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Form 10-Q

Delaware									22-2816046
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
21 Firstfield Road			Gaithersburg			MD			20878
(Address of principal executive offices)									(Zip code)

(240) 268-2000

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, Par Value $0.01 per share			NVAX			The Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			x			Accelerated Filer			o
Non-accelerated filer			o			Smaller reporting company			o
Emerging growth company			o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, was 78,503,952 as of October 31, 2022.

						Page No.
PART I. FINANCIAL INFORMATION						1
Item 1.			Consolidated Financial Statements			1
			Unaudited Consolidated Statements of Operations and Unaudited Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021			2
			Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021			3
			Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021			4
			Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021			4
			Notes to the Consolidated Financial Statements (unaudited)			6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			35
Item 4.			Controls and Procedures			35
PART II. OTHER INFORMATION						37
Item 1.			Legal Proceedings			37
Item 1A.			Risk Factors			38
Item 5.			Other Information			38
Item 6.			Exhibits			39
SIGNATURES						40

Item 1.    Financial Statements

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
Revenue:
Product sales			$	626,091					$	—					$	1,267,174					$	—
Grants			106,273						135,007						313,348						854,390
Royalties and other			2,213						43,837						43,951						69,700
Total revenue			734,577						178,844						1,624,473						924,090
Expenses:
Cost of sales			434,593						—						720,874						—
Research and development			304,297						408,195						977,428						1,571,551
Selling, general, and administrative			122,876						77,793						327,028						214,144
Total expenses			861,766						485,988						2,025,330						1,785,695
Loss from operations			(127,189)						(307,144)						(400,857)						(861,605)
Other expense:
Interest expense			(4,169)						(5,182)						(15,279)						(15,989)
Other expense			(34,783)						(4,064)						(53,002)						(7,267)
Loss before income tax expense			(166,141)						(316,390)						(469,138)						(884,861)
Income tax expense			2,472						6,041						6,552						12,606
Net loss			$	(168,613)					$	(322,431)					$	(475,690)					$	(897,467)
Net loss per share:
Basic and diluted			$	(2.15)					$	(4.31)					$	(6.13)					$	(12.13)
Weighted average number of common shares outstanding
Basic and diluted			78,274						74,745						77,631						73,972

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
Net loss			$	(168,613)					$	(322,431)					$	(475,690)					$	(897,467)
Other comprehensive loss:
Net unrealized losses on marketable securities available-for-sale, net of reclassifications			—						—						—						(9)
Foreign currency translation adjustment			(12,924)						(3,309)						(22,441)						(6,154)
Other comprehensive loss			(12,924)						(3,309)						(22,441)						(6,163)
Comprehensive loss			$	(181,537)					$	(325,740)					$	(498,131)					$	(903,630)

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

			September 30, 2022						December 31, 2021
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	1,280,581					$	1,515,116
Restricted cash			10,785						11,490
Accounts receivable			111,645						454,993
Inventory			82,432						8,872
Prepaid expenses and other current assets			274,522						164,648
Total current assets			1,759,965						2,155,119
Property and equipment, net			255,532						228,696
Right of use asset, net			108,543						40,123
Intangible assets, net			8,456						4,770
Goodwill			117,535						131,479
Other non-current assets			17,406						16,566
Total assets			$	2,267,437					$	2,576,753
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable			$	144,997					$	127,050
Accrued expenses			551,069						673,731
Deferred revenue			404,776						1,422,944
Current portion of finance lease liabilities			82,095						130,533
Convertible notes payable			324,525						—
Other current liabilities			160,499						36,061
Total current liabilities			1,667,961						2,390,319
Deferred revenue			1,035,418						172,528
Convertible notes payable			—						323,458
Non-current finance lease liabilities			31,474						—
Other non-current liabilities			98,569						42,121
Total liabilities			2,833,422						2,928,426
Commitments and contingencies (Note 14)
Stockholders' equity (deficit):
Common stock, $0.01 par value, 600,000,000 shares authorized at September 30, 2022 and December 31, 2021; and 79,204,509 shares issued and 78,476,814 shares outstanding at September 30, 2022 and 76,433,151 shares issued and 75,841,171 shares outstanding at December 31, 2021			792						764
Additional paid-in capital			3,640,597						3,351,967
Accumulated deficit			(4,093,640)						(3,617,950)
Treasury stock, cost basis, 727,695 shares at September 30, 2022 and 591,980 shares at December 31, 2021			(89,940)						(85,101)
Accumulated other comprehensive loss			(23,794)						(1,353)
Total stockholders’ deficit			(565,985)						(351,673)
Total liabilities and stockholders’ deficit			$	2,267,437					$	2,576,753

			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income (Loss)						Total Stockholders' Equity (Deficit)
			Shares						Amount
Balance at June 30, 2022			78,776,234						$	788					$	3,604,614					$	(3,925,027)					$	(86,455)					$	(10,870)					$	(416,950)
Stock-based compensation			—						—						33,386						—						—						—						33,386
Stock issued under incentive programs			428,275						4						2,597						—						(3,485)						—						(884)
Foreign currency translation adjustment			—						—						—						—						—						(12,924)						(12,924)
Net loss			—						—						—						(168,613)						—						—						(168,613)
Balance at September 30, 2022			79,204,509						$	792					$	3,640,597					$	(4,093,640)					$	(89,940)					$	(23,794)					$	(565,985)
Balance at June 30, 2021			74,672,351						$	747					$	3,237,085					$	(2,449,235)					$	(47,205)					$	4,170					$	745,562
Stock-based compensation			—						—						45,274						—						—						—						45,274
Stock issued under incentive programs			1,301,172						13						28,154						—						(31,927)						—						(3,760)
Foreign currency translation adjustment			—						—						—						—						—						(3,309)						(3,309)
Net loss			—						—						—						(322,431)						—						—						(322,431)
Balance at September 30, 2021			75,973,523						$	760					$	3,310,513					$	(2,771,666)					$	(79,132)					$	861					$	461,336

                                                                                                                                                                                                                                                                                                                                                                                                                                            

			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Income (Loss)						Total Stockholders' Equity (Deficit)
			Shares						Amount
Balance at December 31, 2021			76,433,151						$	764					$	3,351,967					$	(3,617,950)					$	(85,101)					$	(1,353)					$	(351,673)
Stock-based compensation			—						—						104,367						—						—						—						104,367
Stock issued under incentive programs			573,960						6						4,900						—						(4,839)						—						67
Issuance of common stock, net of issuance costs of $2,311			2,197,398						22						179,363						—						—						—						179,385
Foreign currency translation adjustment			—						—						—						—						—						(22,441)						(22,441)
Net loss			—						—						—						(475,690)						—						—						(475,690)
Balance at September 30, 2022			79,204,509						$	792					$	3,640,597					$	(4,093,640)					$	(89,940)					$	(23,794)					$	(565,985)
Balance at December 31, 2020			71,350,365						$	714					$	2,535,476					$	(1,874,199)					$	(41,806)					$	7,024					$	627,209
Stock-based compensation			—						—						151,457						—						—						—						151,457
Stock issued under incentive programs			2,044,191						20						58,747						—						(37,326)						—						21,441
Issuance of common stock, net of issuance costs of $7,292			2,578,967						26						564,833						—						—						—						564,859
Unrealized loss on marketable securities			—						—						—						—						—						(9)						(9)
Foreign currency translation adjustment			—						—						—						—						—						(6,154)						(6,154)
Net loss			—						—						—						(897,467)						—						—						(897,467)
Balance at September 30, 2021			75,973,523						$	760					$	3,310,513					$	(2,771,666)					$	(79,132)					$	861					$	461,336

			Nine Months Ended September 30,
			2022						2021
Operating Activities:
Net loss			$	(475,690)					$	(897,467)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			21,832						8,989
Non-cash stock-based compensation			102,525						151,457
Provision for excess and obsolete inventory			358,075						—
Right-of-use assets expensed, net of credits received			40,187						17,117
Other items, net			(25,059)						2,739
Changes in operating assets and liabilities:
Inventory			(426,466)						—
Accounts receivable, prepaid expenses, and other assets			171,325						209,221
Accounts payable, accrued expenses, and other liabilities			90,418						180,708
Deferred revenue			(155,268)						992,590
Net cash provided by (used in) operating activities			(298,121)						665,354
Investing Activities:
Purchases of property and equipment			(66,033)						(41,122)
Internal-use software development costs			(4,888)						—
Purchases of marketable securities			—						(2,167)
Proceeds from maturities and sale of marketable securities			—						159,807
Net cash provided by (used in) investing activities			(70,921)						116,518
Financing Activities:
Net proceeds from sales of common stock			179,385						564,859
Net proceeds from the exercise of stock-based awards			67						21,441
Finance lease payments			(45,904)						(63,876)
Net cash provided by financing activities			133,548						522,424
Effect of exchange rate on cash, cash equivalents, and restricted cash			257						(6,208)
Net increase (decrease) in cash, cash equivalents, and restricted cash			(235,237)						1,298,088
Cash, cash equivalents, and restricted cash at beginning of period			1,528,259						648,738
Cash, cash equivalents, and restricted cash at end of period			$	1,293,022					$	1,946,826
Supplemental disclosure of non-cash activities:
Right-of-use assets from new lease agreements			$	118,262					$	34,914
Capital expenditures included in accounts payable and accrued expenses			$	11,984					$	7,884
Supplemental disclosure of cash flow information:
Cash interest payments			$	17,260					$	17,768
Cash paid for income taxes			$	17,843					$	6,041

