What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-10 compared with 2020-08-10 · 307 added, 164 removed, 403 unchanged (54% of the section changed)

3 unchanged sentences

(in thousands, except share and per share information)

September 30,

Current assets:

3 unchanged sentences

Accounts receivable

Unbilled services

Prepaid expenses and other current assets

4 unchanged sentences

Other non-current assets

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

3 unchanged sentences

Deferred revenue

Current portion of finance lease liabilities

Other current liabilities

2 unchanged sentences

Convertible notes payable

Non-current finance lease liabilities

Other non-current liabilities

2 unchanged sentences

Preferred stock, $ 0.01 par value, 2,000,000 shares authorized;

438,885 shares of redeemable Series A Convertible Preferred Stock issued and outstanding at June 30, 2020 and no shares issued and outstanding at December 31, 2019

438,885 shares of redeemable Series A Convertible Preferred Stock issued and outstanding at September 30, 2020 and no shares issued and outstanding at December 31, 2019

Stockholders' equity (deficit):

Common stock, $ 0.01 par value, 600,000,000 shares authorized at June 30, 2020 and December 31, 2019;

61,262,632 shares issued and 61,211,223 shares outstanding at June 30, 2020 and 32,399,352 shares issued and 32,352,416 shares outstanding at December 31, 2019

Common stock, $ 0.01 par value, 600,000,000 shares authorized at September 30, 2020 and December 31, 2019;

and 63,318,888 shares issued and 62,927,485 shares outstanding at September 30, 2020 and 32,399,352 shares issued and 32,352,416 shares outstanding at December 31, 2019

Additional paid-in capital

2 unchanged sentences

( 1,431,801 )

Treasury stock, 51,409 shares, cost basis at June 30, 2020 and 46,936 shares, cost basis at December 31, 2019

Treasury stock, 391,403 shares, cost basis at September 30, 2020 and 46,936 shares, cost basis at December 31, 2019

Accumulated other comprehensive loss

Total stockholders’ equity (deficit)

Total liabilities, preferred stock and stockholders' equity (deficit)

Total liabilities and stockholders’ equity (deficit)

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

2 unchanged sentences

(in thousands, except per share information)

For the Three Months

For the Six Months

Ended June 30,

For the Three Months Ended

For the Nine Months Ended

September 30,

Grant and other

Government contract

Total revenue

Research and development

Gain on Catalent transaction

General and administrative

7 unchanged sentences

Basic and diluted weighted average number of common shares outstanding

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

For the Three Months

For the Six Months

Ended June 30,

For the Three Months Ended

For the Nine Months Ended

September 30,

Other comprehensive income (loss):

Net unrealized gains on marketable debt securities available-for-sale

Foreign currency translation gain (loss) adjustment

Other comprehensive gain (loss)

Net unrealized gains (losses) on marketable securities available-for-sale

Foreign currency translation adjustment

Other comprehensive income (loss)

Comprehensive loss

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Three Months Ended June 30, 2020 and 2019

Three Months Ended September 30, 2020 and 2019

Stockholders'

2 unchanged sentences

(in thousands, except share information)

Balance at March 31, 2020

Balances at June 30, 2020

( 1,499,325 )

Preferred stock beneficial conversion feature

Non-cash compensation cost for stock options, RSUs, SARs and ESPP

Exercise of stock options/Vesting of RSUs/Purchases under ESPP

Non-cash stock-based compensation

Stock issued under incentive programs

Issuance of common stock, net of issuance costs of $ 725

Unrealized gain on marketable securities

Unrealized loss on marketable securities

Foreign currency translation adjustment

Balance at June 30, 2020

Balance at September 30, 2020

( 1,696,635 )

Balance at March 31, 2019

Balances at June 30, 2019

( 1,381,928 )

Non-cash compensation cost for stock options, RSUs and ESPP

Fractional shares purchased in stock split

Non-cash stock-based compensation

Stock issued under incentive programs

Issuance of common stock, net of issuance costs of $ 161

Foreign currency translation adjustment

Balance at June 30, 2019

Balance at September 30, 2019

( 1,399,971 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Six Months Ended June 30, 2020 and 2019

Nine Months Ended September 30, 2020 and 2019

Stockholders'

5 unchanged sentences

Preferred stock beneficial conversion feature

Non-cash compensation cost for stock options, RSUs, SARs and ESPP

Exercise of stock options/Vesting of RSUs/Purchases under ESPP

Non-cash stock-based compensation

Stock issued under incentive programs

Issuance of common stock, net of issuance costs of $ 5,870

1 unchanged sentence

Foreign currency translation adjustment

Balance at June 30, 2020

Balance at September 30, 2020

( 1,696,635 )

1 unchanged sentence

( 1,299,107 )

Non-cash compensation cost for stock options, RSUs and ESPP

Exercise of stock options/Purchases under ESPP

Non-cash stock-based compensation

Stock issued under incentive programs

Fractional shares purchased in stock split

2 unchanged sentences

Foreign currency translation adjustment

Balance at June 30, 2019

Balance at September 30, 2019

( 1,399,971 )

3 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating Activities:

Reconciliation of net loss to net cash provided by (used in) operating activities:

Reconciliation of net loss to net cash used in operating activities:

Depreciation and amortization

Loss on disposal of property and equipment

Gain on Catalent transaction

Amortization of debt issuance costs

Non-cash stock-based compensation

Write off of right-of-use assets

Changes in operating assets and liabilities:

Prepaid expenses and other assets

Receivables, prepaid expenses and other assets

Accounts payable and accrued expenses

3 unchanged sentences

Capital expenditures

Acquisition of Praha Vaccines a.s., net of cash acquired

Proceeds from maturities of marketable securities

Acquisition of Novavax CZ, net of cash acquired

Proceeds from Catalent transaction

Purchases of marketable securities

Net cash provided by (used in) investing activities

Proceeds from maturities of marketable securities

Net cash (used in) provided by investing activities

Financing Activities:

1 unchanged sentence

Net proceeds from sales of common stock

Proceeds from the exercise of stock options and employee stock purchases

Proceeds from the exercise of stock-based awards

Treasury stock related to tax withholding on stock-based awards

Finance lease payments

Net cash provided by financing activities

4 unchanged sentences

Supplemental disclosure of non-cash activities:

Property and equipment purchases included in accounts payable and accrued expenses

Sale of common stock under the Sales Agreement not settled at quarter-end

Capital expenditures included in accounts payable and accrued expenses

Right-of-use assets from new lease agreements

Supplemental disclosure of cash flow information:

Cash payments of interest

Cash interest payments

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Note 1 – Organization

Novavax, Inc.

