NOVAVAX INC 10-Q

Item 1A. Risk Factors Information regarding risk and uncertainties related to our business appears in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 27, 2025. There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, other than as described below. Risks Related to Our Financial Condition and Capital Requirements Our existing funding and supply agreements, including the Sanofi CLA, or our advance purchase agreements do not assure success of our vaccine candidates or vaccines or that we will be able to fully fund our vaccine candidates or vaccines or our company operations, and if we are unable to satisfy the performance obligations under such agreements, we may not be eligible to receive milestone payments under such agreements, the agreements may be terminated, the purchase commitments may be reduced or we may be required to refund advance payments, which may have a material adverse effect on our liquidity and financial condition. 49 We have entered into, and may in the future enter into, collaboration, funding, supply and other agreements for our vaccines or vaccine candidates that include prepayments from the purchasers to help fund our development, manufacture and/or commercialization of the vaccine. Certain of these agreements may contain development, technology transfer, launch, sales and other milestones related to our vaccines or vaccine candidates pursuant to which we may be eligible to receive milestone payments upon the achievement of the requisite milestone. For example, we earned a payment of $175 million upon the approval of the BLA marketing authorization for a COVID-19 Vaccine Product in a pre-filled syringe from the U.S. FDA and we are eligible to receive future milestone payments under the Sanofi CLA consisting of $125 million related to COVID-19 Vaccine Products and up to $350 million related to influenza-COVID-19 combination products. Such future milestones include a payment of $25 million upon the transfer of such approval to Sanofi, $25 million upon the transfer of EMA approval of a COVID-19 Vaccine Product in a pre-filled syringe to Sanofi, $75 million upon the completion of the technology transfer of our manufacturing process for the COVID-19 Vaccine Products to Sanofi, and up to $350 million in CIC Product-related development and launch milestones. 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. We may experience challenges in satisfying our obligations under these agreements, including as a result of delays in, or failure to receive, regulatory approval, delayed performance of our third-party contractors and suppliers, which may impact our ability to achieve such milestones, and receive related milestone payments, may potentially expose us to damages or other liability pursuant to these agreements, including the Sanofi CLA, and may have a material and adverse effect on our liquidity and financial condition. Under certain APAs, if we do not timely achieve requisite regulatory milestones for our COVID-19 Vaccine in the relevant jurisdictions, obtain supportive recommendations from governmental advisory committees, and/or achieve product volume or delivery timing obligations, purchasers may seek to terminate such agreements, reduce their purchase commitments, require us to refund all or some prepayments we have received, or renegotiate such agreements, each of which could have a material and adverse effect on our liquidity and financial condition. The timing to fulfill performance obligations related to supply agreements will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of prototype COVID-19 Vaccine under certain of our supply agreements. 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. We may not achieve such milestones, which could have a material and adverse effect on our financial condition. For example, in December 2024, we entered into an amendment to the Australia APA pursuant to which, among other things, we acknowledged the cancellation by Australia of the delivery of certain doses of our COVID-19 Vaccine scheduled for delivery between the fourth quarter of 2023 and the fourth quarter of 2025 and we agreed to credit approximately $31 million of the advanced payment paid by Australia to us against outstanding invoices and invoices for the future delivery of approximately three million doses of COVID-19 Vaccine without requiring additional cash payments. In addition, the amendment provides for certain remedies for Australia, including return of unused credit, cancellation of doses, or termination of the Australia APA, in the event we miss or under deliver doses to Australia or fail to receive regulatory approval of a variant COVID-19 vaccine. Specifically, Australia may cancel doses that are due to be delivered in 2025 if we do not receive regulatory approval for, and deliver, the updated COVID-19 Vaccine on or before December 31, 2025, and may terminate the Australia APA, as amended, if we do not receive regulatory approval for, and deliver, the updated COVID-19 Vaccine on or before March 31, 2026. The amendment also provides Australia with the right to cancel doses if we fail to timely notify Australia of changes to our commercialization plans. In the event that we do not, on or before the relevant contractual