    

Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, the “Company”) is a biotechnology company that promotes improved health globally through the discovery, development, and commercialization of innovative vaccines to prevent serious infectious diseases. The Company’s COVID-19 vaccine (“NVX-CoV2373,” “Nuvaxovid™,” “Covovax™,” “Novavax COVID-19 Vaccine, Adjuvanted”); influenza vaccine candidate; COVID-19-Influenza Combination (“CIC”) vaccine candidate; and additional vaccine candidates, including for Omicron subvariants and bivalent formulations with prototype vaccine (“NVX-CoV2373”), are genetically engineered nanostructures of conformationally correct recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or other vaccine approaches. NVX-CoV2373 and the Company’s other vaccine candidates incorporate the Company's proprietary Matrix-M™ adjuvant to enhance the immune response and stimulate higher levels of functional antibodies and induce a cellular immune response. The Company has announced data from its ongoing PREVENT-19 study supporting the use of NVX-CoV2373 for homologous boosting in adults and adolescents aged 12 through 17. Additional findings in Phase 3 COVID-19 Omicron (study 311) trial showed utility of the prototype vaccine as a heterologous booster, inducing broad immune responses against contemporary Omicron variants.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements 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 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. GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

The unaudited consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Accumulated other comprehensive loss included a foreign currency translation loss of $23.8 million and $1.4 million as of September 30, 2022 and December 31, 2021, 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, 2021. Results for this or any interim period are not necessarily indicative of results for any future interim period or for the entire year. The Company operates in one business segment.

Certain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation. These reclassifications have no material effect on previously reported financial position, cash flows, or results of operations.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Revenue Recognition - Product Sales

Product sales are associated with the Company’s NVX-CoV2373 supply agreements, sometimes referred to as advance purchase agreements (“APAs”), with various international governments. The Company recognizes revenue from product sales based on the transaction price per dose calculated in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) when control of the product transfers to the customer and customer acceptance has occurred, unless such acceptance provisions are deemed perfunctory. If an APA includes a term that may have the effect of decreasing the price per dose of previously delivered shipments, the Company constrains the price until it is probable that a significant reversal in revenue recognized will not occur.

Cost of Sales

Cost of sales includes cost of raw materials, production, and manufacturing overhead costs associated with the Company’s product sales during the period. Cost of sales also includes adjustments for excess, obsolete, or expired inventory; idle capacity; and losses on firm purchase commitments to the extent the cost cannot be recovered based on estimates about future demand. Cost of sales does not include certain expenses related to raw materials, production, and manufacturing overhead costs that were expensed prior to regulatory authorization as described under the caption “Inventory” below.

Inventory

Recent Accounting Pronouncements

Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), with amendments in 2018, 2019, 2020, and 2022. The ASU sets forth a “current expected credit loss” (“CECL”) model that requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions. The ASU is effective for the Company beginning on January 1, 2023. Management is currently evaluating the effect of the guidance and does not expect it to have a material impact on the Company’s consolidated financial statements.

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 simplified the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts in an entity’s own equity. Specifically, the new standard removed the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It also removed certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and simplified the diluted earnings per share calculation for convertible instruments. The Company adopted ASU 2020-06 on January 1, 2022 using a modified retrospective approach, which did not have a material impact on the Company’s consolidated financial statements.

The Company's accounts receivable included $43.6 million and $419.7 million related to amounts that were billed to customers and $68.0 million and $35.3 million related to amounts which had not yet been billed to customers as of September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022, changes in the Company's accounts receivables and deferred revenue balances were as follows (in thousands):

			December 31, 2021						Additions						Deductions						September 30, 2022
Contract receivables:
Accounts receivable			$	454,993					1,519,345						(1,862,693)						$	111,645
Contract liabilities:
Deferred revenue(1)			$	1,595,472					96,298						(251,576)(2)						$	1,440,194

(1)    Amount is comprised of $404.8 million and $1.4 billion of current Deferred revenue and $1.0 billion and $172.5 million of non-current Deferred revenue as of September 30, 2022 and December 31, 2021, respectively.

(2)    Deductions from Deferred revenue includes $202.5 million that was realized in Revenue and $49.1 million that was reclassified to Other liabilities.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties, was approximately $4 billion as of September 30, 2022. Failure to meet regulatory milestones, timely obtain supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under the Company’s APA agreements may require the Company to refund portions of upfront payments or result in reduced future payments, which could adversely impact the Company’s ability to realize revenue from its unsatisfied performance obligations. The timing to fulfill performance obligations related to grant agreements will depend on the results of the Company's research and development activities, including clinical trials, and delivery of doses. The timing to fulfill performance obligations related to APAs will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype NVX-CoV2373 vaccine under certain of our APAs. The remaining unfilled performance obligations not related to grant agreements or APAs are expected to be fulfilled in less than 12 months.

Grants

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
U.S. government partnership (“OWS”)			$	104,348					$	96,215					$	311,423					$	699,268
U.S. Department of Defense (“DoD”)			1,925						1,287						1,925						21,472
Coalition for Epidemic Preparedness Innovations (“CEPI”)			—						37,505						—						131,022
Bill & Melinda Gates Foundation (“BMGF”)			—						—						—						2,628
Total grant revenue			$	106,273					$	135,007					$	313,348					$	854,390

U.S. Government

The Company’s U.S. government partnership consists of an agreement (the “OWS Agreement”) with Advanced Technology International, the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed (“OWS”). In July 2022, the Company entered into a modification to the OWS Agreement that amended the terms of such agreement to provide for (i) an initial delivery to the U.S. government of approximately 3 million doses of NVX-CoV2373 and (ii) any additional manufacture and delivery to the U.S. government up to an aggregate of 100 million doses of NVX-CoV2373 contemplated by the original OWS Agreement (inclusive of the initial batch of approximately 3 million doses) dependent on U.S. government demand, FDA guidance on strain selection, agreement between the parties on the price of such doses, and available funding. The 3 million initial doses were delivered in July 2022. Additionally, in July 2022, the Company modified its existing agreement with the DoD and delivered 0.2 million doses of NVX-CoV2373 after receipt of EUA approval from the FDA, with delivery of the remaining 9.8 million doses of NVX-CoV2373 contemplated by the original agreement subject to DoD demand and available funding.

CEPI

Royalties and Other

During the three and nine months ended September 30, 2022, the Company recognized $1.3 million and $10.5 million, respectively, in revenue related to sales-based royalties. During the three months ended June 30, 2022, the Company recognized a $20.0 million milestone payment upon the sale of NVX-CoV2373 in Japan. During the three and nine months ended September 30, 2021, the Company recognized $39.9 million and $63.4 million, respectively, in revenue related to sales-based royalties. During the three and nine months ended September 30, 2021, the Company did not recognize any revenue related to milestone payments.

Advance Purchase Agreements (APAs)

Under the terms of the Company’s supply commitment with Gavi, which includes both Novavax’ APA with Gavi and the supply obligation of its licensed partner, Serum Institute of India Private Limited (“SIIPL”), 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. The Novavax APA contemplates that the Company will manufacture and distribute 350 million doses. Under that agreement with Gavi, the Company received an upfront payment of $350 million from Gavi in 2021 and an additional payment of $350 million in the first quarter of 2022 related to the Company’s achieving WHO Emergency Use Listing. Although Novavax continues to be prepared to deliver the quantities of NVX-CoV2373 doses to Gavi under the terms of the APA, the Company was notified by Gavi of its intent to seek to revise the number and timing of doses of NVX-CoV2373 supplied by Novavax under such agreement. Furthermore, Gavi may seek partial or full recovery of the prior nonrefundable payments it has made to Novavax. The Company’s position is that Gavi has no contractual right to recover prior nonrefundable payments if it fails to order the 350 million doses it committed to order. To date, except for an initial order of approximately 2 million doses, Novavax has not received an order from Gavi and the timing and quantities of future orders to deliver NVX-CoV2373 to the COVAX Facility are unclear.