(“Novavax,” and together with its wholly owned subsidiaries, Novavax AB and Praha Vaccines a.s., the “Company”) is a late-stage biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs.

The Company’s vaccine candidates, including both its recently announced coronavirus vaccine candidate, NVX-CoV2373, as well as its other lead candidate, NanoFlu TM , are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines.

(“Novavax,” and together with its wholly owned subsidiaries, Novavax AB and Novavax CZ (formerly, Praha Vaccines a.s.), the “Company”) is a late-stage biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs.

The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFlu TM , are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines.

The Company’s technology targets a variety of infectious diseases.

5 unchanged sentences

GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.

The consolidated balance sheet as of June 30, 2020, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three and six months ended June 30, 2020 and 2019, the consolidated statements of changes in stockholders’ equity (deficit) for the three and six months ended June 30, 2020 and 2019 and the consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’ equity (deficit) and cash flows, respectively, for the periods presented.

The consolidated balance sheet as of September 30, 2020, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the consolidated statements of changes in stockholders’ equity (deficit) for the three and nine months ended September 30, 2020 and 2019 and the consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’ equity (deficit) and cash flows, respectively, for the periods presented.

Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in consolidated financial statements prepared in accordance with U.S.

1 unchanged sentence

The unaudited consolidated financial statements include the accounts of Novavax, Inc.

and its wholly owned subsidiaries, Novavax AB and Praha Vaccines a.s.

and its wholly owned subsidiaries, Novavax AB and Novavax CZ.

All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in U.S.

The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona), and the functional currency of Praha Vaccines a.s., which is located in the Czech Republic, is the local currency (Czech Koruna).

The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona), and the functional currency of Novavax CZ, which is located in the Czech Republic, is the local currency (Czech Koruna).

The translation of assets and liabilities of these subsidiaries to U.S.

3 unchanged sentences

Translation gains and losses are recognized as a component of accumulated other comprehensive loss in the accompanying unaudited consolidated balance sheets.

The foreign currency translation adjustment balance included in accumulated other comprehensive loss was $ 13.2 million and $ 12.5 million at June 30, 2020 and December 31, 2019, respectively.

The foreign currency translation adjustment balance included in accumulated other comprehensive loss was $ 5.0 million and $ 12.5 million as of September 30, 2020 and December 31, 2019, respectively.

The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

8 unchanged sentences

Cash and cash equivalents consist of the following at (in thousands):

September 30,

Money market funds

Asset-backed securities

Treasury bills

Government-backed securities

Treasury securities

Corporate debt securities

Cash and cash equivalents

1 unchanged sentence

Marketable Securities

Marketable securities consist of debt securities with maturities greater than three months from the date of purchase that include commercial paper, asset-backed securities, treasury bills and corporate notes.

Marketable securities consist of debt securities with maturities greater than three months from the date of purchase that include commercial paper, government-backed securities, treasury securities, corporate notes and agency securities.

Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company's ability and intent to hold the investment to maturity.

6 unchanged sentences

Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company's ability to hold the securities, including whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer's financial condition and business outlook to predict whether the loss in value is other-than-temporary.

If a decline in value is determined to be other-than-temporary, the value of the security is reduced and the impairment is recorded as other income (expense) in the consolidated statements of operations.

Realized gains and losses and declines in value determined to be other-than-temporary are recorded as other income (expense) in the consolidated statements of operations.

The cost of securities sold is based on the specific identification method.

Restricted Cash

The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements (see Note 11), payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreement (see Note 11), escrow funds paid in connection with the acquisition of Praha Vaccines a.s.

(see Note 5) and funds received in connection with a transaction in 2019 with Catalent Maryland, Inc.

(formerly Paragon Bioservices, Inc.), a unit of Catalent Biologics (“Catalent”), pursuant to which the Company agreed to sell to Catalent certain assets related to its biomanufacturing and development activities and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases.

The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements (see Note 12), payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreements (see Note 12), escrow funds paid in connection with the acquisition of Novavax CZ (see Note 5), escrow funds received in connection with a transaction in 2019 with Catalent Maryland, Inc.

(formerly Paragon Bioservices, Inc.), a unit of Catalent Biologics (“Catalent”), and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases.

The Company will utilize the CEPI and BMGF funds as it incurs expenses for services performed under these agreements.

At both June 30, 2020 and December 31, 2019, the restricted cash balances (both current and non-current) consisted of $ 1.4 million of payments received from BMGF, $ 1.5 million held in escrow received in connection with the Catalent transaction and $ 0.4 million of security deposits.

At June 30, 2020, the restricted cash balance also included $ 92.6 million of payments under the CEPI funding agreements and $ 11.2 million held in escrow that was paid by the Company in connection with the Praha Vaccines a.s.

As of September 30, 2020, the restricted cash balances (both current and non-current) consisted of $ 9.1 million for payments received from BMGF, $ 46.3 million of payments under the CEPI funding agreements, $ 11.7 million held in escrow that was paid by the Company in connection with the Novavax CZ acquisition and $ 0.4 million of security deposits.

As of December 31, 2019, the restricted cash balances (both current and non-current) consisted of $ 1.4 million for payments received from BMGF, $ 1.5 million held in escrow received in connection with the Catalent transaction and $ 0.4 million of security deposits.

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

September 30,

Cash and cash equivalents

2 unchanged sentences

Cash, cash equivalents and restricted cash

The Company applies the acquisition method of accounting to business combinations in accordance with ASC 805, Business Combinations.

The Company applies the acquisition method of accounting to business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations .

The Company’s consolidated financial statements include the operating results of an acquired entity from the date on which it obtains control of the business acquired.

4 unchanged sentences

The Company expenses acquisition related costs as incurred.

See Note 5 for further discussion around the Company’s recent acquisition of Praha Vaccines a.s.

See Note 5 for further discussion around the Company’s recent acquisition of Novavax CZ.

Lease Accounting

The Company determines at the inception of a contract if an arrangement is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration.

Depending on the contract, the lease commencement date, defined as the date on which the lessor makes the underlying asset available for use by the lessee, may be different than the inception date of the contract.

Leases are classified as either operating or finance leases based on the economic substance of the agreement.

The Company enters into non-cancelable lease agreements for office space and certain equipment.

Further, the Company enters into supply agreements with contract manufacturing organizations and contract development and manufacturing organizations to manufacture its vaccine candidates.

Certain of these supply agreements include the use of identified manufacturing facilities and equipment that are controlled by the Company and may qualify as an embedded lease.

Supply agreements that contain a lease are treated as lease arrangements in their entirety.

