NVAX Novavax Inc

false2023Q1000100069412/31P1Y00010006942023-01-012023-03-3100010006942023-04-30xbrli:shares0001000694us-gaap:ProductMember2023-01-012023-03-31iso4217:USD0001000694us-gaap:ProductMember2022-01-012022-03-310001000694us-gaap:GrantMember2023-01-012023-03-310001000694us-gaap:GrantMember2022-01-012022-03-310001000694nvax:RoyaltiesAndOtherMember2023-01-012023-03-310001000694nvax:RoyaltiesAndOtherMember2022-01-012022-03-3100010006942022-01-012022-03-31iso4217:USDxbrli:shares00010006942023-03-3100010006942022-12-310001000694us-gaap:CommonStockMember2022-12-310001000694us-gaap:AdditionalPaidInCapitalMember2022-12-310001000694us-gaap:RetainedEarningsMember2022-12-310001000694us-gaap:TreasuryStockCommonMember2022-12-310001000694us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001000694us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001000694us-gaap:CommonStockMember2023-01-012023-03-310001000694us-gaap:TreasuryStockCommonMember2023-01-012023-03-310001000694us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001000694us-gaap:RetainedEarningsMember2023-01-012023-03-310001000694us-gaap:CommonStockMember2023-03-310001000694us-gaap:AdditionalPaidInCapitalMember2023-03-310001000694us-gaap:RetainedEarningsMember2023-03-310001000694us-gaap:TreasuryStockCommonMember2023-03-310001000694us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001000694us-gaap:CommonStockMember2021-12-310001000694us-gaap:AdditionalPaidInCapitalMember2021-12-310001000694us-gaap:RetainedEarningsMember2021-12-310001000694us-gaap:TreasuryStockCommonMember2021-12-310001000694us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-3100010006942021-12-310001000694us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001000694us-gaap:CommonStockMember2022-01-012022-03-310001000694us-gaap:TreasuryStockCommonMember2022-01-012022-03-310001000694us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001000694us-gaap:RetainedEarningsMember2022-01-012022-03-310001000694us-gaap:CommonStockMember2022-03-310001000694us-gaap:AdditionalPaidInCapitalMember2022-03-310001000694us-gaap:RetainedEarningsMember2022-03-310001000694us-gaap:TreasuryStockCommonMember2022-03-310001000694us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100010006942022-03-31nvax:segment0001000694us-gaap:SubsequentEventMemberus-gaap:UnsecuredDebtMember2023-04-012023-04-010001000694us-gaap:SubsequentEventMember2023-04-040001000694us-gaap:GovernmentContractMembernvax:USGovernmentAgreementMember2023-03-310001000694nvax:GaviAdvancePurchaseAgreementCOVAXFacilityMember2023-03-310001000694us-gaap:SubsequentEventMember2023-05-012023-05-31xbrli:pure0001000694nvax:OneTimeEmployeeSeveranceAndBenefitCostsMembersrt:MinimumMembersrt:ScenarioForecastMember2023-05-310001000694nvax:OneTimeEmployeeSeveranceAndBenefitCostsMembersrt:ScenarioForecastMembersrt:MaximumMember2023-05-3100010006942023-04-012023-03-310001000694nvax:GaviAdvancePurchaseAgreementSIIPLMember2023-03-31nvax:dose0001000694nvax:GaviAdvancePurchaseAgreementCOVAXFacilityMember2022-11-180001000694nvax:GaviAdvancePurchaseAgreementSIIPLMember2021-12-310001000694nvax:GaviAdvancePurchaseAgreementSIIPLMember2022-03-310001000694us-gaap:ProductMembersrt:NorthAmericaMember2023-01-012023-03-310001000694us-gaap:ProductMembersrt:NorthAmericaMember2022-01-012022-03-310001000694us-gaap:ProductMembersrt:EuropeMember2023-01-012023-03-310001000694us-gaap:ProductMembersrt:EuropeMember2022-01-012022-03-310001000694us-gaap:ProductMembernvax:RestOfTheWorldMember2023-01-012023-03-310001000694us-gaap:ProductMembernvax:RestOfTheWorldMember2022-01-012022-03-310001000694nvax:USGovernmentPartnershipMember2023-03-310001000694nvax:USGovernmentPartnershipMember2023-01-012023-03-310001000694nvax:SalesBasedRoyaltiesMember2023-01-012023-03-310001000694nvax:SalesBasedRoyaltiesMember2022-01-012022-03-310001000694nvax:TakedaArrangementMember2021-09-300001000694nvax:SettlementAgreementMember2022-09-30nvax:installment0001000694nvax:SettlementAgreementMemberus-gaap:AccruedLiabilitiesMember2023-03-310001000694nvax:SettlementAgreementMember2023-03-310001000694us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2023-03-310001000694us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2023-03-310001000694us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2023-03-310001000694us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2022-12-310001000694us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2022-12-310001000694us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2022-12-310001000694us-gaap:FairValueInputsLevel1Membernvax:GovernmentBackedSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel2Membernvax:GovernmentBackedSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel3Membernvax:GovernmentBackedSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel1Membernvax:GovernmentBackedSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel2Membernvax:GovernmentBackedSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel3Membernvax:GovernmentBackedSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2022-12-310001000694us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2023-03-310001000694us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-03-310001000694us-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-03-310001000694us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