Under the terms of the Company’s SARS-CoV-2 Vaccine Supply Agreement, originally entered into in October 2020 (the “Original UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland (the “Authority”), the Authority agreed to purchase 60 million doses of NVX-CoV2373. In July 2022, the Company entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (the “Amended and Restated UK Supply Agreement”) with the Authority, under which the Authority agreed to purchase a minimum of 1 million doses and up to an additional 15 million doses of NVX-CoV2373, with the number of additional doses contingent on the Company’s timely achievement of supportive recommendations from the Joint Committee on Vaccination and Immunisation (the “JCVI”). In the event that the Company is unable to achieve the JCVI supportive recommendations, it may have to repay up to $225.0 million related to the upfront payment previously received from the Authority under the Original UK Supply Agreement. As of September 30, 2022, the Company will be required to repay a minimum of $40.0 million related to the upfront payment, which is reflected in Other current liabilities, with the remaining balance of $185.0 million reflected in Deferred revenue. Under the Amended and Restated UK Supply Agreement, the Authority also has the option to purchase up to an additional 44 million doses, in one or more tranches, through 2024.

The Company has an APA with the European Commission (“EC”) acting on behalf of various European Union member states to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the EC to purchase an additional 100 million doses up to a maximum aggregate of 200 million doses in one or more tranches, through 2023. In July and August 2022, the Company was notified by the EC that it was cancelling 5 million doses of its prior commitment originally scheduled for delivery in the first and second quarters of 2022, in accordance with the APA, and reducing the order to 65 million doses. The Company is in the process of finalizing a revised delivery schedule for the remaining 23 million committed doses under the APA that were originally scheduled for delivery during the first and second quarters of 2022.

Serum Institute

The Company previously granted SIIPL exclusive and non-exclusive licenses for the development, co-formulation, filling and finishing, registration, and commercialization of NVX-CoV2373. SIIPL agreed to purchase the Company’s Matrix-MTM adjuvant and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373. The Company and SIIPL equally split the revenue from SIIPL’s sale of NVX-CoV2373 in its licensed territory, net of agreed costs. The Company also has a supply agreement with SIIPL and Serum Life Sciences Limited (“SLS”) under which SIIPL and SLS supply the Company with NVX-CoV2373 for commercialization and sale in certain territories, as well as a contract development manufacture agreement with SLS, under which SLS manufactures and supplies finished vaccine product to the Company using antigen drug substance and Matrix-M™ adjuvant supplied by the Company. In May and August 2022, the Company expanded its license and supply arrangements with SIIPL to include its proprietary COVID-19 variant antigen candidate(s), its quadrivalent influenza vaccine candidate, and its CIC vaccine candidate, so that SIIPL can manufacture and commercialize a vaccine targeting COVID-19 variants, including the Omicron subvariants, a quadrivalent influenza vaccine, and CIC vaccine, and supply such vaccines to the Company. In March 2020, the Company granted SIIPL a non-exclusive license for the use of Matrix-M™ adjuvant supplied by the Company to develop, manufacture, and commercialize R21, a malaria candidate developed by the Jenner Institute, University of Oxford.

Takeda Pharmaceutical Company Limited

The Company has a collaboration and license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) under which the Company granted Takeda an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in Japan. Under the agreement, Takeda purchases the Company’s Matrix-M™ adjuvant to manufacture NVX-CoV2373 and the Company is entitled to receive payments from Takeda based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of NVX-CoV2373 in the low to middle double-digit range. During the three months ended June 30, 2022, the Company recognized a milestone payment of $20.0 million upon the first sale in Japan.

SK bioscience Co., Ltd.

The Company has a collaboration and license agreement with SK bioscience Co., Ltd. (“SK bioscience”) to manufacture and commercialize NVX-CoV2373 for sale to the governments of South Korea, Thailand, and Vietnam. SK bioscience pays a royalty in the low to middle double-digit range. Additionally, the Company has a manufacturing supply arrangement with SK bioscience under which SK bioscience supplies the Company with the antigen component of NVX-CoV2373 for use in the final drug product globally, including product to be distributed by the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. In July 2022, the Company signed an additional agreement with SK bioscience for the technology transfer of the Company’s proprietary COVID-19 variant antigen materials so that SK bioscience can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants. The companies also signed an agreement to manufacture and supply the Novavax COVID-19 vaccine in a prefilled syringe.

Other Supply Agreements

On September 30, 2022, the Company, FUJIFILM Diosynth Biotechnologies UK Limited (“FDBK”), FUJIFILM Diosynth Biotechnologies Texas, LLC (“FDBT”), and FUJIFILM Diosynth Biotechnologies USA, Inc. (“FDBU” and together with FDBK and FDBT, “Fujifilm”) entered into a Confidential Settlement Agreement and Release (the “Fujifilm Settlement Agreement”) regarding amounts due to Fujifilm in connection with the termination of manufacturing activity at FDBT under the Commercial Supply Agreement (the “CSA”) dated August 20, 2021 and Master Services Agreement dated June 30, 2020 and associated statements of work (the “MSA”) by and between the Company and Fujifilm. The MSA and CSA established the general terms and conditions applicable to Fujifilm’s manufacturing and supply activities related to NVX-CoV2373 under the associated statements of work.

Pursuant to the Fujifilm Settlement Agreement, the Company is responsible for payment of up to $185.0 million (the “Settlement Payment”) to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the CSA, of which (i) $47.8 million, constituting the initial reservation fee under the CSA, was credited against the Settlement Payment on September 30, 2022 and (ii) the remaining balance is to be paid in four equal quarterly installments of $34.3 million each beginning March 31, 2023. As of September 30, 2022, $102.9 million of the remaining payment was reflected in Accrued expenses and $34.3 million was reflected in Other non-current liabilities. Under the Fujifilm Settlement Agreement, Fujifilm is required to use commercially reasonable efforts to mitigate the losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT under the CSA, and the final two quarterly installments will be mitigated by any replacement revenue achieved by Fujifilm between July 1, 2023 and December 31, 2023. The Settlement Payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expense from FDBT manufacturing activity under the CSA prior to the Fujifilm Settlement Agreement and accordingly, during the three and nine months ended September 30, 2022, the Company recorded a benefit of $98.3 million as Research and development expense (see Note 9).

Except with respect to certain limited activities agreed upon by the parties, the MSA terminated with respect to all activities in FDBU and FDBT on October 21, 2022 and the impact of the termination was determined in accordance with the provisions of the MSA. The terms and conditions of the MSA and CSA will remain in full force and effect with respect to the ongoing activities at FDBK. In addition, the Company and Fujifilm mutually released all claims relating to (i) the cancellation of batches to be manufactured at FDBT under the MSA or CSA, (ii) FDBT facility idle time in 2022, (iii) failure to complete product performance qualification testing of batches manufactured by Fujifilm by December 2021, and (iv) any obligation by Fujifilm to reserve capacity or manufacture batches at FDBT for the benefit of the Company under the MSA or CSA.

The Company continues to assess its manufacturing needs and intends to modify its global manufacturing footprint consistent with its contractual obligations to supply, and anticipated demand for, NVX-CoV2373, and in doing so, recognizes that significant costs may be incurred.

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

			September 30, 2022						December 31, 2021
Cash and cash equivalents			$	1,280,581					$	1,515,116
Restricted cash, current			10,785						11,490
Restricted cash, non-current(1)			1,656						1,653
Cash, cash equivalents, and restricted cash			$	1,293,022					$	1,528,259

(1)Classified as Other non-current assets as of September 30, 2022 and December 31, 2021, on the consolidated balance sheets.

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

			Fair Value at September 30, 2022																		Fair Value at December 31, 2021
Assets			Level 1						Level 2						Level 3						Level 1						Level 2						Level 3
Money market funds(1)			$	365,631					$	—					$	—					$	361,822					$	—					$	—
Government-backed securities(1)			—						261,000						—						—						266,250						—
Corporate debt securities(1)			—						109,914						—						—						790,672						—
Agency securities(1)			—						42,777						—						—						—						—
Total cash equivalents			$	365,631					$	413,691					$	—					$	361,822					$	1,056,922					$	—
Liabilities
Convertible notes payable			$	—					$	317,044					$	—					$	—					$	447,509					$	—

(1)All investments are classified as Cash and cash equivalents as of September 30, 2022 and December 31, 2021, on the consolidated balance sheets.

Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature. Pricing of the Company's Notes (see Note 10) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates, and credit spreads.

During the nine months ended September 30, 2022 and 2021, the Company did not have any transfers between levels.