deadlines, receive regulatory approval for, and deliver, the seasonally updated COVID-19 Vaccine, up to $92.5 million of deferred revenue may become refundable. As of June 30, 2025, $31.2 million was classified as current Deferred revenue and $102.6 million was classified as non-current Deferred revenue with respect to the Australia APA on our consolidated balance sheet, which will be recognized in product revenue as doses are delivered to Australia. Following the withdrawal of our application at the request of the TGA for authorization of our updated COVID-19 Vaccine, we are in discussions with the TGA, regarding potential regulatory paths for approval, including the submission of a new application. We may seek to further amend the Australian APA in light of this development, which amendment may not be achievable on acceptable terms or at all. For additional information on the terms of our existing APAs and termination of our prior APAs, see Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity Matters and Capital Resources — Supply Agreements.” 50 Risks Related to Product Development and Commercialization Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face uncertainty with respect to pricing, third-party reimbursement and healthcare reform, all of which could be subject to change, and could adversely affect any commercial success of our vaccine candidates. Our ability to collect revenue from the commercial sale of our vaccines may depend on our ability, and that of any current or potential future collaboration partners or customers, to obtain and if obtained, maintain adequate levels of approval, coverage and reimbursement for such products from third-party payers such as: • government health administration authorities such as the Advisory Committee for Immunization Practices of the Centers for Disease Control and Prevention (“ACIP”); • private health insurers; • managed care organizations; • pharmacy benefit management companies; and • other healthcare related organizations. Third-party payers are increasingly challenging the prices charged for medical products and may deny coverage or offer inadequate levels of reimbursement if they determine that a product has not received appropriate clearances from the U.S. FDA, or foreign equivalent, or other government regulators; is not used in accordance with cost-effective treatment methods as determined by the third-party payer; or is experimental, unnecessary, or inappropriate. Prices could also be driven down by managed care organizations that control or significantly influence utilization of healthcare products. In both the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the healthcare system in ways that could affect our ability to sell vaccines and could adversely affect the prices that we receive for our vaccine candidates, if approved. Some of these proposed and implemented reforms could result in reduced drug pricing or reimbursement rates for medical products, and the impact of such reform could adversely affect our business strategy, operations and financial results. Our exposure to price-related regulation could depend on whether our products are reimbursed by Medicare under Part B or Part D. Medicare Part B vaccine coverage includes vaccines to prevent influenza, pneumococcal disease, hepatitis B for beneficiaries who are at medium or high risk, and COVID-19. Vaccines for such conditions do not have any cost-sharing requirements. Meanwhile, Medicare Part D vaccine coverage includes all other commercially available vaccines that are determined to be reasonable and necessary to prevent illness. Part D vaccine coverage historically included cost-sharing requirements, but, effective January 1, 2023, the IRA modified the legal requirements to provides access to the Centers for Disease Control and Prevention (“CDC”) and ACIP-recommended vaccines covered under Medicare Part D without cost-sharing. Recommendation by ACIP of a vaccine has significant impacts on the coverage and reimbursement of the vaccine from commercial and governmental payers, such as Medicaid and Medicare. For example, vaccines that receive ACIP recommendations benefit from enhanced coverage requirements under the Affordable Care Act, the Inflation Reduction Act, and the Social Security Act, among other statutes. ACIP’s recommendations therefore directly influence coverage and reimbursement decisions by governments and private payers, in turn influencing healthcare providers and individual decision making. Similarly, the absence or withdrawal of an ACIP recommendation for a vaccine can result in increased beneficiary cost-sharing obligations and absence or limitations of coverage and reimbursement. Under the Trump administration, the COVID-19 vaccine for healthy children and healthy pregnant women has been removed from the CDC recommended immunization schedules, and the HHS Secretarial Directives ratifying CDC recommendations for use of COVID-19 vaccines for children ages six months to 17 years have been rescinded. In June 2025, the Trump administration retired all members of ACIP and appointed new members, some of whom have previously voiced negative views regarding COVID-19 vaccines. It is possible that the ACIP may withdraw or limit its recommendation for COVID-19 vaccines. The changes of the CDC recommendations, as well as any possible negative actions by ACIP regarding COVID-19 vaccines, may adversely affect demand for our vaccines and have material adverse effects on our business and results of operations. 