For leases that have a lease term of more than 12 months at the lease commencement date, the Company recognizes lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, and corresponding right-of-use (“ROU”) assets, which represent the right to use an underlying asset for the lease term, based on the present value of the fixed future payments over the lease term.

The Company calculates the present value of future payments using the discount rate implicit in the lease, if available, or the Company’s incremental borrowing rate.

For all leases that have a lease term of 12 months or less at the commencement date (referred to as “short-term” leases), the Company has elected to apply the practical expedient in ASC Topic 842, Leases (“ASC 842”), to not recognize a lease liability or ROU asset but instead, recognize lease payments as an expense on a straight-line basis over the lease term and variable lease payments that do not depend on an index or rate, as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements.

In determining the lease period, the Company evaluates facts and circumstances that could affect the period over which it is reasonably certain to

use the underlying asset while taking into consideration the non-cancelable period over which it has the right to use the underlying asset and any option period to extend or terminate the lease if it is reasonably certain to exercise the option.

The Company reevaluates short-term leases that are modified and if they no longer meets the requirements to be treated as short-term leases, recognizes and measures the lease liability and ROU asset as if the date of the modification is the lease commencement date.

For operating leases, the Company recognizes lease expense related to fixed payments on a straight-line basis over the lease term and lease expense related to variable payments as incurred based on performance or usage in accordance with the contractual agreements.

For finance leases, the Company recognizes the amortization of the ROU asset over the shorter of the lease term or useful life of the underlying asset.

The Company expenses ROU assets acquired for research and development activities under ASC Topic 730, Research and Development , if they do not have an alternative future use, in research and development projects or otherwise.

The Company uses significant assumptions and judgment in evaluating its lease contracts and other agreements under ASC 842, including the determination of whether an agreement is or contains a lease, whether a lease represents an operating or finance lease, the discount rate used to determine the present value of lease obligations and the term of a lease embedded in its supply agreements.

Revenue Recognition

The Company performs research and development under grant, license and clinical development agreements.

Payments received in advance of work performed are recorded as deferred revenue.

The Company entered into funding agreements with CEPI that provide total funding of up to $ 388.4 million (see Note 11).

The funding includes approximately $ 245.9 million in the form of a grant (“CEPI Grant Funding”) and up to $ 142.5 million in the form of one or more forgivable no interest term loans (“CEPI Forgivable Loan Funding”).

Under the CEPI Grant Funding, the Company is entitled to reimbursement for costs that support development activities of NVX-CoV2373.

The Company performs research and development under government funding, grant, license and clinical development agreements.

The revenue primarily consists of funding under U.S.

government contracts and other arrangements to advance the clinical development and manufacturing of NVX-CoV2373.

The Company’s U.S.

government contracts are with the U.S.

Department of Defense (the “DoD”) and its participation in Operation Warp Speed (“OWS”) (see Note 12).

Other funding arrangements primarily include a grant and forgivable loan funding from CEPI (see Note 12).

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

Currently, the Company’s revenue arrangements represent customer contracts within the scope of ASC Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) or are contributions under the scope of ASC Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”.) The Company recognizes revenue from arrangements within the scope of ASC 606 following the five-step model:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligation(s) in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligation(s) in the contract;

and (v) recognize revenue when (or as) it satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to its customer.

The Company recognizes contribution revenue within the scope of ASC 958-605 when the funder-imposed conditions have been substantially met.

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

Under the U.S.

government contracts, the Company is entitled to receive funding of up to $ 1.66 billion, on a reimbursable-cost or reimbursable-cost-plus-fixed-fee basis, to support certain activities related to the development, manufacture and delivery of NVX-CoV2373 to the U.S.

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

The obligations under each of the contracts are not distinct in the context of the contract as they are highly interdependent or interrelated and, as such, they are accounted for as a single performance obligation.

The transaction price under these arrangements is the consideration the Company is expecting to receive and consists of the funded contract amount and the unfunded variable amount to the extent that it is probable that a significant reversal of revenue will not occur.

The Company recognizes revenue for these contracts over time as the Company transfers control over the goods and services and satisfies the performance obligation.

The Company measures progress toward satisfaction of the performance obligation using an Estimate-at-Completion (“EAC”) process, which is a cost-based input method that reviews and monitors the progress towards the completion of the Company’s performance obligation.

Under this process, management considers the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and productivity, material and subcontractor costs and identified risks.

Estimating the total allowable cost at completion of the performance obligation under a contract is subjective and requires the Company to make assumptions about future activity and cost drivers.

Changes in these estimates can occur for a variety of reasons and, if significant, may impact the timing of revenue and fee recognition on the Company’s contracts.

Allowable contract costs include direct costs incurred

on the contract and indirect costs that are applied in the form of rates to the direct costs.

Billings under the contracts are initially based on provisional indirect billing rates, agreed upon between the Company and the U.S.

These indirect rates are subject to audit on an annual basis.

The Company records the impact of changes in the indirect billing rates in the period when such changes are identified.

These changes reflect the difference between actual indirect costs incurred compared to the estimated amounts used to determine the provisional indirect billing rates agreed upon with the U.S.

The Company recognizes revenue on the U.S government contracts based on reimbursable allowable contract costs incurred in the period up to the transaction price.

For reimbursable-cost-plus-fixed-fee contracts, the Company recognizes the fixed-fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the underlying performance obligation as determined under the EAC process.

The Company recognizes changes in estimates related to the EAC process in the period when such changes are made on a cumulative catch-up basis.

The Company includes the transaction price comprising both funded and unfunded portions of customer contracts, in this estimate.

As of September 30, 2020, $ 1.62 billion of the total transaction price of $ 1.66 billion was not yet satisfied and the Company had a contract asset of $ 3.8 million and a contract liability of $ 26.5 million.

The Company’s other funding agreements currently include funding from CEPI of $ 399.5 million in the form of a grant of $ 257.0 million (“CEPI Grant Funding”) and one or more forgivable no interest term loans of $ 142.5 million (“CEPI Forgivable Loan Funding”).

Under the Company’s grant funding arrangements, including the CEPI Grant Funding, the Company is primarily entitled to reimbursement for costs that support development related activities of NVX- CoV2373 .

The CEPI Forgivable Loan Funding is designated for the prepayment of certain manufacturing activities.

The funding from CEPI is critical to enable ongoing development of NVX-CoV2373, and to enable the Company to obtain product licensing to produce the vaccine for use in clinical trials and commercial distribution, if approved.

The CEPI funding agreements do not provide a direct economic benefit to CEPI.