Inventory consisted of the following (in thousands):

			September 30, 2022						December 31, 2021
Raw materials			$	17,557					$	8,872
Semi-finished goods			33,030						—
Finished goods			31,845						—
Total inventory			$	82,432					$	8,872

Inventory write-downs as a result of excess, obsolescence, expiry, or other reasons, and losses on firm purchase commitments are recorded as a component of cost of sales in our consolidated statements of operations. For the three and nine months ended September 30, 2022, inventory write-downs were $202.4 million and $358.1 million, respectively. For the three and nine months ended September 30, 2022, losses on firm purchase commitments were $46.6 million and $146.2 million, respectively. There were no inventory write-downs or losses on firm purchase commitments during 2021.

Purchased intangible assets consisted of the following (in thousands):

			September 30, 2022																		December 31, 2021
			Gross Carrying Amount						Accumulated  Amortization						Intangible Assets, Net						Gross Carrying Amount						Accumulated  Amortization						Intangible Assets, Net
Finite-lived intangible assets:
Proprietary adjuvant technology			$	6,911					$	(3,069)					$	3,842					$	8,239					$	(3,469)					$	4,770
Internal-use software(1)			4,888						(274)						4,614						—						—						—
Total identifiable intangible assets			$	11,799					$	(3,343)					$	8,456					$	8,239					$	(3,469)					$	4,770

(1)As of September 30, 2022, internal-use software included $3.6 million for assets under development.

Amortization expense for the nine months ended September 30, 2022 and 2021 was $0.6 million and $0.3 million, respectively. Estimated amortization expense for existing in-use intangible assets for the remainder of 2022 and for each of the five succeeding years ending December 31 is estimated to be as follows (in thousands):

Year						Amount
2022 (remainder)						$	189
2023						756
2024						740
2025						392
2026						335
2027						335

The change in the carrying amounts of goodwill for the nine months ended September 30, 2022 was as follows (in thousands):

			Amount
Balance at December 31, 2021			$	131,479
Currency translation adjustments			(13,944)
Balance at September 30, 2022			$	117,535

During the three and nine months ended September 30, 2022, the Company recognized a short-term lease benefit of $46.6 million and expense of $37.3 million, respectively, related to its embedded leases, net of a benefit of $98.3 million related to the Fujifilm Settlement Agreement (see Note 4). During the three and nine months ended September 30, 2022, the Company expensed $24.2 million and $44.0 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement or modification of the lease. During the three and nine months ended September 30, 2021, the Company recognized a short-term lease expense of $111.3 million and $325.5 million, respectively, related to its embedded leases and expensed $4.4 million and $17.1 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement or modification of the lease. During the three and nine months ended September 30, 2022, the Company recognized $0.9 million and $4.3 million of interest expense, respectively, on its finance lease liabilities. During the three and nine months ended September 30, 2021, the Company recognized $1.6 million and $5.6 million of interest expense, respectively, on its finance lease liabilities.

During 2020, the Company entered into a lease agreement for the premises located at 700 Quince Orchard Road, Gaithersburg, Maryland. The lease is for approximately 170,000 square feet of space that the Company intends to use for manufacturing, research and development, and corporate offices. The term of the lease is 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. During the nine months ended September 30, 2022, the Company obtained the right to direct the use of, and obtain substantially all of the benefit from, certain floors located at the premises and recognized an ROU asset and related lease obligation of $73.2 million as the lease commencement dates for accounting purposes had occurred.

The Company incurred approximately $10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”), which were recorded as a reduction to the Notes on the consolidated balance sheet. The $10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven-year contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method.

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

			September 30, 2022						December 31, 2021
Principal amount of Notes			$	325,000					$	325,000
Unamortized debt issuance costs			(475)						(1,542)
Total convertible notes payable(1)			$	324,525					$	323,458

(1)    Convertible notes are classified as current liabilities and as non-current liabilities in the consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

The interest expense incurred in connection with the Notes consisted of the following (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Coupon interest at 3.75%			$	3,047					$	3,047					$	9,141					$	9,141
Amortization of debt issuance costs			356						356						1,068						1,068
Total interest expense on Notes			$	3,403					$	3,403					$	10,209					$	10,209

During the three months ended March 31, 2022, the Company sold 2.2 million of shares of its common stock resulting in net proceeds of approximately $179 million, under its most recent At Market Issuance Sales agreement entered in June 2021 (the “June 2021 Sales Agreement”), which allows it to issue and sell up to $500 million in gross proceeds of shares of its common stock. As of September 30, 2022, the remaining balance under the June 2021 Sales Agreement was approximately $318 million.

During the nine months ended September 30, 2021, the Company sold 2.6 million shares of its common stock resulting in net proceeds of approximately $565 million, under its various At Market Issuance Sales agreements.

Equity Plans

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees, and consultants of and advisors to the Company and any present or future subsidiary.

The 2015 Plan authorizes the issuance of up to 14.8 million shares of common stock under equity awards granted under the 2015 Plan, which includes an increase of 2.4 million shares approved for issuance under the 2015 Plan at the Company's 2022 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025. As of September 30, 2022, there were 4.6 million shares available for issuance under the 2015 Plan.

The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.

The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights (“SARs”), and restricted stock units (“RSUs”). In addition, under the 2015 Plan, unrestricted stock, stock units, and performance awards may be granted. Stock options and SARs generally have a maximum term of ten years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company's common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years.

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Cost of sales			$	51					$	—					$	51					$	—
Research and development			16,107						21,860						52,692						70,429
General and administrative			15,389						23,414						49,782						81,028
Total stock-based compensation expense			$	31,547					$	45,274					$	102,525					$	151,457

Total stock-based compensation capitalized and included in inventory as of September 30, 2022 was $1.8 million. There was no stock-based compensation capitalized and included in inventory as of December 31, 2021.

As of September 30, 2022, there was approximately $189 million of total unrecognized compensation expense related to unvested stock options, SARs, RSUs, and the Company’s Employee Stock Purchase Plan, as amended (“ESPP”). This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of approximately one year. This estimate does not include the impact of other possible stock-based awards that may be made during future periods.

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 SARs) that would have been received by the holders had all stock option and SAR holders exercised their stock options and SARs on September 30, 2022. This amount is subject to change based on changes to the closing price of the Company's common stock. The aggregate intrinsic value of stock options and SARs exercises and vesting of RSUs for the nine months ended September 30, 2022 and 2021 was approximately $19 million and $381 million, respectively.

The following is a summary of stock options and SARs activity under the 2015 Plan and 2005 Plan for the nine months ended September 30, 2022:

			2015 Plan												2005 Plan
			Stock Options						Weighted-Average Exercise Price						Stock Options						Weighted-Average Exercise Price
Outstanding at December 31, 2021			3,635,837						$	42.60					68,225						$	109.52
Granted			558,181						71.21						—						—
Exercised			(132,420)						15.75						(3,000)						31.10
Canceled			(61,364)						88.58						(1,500)						121.00
Outstanding at September 30, 2022			4,000,234						$	46.78					63,725						$	112.94
Shares exercisable at September 30, 2022			2,739,565						$	39.72					63,725						$	112.94

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Weighted average Black-Scholes fair value of stock options granted			$37.66						$203.51						$60.24						$156.86
Risk-free interest rate			3.0%-3.6%						0.6%-0.9%						1.4%-3.6%						0.5%-1.1%
Dividend yield			—%						—%						—%						—%
Volatility			122.2%-136.4%						126.4%-140.0%						120.5%-136.7%						124.7%-142.0%
Expected term (in years)			4.0-5.3						4.1-6.1						4.0-6.3						4.1-6.1

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of September 30, 2022 was approximately $9 million and 7.4 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of September 30, 2022 was approximately $5 million and 7.0 years, respectively.

Restricted Stock Units

The following is a summary of RSU activity for the nine months ended September 30, 2022:

			Number of Shares						Per Share Weighted- Average Fair Value
Outstanding and unvested at December 31, 2021			819,828						$	116.70
Granted			1,113,958						68.49
Vested			(379,802)						78.17
Forfeited			(114,976)						110.59
Outstanding and unvested at September 30, 2022			1,439,008						$	90.03

The ESPP was approved at the Company's annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 1.1 million shares of common stock to be purchased, and the aggregate amount of shares will continue to increase 5% on each anniversary of its adoption up to a maximum of 1.65 million shares. 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). As of September 30, 2022, there were 0.7 million shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Range of Black-Scholes fair values of ESPP shares granted			$23.59-$39.73						$83.47-$152.11						$23.59-$79.74						$83.47-$238.85
Risk-free interest rate			3.2%-3.3%						0.1%-0.2%						0.6%-3.3%						0.1%-0.2%
Dividend yield			—%						—%						—%						—%
Volatility			103.0%-114.8%						114.9%-150.6%						103.0%-142.9%						114.9%-159.4%
Expected term (in years)			0.5-2.0						0.5-2.0						0.5-2.0						0.5-2.0

The Company recognized federal and state income tax expense of $2.4 million and $4.3 million, in total, for the three and nine months ended September 30, 2022, respectively, and did not recognize federal or state income tax expense for the three and nine months ended September 30, 2021. The Company recognized income tax expense related to foreign withholding tax on royalties of $0.1 million and $2.3 million, respectively, for the three and nine months ended September 30, 2022 and $6.0 million and $12.6 million for the three and nine months ended September 30, 2021, respectively.

