,920 Other expenses 32,540 35,639 Total research and development expenses $ 286,789 $ 572,805 Research and development expenses for coronavirus vaccines for the nine months ended September 30, 2024 and 2023 decreased from $321.1 million to $87.8 million primarily as a result of a reduction in manufacturing and support costs due, in part, to a reduction in our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, COVID-19 Vaccine, including embedded lease costs, under manufacturing supply agreements with CMOs and CDMOs. The decrease was also due to a benefit of $26.6 million for the nine months ended September 30, 2024 resulting from the Confidential Settlement Agreement and Release agreement entered into with Fujifilm resulting in a reduction to previously recorded expense (see Note 6 to our accompanying unaudited consolidated financial statements). Selling, General, and Administrative Expenses Selling, general, and administrative expenses decreased to $258.8 million for the nine months ended September 30, 2024 from $313.7 million for the same period in 2023, a decrease of $54.9 million. Excluding the Sanofi transaction related costs of $31.7 million, the decrease in selling, general, and administrative expenses is primarily due to certain cost containment measures to reduce our operating spend. For the remainder of 2024, we expect a reduction in our annual combined research and development, and selling, general, and administrative spend as a result of our Restructuring Plan as discussed in Note 15 to our accompanying unaudited 37 consolidated financial statements. Other Income (Expense) Nine Months Ended September 30, 2024 2023 Change Other income (expense), net (in thousands): Interest expense $ (12,490) $ (10,299) $ (2,191) Other income 27,307 26,912 395 Total other income (expense), net $ 14,817 $ 16,613 $ (1,796) Total other income (expense), net for the nine months ended September 30, 2024 was $14.8 million of income as compared to $16.6 million of income for the same period in 2023, a decrease of $1.8 million. Income Tax Expense During the nine months ended September 30, 2024, we recognized an income tax expense of $3.4 million related to federal, state, and foreign income taxes and foreign withholding taxes. During the nine months ended September 30, 2023, we recognized an income tax expense of $0.3 million related to federal, state, and foreign income taxes. Net Loss Nine Months Ended September 30, 2024 2023 Change Net Loss (in thousands, except per share information): Net Loss $ (106,469) $ (366,673) $ 260,204 Net Loss per share, basic and dilutive $ (0.71) $ (3.94) $ 3.23 Weighted average shares outstanding, basic and dilutive 149,486 93,046 56,440 Net loss for the nine months ended September 30, 2024 was $106.5 million, or $0.71 per share, basic and dilutive, as compared to net loss of $366.7 million, or $3.94 per share, basic and dilutive, for the same period in 2023. The decrease in net loss during the nine months ended September 30, 2024, was primarily due to a decrease in research and development expenses. The increase in weighted average shares outstanding for the nine months ended September 30, 2024 is primarily a result of sales of our common stock. Liquidity Matters and Capital Resources Our future capital requirements depend on numerous factors including, but not limited to, revenue from our product sales, milestone payments, royalties and reimbursements under licensing arrangements with our strategic partners; our projected activities related to the development and commercial support of our COVID-19 Vaccine and our CIC and stand-alone influenza vaccine candidates, including significant commitments under various clinical research organizations, CMO, and CDMO agreements; the progress of preclinical studies and clinical trials; the time and costs involved in obtaining regulatory approvals; the costs of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights; and other manufacturing, sales, and distribution costs. We plan to continue developing other vaccines and product candidates, such as our potential combination vaccine candidates, which are in various stages of development. Our ability to generate revenue from product sales is subject to uncertainty specifically as it relates to our ability to successfully develop, manufacture, distribute, and market our updated vaccine and to successfully execute on our APAs, as discussed below. Additionally, our plans include our ongoing restructuring and cost reduction measures (see Note 15 to our accompanying unaudited consolidated financial statements), and may also include raising additional capital through a combination of additional equity and debt financing, collaborations, strategic alliances, asset sales, and marketing, distribution, or licensing arrangements. New financings may not be available to us on commercially acceptable terms, or at all. If we are unable to obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate some or all of our operations, or further downsize our organization, any of which may have a material adverse effect on our business, financial condition, results of operations. 