Rather, the Company entered into an agreement with CEPI to attempt to develop a COVID-19 vaccine under which CEPI only benefits to the extent the arrangement furthers its public health mission.

Based on these circumstances, the Company does not consider CEPI to be a customer and concluded the funding agreements are outside the scope of ASC 606, Revenue from Contracts with Customers .

Payments received under the CEPI Grant Funding are considered conditional contributions under the scope of ASC 958-605, Not-for-Profit Entities – Revenue Recognition , and are recorded as deferred revenue until the period in which such research and development activities are performed and revenue can be recognized.

The CEPI Forgivable Loan Funding provides the Company access to up to $ 142.5 million in funds to be used in connection with the potential commercial manufacture of NVX-CoV2373.

As of June 30, 2020, the Company received $ 76.0 million of such funding.

Under the funding agreements, the Company is only required to repay the CEPI Forgivable Loan Funding if the proceeds of sales to one or more third parties of NVX-CoV2373 cover the Company’s costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI.

As the financial risk remains with CEPI, the Company has determined that the use of the CEPI Forgivable Loan Funding is outside the scope of ASC 470, Debt.

The research and development risk is considered substantive, such that it is not yet probable the development will be successful.

Therefore, the Company has concluded that ASC 730, Research and Development is considered applicable and most appropriate.

Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, the Company will account for its obligation under the CEPI Forgivable Loan Funding as a contract to perform research and development for others.

The Company will record contract revenue as it performs the contractual research and development services.

The Company has determined that payments received under these agreements should be recorded as revenue rather than a reduction to research and development expenses.

In reaching this determination that such payments should be recorded as revenue, management considered a number of factors, including whether the Company is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s core operations.

Further, management has consistently applied its policy of presenting such amounts as revenue.

The Company analyzed these other funding arrangements and determined that they are not within the scope of ASC 606 as they do not provide a direct economic benefit to the grantor.

Payments received under the grant funding arrangements are considered conditional contributions under the scope of ASC 958-605 and are recorded as deferred revenue until the period in which such research and development activities are actually performed that satisfy the funder-imposed conditions.

Payments received under the CEPI Forgivable Loan Funding agreements are only repayable if the proceeds of sales to one or more third parties of NVX-CoV2373 cover the Company’s costs of manufacturing such vaccine candidate, not including manufacturing costs funded by CEPI.

As the financial risk remains with CEPI, the Company determined that the use of the CEPI Forgivable Loan Funding is outside the scope of ASC Topic 470, Debt.

The research and development risk is considered substantive, such that it is not yet probable that the development will be successful.

Therefore, the Company has concluded that ASC 730 is considered applicable and most appropriate.

Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, the Company has accounted for the obligation under the CEPI Forgivable Loan Funding as a contract to perform research and development for others.

The Company has determined that payments received under these agreements should be recorded as revenue under ASC 958-605 rather than a reduction to research and development expenses.

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

In reaching this determination, the Company considered a number of factors, including whether it is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s core operations.

The Company will record revenue as it performs the contractual research and development services.

Net Loss per Share

Net loss per share is computed using the weighted average number of shares of common stock outstanding.

At June 30, 2020 and 2019, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 7,797,651 and 2,935,847 , respectively.

In addition, at June 30, 2020, the Company had 438,885 shares outstanding of its newly designated Series A Convertible Preferred Stock , which are convertible into 4,388,850 shares of the Company’s common stock.

At June 30, 2020, the Company’s Notes (see Note 7) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $ 136.20 or higher.

As of September 30, 2020 and 2019, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 6,623,466 and 5,041,526 , respectively.

In addition, as of September 30, 2020, the Company had 438,885 shares outstanding of its newly designated Series A Convertible Preferred Stock , which are convertible into 4,388,850 shares of the Company’s common stock.

As of September 30, 2020, the Company’s Notes (see Note 8) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $ 136.20 or higher.

These and any shares due to the Company upon settlement of its capped call transactions are excluded from the computation, as their effect is antidilutive.

1 unchanged sentence

Recently Adopted

In January 2017, the FASB issued ASU No.

In January 2017, the FASB issued Accounting Standards Update (“ASU”) No.

2017-04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017-04”), which will simplify the goodwill impairment calculation by eliminating Step 2 from the current goodwill impairment test.

4 unchanged sentences

The adoption of ASU 2017-04 did not have a material impact on the Company’s historical financial statements.

Not Yet Adopted

In August 2020, the FASB issued ASU No.

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

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

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

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

ASU 2020-06 will be effective January 1, 2022 for the Company and may be applied using a full or modified retrospective approach.

Early adoption is permitted, but no earlier than January 1, 2021 for the Company.

Management is evaluating the impact of adopting ASU 2020-06 and whether it will have a material impact on the Company’s consolidated financial statements.

Note 3 – Fair Value Measurements

The following table represents the Company's fair value hierarchy for its financial assets and liabilities measured at fair value (in thousands):

Fair Value at June 30, 2020

Fair Value at September 30, 2020

Fair Value at December 31, 2019

Money market funds(1)

Asset-backed securities(2)

Treasury bills(3)

Government-backed securities(2)

Treasury securities(3)

Corporate debt securities(4)

Agency securities

Total cash equivalents and marketable securities

Convertible notes payable

Classified as cash and cash equivalents as of June 30, 2020 and December 31, 2019, respectively, on the consolidated balance sheets.

Includes $ 24,250 and $ 20,000 classified as cash and cash equivalents as of June 30, 2020 and December 31, 2019, respectively, on the consolidated balance sheets.

Includes $ 49,989 classified as cash and cash equivalents as of June 30, 2020 on the consolidated balance sheets.

Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor's valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics.

Classified as cash and cash equivalents as of September 30, 2020 and December 31, 2019, respectively, on the consolidated balance sheets.

Includes $ 43,250 and $ 20,000 classified as cash and cash equivalents as of September 30, 2020 and December 31, 2019, respectively, on the consolidated balance sheets.

Includes $ 24,998 classified as cash and cash equivalents as of September 30, 2020 on the consolidated balance sheets.

Includes $ 59,468 classified as cash and cash equivalents as of September 30, 2020 on the consolidated balance sheets.

commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics.

Pricing of the Company's Notes (see Note 8) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates and credit spreads among others.

During the six months ended June 30, 2020 and 2019, the Company did not have any transfers between levels .

During the nine months ended September 30, 2020 and 2019 , the Company did not have any transfers between levels .

The amount recorded in the Company's unaudited consolidated balance sheets for accounts payable and accrued expenses approximates its fair value due to its short-term nature.