Note 14 – Commitments and Contingencies

On November 12, 2021, Sothinathan Sinnathurai filed a purported securities class action in the U.S. District Court for the District of Maryland against the Company and certain members of senior management, captioned Sothinathan Sinnathurai v. Novavax, Inc., et al., No. 8:21-cv-02910-TDC (the “Sinnathurai Action”). On January 26, 2022, the court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs in the Sinnathurai Action. The co-lead plaintiffs filed a consolidated amended complaint on March 11, 2022, alleging that the defendants made certain purportedly false and misleading statements concerning the Company’s ability to manufacture NVX-CoV2373 on a commercial scale and to secure the vaccine’s regulatory approval. The amended complaint defines the purported class as those stockholders who purchased the Company’s securities between February 24, 2021 and October 19, 2021. On April 25, 2022, defendants filed a motion to dismiss the consolidated amended complaint. On June 9, 2022, the co-lead plaintiffs filed an opposition to the motion to dismiss and on July 11, 2022, the Company filed a reply brief. The matter is now fully briefed. The Court has not indicated whether it intends to schedule any hearing on the motion before issuing a ruling.

After the Sinnathurai Action was filed, six derivative lawsuits were filed: (i) Robert E. Meyer v. Stanley C. Erck, et al., No. 8:21-cv-02996-TDC (the “Meyer Action”), (ii) Shui Shing Yung v. Stanley C. Erck, et al., No. 8:21-cv-03248-TDC (the “Yung Action”), (iii) William Kirst, et al. v. Stanley C. Erck, et al., No. 8:22-cv-00024-TDC (the “Kirst Action”), (iv) Amy Snyder v. Stanley C. Erck, et al., No. 8:22-cv-01415-TDC (the “Snyder Action”), (v) Charles R. Blackburn, et al. v. Stanley C. Erck, et al., No. 1:22-cv-01417-TDC (the “Blackburn Action”), and (vi) Diego J. Mesa v. Stanley C. Erck, et al. (the “Mesa Action”). The Meyer, Yung, Snyder, and Blackburn Actions were filed in the U.S. District Court for the District of Maryland. The Kirst Action was filed in the Circuit Court for Montgomery County, Maryland, and shortly thereafter removed to the U.S. District Court for the District of Maryland by the defendants. The Mesa Action was filed in the Delaware Court of Chancery. The derivative lawsuits name members of the board of directors and certain members of senior management as defendants. The Company is deemed a nominal defendant. The plaintiffs assert derivative claims arising out of substantially the same alleged facts and circumstances as the Sinnathurai Action. Collectively, the derivative complaints assert claims for breach of fiduciary duty, insider selling, unjust enrichment, violation of federal securities law, abuse of control, waste, and mismanagement. Plaintiffs seek declaratory and injunctive relief, as well as an award of monetary damages and attorneys’ fees.

On February 26, 2021, a Novavax stockholder named Thomas Golubinski filed a derivative complaint against members of the Novavax board of directors and members of senior management in the Delaware Court of Chancery (the “Court”), captioned Thomas Golubinski v. Richard H. Douglas, et al., No. 2021-0172-JRS. The Company is deemed a nominal defendant. Golubinski challenged equity awards made in April 2020 and in June 2020 on the ground that they were “spring-loaded,” that is, made at a time when such board members or members of senior management allegedly possessed undisclosed positive material information concerning the Company. The complaint asserted claims for breach of fiduciary duty, waste, and unjust enrichment. The plaintiff sought an award of damages to the Company, an order rescinding both awards or requiring disgorgement, and an award of attorneys’ fees incurred in connection with the litigation. On May 10, 2021, the defendants moved to dismiss the complaint in its entirety. On June 17, 2021, the Company’s stockholders voted FOR ratification of the April 2020 awards and ratification of the June 2020 awards. Details of the ratification proposals are set forth in the Company’s Definitive Proxy Statement filed with the SEC on May 3, 2021. The results of the vote were disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2021. Thereafter, the plaintiff stipulated that, as a result of the outcome of the June 17, 2021 vote, the plaintiff no longer intends to pursue the lawsuit or any claim arising from the April 2020 and June 2020 awards. On August 23, 2021, the plaintiff filed a motion seeking an award of attorneys’ fees and expenses, to which the defendants filed an opposition. The motion was argued before the Court on October 18, 2022. The same day, the Court issued a bench ruling denying the plaintiff’s fee application in its entirety and entered an order to that effect. Under a prior Court order, the case was automatically dismissed with prejudice upon denial of the plaintiff’s fee application.

On March 29, 2022, Par Sterile Products, LLC (“Par”) submitted a demand for arbitration against the Company with the American Arbitration Association, alleging that the Company breached certain provisions of the Manufacturing and Services Agreement (“MSA”) that the Company entered into with Par in September 2020 to provide fill-finish manufacturing services for NVX-CoV2373. The matter is at a preliminary stage and therefore the potential loss is not reasonably estimable. The parties are engaged in discovery and arbitration is scheduled for July 2023. While the Company maintains that no breach of the MSA has occurred and intends to vigorously defend the matter, if the final resolution of the matter is adverse to the Company, it could have a material impact on the Company’s financial position, results of operations, or cash flows.

Once a pathogenic threat has been identified, the genetic sequence encoding the antigen is selected for subsequent use in developing the vaccine construct. The genetic sequence may be optimized to enhance protein stability or confer resistance to degradation. This genetic construct is inserted into the baculovirus Spodoptera frugiperda (“Sf9/BV”) insect cell-expression system, which enables efficient, large-scale expression of the optimized protein. The Sf9/BV system produces proteins that are properly folded and modified – which can be critical for functional, protective immunity – as the vaccine antigen. Protein antigens are purified and organized around a polysorbate-based nanoparticle core, in a configuration that resembles their native presentation. This results in a highly immunogenic nanoparticle that is ready to be formulated with Matrix-M™ adjuvant.

(1)    Regulatory approval received in partnership with SIIPL.

(2)    Regulatory manufacturing and marketing approval received by partner Takeda Pharmaceutical Company Limited (“Takeda”).

(1)    Regulatory filing submitted by our partner, SK bioscience, Co., Ltd. (“SK bioscience”).

Our clinical pipeline encompasses vaccine candidates spanning multiple therapeutic areas including coronavirus, seasonal influenza, and RSV, in addition to providing Matrix-MTM adjuvant for collaborations investigating the prevention of malaria. Our COVID-19 vaccine candidate, NVX-CoV2373, is our leading product, having received approval, interim authorization, provisional approval, CMA, and EUA from multiple regulatory authorities globally.

Furthermore, we remain interested in continuing the development of both our RSV Program for respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) and Matrix-MTM adjuvant collaborations for malaria. There is an ongoing Phase 3 trial being conducted by our partner, Jenner Institute, University of Oxford, for R21, a malaria candidate which is formulated using our Matrix-M™ adjuvant. In September 2022, positive results from an ongoing Phase 1/2b study were published in The Lancet Infectious Diseases reporting safety, immunogenicity, and efficacy results at 12 months following administration of a booster vaccination. A booster dose of R21 formulated with our Matrix-M™ adjuvant at one year following the primary three-dose regimen maintained high efficacy against first and multiple episodes of clinical malaria. The booster vaccine induced antibody concentrations that is related to vaccine efficacy. The trial is ongoing to assess long-term follow-up of the participants and the value of further booster vaccinations.

(1)    Supported by OWS, DoD, CEPI, and BMGF.

(2)    Authorized for provisional approval, CMA, or EUA in select geographies under trade names NuvaxovidTM and CovovaxTM. Received EUA from the U.S. FDA. PREVENT-19, a Phase 3 clinical trial in the U.S. and Mexico; Ongoing PREVENT-19 pediatric expansion in the U.S.; Phase 3 clinical trial in the UK; Ongoing Phase 2b clinical trial in South Africa. We, along with our partners, will have commercial rights in authorized geographies to sell and distribute NVX-CoV2373.

(3) Ongoing Phase 3 strain change trial.