-12-310001000694us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-310001000694us-gaap:FairValueInputsLevel1Member2023-03-310001000694us-gaap:FairValueInputsLevel2Member2023-03-310001000694us-gaap:FairValueInputsLevel3Member2023-03-310001000694us-gaap:FairValueInputsLevel1Member2022-12-310001000694us-gaap:FairValueInputsLevel2Member2022-12-310001000694us-gaap:FairValueInputsLevel3Member2022-12-310001000694nvax:FivePointZeroConvertibleNotesDue2027Member2023-03-310001000694us-gaap:FairValueInputsLevel1Membernvax:FivePointZeroConvertibleNotesDue2027Member2023-03-310001000694us-gaap:FairValueInputsLevel2Membernvax:FivePointZeroConvertibleNotesDue2027Member2023-03-310001000694us-gaap:FairValueInputsLevel3Membernvax:FivePointZeroConvertibleNotesDue2027Member2023-03-310001000694us-gaap:FairValueInputsLevel1Membernvax:FivePointZeroConvertibleNotesDue2027Member2022-12-310001000694us-gaap:FairValueInputsLevel2Membernvax:FivePointZeroConvertibleNotesDue2027Member2022-12-310001000694us-gaap:FairValueInputsLevel3Membernvax:FivePointZeroConvertibleNotesDue2027Member2022-12-310001000694nvax:ThreePointSeventyFiveConvertibleNotesDue2023Member2023-03-310001000694nvax:ThreePointSevenFiveConvertibleNotesDue2023Memberus-gaap:FairValueInputsLevel1Member2023-03-310001000694us-gaap:FairValueInputsLevel2Membernvax:ThreePointSevenFiveConvertibleNotesDue2023Member2023-03-310001000694us-gaap:FairValueInputsLevel3Membernvax:ThreePointSevenFiveConvertibleNotesDue2023Member2023-03-310001000694nvax:ThreePointSevenFiveConvertibleNotesDue2023Memberus-gaap:FairValueInputsLevel1Member2022-12-310001000694us-gaap:FairValueInputsLevel2Membernvax:ThreePointSevenFiveConvertibleNotesDue2023Member2022-12-310001000694us-gaap:FairValueInputsLevel3Membernvax:ThreePointSevenFiveConvertibleNotesDue2023Member2022-12-31nvax:reporting_unit00010006942022-01-012022-12-310001000694us-gaap:UnsecuredDebtMembernvax:ThreePointSeventyFiveConvertibleNotesDue2023Member2023-03-310001000694us-gaap:UnsecuredDebtMembernvax:ThreePointSeventyFiveConvertibleNotesDue2023Member2022-12-310001000694nvax:FivePointZeroConvertibleNotesDue2027Memberus-gaap:UnsecuredDebtMember2023-03-310001000694nvax:FivePointZeroConvertibleNotesDue2027Memberus-gaap:UnsecuredDebtMember2022-12-310001000694us-gaap:UnsecuredDebtMembernvax:ThreePointSeventyFiveConvertibleNotesDue2023Member2023-01-012023-03-310001000694us-gaap:CommonStockMember2021-06-012021-06-300001000694nvax:TwoThousandTwentyThreeStockInducementPlanMember2023-01-310001000694nvax:TwoThousandTwentyThreeStockInducementPlanMember2023-03-310001000694nvax:TwoThousandFifteenStockIncentivePlanMember2023-03-310001000694nvax:TwoThousandFifteenStockIncentivePlanMember2015-06-012015-06-300001000694nvax:TwoThousandFifteenStockIncentivePlanMember2015-06-300001000694srt:MinimumMembernvax:TwoThousandFifteenStockIncentivePlanMember2015-06-012015-06-300001000694nvax:TwoThousandFifteenStockIncentivePlanMembersrt:MaximumMember2015-06-012015-06-300001000694us-gaap:CostOfSalesMember2023-01-012023-03-310001000694us-gaap:CostOfSalesMember2022-01-012022-03-310001000694us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001000694us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-310001000694us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-03-310001000694us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-03-310001000694nvax:TwoThousandTwentyThreeStockInducementPlanMember2022-12-310001000694nvax:TwoThousandFifteenStockIncentivePlanMember2022-12-310001000694nvax:TwoThousandFiveStockIncentivePlanMember2022-12-310001000694nvax:TwoThousandTwentyThreeStockInducementPlanMember2023-01-012023-03-310001000694nvax:TwoThousandFifteenStockIncentivePlanMember2023-01-012023-03-310001000694nvax:TwoThousandFiveStockIncentivePlanMember2023-01-012023-03-310001000694nvax:TwoThousandFiveStockIncentivePlanMember2023-03-310001000694us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001000694us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001000694srt:MinimumMemberus-gaap:EmployeeStockOptionMember2023-01-012023-03-310001000694us-gaap:EmployeeStockOptionMembersrt:MaximumMember2023-01-012023-03-310001000694srt:MinimumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001000694us-gaap:EmployeeStockOptionMembersrt:MaximumMember2022-01-012022-03-310001000694us-gaap:RestrictedStockUnitsRSUMembernvax:TwoThousandTwentyThreeStockInducementPlanMember2022-12-310001000694us-gaap:RestrictedStockUnitsRSUMembernvax:TwoThousandFifteenStockIncentivePlanMember2022-12-310001000694us-gaap:RestrictedStockUnitsRSUMembernvax:TwoThousandTwentyThreeStockInducementPlanMember2023-01-012023-03-310001000694us-gaap:RestrictedStockUnitsRSUMembernvax:TwoThousandFifteenStockIncentivePlanMember2023-01-012023-03-310001000694us-gaap:RestrictedStockUnitsRSUMembernvax:TwoThousandTwentyThreeStockInducementPlanMember2023-03-310001000694us-gaap:RestrictedStockUnitsRSUMembernvax:TwoThousandFifteenStockIncentivePlanMember2023-03-310001000694us-gaap:EmployeeStockMember2013-06-300001000694us-gaap:EmployeeStockMember2023-03-310001000694us-gaap:EmployeeStockMember2023-01-012023-03-3100010006942022-01-0100010006942022-12-122022-12-12nvax:defendant00010006942022-12-282022-12-28nvax:lawsuit0001000694nvax:GaviAdvancePurchaseAgreementCOVAXFacilityMember2022-12-310001000694us-gaap:SubsequentEventMembernvax:CanadaAdvancePurchaseAgreementMember2023-04-30