38 In May 2024, we entered into the Sanofi CLA pursuant to which Sanofi received: i) A co-exclusive license to commercialize our current stand-alone COVID-19 Vaccine, including our prototype vaccine and updated vaccines, that address seasonal variants throughout the world (the “COVID-19 Vaccine Products”); ii) A sole license to develop and commercialize combination products containing a potential combination of our COVID-19 Vaccine and Sanofi’s seasonal influenza vaccine (“COVID-19 and influenza Combination Products” or “CIC Products”); iii) A non-exclusive license to develop and commercialize combination products containing both our COVID-19 Vaccine and one or more non-influenza vaccines (“Other Combination Products” and together with the COVID-19 Vaccine Products, CIC Products, and Other Combination Products (“Licensed COVID-19 Products” ); and iv) A non-exclusive license to develop and commercialize other vaccine products selected by Sanofi that include our Matrix-M™ adjuvant. Under the Sanofi CLA, we received a non-refundable upfront payment of $500 million. In addition, we will also be eligible to receive development, technology transfer, launch, and sales milestone payments totaling up to $700 million in the aggregate with respect to the Licensed COVID-19 Products and royalty payments on Sanofi’s sales of such licensed products. In addition, we are eligible to receive development, launch, and sales milestone payments of up to $200 million for each of the first four Adjuvant Products and $210 million for each Adjuvant Product thereafter, and royalty payments on Sanofi’s sales of all such licensed products. Commencing shortly after the effective date of the Sanofi CLA, we commenced activities related to the technology transfer of our manufacturing process for the COVID-19 Vaccine Products and Matrix-M™ components to Sanofi. Until the successful completion of such transfer, we will supply Sanofi with both COVID-19 Vaccine Products and Matrix-M™ intermediary components for Sanofi’s use and are eligible for reimbursement of such costs from Sanofi. Additionally, Sanofi will reimburse us for our research and development and medical affairs costs related to the COVID-19 Vaccine Products in accordance with agreed upon plans and budgets. Under the Sanofi CLA, we will continue to commercialize the updated vaccine. Beginning in 2025 and continuing during the term of the Sanofi CLA, we and Sanofi will commercialize the COVID-19 Vaccine Products worldwide in accordance with a commercialization plan agreed by us and Sanofi, under which we will continue to supply our existing APA customers and strategic partners, including Takeda and SII. Upon completion of the existing APAs, we and Sanofi will jointly agree on commercialization activities of each party in each jurisdiction. In May 2024, we also entered into the Subscription Agreement, pursuant to which we sold and issued to Sanofi, in a private placement, 6.9 shares of our common stock at a price of $10.00 per share for aggregate gross proceeds to us of $68.8 million. We have also entered into supply agreements, sometimes referred to as APAs, with various countries globally. As of September 30, 2024, the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties under the licensing agreements, was approximately $1.3 billion, of which $1.1 billion is included in Deferred revenue on our consolidated balance sheet. Failure to timely meet regulatory milestones, obtain timely supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under our APAs may require us to refund portions of upfront or other payments or result in reduced future payments, which could adversely impact our ability to realize revenue from our unsatisfied performance obligations. The timing to fulfill performance obligations related to supply agreements will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine under certain of our APAs. The supply agreements typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment, and are applied to billings upon delivery of COVID-19 Vaccine. Such upfront payments generally become non-refundable upon our achievement of certain development, regulatory, and commercial milestones. Additionally, for the remaining APA agreements, our intent is to amicably negotiate or deliver doses or when appropriate, exit agreements. In October 2023, NVX-CoV2601 received EUA from the U.S. FDA for active immunization to prevent COVID-19 in individuals aged 12 and older. Immediately upon authorization, NVX-CoV2601 has also been included in the recommendations issued by the CDC in September 2023. Doses became available within the U.S. at many major pharmacy retailers, following the 39 Center for Biologics Evaluation and Research release of vaccine batches. We have established reserves for gross-to-net deductions for amounts that we expect to return to our customers. As of September 30, 2024, gross-to-net reserve balances were $78.3 million related to product returns and $24.6 million related to wholesale distributor fees, discounts, and chargebacks and was included in Accrued expenses on our consolidated balance sheet. Pursuant to the Settlement Agreement with Fujifilm (see Note 6 to our accompanying unaudited consolidated financial statements), in March 