Note 4 – Marketable Securities

Marketable securities classified as available-for-sale as of June 30, 2020 and December 31, 2019 were comprised of (in thousands):

June 30, 2020

Marketable securities classified as available-for-sale as of September 30, 2020 and December 31, 2019 were comprised of (in thousands):

September 30, 2020

December 31, 2019

Treasury bills

Treasury securities

Corporate debt securities

Agency securities

The primary objective of the Company's investment policy is the preservation of capital;

thus, the Company's investment policy limits investments to certain types of instruments with high-grade credit ratings, places restrictions on maturities and concentrations in certain industries and requires the Company to maintain a certain level of liquidity.

Note 5 – Acquisition of Praha Vaccines a.s.

Note 5 – Acquisition of Novavax CZ

On May 27, 2020 (the “Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Deed”) by and among Novavax AB, the Company’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V.

1 unchanged sentence

and the Company.

Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Praha Vaccines a.s., a vaccine manufacturing company, organized and existing under the laws of the Czech Republic (“Praha Vaccines”), from the Sellers for approximately € 151.7 million (approximately $ 167.3 million) in cash (the “Purchase Price”), subject to customary working capital adjustments (collectively, the “Acquisition”), which have not been finalized.

The assets of Praha Vaccines acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity.

The Purchase Price includes € 10.0 million (approximately $ 11.1 million), which has been placed in an escrow account until September 30, 2020, less any amounts to settle claims made by the Buyer against the Sellers under the Deed or other ancillary agreements.

Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Novavax CZ (formerly, Praha Vaccines a.s.), a vaccine manufacturing company (the “Acquisition”).

The assets of Novavax CZ acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity.

The Purchase Price includes € 10.0 million (approximately $ 11.1 million at the time of the Acquisition), which was placed in an escrow account and subsequently paid to the Sellers after September 30, 2020.

The Deed and ancillary agreements contain customary warranties and post-completion covenants, as well as indemnities by each of the parties thereto.

8 unchanged sentences

Any potential adjustments made could be material in relation to the preliminary values presented in the table below.

The table below summarizes the preliminary allocation of the Purchase Price based upon the fair values of assets acquired and liabilities assumed at the Acquisition Date.

The table below summarizes the preliminary allocation of the Purchase Price based upon the fair values of assets acquired and liabilities assumed at the Acquisition Date, adjusted for an increase in the Purchase Price of $ 0.2 million in the three months ended ended September 30, 2020 for a customary working capital adjustment.

The preliminary allocation is based upon information that was available to management at the time the consolidated financial statements were prepared and is subject to change prior to completion of the measurement period (in thousands):

17 unchanged sentences

federal income tax purposes.

The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition, such as the assembled workforce of Praha Vaccines.

The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition, such as the assembled workforce of Novavax CZ.

Current assets and current liabilities were recorded at their contractual or historical acquisition amounts, which approximate their fair value.

1 unchanged sentence

Use of different estimates and judgments could yield different results.

Impact to Financial Results for the Three and Six Months Ended June 30, 2020

The results of operations from Praha Vaccines have been included in the consolidated financial statements since the Acquisition Date.

As a result, the consolidated financial results for the three and six months ended June 30, 2020 do not reflect a full three months and six months of Praha Vaccines results, respectively.

From the Acquisition Date through June 30, 2020, Praha Vaccines has not recognized any revenue and recorded a net income of $ 1.8 million from Praha Vaccines’ operations.

The Company incurred approximately $ 1.9 million of costs related to the Acquisition in the three months ended June 30, 2020, which are included within general and administrative expenses in the consolidated statements of operations.

Impact to Financial Results for the Three and Nine Months Ended September 30, 2020

The results of operations from Novavax CZ have been included in the consolidated financial statements since the Acquisition Date.

As a result, the consolidated financial results for the nine months ended September 30, 2020 does not reflect a full nine months of Novavax CZ results.

From the Acquisition Date through September 30, 2020, Novavax CZ has not recognized any revenue and recorded a net loss of $ 4.3 million from Novavax CZ’ operations.

The Company incurred approximately $ 0.7 million and $ 2.7 million of costs related to the Acquisition in the three months and nine months ended September 30, 2020, respectively, which are included within general and administrative expenses in the consolidated statements of operations.

Supplemental Pro Forma Financial Information (Unaudited)

1 unchanged sentence

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the Acquisition been consummated as of that time.

The unaudited pro forma financial information combines the historical results of operations of the Company and Praha Vaccines for the periods presented below and reflects the application of certain pro forma adjustments (in thousands, except per share amounts):

The unaudited pro forma financial information combines the historical results of operations

of the Company and Novavax CZ for the periods presented below and reflects the application of certain pro forma adjustments (in thousands, except per share amounts):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30, 2020

September 30,

Basic and diluted net loss per share

Pro forma adjustments include the recognition of depreciation expense based on the Acquisition Date fair value and remaining useful lives of Praha Vaccines’ fixed assets (net of historical depreciation expense) and the elimination of costs related to the Acquisition, which are non-recurring in nature.

Pro forma adjustments include the recognition of depreciation expense based on the Acquisition Date fair value and remaining useful lives of Novavax CZ’ fixed assets (net of historical depreciation expense) and the elimination of costs related to the Acquisition, which are non-recurring in nature.

Note 6 – Goodwill and Other Intangible Assets

The change in the carrying amounts of goodwill for the six months ended June 30, 2020 was as follows (in thousands):

The change in the carrying amounts of goodwill for the nine months ended September 30, 2020 was as follows (in thousands):

Balance at December 31, 2019

Goodwill resulting from the acquisition of Praha Vaccines

Goodwill resulting from the acquisition of Novavax CZ

Currency translation adjustments

Balance at June 30, 2020

Balance at September 30, 2020

Identifiable Intangible Assets

Purchased intangible assets consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020

Purchased intangible assets consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

December 31, 2019

3 unchanged sentences

Total identifiable intangible assets

Amortization expense for the six months ended June 30, 2020 and 2019 was $ 0.3 million.

Amortization expense for the nine months ended September 30, 2020 and 2019 was $ 0.5 million.

Estimated amortization expense for existing intangible assets for the remainder of 2020 and for each of the five succeeding years ending December 31 will be as follows (in thousands):

2020 (remainder)

Note 7 - Leases

During the three months ended September 30, 2020, there were no material new or modified real estate lease arrangements.

During the three months ended September 30, 2020, the Company entered into multiple supply agreements with contract manufacturing organizations and contract development and manufacturing organizations to manufacture the Company’s COVID-19 vaccine candidate, NVX-CoV2373.

The agreements include the use of identified manufacturing facilities, contain fixed or minimum commitments and include variable costs related to production and material costs in excess of the fixed or minimum commitment specified in the agreements.