•Nuvaxovid™ booster authorized for emergency use in the U.S., European Union (“EU”), Switzerland, United Arab Emirates (UAE) and New Zealand, with submissions completed to WHO, as well as in Great Britain and South Korea

◦Recommendations provided by U.S. Centers for Disease Control and Prevention (“CDC”), E.U.’s Committee for Medicinal Products for Human Use and Switzerland’s Federal Office of Public Health

•Nuvaxovid™ granted import and use permit in Israel for primary series and as a booster

•Covovax™ granted full product registration in South Africa for primary series

•Nuvaxovid™ primary series authorized for emergency use in the U.S., EU, Japan, Great Britain, Australia, South Korea, Taiwan, Switzerland, Thailand, UAE and New Zealand, with submissions completed to WHO and in Singapore

◦Recommendation provided by U.S. CDC

•Nuvaxovid™ granted import and use permit in Israel for primary series and as a booster

•Delivered over 94 million doses of NVX-CoV2373 globally to date

•Completed submission to add Novavax CZ as an EU manufacturing site

•Solidified manufacturing and supply network ensuring capacity to support ongoing global demand

•Announced topline results from Phase 3 Boosting Trial for NVX-CoV2515, meeting the primary strain-change endpoint and reaffirming that prototype vaccine induces broadly cross-reactive responses, suggesting utility against current and future variants

•PREVENT-19 Phase 3 NVX-CoV2373 homologous booster data support benefits against variants

◦Following a single homologous booster dose, adult participants demonstrated increased anti-spike IgG levels and increased functional antibody levels measured by hACE2 receptor inhibition against Omicron BA.1, BA.2 and BA.5 variants, approximating levels observed in our Phase 3 efficacy studies

◦Robust booster responses were consistent between younger (less than 65 years of age) and older (greater than 65 years of age) adults, and independent of whether the booster dose was administered eight or 11 months after the primary series, offering further evidence of broad utility and duration of response with NVX-CoV2373

◦Adolescent participants following a single booster dose demonstrated neutralizing titers were 2.7-fold higher than those seen with primary vaccination and a broad antibody response against Omicron BA.1, BA.2 and BA.5 variants

•Demonstrated NVX-CoV2373 induced consistent immune responses when boosted on top of mRNA or AD26 vaccines, and achieved primary endpoint of Lot Consistency study for adults aged 18 through 49, demonstrating a consistent manufacturing process

◦When used as a heterologous boost (after either 2 or 3 doses of mRNA OR 1 or 2 doses of AD26) NVX-CoV2373 generated antibody levels previously found to be related to efficacy in the PREVENT-19 Phase 3 trial

•Initiated Phase 2b/3 Hummingbird global clinical trial for NVX-CoV2373 in younger children aged six months through 11 years, enrolling the sentinel cohort in the first group aged six through 11 years in the U.S.

◦Based on initial supportive safety and tolerability data analyzed by an independent Safety and Monitoring Committee, progressed to recruiting the full age cohort

•Announced positive cellular immunity results of CIC Phase 1/2 trial following initial results announced in April, demonstrating ability to generate immune responses, including both antibody and polyfunctional CD4+ T-cell responses, against SARS-CoV-2 and homologous and heterologous influenza strains

◦Generated robust antibody responses against both prototype and Omicron BA.1 strains of SARS-CoV-2 and influenza antigens

◦Safety and tolerability profile was consistent with standalone NVX-CoV2373 prototype vaccine and quadrivalent influenza vaccine candidate

◦Phase 2 trial expected to begin by the end of 2022

During the three months ended March 31, 2022, we sold 2.2 million of shares of our common stock resulting in net proceeds of approximately $179 million, under our most recent At Market Issuance Sales agreement entered in June 2021 (the “June 2021 Sales Agreement”), which allows us to issue and sell up to $500 million in gross proceeds of shares of our common stock. As of September 30, 2022, the remaining balance under our June 2021 Sales Agreement was approximately $318 million.

During the nine months ended September 30, 2021, we sold 2.6 million shares of our common stock resulting in net proceeds of approximately $565 million, under our various At Market Issuance Sales agreements then in effect.

We periodically analyze our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to its estimated net realizable value based on assumptions about expected future demand and market conditions. Our assumptions about expected future demand are inherently uncertain and if we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of inventory write down that we report in a particular period. Expense incurred related to excess inventory and obsolete inventory is recorded as a component of cost of sales in the consolidated statement of operations.

See “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (under the caption “Recent Accounting Pronouncements”).

The following is a discussion of the historical financial condition and results of our operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report.

			Three Months Ended September 30,
			2022						2021						Change
Revenue (in thousands):
Product sales			$	626,091					$	—					$	626,091
Grants			106,273						135,007						(28,734)
Royalties and other			2,213						43,837						(41,624)
Total revenue			$	734,577					$	178,844					$	555,733

Revenue for the three months ended September 30, 2022 was $734.6 million as compared to $178.8 million for the same period in 2021, an increase of $555.7 million. Revenue for the three months ended September 30, 2022 was primarily comprised of revenue from product sales of NVX-CoV2373 and revenue for services performed under the agreement with the U.S. government partnership formerly known as OWS (“OWS Agreement”). Revenue for the three months ended September 30, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and our funding agreements with CEPI. The increase in revenue was due to the commencement of commercial sales of NVX-CoV2373 in 2022, partially offset by decreased development activities under our funding agreements with CEPI.

We expect revenue in 2022 to significantly increase as compared to 2021 due to product sales of NVX-CoV2373 under various supply agreements, sometimes referred to as advance purchase agreements (“APAs”), as a result of multiple global regulatory approvals.

			Three Months Ended September 30,
			2022						2021						Change
Expenses (in thousands):
Cost of sales			$	434,593					—						$	434,593
Research and development			304,297						408,195						(103,898)
Selling, general, and administrative			122,876						77,793						45,083
Total expenses			$	861,766					$	485,988					$	375,778

Cost of sales was $434.6 million, or 69% of product sales, for the three months ended September 30, 2022, including expense of $249.0 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments. Prior to receiving regulatory approval, we expensed manufacturing costs as research and development expenses. After receiving regulatory approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. However, based on our expectations for future manufacturing costs to produce our vaccine product and components inventory, we estimate at September 30, 2022 we had approximately $0.1 billion of commercial inventory that was expensed prior to approval. We expect to utilize the majority of our reduced-cost inventory through 2023. If inventory sold for the three months ended September 30, 2022 was valued at expected standard cost, including expenses related to excess and obsolete inventory, adjusted cost of sales for the period would have been approximately $444.0 million, or 71% of product sales, an adjustment of $9.4 million as compared to cost of sales recognized. The cost of sales to high income countries is expected to be between 15% and 30% of product sales based on our standard cost. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer mix or standard costs.

Research and Development Expenses

Research and development expenses decreased to $304.3 million for the three months ended September 30, 2022 as compared to $408.2 million for the three months ended September 30, 2021, a decrease of $103.9 million primarily due to research and development of coronavirus vaccines, including NVX-CoV2373, NVX-CoV2515, bivalent formulations, and CIC, as summarized in the table below (in thousands):

			Three Months Ended September 30,
			2022						2021
Coronavirus vaccines			$	208,004					$	341,600
Influenza vaccine			3,011						1,656
Other vaccine development programs			843						126
Total direct external research and development expense			211,858						343,382
Employee expenses			45,150						36,574
Stock-based compensation expense			16,107						21,860
Facility expenses			16,770						4,983
Other expenses			14,412						1,396
Total research and development expenses			$	304,297					$	408,195

Research and development expenses for coronavirus vaccines for the three months ended September 30, 2022 and 2021, included a benefit of $80.5 million related to previously accelerated manufacturing costs and an expense of $35.8 million related to the acceleration of manufacturing costs, respectively, for leases that we determined were embedded in multiple manufacturing supply agreements with Contract Manufacturing Organizations (“CMOs”) and contract manufacturing and development organizations (“CDMOs”). Pursuant to the Fujifilm Settlement Agreement (see Note 4 to our consolidated financial statements in this Quarterly Report), we are responsible for a Settlement Payment of up to $185.0 million to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the CSA, of which $47.8 million, constituting the initial reservation fee under the CSA, was credited against the Settlement Payment on September 30, 2022. The Settlement Payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expense from FDBT manufacturing activity under the CSA prior to the Fujifilm Settlement Agreement and accordingly, during the three months ended September 30, 2022, we recorded a benefit of $98.3 million as Research and development expense. For 2022, we expect total research and development expenses to decrease as compared to 2021, primarily due to capitalization of manufacturing costs during 2022 that were previously recognized as research and development expenses in prior periods, partially offset by research and development expenses related to increased clinical activities as we continue to develop our coronavirus vaccines and other programs.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased to $122.9 million for the three months ended September 30, 2022 from $77.8 million for the same period in 2021, an increase of $45.1 million. The increase in selling, general, and administrative expenses is primarily due to an increase in professional fees and marketing costs in support of our NVX-CoV2373 program. For 2022, we expect selling, general, and administrative expenses to increase significantly as compared to 2021 due to increased activities related to supporting our NVX-CoV2373 program and increases in professional fees and marketing costs.