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 86,305,085 as of April 30, 2023.

						Page No.
PART I. FINANCIAL INFORMATION						1
Item 1.			Consolidated Financial Statements			1
			Unaudited Consolidated Statements of Operations and Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022			2
			Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022			3
			Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2023 and 2022			4
			Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022			5
			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			31
Item 4.			Controls and Procedures			32
PART II. OTHER INFORMATION						32
Item 1.			Legal Proceedings			32
Item 1A.			Risk Factors			34
Item 6.			Exhibits			39
SIGNATURES						40

Item 1.    Financial Statements

			For the Three Months Ended March 31,
			2023						2022
Revenue:
Product sales			$	(7,457)					$	585,628
Grants			87,379						99,301
Royalties and other			1,029						19,042
Total revenue			80,951						703,971
Expenses:
Cost of sales			34,086						15,204
Research and development			247,101						383,483
Selling, general, and administrative			112,532						95,992
Total expenses			393,719						494,679
Income (Loss) from operations			(312,768)						209,292
Other income (expense):
Interest expense			(4,316)						(4,876)
Other income			24,362						1,654
Income (Loss) before income tax expense			(292,722)						206,070
Income tax expense			1,183						2,662
Net income (loss)			$	(293,905)					$	203,408
Net income (loss) per share:
Basic			$	(3.41)					$	2.66
Diluted			$	(3.41)					$	2.56
Weighted average number of common shares outstanding
Basic			86,158						76,457
Diluted			86,158						80,711

			For the Three Months Ended March 31,
			2023						2022
Net income (loss)			$	(293,905)					$	203,408
Other comprehensive income:
Foreign currency translation adjustment			3,211						41
Other comprehensive income			3,211						41
Comprehensive income (loss)			$	(290,694)					$	203,449

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

			March 31, 2023						December 31, 2022
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	624,950					$	1,336,883
Restricted cash			10,330						10,303
Accounts receivable			112,849						82,375
Inventory			34,185						36,683
Prepaid expenses and other current assets			188,714						237,147
Total current assets			971,028						1,703,391
Property and equipment, net			307,414						294,247
Right of use asset, net			103,923						106,241
Goodwill			129,827						126,331
Other non-current assets			30,507						28,469
Total assets			$	1,542,699					$	2,258,679
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable			$	124,801					$	216,517
Accrued expenses			518,706						591,158
Deferred revenue			415,764						370,137
Current portion of finance lease liabilities			1,205						27,196
Convertible notes payable			—						324,881
Other current liabilities			858,382						930,055
Total current liabilities			1,918,858						2,459,944
Deferred revenue			274,062						179,414
Convertible notes payable			166,857						166,466
Non-current finance lease liabilities			30,993						31,238
Other non-current liabilities			47,511						55,695
Total liabilities			2,438,281						2,892,757
Commitments and contingencies (Note 15)
Preferred stock, $0.01 par value, 2,000,000 shares authorized at March 31, 2023 and December 31, 2022; no shares issued and outstanding at March 31, 2023 and December 31, 2022.			—						—
Stockholders' deficit:
Common stock, $0.01 par value, 600,000,000 shares authorized at March 31, 2023 and December 31, 2022; 87,139,831 shares issued and 86,291,473 shares outstanding at March 31, 2023 and 86,806,554 shares issued and 86,039,923 shares outstanding at December 31, 2022			871						868
Additional paid-in capital			3,767,733						3,737,979
Accumulated deficit			(4,569,794)						(4,275,889)
Treasury stock, cost basis, 848,358 shares at March 31, 2023 and 766,631 shares at December 31, 2022			(91,226)						(90,659)
Accumulated other comprehensive loss			(3,166)						(6,377)
Total stockholders’ deficit			(895,582)						(634,078)
Total liabilities and stockholders’ deficit			$	1,542,699					$	2,258,679