2024, we paid $42.0 million to Fujifilm, the parties agreed to a mutual release of claims arising from, under or otherwise in connection with the prior confidential settlement agreement and release effective September 30, 2022, and Fujifilm agreed to dismiss its demand for arbitration with the Judicial Arbitration and Mediation Services (“JAMS”). This payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expenses from Fujifilm manufacturing activity and accordingly, during the nine months ended September 30, 2024, we recorded a benefit of $26.6 million as Research and development expenses. We have an APA with the Commonwealth of Australia (“Australia”) for the purchase of doses of COVID-19 Vaccine (the “Australia APA”). In March 2024, we and Australia agreed to cancel the COVID-19 Vaccine doses previously scheduled for delivery in the fourth quarter of 2023. As a result of the cancellation, the total contract value was reduced by $54.0 million, including $6.0 million of deferred revenue related to the cancelled doses that will be applied as a credit towards future deliveries of doses. Australia is not required to purchase updated vaccine doses until we receive authorization from Therapeutic Goods Administration (“TGA”). We do not expect approval in time for product delivery in 2024 which could result in a loss or deferral of approximately $240 million of contract value. We plan to seek an amendment to the Australia APA which may not be achievable on acceptable terms or at all. As of September 30, 2024, $119.1 million was classified as current Deferred revenue and $14.7 million was classified as non-current Deferred revenue with respect to the Australia APA in our consolidated balance sheet. If we are unable to satisfy our obligations under the amended Australia APA, $92.5 million of deferred revenue may become refundable and approximately $225 million of remaining funds under the contract may no longer be available. In July 2024, the Pharmaceutical Management Agency (“Pharmac”), a New Zealand Crown entity, provided notice of its termination of its APA (the “New Zealand APA”). Pharmac has requested a refund of certain advanced payments, and we are in discussion with Pharmac regarding whether a refund of the advanced payments is appropriate under the New Zealand APA. As of September 30, 2024, $31.3 million was reclassified from current Deferred revenue to Other current liabilities in our consolidated balance sheet. Approximately $125 million of the contract value related to future deliverables may no longer be available if the New Zealand APA is terminated. We responded to Pharmac in September 2024 indicating we do not believe Pharmac has the right to unilaterally terminate the contract or receive a refund of any part of the remaining upfront payment. We have an APA with His Majesty the King in Right of Canada as represented by the Minister of Public Works and Government Services, as successor in interest to Her Majesty the Queen in Right of Canada, as represented by the Minister of Public Works and Government Services (the “Canadian government”), for the purchase of doses of COVID-19 Vaccine (the “Canada APA”). The Canadian government may terminate the Canada APA, as amended, if we fail to receive regulatory approval for its COVID-19 Vaccine using bulk antigen produced at Biologics Manufacturing Centre (“BMC”) Inc. on or before December 31, 2024. We do not expect to receive regulatory approval of our COVID-19 Vaccine using bulk antigen produced at BMC on or before December 31, 2024 . Therefore, we plan to seek an amendment to the Canada APA to address possible alternatives, which may not be achievable on acceptable terms or at all. As of September 30, 2024, $452.1 million was classified as current Deferred revenue and $136.1 million was classified as non-current Deferred revenue with respect to the Canadian APA in our 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. In September 2022, we entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (the “Amended and Restated UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy (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 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 our prototype vaccine, with the number of Conditional Doses contingent on, and subject to reduction based on, our timely achievement of supportive recommendations from the Joint Committee on Vaccination and Immunisation (“JCVI”) that is approved by the UK Secretary of State for Health. If the Authority did not purchase the Conditional Doses or the number of such Conditional Doses was reduced below 15 million doses of our prototype vaccine, we 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. 40 As of November 30, 2022, the JCVI had not made a supportive recommendation with respect to our prototype vaccine, thereby triggering, under the terms of the Amended and Restated UK Supply Agreement, (i) a reduction of the number of Conditional Doses from 15 million doses to 7.5 million doses, which reduced number of Conditional Doses were contingent on, and subject to further reduction based on, our timely achievement by November 30, 2023 of a supportive recommendation from JCVI that is approved by the UK Secretary of State for Health as described in the paragraph above, and (ii) an obligation for us to repay $112.5 million related to the upfront payment previously received from the Authority under the Original UK Supply Agreement. In April 2023, we repaid the $112.5 million related to the November 30, 2022 triggering event. 