			Three Months Ended September 30,
			2022						2021						Change
Other Expense (in thousands):
Interest expense			$	(4,169)					$	(5,182)					$	1,013
Other expense			(34,783)						(4,064)						(30,719)
Total other expense, net			$	(38,952)					$	(9,246)					$	(29,706)

We had total other expense, net, of $39.0 million for the three months ended September 30, 2022 as compared to $9.2 million for the same period in 2021. During the three months ended September 30, 2022 and 2021, other expense was primarily related to losses due to foreign exchange rate activity.

During the three months ended September 30, 2022 and 2021, we recognized $2.5 million and $6.0 million, respectively, of income tax expense related to federal and state income taxes and foreign withholding tax on royalties.

			Three Months Ended September 30,
			2022						2021						Change
Net Loss (in thousands, except per share information):
Net loss			$	(168,613)					$	(322,431)					$	153,818
Net loss per share, basic and diluted			$	(2.15)					$	(4.31)					$	2.16
Weighted average shares outstanding, basic and diluted			78,274						74,745						3,529

Net loss for the three months ended September 30, 2022 was $168.6 million, or $2.15 per share, basic, as compared to $322.4 million, or $4.31 per share, basic, for the same period in 2021. The decrease in net loss during the three months ended September 30, 2022, was primarily due to the commencement of commercial sales of NVX-CoV2373 in 2022 and a decrease in research and development expense, partially offset by the write-down of excess, obsolete, or expired inventory and losses on firm purchase commitments.

The increase in weighted average shares outstanding for the three months ended September 30, 2022 is primarily a result of sales of our common stock and exercises of stock-based awards in 2022 and 2021.

			Nine Months Ended September 30,
			2022						2021						Change
Revenue (in thousands):
Product sales			$	1,267,174					$	—					$	1,267,174
Grants			313,348						854,390						(541,042)
Royalties and other			43,951						69,700						(25,749)
Total revenue			$	1,624,473					$	924,090					$	700,383

Revenue for the nine months ended September 30, 2022 was $1.6 billion as compared to $924.1 million for the same period in 2021, an increase of $700.4 million. Revenue for the nine months ended September 30, 2022 was primarily comprised of revenue from product sales of NVX-CoV2373 and, to a lesser extent, revenue for services performed under the OWS Agreement. Revenue for the nine months ended September 30, 2021 was primarily comprised of revenue for services performed under the OWS Agreement and our funding agreements with CEPI. The increase in revenue was due to the commencement of commercial sales of NVX-CoV2373 in 2022, partially offset by decreased development activities under the OWS Agreement and our funding agreements with CEPI.

			Nine Months Ended September 30,
			2022						2021						Change
Expenses (in thousands):
Cost of sales			$	720,874					$	—					$	720,874
Research and development			977,428						1,571,551						(594,123)
Selling, general, and administrative			327,028						214,144						112,884
Total expenses			$	2,025,330					$	1,785,695					$	239,635

Cost of sales was $720.9 million, or 57% of product sales, for the nine months ended September 30, 2022, including expense of $504.3 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments. Prior to receiving approval, we expensed manufacturing costs as research and development expenses. After receiving approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. However, based on our expectations for future manufacturing costs to produce our vaccine product and components inventory, we estimate at September 30, 2022 we had approximately $0.1 billion of commercial inventory that was expensed prior to approval. We expect to utilize the majority of our reduced-cost inventory through 2023. If inventory sold for the nine months ended September 30, 2022 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $883.5 million, or 70% of product sales, an adjustment of $162.6 million as compared to cost of sales recognized. The cost of sales to high income countries is expected to be between 15% and 30% of product sales based on our standard cost. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer mix or standard costs.

Research and Development Expenses

Research and development expenses decreased to $977.4 million for the nine months ended September 30, 2022 from $1.6 billion for the same period in 2021, a decrease of $594.1 million, primarily due to decreased development activities relating to coronavirus vaccines, including NVX-CoV2373, NVX-CoV2515, bivalent formulations, and CIC, as summarized in the table below (in thousands):

			Nine Months Ended September 30,
			2022						2021
Coronavirus vaccines			$	697,952					$	1,376,921
Influenza vaccine			6,581						5,950
Other vaccine development programs			1,156						641
Total direct external research and development expense			705,689						1,383,512
Employee expenses			132,069						86,085
Stock-based compensation expense			52,692						70,429
Facility expenses			40,842						11,387
Other expenses			46,136						20,138
Total research and development expenses			$	977,428					$	1,571,551

Research and development expenses for coronavirus vaccines for the nine months ended September 30, 2022 and 2021, included a benefit of $147.8 million related to previously accelerated manufacturing costs and an expense of $78.8 million related to the acceleration of manufacturing costs, respectively, for leases that we determined were embedded in multiple manufacturing supply agreements with CMOs and CDMOs. Pursuant to the Fujifilm Settlement Agreement (see Note 4 to our consolidated financial statements in this Quarterly Report), we are responsible for a Settlement Payment of up to $185.0 million to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the CSA, of which $47.8 million, constituting the initial reservation fee under the CSA, was credited against the Settlement Payment on September 30, 2022. The Settlement Payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expense from FDBT manufacturing activity under the CSA prior to the Fujifilm Settlement Agreement and accordingly, during the three months ended September 30, 2022, we recorded a benefit of $98.3 million as Research and development expense.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased to $327.0 million for the nine months ended September 30, 2022 from $214.1 million for the same period in 2021, an increase of $112.9 million. The increase in selling, general, and administrative expenses is primarily due to an increase in professional fees and marketing costs in support of our NVX-CoV2373 program.

			Nine Months Ended September 30,
			2022						2021						Change
Other Expense (in thousands):
Interest expense			$	(15,279)					$	(15,989)					$	710
Other expense			(53,002)						(7,267)						(45,735)
Total other expense, net			$	(68,281)					$	(23,256)					$	(45,025)

We had total other expense, net of $68.3 million for the nine months ended September 30, 2022 as compared to $23.3 million for the same period in 2021. During the nine months ended September 30, 2022 and 2021, other expense was primarily related to losses due to foreign exchange rate activity.

During the nine months ended September 30, 2022 and 2021, we recognized $6.6 million and $12.6 million, respectively, of income tax expense related to federal and state income taxes and foreign withholding tax on royalties.

			Nine Months Ended September 30,
			2022						2021						Change
Net Loss (in thousands, except per share information):
Net loss			$	(475,690)					$	(897,467)					$	421,777
Net loss per share, basic and diluted			$	(6.13)					$	(12.13)					$	6.00
Weighted average shares outstanding, basic and diluted			77,631						73,972						3,659

Net loss for the nine months ended September 30, 2022 was $475.7 million, or $6.13 per share, as compared to $897.5 million, or $12.13 per share, for the same period in 2021. The decrease in net loss during the nine months ended September 30, 2022 was primarily due to the commencement of commercial sales of NVX-CoV2373 in 2022 and a decrease in research and development expense, partially offset by decreased revenue under the OWS Agreement and the write-down of excess, obsolete, or expired inventory and losses on firm purchase commitments.

The increase in weighted average shares outstanding for the nine months ended September 30, 2022 is primarily a result of sales of our common stock in 2022 and 2021.

Our future capital requirements depend on numerous factors including, but not limited to, revenue from our product sales and royalties under licensing arrangements with our strategic partners; funding under our grant agreements; our projected activities related to the development and commercial support of NVX-CoV2373 and variant candidates, including significant commitments under various CRO, CMO, and CDMO agreements; the progress of preclinical studies and clinical trials; the time and costs involved in obtaining regulatory approvals; the costs of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights; and other manufacturing, sales, and distribution costs. We plan to continue developing other vaccines and product candidates, such as our influenza vaccine candidate and potential combination vaccines candidates, which are in various stages of development.

In addition, we continue to assess our manufacturing needs and intend to modify our global manufacturing footprint consistent with our contractual obligations to supply, and anticipated demand for, NVX-CoV2373, and in doing so recognize that significant costs may be incurred. Pursuant to the Fujifilm Settlement Agreement (see Note 4 to our consolidated financial statements in this Quarterly Report), we are responsible for a Settlement Payment of up to $185.0 million to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the CSA, of which $47.8 million, constituting the initial reservation fee under the CSA, was credited against the Settlement Payment on September 30, 2022. The Settlement Payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expense from FDBT manufacturing activity under the CSA prior to the Fujifilm Settlement Agreement and accordingly, during the three months ended September 30, 2022, we recorded a benefit of $98.3 million as Research and development expense.