			Common Stock												Additional Paid-in Capital						Accumulated Deficit						Treasury Stock						Accumulated Other Comprehensive Loss						Total Stockholders' Equity (Deficit)
			Shares						Amount
Balance at December 31, 2022			86,806,554						$	868					$	3,737,979					$	(4,275,889)					$	(90,659)					$	(6,377)					$	(634,078)
Stock-based compensation			—						—						28,647						—						—						—						28,647
Stock issued under incentive programs			333,277						3						1,107						—						(567)						—						543
Foreign currency translation adjustment			—						—						—						—						—						3,211						3,211
Net loss			—						—						—						(293,905)						—						—						(293,905)
Balance at March 31, 2023			87,139,831						$	871					$	3,767,733					$	(4,569,794)					$	(91,226)					$	(3,166)					$	(895,582)
Balance at December 31, 2021			76,433,151						$	764					$	3,351,967					$	(3,617,950)					$	(85,101)					$	(1,353)					$	(351,673)
Stock-based compensation			—						—						32,933						—						—						—						32,933
Stock issued under incentive programs			91,788						1						2,029						—						(800)						—						1,230
Issuance of common stock, net of issuance costs of $2,311			2,197,398						22						179,363						—						—						—						179,385
Foreign currency translation adjustment			—						—						—						—						—						41						41
Net income			—						—						—						203,408						—						—						203,408
Balance at March 31, 2022			78,722,337						$	787					$	3,566,292					$	(3,414,542)					$	(85,901)					$	(1,312)					$	65,324

			Three Months Ended March 31,
			2023						2022
Operating Activities:
Net income (loss)			$	(293,905)					$	203,408
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			9,043						6,765
Non-cash stock-based compensation			28,647						32,933
Provision for excess and obsolete inventory			12,490						—
Right-of-use assets expensed, net of credits received			—						214
Other items, net			(1,252)						634
Changes in operating assets and liabilities:
Inventory			(9,222)						(99,557)
Accounts receivable, prepaid expenses, and other assets			18,430						(56,016)
Accounts payable, accrued expenses, and other liabilities			(230,099)						(115,500)
Deferred revenue			140,275						(61,391)
Net cash used in operating activities			(325,593)						(88,510)
Investing Activities:
Capital expenditures			(19,801)						(16,826)
Internal-use software			(3,757)						—
Net cash used in investing activities			(23,558)						(16,826)
Financing Activities:
Net proceeds from sales of common stock			—						179,385
Net proceeds from the exercise of stock-based awards			543						1,318
Finance lease payments			(26,331)						(20,838)
Repayment of 2023 Convertible notes			(325,000)						—
Payments of costs related to issuance of 2027 Convertible notes			(3,591)						—
Net cash provided by (used in) financing activities			(354,379)						159,865
Effect of exchange rate on cash, cash equivalents, and restricted cash			(8,372)						1,312
Net increase (decrease) in cash, cash equivalents, and restricted cash			(711,902)						55,841
Cash, cash equivalents, and restricted cash at beginning of period			1,348,845						1,528,259
Cash, cash equivalents, and restricted cash at end of period			$	636,943					$	1,584,100
Supplemental disclosure of non-cash activities:
Right-of-use assets from new lease agreements			$	—					$	58,352
Capital expenditures included in accounts payable and accrued expenses			$	10,847					$	15,874
Supplemental disclosure of cash flow information:
Cash interest payments, net of amounts capitalized			$	6,566					$	6,654
Cash paid for income taxes			$	—					$	15,451

    

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 Company has received approval, interim authorization, provisional approval, conditional marketing authorization, and emergency use authorization (“EUA”) from multiple regulatory authorities globally for NVX-CoV2373 for both adult and adolescent populations as a primary series and for both homologous and heterologous booster indications, and commenced commercial shipments of NVX-CoV2373 doses under the name “Novavax COVID-19 Vaccine, Adjuvanted” and the brand name “Nuvaxovid™” during the first quarter 2022.

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 $3.2 million and $6.4 million at March 31, 2023 and December 31, 2022, respectively. The aggregate foreign currency transaction gains resulting from the conversion of the transaction currency to functional currency were $16.3 million and $2.2 million for the three months ended March 31, 2023 and 2022, respectively, which are reflected in Other income.

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, 2022. 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.

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern within one year after the date that the financial statements are issued. At March 31, 2023, the Company had $636.9 million in cash and cash equivalents and restricted cash. In April 2023, the Company repaid $112.5 million related to the refund due under the Amended and Restated SARS-CoV-2 Vaccine Supply Agreement, dated July 1, 2022, as further amended on September 26, 2022, (the “Amended and Restated UK Supply Agreement”) with The Secretary of

Management believes that, given the significance of these uncertainties, substantial doubt exists regarding the Company’s ability to continue as a going concern through one year from the date that these financial statements are issued.