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. In November 2024, we and the Authority entered into a Termination and Settlement Agreement (the “Settlement Agreement”) and a Letter of Amendment to the Settlement Agreement (the “Settlement Agreement Amendment”), relating to the Amended and Restated Supply Agreement by and between us and the Authority, settling the disputes regarding the Amended and Restated Supply Agreement and releasing both parties of all claims arising out of or connected with the Amended and Restated Supply Agreement. Under the terms of the Settlement Agreement, we and the Authority agreed to terminate the Amended and Restated Supply Agreement and to fully settle the outstanding amount under dispute related to upfront payments of $112.5 million, which is reflected in Other current liabilities on the consolidated balance sheet, previously received by us from the Authority under the Amended and Restated Supply Agreement. Pursuant to the Settlement Agreement, we agreed to pay a refund of $123.8 million (the “Settlement Payment”) to the Authority in equal quarterly installments of $10.3 million over a three year period, ending in June 2027. The Settlement Payment amount includes a $11.3 million provision for interest over the period and may be avoided if we choose to accelerate payments. Under the terms of the Settlement Agreement Amendment, we and the Authority agreed to the date of payment for the first quarterly installment to be November 30, 2024. We entered into an APA with the Vaccine Alliance (“Gavi”) in May 2021 (the “Gavi APA”), pursuant to which we received upfront payments of $700 million from Gavi (the “Advance Payment Amount”) to be applied against purchases of our prototype vaccine by certain countries participating in the COVAX Facility. As of December 31, 2023, the remaining Gavi Advance Payment Amount was $696.4 million. In February 2024, we 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, we are responsible for payment to Gavi of (i) an initial settlement payment of $75 million, which we paid in February 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 second 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 our vaccines funded by Gavi for supply to certain low-income and lower-middle income countries. We have the right to price the vaccines offered to such low-income and lower-middle income countries in our discretion, and, when utilized by Gavi, we will credit the actual price per vaccine paid against the applicable credit. We intend to price vaccines offered via the tender process, consistent with our shared goal with Gavi to provide equitable access to those countries. Also, pursuant to the Gavi Settlement Agreement, we granted Gavi an additional credit of up to $225 million that may be applied against qualifying sales of any of our 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 total, the Gavi settlement agreement is comprised of $700 million of potential consideration, consisting of the $75 million initial settlement payment, deferred payments of up to $400 million that may be reduced through annual vaccine credits, and the additional credit of up to $225 million that may be applied for certain qualifying sales. We recorded the $3.6 million difference between the refund liability recorded as of December 31, 2023 of $696.4 million and the $700 million of total consideration under the arrangement as a revenue adjustment during the nine months ended September 30, 2024. As of September 30, 2024, the remaining amounts included on our consolidated balance sheet are classified as $225.0 million in non-current Deferred revenue for the additional credit that may be applied against future qualifying sales, $95.0 million in Other current liabilities, and $290.0 million in Other non-current liabilities. In addition, we and Gavi entered into a security agreement pursuant to which we granted Gavi a security interest in accounts receivable from SII under the SII R21 Agreement (see Note 6 to our accompanying unaudited consolidated financial statements), 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. Our funding agreements currently include funding from the Coalition for Epidemic Preparedness Innovations (“CEPI”) in the form of one or more forgivable no interest term loans (“CEPI Forgivable Loan Funding”). Payments received 41 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 our costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI. The timing and amount of any loan repayments is currently uncertain. We continue to assess our manufacturing needs and modify our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, COVID-19 Vaccine, and in doing so recognize that significant costs may be incurred. For the 2023-2024 vaccination season, we depended exclusively on Serum for co-formulation and filling, and finishing. For