The Company evaluated the agreements at inception and determined that certain of these arrangements contain an embedded lease under ASC 842 as it has the exclusive use of, and control over, a portion of the manufacturing facility and equipment of the supplier during the contractual term of the arrangement.

The Company recognized a financing lease liability and ROU asset of $ 187.2 million related to its supply agreements using the Company’s Incremental Borrowing Rate of 6.6 %.

The Company used significant judgment and estimates, including the estimated value of the underlying leased asset and financial profile of comparable companies to analyze the credit spread as on the date of the lease inception.

The Company expensed the ROU asset as it represents an asset acquired for research and development activities related to the development of NVX-CoV2373 that currently does not have an alternative future use.

Supplemental balance sheet information for embedded leases in supply agreements entered into by the Company during the three months ended September 30, 2020 is as follows (in thousands, except weighted-average remaining lease term and discount rate):

Lease Liabilities

Classification

Current operating lease liabilities

Other current liabilities

Current portion of finance lease liabilities

Non-current finance lease liabilities

Weighted-average remaining lease term (years):

Operating lease

Finance lease

Weighted-average discount rate:

Operating lease

Finance lease

Lease expense for the operating, finance and short-term embedded leases related to the supply agreements entered into by the Company during the three months ended September 30, 2020 was as follows (in thousands):

Three Months Ended September 30, 2020

Operating lease expense:

Fixed lease expense

Finance lease expense:

Fixed lease expense

Interest expense

Short-term expense

Total lease expense

Supplemental cash flow information related to the embedded leases for three months ended September 30, 2020 was as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:

Financing cash flows from finance lease

As of September 30, 2020, maturities of embedded lease liabilities were as follows (in thousands):

Total minimum lease payments

Imputed interest

Total lease liabilities

As of September 30, 2020, the Company had one agreement that contains an embedded finance lease for a manufacturing arrangement that is expected to commence in the fourth quarter of 2020 with a lease term of approximately 5 years .

Note 8 – Long-Term Debt

3 unchanged sentences

Total convertible notes payable consisted of the following at (in thousands):

Principal amount of the Notes

September 30,

Principal amount of Notes

Unamortized debt issuance costs

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Coupon interest at 3.75 %

Amortization of debt issuance costs

Total interest expense on the Notes

Total interest expense on Notes

Note 9 – Preferred Stock

11 unchanged sentences

In May 2020, the Company entered into an At Market Issuance Sales Agreement ("May 2020 Sales Agreement"), which allows it to issue and sell up to $ 250 million in gross proceeds of its common stock.

During the six months ended June 30, 2020, the Company sold 2.2 million shares of common stock under the May 2020 Sales Agreement resulting in $ 107.0 million in net proceeds, leaving $ 141.6 million remaining under the May 2020 Sales Agreement.

During the nine months ended September 30, 2020, the Company sold 2.8 million shares of common stock under the May 2020 Sales Agreement resulting in $ 160.3 million in net proceeds (this amount excludes $ 3.9 million received in the fourth quarter of 2020 for shares traded in late September 2020).

From October 1, 2020 through November 3, 2020, the Company sold 0.7 million shares of common stock resulting in $ 74.1 million in net proceeds, leaving $ 8.7 million remaining under the May 2020 Sales Agreement.

In March 2020, the Company entered into an At Market Issuance Sales Agreement (“March 2020 Sales Agreement”), which allowed it to issue and sell up to $ 150 million in gross proceeds of its common stock.

5 unchanged sentences

In December 2018, the Company entered into an At Market Issuance Sales Agreement (“December 2018 Sales Agreement”), which allowed it to issue and sell up to $ 100 million in gross proceeds of its common stock.

During the six months ended June 30, 2019, the Company sold 1.7 million shares of common stock under the December 2018 Sales Agreement, of which all were sold in the first quarter of 2019, resulting in $ 17.4 million in net proceeds.

During the six months ended June 30, 2020, the Company sold 7.2 million shares of common stock under the December 2018 Sales Agreement, of which all were sold in the first quarter of 2020, resulting in $ 38.5 million in net proceeds.

During the nine months ended September 30, 2019, the Company sold 3.6 million shares of common stock under the December 2018 Sales Agreement, of which 1.7 million shares of common stock were sold in the first quarter of 2019, resulting in $ 29.3 million in net proceeds.

In January 2020, the Company sold 7.2 million shares of common stock under the December 2018 Sales Agreement resulting in $ 38.5 million in net proceeds.

The December 2018 Sales Agreement was fully utilized at that time.

In December 2017, the Company entered into an At Market Issuance Sales Agreement (“December 2017 Sales Agreement”), which allowed it to issue and sell up to $ 75 million in gross proceeds of its common stock.

During the six months ended June 30, 2019, the Company sold 2.5 million shares of common stock under the December 2017 Sales Agreement, of which all were sold in the first quarter of 2019, resulting in $ 37.9 million in net proceeds.

During the three months ended March 31, 2019, the Company sold 2.5 million shares of common stock under the December 2017 Sales

Agreement resulting in $ 37.9 million in net proceeds.

The December 2017 Sales Agreement was fully utilized at that time.

9 unchanged sentences

In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted.

Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100 % of the fair market value of the Company's common stock at the time of grant.

Stock options and stock appreciation rights generally have a maximum term of 10 year s and may be or were granted with an exercise price that is no less than 100 % of the fair market value of the Company's common stock at the time of grant.

Grants of stock options are generally subject to vesting over periods ranging from one to four years .

Stock Options and Stock Appreciation Rights

The following is a summary of stock options and stock appreciation rights activity under the 2015 Plan and 2005 Plan for the six months ended June 30, 2020:

Stock Options

Exercise Price

Stock Options

Exercise Price

The following is a summary of stock options and stock appreciation rights activity under the 2015 Plan and 2005 Plan for the nine months ended September 30, 2020:

Outstanding at January 1, 2020

Outstanding at June 30, 2020

Shares exercisable at June 30, 2020

Shares available for grant at June 30, 2020

Outstanding at September 30, 2020

Shares exercisable at September 30, 2020

Shares available for grant at September 30, 2020

In 2019, the Company granted 192,400 stock appreciation rights, with a weighted-average exercise price of $ 5.95 , under the 2015 Plan.

4 unchanged sentences

Three Months Ended

Six Months Ended

Weighted-average Black-Scholes fair value of stock options granted

Nine Months Ended

September 30,

Weighted average Black-Scholes fair value of stock options and SARs granted

Risk-free interest rate

6 unchanged sentences

Expected forfeiture rate

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights outstanding under the 2015 Plan and 2005 Plan as of June 30, 2020 was $ 357.5 million and 8.5 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights exercisable under the 2015 Plan and 2005 Plan as of June 30, 2020 was $ 34.1 million and 5.3 years, respectively.