The Company’s ability to fund Company operations is dependent upon revenue related to vaccine sales for its products and product candidates, if such product candidates receive marketing approval and are successfully commercialized; the resolution of certain matters, including whether, when, and how the dispute with Gavi is resolved; and management’s plans, which include resolving the dispute with Gavi and cost reductions associated with the Company’s global restructuring and cost reduction plan. Management’s plans may also include raising additional capital through a combination of equity and debt financing, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. New financings may not be available to the Company on commercially acceptable terms, or at all. Also, any collaborations, strategic alliances, and marketing, distribution, or licensing arrangements may require the Company to give up some or all of its rights to a product or technology, which in some cases may be at less than the full potential value of such rights. In addition, the regulatory and commercial success of NVX-CoV2373 and the Company’s other vaccine candidates, including an influenza vaccine candidate, a CIC vaccine candidate, and a COVID-19 variant strain-containing monovalent or bivalent formulation, remains uncertain. If the Company is unable to obtain additional capital, the Company will assess its capital resources and may be required to delay, reduce the scope of, or eliminate some or all of its operations, or further downsize its organization, any of which may have a material adverse effect on its business, financial condition, results of operations, and ability to operate as a going concern.

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 Constraints

The Company constrains the transaction price for customer arrangements until it is probable that a significant reversal in cumulative revenue recognized will not occur. Specifically, if a customer arrangement includes a provision whereby the customer may request a discount, return or refund for a previously satisfied performance obligation or otherwise could have the effect of decreasing the transaction price, revenue is constrained based on an estimate of the impact to the transaction price recognized until it is probable that a significant reversal in cumulative revenue recognized will not occur.

Recent Accounting Pronouncements

Adopted

In June 2016, the Financial Accounting Standards Board 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” 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 Company adopted ASU 2020-06 on January 1, 2023, using a modified retrospective approach, and it did not have a material impact on the Company’s consolidated financial statements.

The Company's accounts receivable included $70.2 million, $53.8 million, $425.9 million, and $419.7 million related to amounts that were billed to customers and $42.7 million, $28.6 million, $52.3 million, and $35.3 million related to amounts which had not yet been billed to customers as of March 31, 2023, December 31, 2022, March 31, 2022, and December 31, 2021, respectively. During the three months ended March 31, 2023 and 2022, changes in the Company's accounts receivables, allowance for doubtful accounts, and deferred revenue balances were as follows (in thousands):

			Balance, Beginning of Period						Additions						Deductions						Balance, End of Period
Accounts receivable:
Three months ended March 31, 2023			$	96,210					$	146,424					$	(115,950)					$	126,684
Three months ended March 31, 2022			454,993						625,124						(601,961)						478,156
Allowance for doubtful accounts(1):
Three months ended March 31, 2023			$	(13,835)					$	—					$	—					$	(13,835)
Three months ended March 31, 2022			—						—						—						—
Deferred revenue:
Three months ended March 31, 2023			$	549,551					$	140,324					$	(49)					$	689,826
Three months ended March 31, 2022			1,595,472						49,094						(108,586)						1,535,980

(1)    There was no bad debt expense recorded during the three months ended March 31, 2023 or 2022. To estimate the allowance for doubtful accounts, the Company evaluates the credit risk related to its customers based on historical loss experience, economic conditions, the aging of receivables, and customer-specific risks.

As of March 31, 2023, the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties, the Gavi APA, and the reduction in doses related to the Amended and Restated UK Supply Agreement, was approximately $3 billion of which $689.8 million was included in Deferred revenue. 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 advance purchase agreements (“APAs”) may require the Company to refund portions of upfront payments or result in reduced future payments, which could adversely impact the Company’s ability to realize revenue from its unsatisfied performance obligations. The timing to fulfill performance obligations related to grant agreements will depend on the results of the Company's research and development activities, including clinical trials, and delivery of doses. The timing to fulfill performance obligations related to APAs will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype

On November 18, 2022, the Company delivered written notice to Gavi to terminate the Gavi APA on the basis of Gavi’s failure to procure the purchase of 350 million doses of NVX-CoV2373 from the Company as required by the Gavi APA. As of November 18, 2022, the Company had only received orders under the Gavi APA for approximately 2 million doses. On December 2, 2022, Gavi issued a written notice purporting to terminate the Gavi APA based on Gavi’s contention that the Company repudiated the agreement and, therefore, materially breached the Gavi APA. Gavi also contends that, based on its purported termination of the Gavi APA, it is entitled to a refund of the Advance Payment Amount less any amounts that have been credited against the purchase price for binding orders placed by a buyer participating in the COVAX Facility. As of March 31, 2023, the remaining Gavi Advance Payment Amount of $697.4 million, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, was reclassified from Deferred revenue to Other current liabilities in the Company’s consolidated balance sheets. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on the claims described above. The Company filed its Answer and Counterclaims on March 2, 2023. On April 5, 2023, Gavi filed its Reply to the Company’s Counterclaims. Arbitration is inherently uncertain, and while the Company believes that it is entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that it could be required to refund all or a portion of the remaining Advance Payment Amount from Gavi.