In the nine months ended September 30, 2022, we primarily funded our operations with cash and cash equivalents, upfront payments under APAs, revenue from product sales, royalties under licensing arrangements with our strategic partners, and proceeds from the sale of common stock, together with revenue under the OWS Agreement that supports our NVX-CoV2373 vaccine development activities. We anticipate our future operations to be funded by revenue from product sales, royalties under licensing arrangements with our strategic partners, revenue under our OWS Agreement, our cash and cash equivalents, and other potential funding sources.

As of September 30, 2022, we had $1.3 billion in cash and cash equivalents and restricted cash as compared to $1.5 billion as of December 31, 2021.

The following table summarizes cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):

			Nine Months Ended September 30,
			2022						2021						Change
Net cash provided by (used in):
Operating activities			$	(298,121)					$	665,354					$	(963,475)
Investing activities			(70,921)						116,518						(187,439)
Financing activities			133,548						522,424						(388,876)
Effect on exchange rate on cash, cash equivalents, and restricted cash			257						(6,208)						6,465
Net increase (decrease) in cash, cash equivalents, and restricted cash			(235,237)						1,298,088						(1,533,325)
Cash, cash equivalents, and restricted cash at beginning of period			1,528,259						648,738						879,521
Cash, cash equivalents, and restricted cash at end of period			$	1,293,022					$	1,946,826					$	(653,804)

Net cash used in operating activities was $298.1 million for the nine months ended September 30, 2022, as compared to net cash provided by operating activities of $665.4 million for the same period in 2021. The decrease in cash provided is primarily due to the application of upfront payments under APAs resulting from sales of NVX-CoV2373 during the nine months ended September 30, 2022 as compared to an increase in cash due to the receipt of upfront payments under APAs during the nine months ended September 30, 2021.

During the nine months ended September 30, 2022 and 2021, our investing activities consisted primarily of capital expenditures and maturities and sale of marketable securities, net of purchases. Capital expenditures for the nine months ended September 30, 2022 and 2021 were $66.0 million and $41.1 million, respectively. For 2022, we expect our capital expenditures to continue to increase due to further development activities for our NVX-CoV2373 program, including the additional build-out of research and development and manufacturing facilities and related equipment, and the build-out of our new corporate office facility.

Our financing activities consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements, payments of finance lease liabilities, and exercise of stock-based awards. In the nine months ended September 30, 2022 and 2021, we received net proceeds of approximately $179 million and $565 million, respectively, from selling shares of common stock through our At Market Issuance Sales Agreements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Item 4.    Controls and Procedures

Our management, with the assistance of our chief executive officer and chief financial officer, has reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2022. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving such control objectives. Based on the evaluation of our disclosure controls and procedures as of September 30, 2022, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Our management, including our chief executive officer and chief financial officer, have evaluated changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022, and have concluded that there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 1.    Legal Proceedings

On November 12, 2021, Sothinathan Sinnathurai filed a purported securities class action in the U.S. District Court for the District of Maryland against Novavax and certain members of senior management, captioned Sothinathan Sinnathurai v. Novavax, Inc., et al., No. 8:21-cv-02910-TDC (the “Sinnathurai Action”). On January 26, 2022, the court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs in the Sinnathurai Action. The co-lead plaintiffs filed a consolidated amended complaint on March 11, 2022, alleging that the defendants made certain purportedly false and misleading statements concerning the Company’s ability to manufacture NVX-CoV2373 on a commercial scale and to secure the vaccine’s regulatory approval. The amended complaint defines the purported class as those stockholders who purchased Novavax securities between February 24, 2021 and October 19, 2021. On April 25, 2022, defendants filed a motion to dismiss the consolidated amended complaint. On June 9, 2022, the co-lead plaintiffs filed an opposition to the motion to dismiss and on July 11, 2022, the Company filed a reply brief. The matter is now fully briefed. The Court has not indicated whether it intends to schedule any hearing on the motion before issuing a ruling.

After the Sinnathurai Action was filed, six derivative lawsuits were filed: (i) Robert E. Meyer v. Stanley C. Erck, et al., No. 8:21-cv-02996-TDC (the “Meyer Action”), (ii) Shui Shing Yung v. Stanley C. Erck, et al., No. 8:21-cv-03248-TDC (the “Yung Action”), (iii) William Kirst, et al. v. Stanley C. Erck, et al., No. 8:22-cv-00024-TDC (the “Kirst Action”), (iv) Amy Snyder v. Stanley C. Erck, et al., No. 8:22-cv-01415-TDC (the “Snyder Action”), (v) Charles R. Blackburn, et al. v. Stanley C. Erck, et al., No. 1:22-cv-01417-TDC (the “Blackburn Action”), and (vi) Diego J. Mesa v. Stanley C. Erck, et al. (the “Mesa Action”). The Meyer, Yung, Snyder, and Blackburn Actions were filed in the U.S. District Court for the District of Maryland. The Kirst Action was filed in the Circuit Court for Montgomery County, Maryland, and shortly thereafter removed to the U.S. District Court for the District of Maryland by the defendants. The Mesa Action was filed in the Delaware Court of Chancery. The derivative lawsuits name members of the board of directors and certain members of senior management as defendants. Novavax is deemed a nominal defendant. The plaintiffs assert derivative claims arising out of substantially the same alleged facts and circumstances as the Sinnathurai Action. Collectively, the derivative complaints assert claims for breach of fiduciary duty, insider selling, unjust enrichment, violation of federal securities law, abuse of control, waste, and mismanagement. Plaintiffs seek declaratory and injunctive relief, as well as an award of monetary damages and attorneys’ fees.

On March 29, 2022, Par Sterile Products, LLC (“Par”) submitted a demand for arbitration against the Company with the American Arbitration Association, alleging that the Company breached certain provisions of the Manufacturing and Services Agreement (“MSA”) that the Company entered into with Par in September 2020 to provide fill-finish manufacturing services for NVX-CoV2373. The matter is at a preliminary stage and therefore the potential loss is not reasonably estimable. The parties are engaged in discovery and arbitration is scheduled for July 2023. While the Company maintains that no breach of the MSA has occurred and intends to vigorously defend the matter, if the final resolution of the matter is adverse to the Company, it could have a material impact on the Company's financial position, results of operations, or cash flows.

Item 5.    Other Information

On July 1, 2022, Novavax, Inc. (the “Company”) entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (the “Amended and Restated UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland (the “Authority”), which amended and restated in its entirety the SARS-CoV-2 Vaccine Supply Agreement, dated October 22, 2020, between the parties.

The description of the Amended and Restated UK Supply Agreement set forth in Part II, Item 5. “Other Information” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 is incorporated herein by reference.

Item 6.    Exhibits

3.1						Second Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770))
3.2						Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 9, 2019 (File No. 000-26770))
3.3						Amended and Restated By-Laws of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 24, 2021 (File No. 000-26770))
3.4						Certificate of Designation of Series A Convertible Preferred Stock of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770))
10.1*±						Amended and Restated SARS-CoV-2 Vaccine Supply Agreement, dated as of July 1, 2022, between the Company and The Secretary of State for Business, Energy, and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland
10.2*±						Letter of Amendment to the Amended and Restated SARS-CoV-2 Vaccine Supply Agreement, dated as of September 26, 2022, between the Company and The Secretary of State for Business, Energy, and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland
10.3*±						Modification No. 02 to Base Agreement between the Company and Advanced Technology International, dated as of August 2, 2022
10.4*±						Modification No. 14 to Undefinitized Project Agreement No. 1, dated July 1, 2022, between the Company and Advanced Technology International
10.5*±						Modification No. 15 to Undefinitized Project Agreement No. 1, dated August 9, 2022, between the Company and Advanced Technology International
10.6*±						Modification No. 16 to Undefinitized Project Agreement No. 1, dated September 9, 2022, between the Company and Advanced Technology International
10.7*±						Amendment of Solicitation/Modification of Contract No. 4, dated as of July 29, 2022, between the Company. and the U.S. Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense
10.8*±						Settlement Agreement, dated September 30, 2022, between the Company and FUJIFILM Diosynth Biotechnologies UK Limited, FUJIFILM Diosynth Biotechnologies Texas, LLC, and FUJIFILM Diosynth Biotechnologies USA, Inc.
31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act
31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act
32.1*						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101						The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2022 and 2021, (ii) the Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, (iii) the Consolidated Statements of Comprehensive Income (Loss) for the three- and nine-month periods ended September 30, 2022 and 2021, (iv) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three- and nine-month periods ended September 30, 2022 and 2021, (v) the Consolidated Statements of Cash Flows for the three- and nine-month periods ended September 30, 2022 and 2021, and (vi) the Notes to Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).