The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and stock appreciation rights) that would have been received by the holders had all stock option and stock appreciation rights holders exercised their stock options and stock appreciation rights on June 30, 2020.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights outstanding under the 2015 Plan and 2005 Plan as of September 30, 2020 was $ 446.5 million and 8.5 years, respectively.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights exercisable under the 2015 Plan and 2005 Plan as of September 30, 2020 was $ 43.3 million and 5.3 years, respectively.

This amount is subject to change based on changes to the closing price of the Company's common stock.

The aggregate intrinsic value of stock options and vesting of restricted stock awards for the six months ended June 30, 2020 and 2019 was $ 7.8 million and $ 0.1 million, respectively.

The aggregate intrinsic value of stock options and vesting of restricted stock awards for the nine months ended September 30, 2020 and 2019 was $ 164.3 million and $ 0.1 million, respectively.

Employee Stock Purchase Plan

2 unchanged sentences

The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15 % of their compensation, at 85 % of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate).

At June 30, 2020, there were 278,543 shares available for issuance under the ESPP.

As of September 30, 2020, there were 255,596 shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes.

1 unchanged sentence

Three Months Ended

Six Months Ended

Range of Black-Scholes fair value of ESPP shares granted

Nine Months Ended

September 30,

Range of Black-Scholes fair values of ESPP shares granted

$ 3.08 -$ 92.67

11 unchanged sentences

Restricted Stock Units

The following is a summary of restricted stock units activity for the six months ended June 30, 2020:

The following is a summary of restricted stock units activity for the nine months ended September 30, 2020:

Outstanding and Unvested at January 1, 2020

2 unchanged sentences

Restricted stock units forfeited

Outstanding and Unvested at June 30, 2020

Outstanding and Unvested at September 30, 2020

The Company recorded all stock-based compensation expense in the consolidated statements of operations as follows (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development

1 unchanged sentence

Total stock-based compensation expense

As of June 30, 2020, there was approximately $ 344 million of total unrecognized compensation expense related to unvested stock options, stock appreciation rights, restricted stock units and the ESPP.

As of September 30, 2020, there was approximately $ 311 million of total unrecognized compensation expense related to unvested stock options, SARs, restricted stock units and the ESPP.

The increase in unrecognized compensation expense is primarily due to the awards that were subject to approval of an increase in the number of shares under the 2015 Plan at the Company's 2020 annual meeting of stockholders, as discussed in the "

7 unchanged sentences

In July 2020, the Company entered into a Project Agreement (the “Project Agreement”) with Advanced Technology International, Inc.

(“ATI”), the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with Operation Warp Speed (“OWS”).

(“ATI”), the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with OWS.

OWS is a partnership among components of the U.S.

12 unchanged sentences

Government agreements of this nature, including provisions giving the U.S.

Government the right to terminate the Base Agreement and/or the Project Agreement based on a reasonable determination that the funded project will not produce beneficial results commensurate with the expenditure of resources and that termination would be in the U.S.

Government the right to terminate the Base Agreement and/or the Project Agreement based on a

reasonable determination that the funded project will not produce beneficial results commensurate with the expenditure of resources and that termination would be in the U.S.

Government’s interest.

2 unchanged sentences

Government or extension by mutual agreement of the parties.

During the three months ended September 30, 2020, the Company recognized revenue from the OWS Agreement of $ 39.4 million.

Department of Defense

In June 2020, the Company entered into a letter contract (the “DoD Contract”) with the U.S.

Department of Defense (the “DoD”) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CRBND-EB”), under which JPEO-CRBND-EB agreed to provide funding of up to $ 60.0 million to the Company to support the manufacture of NVX-CoV2373.

In June 2020, the Company entered into a letter contract (the “DoD Contract”) with the DoD Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CRBND-EB”), under which JPEO-CRBND-EB agreed to provide funding of up to $ 60.0 million to the Company to support the manufacture of NVX-CoV2373.

Under the DoD Contract, the Company is currently authorized to make expenditures or incur obligations up to $ 30.0 million, and the Company and the DoD have committed to negotiate a definitive cost-reimbursement contract by December 2020 that provides for costs payable by the DoD not to exceed $ 60.0 million.

If the Company and the DoD have not agreed on pricing or terms by December 2020, or any extension of such target date granted by the DoD, the DoD has the discretion to determine a reasonable price or fee for completion of the contract.

Under the DoD Contract, the Company is expected to deliver 10 million doses of NVX-CoV2373 to the DoD in the fourth quarter of 2020.

Under the DoD Contract, the Company is expected to deliver 10 million doses of NVX-CoV2373 to the DoD.

The 10 million doses of NVX-CoV2373 may be used in Phase 2/3 clinical trials or under an Emergency Use Authorization, if approved by the U.S.

1 unchanged sentence

Pursuant to the DoD Contract, if NVX-CoV2373 is approved by the FDA, the DoD is entitled to most-favored customer status for a period of five years from the award of the DoD Contract, meaning that the Company cannot give any comparable commercial client in the United States more favorable pricing than the DoD under similar transactional circumstances.

During the three months ended June 30, 2020, the Company recognized revenue from the DoD Contract of $ 0.3 million.

During the three months and nine months ended September 30, 2020, the Company recognized revenue from the DoD Contract of $ 3.6 million and $ 3.9 million, respectively.

Coalition for Epidemic Preparedness Innovations

In May 2020, the Company entered into a restated funding agreement (the “CEPI Funding Agreement”) with CEPI, under which CEPI agreed to provide funding of up to $ 384.5 million to the Company to support the development of NVX-CoV2373, in addition to the $ 3.9 million of funding CEPI provided to the Company pursuant to an initial funding agreement entered into between the Company and CEPI in March 2020.

In May 2020, the Company entered into a restated funding agreement which was modified in November 2020 (the “CEPI Funding Agreement”) with CEPI, under which CEPI agreed to provide funding of up to $ 399.5 million to the Company to support the development of NVX-CoV2373, in addition to the $ 3.9 million of funding CEPI provided to the Company pursuant to an initial funding agreement entered into between the Company and CEPI in March 2020.

The CEPI Funding Agreement provides up to $ 257.0 million in Grant Funding and up to $ 142.5 million in Forgivable Loan Funding, which loans are in the form of one or more forgivable no interest term loans in order to prepay certain manufacturing activities and are not subject to restrictive or financial covenants.