Product Sales

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

			Three Months Ended March 31,
			2023						2022
North America			$	—					$	64,762
Europe			57,267						413,745
Rest of the world			(64,724)						107,121
Total product revenue			$	(7,457)					$	585,628

In May 2023, the Company extended a credit for certain doses delivered in 2022 that qualified for replacement under the contract with the customer. This credit is the result of a single lot sold to the Australian government that upon pre-planned 6-month stability testing was found to have fallen below the defined specifications and the lot was therefore removed from the market. The credit will be applied against the future sale of doses to the customer and, during the three months ended March 31, 2023, the Company recorded a reduction of $64.7 million in product sales, with a corresponding increase to Deferred revenue, non-current.

Grants

The Company’s U.S. government agreement consists of a Project Agreement (the “Project Agreement”) and a Base Agreement with Advanced Technology International, the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed (the Base Agreement

Royalties and Other

During the three months ended March 31, 2023, the Company did not recognize revenue related to sales-based royalties. The Company recognized $7.4 million in revenue related to sales-based royalties during the three months ended March 31, 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, its proprietary COVID-19 variant antigen candidate(s), its quadrivalent influenza vaccine candidate, and its CIC vaccine candidate. SIIPL agreed to purchase the Company's Matrix-M™ adjuvant and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of 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 SLS under which SIIPL and SLS supply the Company with NVX-CoV2373, its proprietary COVID-19 variant antigen candidate(s), its quadrivalent influenza vaccine candidate, and its CIC vaccine candidate for commercialization and sale in certain territories, as well as a contract development manufacture agreement with SLS, under which SLS manufactures and supplies finished vaccine product to the Company using antigen drug substance and Matrix-M™ adjuvant supplied by the Company. In March 2020, the Company 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 (“R21/Malaria”). Under the agreement, SIIPL purchases the Company's Matrix-M™ adjuvant to manufacture R21/Malaria and SIIPL pays a royalty in the single to low double-digit range for a period of 15 years after the first commercial sale of product in each country.

Takeda Pharmaceutical Company Limited

The Company has a collaboration and license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) under which the Company granted Takeda an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in Japan. Under the agreement, Takeda purchases Matrix-M™ adjuvant from the Company to manufacture doses of NVX-CoV2373 and the Company is entitled to receive payments from Takeda based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of NVX-CoV2373. In September 2021, Takeda finalized an agreement with the Government of Japan’s Ministry of Health, Labour and Welfare ("MHLW") for the purchase of 150 million doses of NVX-CoV2373. In February 2023, MHLW cancelled the remainder of doses under its agreement with Takeda. As a result, it is uncertain whether the Company will receive future payments from Takeda under the terms and conditions of their current collaboration and licensing agreement.

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, which began on March 31, 2023. As of March 31, 2023, the remaining payment of $102.9 million was reflected in Accrued expenses. Under the Fujifilm Settlement Agreement, Fujifilm is required to use commercially reasonable efforts to mitigate the losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT under the Fujifilm CSA, and the final two quarterly installments will be mitigated by any replacement revenue achieved by Fujifilm between July 1, 2023 and December 31, 2023.

The 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.

Note 5 – Earnings (Loss) per Share

Basic and diluted net income (loss) per share were calculated as follows (in thousands, except per share data):

			Three Months Ended March 31,
			2023						2022
Numerator:
Net income (loss), basic			$	(293,905)					$	203,408
Interest on convertible notes, net			—						3,403
Net income (loss), dilutive			(293,905)						206,811
Denominator:
Weighted average number of common shares outstanding, basic			86,158						76,457
Effect of dilutive securities			—						4,254
Weighted average number of common shares outstanding, dilutive			86,158						80,711
Net income (loss) per share:
Basic			$	(3.41)					$	2.66
Diluted			$	(3.41)					$	2.56
Anti-dilutive securities excluded from calculations of diluted net income (loss) per share			23,971						1,474

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 consolidated statements of cash flows (in thousands):

			March 31, 2023						December 31, 2022
Cash and cash equivalents			$	624,950					$	1,336,883
Restricted cash, current			10,330						10,303
Restricted cash, non-current(1)			1,663						1,659
Cash, cash equivalents, and restricted cash			$	636,943					$	1,348,845

(1)Classified as Other non-current assets as of March 31, 2023 and December 31, 2022, 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 March 31, 2023																		Fair Value at December 31, 2022
Assets			Level 1						Level 2						Level 3						Level 1						Level 2						Level 3
Money market funds(1)			$	152,786					$	—					$	—					$	398,834					$	—					$	—
Government-backed securities(1)			—						296,000						—						—						296,000						—
Corporate debt securities(1)			—						4,991						—						—						—						—
Agency securities(1)			—						—						—						—						104,536						—
Total cash equivalents			$	152,786					$	300,991					$	—					$	398,834					$	400,536					$	—
Liabilities
5.00% Convertible notes due 2027			$	—					$	103,811					$	—					$	—					$	172,789					$	—
3.75% Convertible notes due 2023			—						—						—						—						322,111						—
Total convertible notes payable			$	—					$	103,811					$	—					$	—					$	494,900					$	—

(1)All investments are classified as Cash and cash equivalents as of March 31, 2023 and December 31, 2022, on the consolidated balance sheets.

Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor’s valuation models that use verifiable observable market data, such as interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers, or quoted prices of securities with similar characteristics. Pricing of the Company’s convertible notes has been estimated using observable inputs, including the price of the Company’s common stock, implied volatility, interest rates, and credit spreads.