the 2024-2025 vaccination season, we expanded our supply chain network and introduced new single-dose vial and pre-filled syringe product presentations in certain markets. In May 2024, we and SLS entered into a supply agreement (the “SLS Supply Agreement”) under which SLS will supply us antigen drug substance and finished COVID-19 Vaccine doses. The SLS Supply Agreement includes the general terms and conditions of supply orders between us and SLS. We and SLS execute firm purchase orders to include specific quantities to be delivered under the SLS Supply Agreement. Pursuant to the SLS Supply Agreement, SLS or its authorized manufacturer is responsible for obtaining and maintaining all necessary permits or other regulatory approvals to manufacture drug substance and drug product. Unless otherwise earlier terminated, the SLS Supply Agreement will expire on the later of June 30, 2028 or two years after the expiration or termination of the last firm purchase order under the SLS Supply Agreement. Either party may terminate the SLS Supply Agreement if the other party commits a material breach of the SLS Supply Agreement that is not timely cured or is not curable. The SLS Supply Agreement contains certain customary representations and warranties of the parties along with certain customary covenants, including confidentiality and indemnity provisions. Any delays or disruptions in these suppliers’ operations could prevent or delay the delivery of customer orders. As of September 30, 2024, we had $924.5 million in cash and cash equivalents, restricted cash and marketable securities as compared to $583.8 million as of December 31, 2023. We funded our operations for the nine months ended September 30, 2024 primarily with cash and cash equivalents, non-refundable upfront payment under the Sanofi CLA and Subscription Agreement, proceeds from the sale of securities under our August 2023 Sales Agreement, upfront payments under APAs, and revenue from product sales. In May 2023, we announced our plan to restructure our global footprint to reduce our planned expenditures and in January 2024, we announced further reductions in our global workforce. We anticipate our future operations to be funded primarily by milestone payments, royalties, transition services and technology transfer under our Sanofi CLA, revenue from product sales, our cash and cash equivalents and investments in marketable securities, and other potential funding sources including equity financings, which may include at the market offerings, debt financings, collaborations, strategic alliances, asset sales, and marketing, distribution or licensing arrangements. The following table summarizes cash flows for the nine months ended September 30, 2024 and 2023 (in thousands): Nine Months Ended September 30, 2024 2023 Change Net cash provided by (used in): Operating activities $ 85,900 $ (537,186) $ 623,086 Investing activities (348,045) (49,728) (298,317) Financing activities 264,005 (95,923) 359,928 Effect on exchange rate on cash, cash equivalents, and restricted cash 2,917 355 2,562 Net increase (decrease) in cash, cash equivalents, and restricted cash 4,777 (682,482) 687,259 Cash, cash equivalents, and restricted cash at beginning of period 583,810 1,348,845 (765,035) Cash, cash equivalents, and restricted cash at end of period $ 588,587 $ 666,363 $ (77,776) Net cash provided by operating activities was $85.9 million for the nine months ended September 30, 2024, as compared to net cash used in operating activities of $537.2 million for the same period in 2023. The increase in cash provided by operating activities is primarily due to the non-refundable upfront payment under the Sanofi CLA and an overall decrease in operating expenses period-over-period, partially offset by the timing of payments to vendors. Net cash used in investing activities was $348.0 million for the nine months ended September 30, 2024, as compared to $49.7 million for the same period in 2023. The increase in cash used in investing activities is primarily due to our investment in marketable securities, partially offset by lower expenditures on equipment and leasehold improvements. 42 Net cash provided by financing activities was $264.0 million for the nine months ended September 30, 2024, as compared to net cash used in financing activities of $95.9 million for the same period in 2023. The increase in cash provided by financing activities is primarily as a result of proceeds from the sale of shares under our August 2023 Sales Agreement of approximately $188 million and Subscription Agreement of $68.8 million in 2024 as compared with the $325 million repayment of our 3.75% Convertible notes and finance lease payments during 2023, partially offset by $257.0 million of proceeds from the sale of shares under our June 2021 Sales Agreement and August 2023 Sales Agreement and the sale of SK Shares. Going Concern As described in Note 2 to our accompanying unaudited consolidated financial statements, we evaluated our ability to continue as a going concern and concluded that we will have sufficient capital available to fund our operations for at least one-year from the date that the financial statements were issued.