51 Since the beginning of the COVID-19 pandemic, the U.S. federal government has been the predominant purchaser of COVID-19 vaccines, making it possible for population-wide access to vaccinations. This population-wide access may change as the pandemic moves past the crisis phase and the market transitions to a third‐party reimbursement model. This transition to a more traditional third‐party reimbursement model is not tied to the ending of the Public Health Emergency and in part reflects the fact that the U.S. federal government has not received additional funds from Congress to continue to purchase more vaccines. As federal funding declines for COVID-19 vaccines, the federal government will most likely transition to standard commercial purchasing through different healthcare system channels, including commercial insurers and pharmacy benefit managers, and consequently shift the cost of COVID-19 vaccines to insurers and patients (in the form of premiums and out-of-network costs). With respect to the government healthcare programs and commercial insurance, there may no longer be blanket coverage of COVID-19 vaccines without, in certain instances, accompanying conditions of reimbursement, such as the institution of prior authorization protocols. While coverage under Medicare, Medicaid, the Children’s Health Insurance Program, and private plans may continue to be available for COVID-19 vaccines, adverse decisions from ACIP may limit or reduce the coverage and result in beneficiary cost-sharing obligations that do not apply so long as a vaccine is ACIP-recommended. The transition to private payer coverage of COVID-19 vaccines, combined with adverse changes in CDC recommendations as well as potential negative actions by ACIP, could have an adverse effect on our business and results of operations. Further, even if consumers are guaranteed free access or protected against some costs, they could face access challenges to our product if sufficient amounts of our product are not available compared to that of our competitors or not procured by pharmacies or other providers. Additionally, the pharmaceutical industry has also been the subject of significant publicity in recent years regarding the pricing of pharmaceutical products, including publicity and pressure resulting from prices charged by pharmaceutical companies for new products as well as price increases by pharmaceutical companies on older products that some people have deemed excessive. As a result, pharmaceutical product prices have been the focus of increased scrutiny by the United States government, including certain state attorneys general, members of Congress, the Trump administration, and the United States Department of Justice. If reforms in the healthcare industry limit or reduce reimbursement for our potential products, the market for our potential products will be reduced, and we could lose potential sources of revenue. The existence or threat of cost control measures could cause our corporate collaborators to be less willing or able to pursue research and development programs related to our vaccine candidates. Further, it is also possible that additional governmental action is taken in response to the COVID-19 pandemic. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us. We also cannot predict if the Trump administration’s policies might adversely impact funding for vaccine research and development, reimbursement for vaccines and their administration, vaccine mandates and recommendations, and public perception of vaccine importance. As described above, the U.S. Department of Health and Human Services (“DHHS”) Secretary Robert F. Kennedy Jr. is replacing the members of ACIP, and some new members have previously voiced negative views regarding COVID-19 vaccines. It remains unclear whether U.S. FDA will make comparable changes with respect to its Vaccines and Related Biological Products Advisory Committee, which makes recommendations to U.S. FDA regarding novel vaccine products. Furthermore, on May 26, 2025, Secretary Kennedy directed the CDC to remove COVID-19 vaccines from the recommended immunization schedule for children and adolescents between six months and 17 years of age, and for pregnant individuals. Such changes and similar changes adopted by the current administration could, among other things, result in adverse recommendations from ACIP or delay ACIP decisions or other elements of the approval pathway, potentially adversely impacting vaccine availability and recommendations, which could have a material adverse effect on our results of operations and financial condition. We may not succeed in obtaining or maintaining full U.S. FDA licensure or foreign regulatory approvals necessary to sell our vaccine candidates. The development, manufacture and marketing of our pharmaceutical and biological products are subject to government regulation by the U.S. FDA and regulatory authorities in other jurisdictions, including the EMA and the Swedish Medical Products Agency (Läkemedelsverket, LV) with respect to our adjuvant product being developed in Sweden, as well as other country authorities into which active pharmaceutical ingredients and excipients are imported and/or manufactured by us or our sub-contracted manufacturers. In the U.S. and most foreign countries, we must complete rigorous preclinical testing and extensive clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product. In May 2025, the U.S. FDA approved our COVID-19 Vaccine, marketed as Nuvaxovid, for active immunization to prevent COVID-19 caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) in adults 65 years and older and individuals 12 through 64 years who have at least one underlying condition that puts them at high risk for severe outcomes from COVID-19. Our COVID-19 Vaccine has also received conditional marketing authorization, emergency use authorization, or full approval in the various other jurisdictions. We also have vaccine candidates in clinical trials and preclinical laboratory or animal studies. 52 Delays in obtaining regulatory approval, including regulatory decisions impacting labeling, approval or authorization, including the scope of the indicated population, product dosage, manufacturing processes, shelf life, safety and/or other matters, can be extremely costly in terms of lost sales opportunities, loss of any potential marketing advantage of being early to market and increased clinical trial costs. For example, our recently approved BLA covers a formulation of our product with a three month shelf life, and we have sought FDA approval through a BLA supplement to extend the shelf life to six months, for which, approval is pending as of the date of this Quarterly Report. The approval of this BLA supplement is necessary for the commercial viability of our COVID-19 Vaccine, given that a three month shelf life is unlikely to be commercially attractive to customers to whom we sell our products due to the short amount of unexpired shelf life available to them after completion of testing and distribution. Even if we do obtain approval of this BLA supplement, it may not be issued in time to distribute our product for use during the full 2025-2026 vaccination season. If we are delayed in offering our product during the 2025-2026 vaccination season, or we are unable to do so at all because of the failure to obtain or delay in obtaining approval of the BLA supplement, this could negatively impact our business and results of operations. Moreover, even though we have obtained approval of a BLA, we are required to conduct postmarket clinical trials, which are time-consuming, expensive, and may ultimately not be successful. If we do not conduct our postmarket clinical trials to the satisfaction of the FDA or if we do not generate favorable data with respect to our marketed products in these or other studies, this could result in labeling changes, narrowed indications, or withdrawal of approval, and we could be subject to regulatory action. There is no guarantee that the results obtained in preclinical studies or our clinical trials of our current and future vaccine candidates will be sufficient to obtain or maintain regulatory approval or marketing authorization for such vaccines and vaccine candidates. Additionally, even if regulatory authorities agree with the design and implementation of the clinical trials set forth in an investigational new drug or other applicable regulatory submission, such regulatory authorities may change their requirements or recommendations in the future. Any delays or failure to obtain regulatory approvals or clearances to initiate our clinical trials may prevent us from completing our clinical trials or commercializing and marketing our current and future product candidates on a timely basis, if at all, which could negatively impact our results of operations and financial condition. The regulatory pathway for our COVID-19 Vaccine is continually evolving and may result in unexpected or unforeseen challenges. The regulatory pathway for our COVID-19 Vaccine is evolving and failure by us to comply with any laws, rules and standards, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including penalties, fines and delays in vaccine licensure. Efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention to regulatory compliance activities. Such rules or standards may adversely affect our plans to develop our COVID-19 Vaccine and failure by us to comply with any laws, rules or standards, some of which may not exist yet or may change, could result in a range of adverse consequences, such as penalties, fines or failure to receive funding. The speed at which multiple stakeholders are moving to create, test and approve vaccines for COVID-19 is highly unusual and may increase the risks associated with traditional vaccine development, which typically takes between eight and ten years. Given this accelerated timeline, we and regulators, such as the U.S. FDA, the EMA, and the Medicines and Healthcare products Regulatory Agency may make decisions more rapidly than is typical. Evolving or changing plans or priorities at the U.S. FDA or other regulatory bodies to whom we wish to apply for authorization, including based on new knowledge of COVID-19 and how the disease affects the