7 unchanged sentences

Cash payments received under the funding agreements are restricted as to their use until expenditures contemplated in the funding agreements are incurred.

During the three and six months ended June 30, 2020, the Company recognized revenue from the funding agreements of $ 34.2 million and $ 36.5 million, respectively.

During the three and nine months ended September 30, 2020, the Company recognized revenue from the funding agreements of $ 111.3 million and $ 147.8 million, respectively.

Bill & Melinda Gates Foundation

6 unchanged sentences

The term of the GACA may be extended in certain circumstances, by a period of up to five additional years.

In July 2020, the Company entered into a grant agreement with BMGF (the “BMGF SA Grant Agreement”) under which it was awarded a grant of $ 15.0 million to support a Phase 2b clinical trial in the Republic of South Africa to evaluate the safety, immunogenicity, and potential efficacy of NVX-CoV2373.

Payments received in advance that are related to future performance are deferred and recognized as revenue when the research and development activities are performed.

Cash payments received under the BMGF Grant Agreement are restricted as to their use until expenditures contemplated in the BMGF Grant Agreement are incurred.

During the three and six months ended June 30, 2020, the Company recognized revenue from the Grant of $ 0.2 million and $ 0.4 million, respectively, and has recognized approximately $ 82 million in revenue since the inception of the agreement.

Cash payments received under the BMGF Grant Agreement and the BMGF SA Grant Agreement are restricted as to their use until expenditures contemplated in the agreements are incurred.

During the nine months ended September 30, 2020, the Company recognized revenue from the BMGF Grant Agreement of less than $ 0.1 million and $ 0.4 million, respectively, and has recognized approximately $ 82 million in revenue since the inception of the agreement.

During the three months ended September 30, 2020, the Company recognized revenue from the BMGF SA Grant Agreement of $ 2.4 million.

Serum Institute of India Private Limited

In July 2020, the Company entered into a supply and license agreement with Serum Institute of India Private Limited (“SIIPL”), under which it granted exclusive and non-exclusive licenses to SIIPL for the development, co-formulation, filling and finishing, registration and commercialization by SIIPL of NVX-CoV2373.

SIIPL agreed to purchase the two vaccine components (the antigen drug substance and the Matrix-M adjuvant) from the Company and the parties will equally split the revenue from sale of such product by SIIPL in its licensed territory, net of agreed costs.

In July 2020, the Company entered into a supply and license agreement with Serum Institute of India Private Limited (“SIIPL”), as amended by the parties in September 2020, under which the Company granted exclusive and non-exclusive licenses to SIIPL for the development, co-formulation, filling and finishing, registration and commercialization by SIIPL of NVX-CoV2373.

SIIPL has agreed to purchase Matrix-M adjuvant from the Company and the Company has granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373 under the terms of the agreement.

The parties will equally split the revenue from sale of NVX-CoV2373 by SIIPL in its licensed territory, net of agreed costs.

The Company granted to SIIPL (i) an exclusive license in India during the agreement, and (ii) a non-exclusive license (a) during the “Pandemic Period” (as declared by the World Health Organization), in all countries other than specified countries designated by the World Bank as upper-middle or high-income countries, with respect to which the Company retains rights, and (b) after the Pandemic Period, in only those countries designated as low or middle-income by the World Bank.

Following the Pandemic Period, the Company may notify SIIPL of any bona fide opportunities for the Company to license the product to a third party in such low and middle-income countries and SIIPL would have an opportunity to match or improve such third party terms, failing which, the Company would have the discretion to remove one or more non-exclusive countries from SIIPL’s license.

Following the Pandemic Period, the Company may notify SIIPL of any bona fide opportunities for the Company

to license NVX-CoV2373 to a third party in such low and middle-income countries and SIIPL would have an opportunity to match or improve such third party terms, failing which, the Company would have the discretion to remove one or more non-exclusive countries from SIIPL’s license.

Takeda Pharmaceutical Company Limited

1 unchanged sentence

Takeda will receive funding from the Government of Japan’s Ministry of Health, Labour and Welfare to support the technology transfer, establishment of infrastructure and scale-up of manufacturing.

The Company anticipates that Takeda has manufacturing capacity of over 250 million doses per year.

The Company will be entitled to receive payments based on the achievement of certain development and commercial milestones, as well as a portion of proceeds from the sale of the vaccine.

At June 30, 2020, the Company's current restricted cash and deferred revenue balances on the consolidated balance sheet include its estimate of costs to be reimbursed and revenue to be recognized, respectively, in the next twelve months under the CEPI Funding Agreement and BMGF Grant Agreement.

UK SARS-CoV-2 Vaccine Supply Agreement

In October 2020, the Company entered into a SARS-CoV-2 vaccine supply agreement with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the United Kingdom (“UK”) government (the “Authority”) under which the Authority agreed to purchase up to 60 million doses of NVX-CoV2372, plus such additional orders as the Authority may make from time to time.

The Company agreed to continue to conduct its UK-based Phase 3 clinical trial of NVX-CoV2373, establish a committed supply chain for NVX-CoV2373 in the UK and seek regulatory approval for NVX-CoV2373 in the UK.

Pursuant to the terms of the agreement, the Company agreed to supply the initial 60 million doses of NVX-CoV2373 to the Authority on a priority supply basis and to supply any additional orders of NVX-CoV2373 to the Authority on an equal priority basis with other third parties.

The Authority has certain termination rights, or rights to reduce or cancel orders, if the Authority's supply of NVX-CoV2373 is materially interrupted, delayed or deferred.

Note 13 – CARES Act

1 unchanged sentence

Amongst other items, the CARES Act lifts certain interest expense deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017.

The enactment of the CARES Act did not result in any material adjustments to the Company's income tax provision or net deferred tax assets for the six months ended June 30, 2020.

The enactment of the CARES Act did not result in any material adjustments to the Company's income tax provision or net deferred tax assets for the nine months ended September 30, 2020.

Note 14 – Subsequent Events

In October 2020, the Company entered into a lease for approximately 170,000 square feet of space for premises located at 700 Quince Orchard Road Gaithersburg, MD.

The Company intends to use the premises for manufacturing, research and development and offices.

The term of the lease is approximately 15 years with options to extend the lease.

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

The Landlord will contribute an aggregate of $ 30.6 million toward tenant improvements.

In addition, in October 2020, the Company purchased a parcel of land at 14 Firstfield Road, Gaithersburg, MD that the Company plans to develop in the future to accommodate growth of the Company.

The purchase price of the parcel of land was $ 14.5 million.

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

What changed 10-Q

Item 1. Financial Statements