During the three months ended March 31, 2023 and 2022, the Company did not have any transfers between levels.

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

Inventory consisted of the following (in thousands):

			March 31, 2023						December 31, 2022
Raw materials			$	12,320					$	13,912
Semi-finished goods			13,108						21,410
Finished goods			8,757						1,361
Total inventory			$	34,185					$	36,683

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 months ended March 31, 2023, inventory write-downs were $12.5 million. For the three months ended March 31, 2023, losses on firm purchase commitments were $7.7 million. There were no inventory write-downs or losses on firm purchase commitments during the three months ended March 31, 2022.

The Company has one reporting unit, which has a negative equity value as of ended March 31, 2023 and December 31, 2022. The change in the carrying amounts of goodwill for the three months ended March 31, 2023 was as follows (in thousands):

			Amount
Balance at December 31, 2022			$	126,331
Currency translation adjustments			3,496
Balance at March 31, 2023			$	129,827

The Company has embedded leases related to supply agreements with contract manufacturing organizations (“CMOs”) and contract manufacturing and development organizations to manufacture NVX-CoV2373, as well as operating leases for its research and development and manufacturing facilities, corporate headquarters and offices, and certain equipment. During the three months ended March 31, 2023, the Company continued to align its global manufacturing footprint as a result of its ongoing assessment of manufacturing needs consistent with its contractual obligations related to the supply, and anticipated demand for, NVX-CoV2373.

During the three months ended March 31, 2023, the Company recognized a short-term lease expense of $0.7 million, related to its embedded leases and no expense was recognized for the write off of right of use (“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 months ended March 31, 2022, the Company recognized a short-term lease expense of $78.1 million, related to its embedded leases and expensed $10.4 million of ROU write off. During the three months ended March 31, 2023 and 2022, the Company recognized $0.5 million and $1.1 million, respectively, of interest expense on its finance lease liabilities.

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

			March 31, 2023						December 31, 2022
Current portion:
3.75% Convertible notes due 2023			$	—					$	325,000
Unamortized debt issuance costs			—						(119)
Total current convertible notes payable			$	—					$	324,881
Non-current portion:
5.00% Convertible notes due 2027			$	175,250					$	175,250
Unamortized debt issuance costs and discount			(8,393)						(8,784)
Total non-current convertible notes payable			$	166,857					$	166,466

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

			Three Months Ended March 31,
			2023						2022
Coupon interest			$	3,206					$	3,047
Amortization of debt issuance costs			510						356
Total interest expense on convertible notes payable			$	3,716					$	3,403

In June 2021, the Company entered into an At Market Issuance Sales Agreement (the "June 2021 Sales Agreement"), which allows it to issue and sell up to $500 million in gross proceeds of shares of its common stock. As of March 31, 2023, the remaining balance available under the June 2021 Sales Agreement was approximately $318 million. There were no sales recorded under the June 2021 Sales Agreement during the three months ended March 31, 2023.

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

Equity Plans

In January 2023, the Company established the 2023 Inducement Plan (the “2023 Inducement Plan”), which provides for the granting of share-based awards to individuals who were not previously employees, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Company reserved 1.0 million shares of common stock for grant under the 2023 Inducement Plan. As of March 31, 2023, there were 0.3 million shares available for issuance under the 2023 Inducement Plan.

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015. 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. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025. As of March 31, 2023, there were 0.5 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 2023 Inducement Plan and the 2015 Plan permit 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 2023 Inducement Plan and 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 share-based awards are generally subject to vesting over periods ranging from one to four years.

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

			Three Months Ended March 31,
			2023						2022
Cost of sales			$	519					$	—
Research and development			13,858						16,887
Selling, general, and administrative			14,270						16,046
Total stock-based compensation expense			$	28,647					$	32,933

Total stock-based compensation capitalized and included in inventory as of March 31, 2023 and December 31, 2022 was $1.7 million.

As of March 31, 2023, there was approximately $174 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 March 31, 2023. 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 three months ended March 31, 2023 and 2022 was approximately $1.5 million and $5.6 million, respectively.

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

			2023 Inducement Plan												2015 Plan												2005 Plan
			Stock Options						Weighted-Average Exercise Price						Stock Options						Weighted-Average Exercise Price						Stock Options						Weighted-Average Exercise Price
Outstanding at December 31, 2022			—						$	—					4,053,290						$	46.07					63,725						$	112.94
Granted			358,600						10.96						927,742						7.20						—						—
Exercised			—						—						(5,031)						6.81						—						—
Canceled			—						—						(15,835)						81.44						(5,250)						36.60
Outstanding at March 31, 2023			358,600						$	10.96					4,960,166						$	38.73					58,475						$	119.80
Shares exercisable at March 31, 2023			—						$	—					311,560						$	40.60					58,475						$	119.80

    

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

			Three Months Ended March 31,
			2023						2022
Weighted average Black-Scholes fair value of stock options granted			$7.19						$65.78
Risk-free interest rate			3.6%-4.0%						1.4%-2.0%
Dividend yield			—%						—%
Volatility			127.7%-140.3%						120.5%-130.6%
Expected term (in years)			3.9-5.1						4.1-5.3

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2023 Inducement Plan, 2015 Plan and 2005 Plan as of March 31, 2023 was approximately $0.9 million and 7.5 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2023 Inducement Plan, 2015 Plan and 2005 Plan as of March 31, 2023 was approximately $0.7 million and 6.5 years, respectively.