human body, new variants of the virus, and regulatory policy changes (including those at U.S. agencies such as the DHHS, U.S. FDA, and CDC due to the change in U.S. presidential administration in January 2025), may significantly affect the regulatory pathway for our COVID-19 Vaccine. For example, in May 2023, the COVID-19 Public Health Emergency designation expired in the U.S. and the WHO determined that the COVID-19 pandemic no longer fit the definition of a Public Health Emergency of National Concern, which removed the justification for shortened regulatory timelines. Results from clinical testing may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects. 53 In addition, the U.S. FDA’s or other regulatory authorities’ analysis of clinical data may differ from our interpretation, or regulators’ requirements and expectations for vaccine authorization or approval may change over time, with the result that the U.S. FDA or other regulators may require that we conduct additional clinical trials or non-clinical studies. The evolving regulatory pathway may impede the development, commercialization and/or licensure of our COVID-19 Vaccine. For example, on June 26, 2025, new FDA commissioner, Martin Makary, and the previous director of FDA’s Center for Biologics Evaluation and Research, co-authored a publication in the New England Journal of Medicine, in which they set forth a new FDA framework for the development of COVID-19 vaccines. According to the publication, FDA now recommends that sponsors of vaccines intended for otherwise healthy individuals under the age of 65 (e.g., those without an underlying medical condition that increases the risk of severe COVID-19) conduct randomized, placebo controlled trials to support BLA submissions for use of their COVID-19 vaccine candidates in these populations, while signaling the intent to continue approving BLAs for use in at-risk populations (e.g., those 65 years of age and older or those with underlying risk factors) on the basis of immunogenicity. Although the degree to which this policy will bind vaccine sponsors remains unclear, requirements to conduct placebo-controlled trials could increase expenses and/or delay or prevent the approval of new or modified COVID-19 vaccine candidates in patients who are not considered at-risk for severe COVID-19. Moreover, we are required to continue conducting clinical trials on a post-approval basis as a condition of approval of our BLA by the FDA, and regulators may require changes to our products as a result of the results of these studies. In addition, because the path to licensure of any vaccine against COVID-19 is unclear, we may have a widely used vaccine in circulation in certain countries as an investigational vaccine or a product authorized for temporary or emergency use prior to our receipt of full marketing approval. Unexpected safety issues in these circumstances could lead to significant reputational damage for us and our technology platform going forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional financial resources. Due to the recent change in presidential administration, we face uncertainty regarding potential regulatory developments that may adversely affect our business. We face uncertainty regarding the potential for changes in the regulatory environment following the change in presidential administration in January 2025. The new administration and federal government could adopt legislation, regulation, or policy that adversely affects our business or creates a more challenging and costly environment to pursue the development and commercialization of vaccines or other products. For example, the federal government, including the DHHS, the U.S. FDA, and the Centers for Disease Control and Prevention, may implement legislative, regulatory, or policy changes regarding the standards for approving new or updated vaccines, vaccine safety requirements, recommended immunization schedules for COVID-19 and other vaccinations and other information shared with the public regarding vaccines, vaccine coverage and reimbursement under federal healthcare programs, and manufacturer liability for vaccine-associated injuries. For additional information, refer to the risk factor titled “ Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face uncertainty with respect to pricing, third-party reimbursement and healthcare reform, all of which could be subject to change and could adversely affect any commercial success of our vaccine candidates .” Additionally, because one objective of the current Trump administration appears to be to decrease spending in the federal government, the U.S. FDA has faced staff reductions, which could impact the U.S. FDA’s ability to engage in routine regulatory and oversight activities and result in delays or limitations on our ability to proceed with clinical development programs and obtain regulatory approvals. It is difficult to predict how executive actions that may be taken under the current Trump administration may affect the U.S. FDA’s ability to exercise its regulatory authority. If such executive actions impose constraints on the U.S. FDA’s ability to engage in routine oversight and product review activities in the normal course, our business may be negatively impacted.