Restricted Stock Units

The following is a summary of RSU activity for the three months ended March 31, 2023:

			2023 Inducement Plan												2015 Plan
			Number of Shares						Per Share Weighted- Average Fair Value						Number of Shares						Per Share Weighted- Average Fair Value
Outstanding and unvested at December 31, 2022			—						$	—					2,034,574						$	61.67
Granted			308,390						$	10.96					2,531,445						7.20
Vested			—						$	—					(211,688)						87.25
Forfeited			—						$	—					(88,570)						52.68
Outstanding and unvested at March 31, 2023			308,390						$	10.96					4,265,761						$	28.26

Employee Stock Purchase Plan

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 March 31, 2023, there were 0.5 million shares available for issuance under the ESPP.

The Company evaluates the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2023 and that the Company has historically generated pretax losses. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. On the basis of this evaluation, as of March 31, 2023, the Company continued to maintain a full valuation allowance against its deferred tax assets, except to the extent Net Operating Losses (“NOLs”) have been used to reduce taxable income. The Company’s remaining U.S. Federal NOLs are subject to limitation in accordance with the 2017 Tax Cuts and Jobs Act (“TCJA”), which limits allowable NOL deductions to 80% of federal taxable income.

Effective January 1, 2022, a provision of the TCJA has taken effect creating a significant change to the treatment of research and experimental expenditures under Section 174 of the IRC (“Sec. 174 expenses”). Historically, businesses have had the option of deducting Sec. 174 expenses in the year incurred or capitalizing and amortizing the costs over five years. The new TCJA provision, however, eliminates this option and will require Sec. 174 expenses associated with research conducted in the U.S. to be capitalized and amortized over a five-year period. For expenses associated with research outside of the U.S., Sec. 174 expenses will be capitalized and amortized over a 15-year period.

The Company recognized federal, state, and foreign income tax expense of $1.2 million and $0.6 million, in total, for the three months ended March 31, 2023 and 2022, respectively. The Company recognized foreign withholding tax expense on royalties of $2.1 million for the three months ended March 31, 2022. The Company did not recognize any foreign withholding tax expense on royalties for the three months ended March 31, 2023.

Note 15 – Commitments and Contingencies

Legal Matters

On November 12, 2021, Sothinathan Sinnathurai filed a purported securities class action in the U.S. District Court for the District of Maryland (the “Maryland Court”) against the Company and certain members of senior management, captioned Sothinathan Sinnathurai v. Novavax, Inc., et al., No. 8:21-cv-02910-TDC (the “Sinnathurai Action”). On January 26, 2022, the Maryland Court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs in the Sinnathurai Action. The co-lead plaintiffs filed a consolidated amended complaint on March 11, 2022,

After the Sinnathurai Action was filed, seven 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”), (vi) Diego J. Mesa v. Stanley C. Erck, et al. (the “Mesa Action”), and (vii) Sean Acosta v. Stanley C. Erck, et al. (the “Acosta Action”). The Meyer, Yung, Snyder, and Blackburn Actions were filed in the Maryland Court. The Kirst Action was filed in the Circuit Court for Montgomery County, Maryland, and shortly thereafter removed to the Maryland Court by the defendants. The Mesa and Acosta Actions were filed in the Delaware Court of Chancery (the “Delaware Court”). The derivative lawsuits name members of the Company’s 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 7, 2022, the Maryland Court entered an order consolidating the Meyer and Yung Actions (the “First Consolidated Derivative Action”). The plaintiffs in the First Consolidated Derivative Action filed their consolidated derivative complaint on April 25, 2022. On May 10, 2022, the Maryland Court entered an order granting the parties’ request to stay all proceedings and deadlines pending the earlier of dismissal or the filing of an answer in the Sinnathurai Action. On June 10, 2022, the Snyder and Blackburn Actions were filed. On October 5, 2022, the Maryland Court entered an order granting a request by the plaintiffs in the First Consolidated Derivative Action and the Snyder and Blackburn Actions to consolidate all three actions and appoint co-lead plaintiffs and co-lead and liaison counsel (the “Second Consolidated Derivative Action”). The co-lead plaintiffs in the Second Consolidated Derivative Action filed a consolidated amended complaint on November 21, 2022. On February 10, 2023, defendants filed a motion to dismiss the Second Consolidated Derivative Action. Plaintiffs’ filed their opposition to the motion to dismiss on April 11, 2023. Defendant’s reply brief in further support of their motion to dismiss is due by May 11, 2023.

On July 21, 2022, the Maryland Court issued a memorandum opinion and order remanding the Kirst Action to state court. On December 6, 2022, the parties to the Kirst Action filed a stipulated schedule pursuant to which the plaintiffs were expected to file an amended complaint on December 22, 2022, and either (i) the parties would file a stipulated stay of the Kirst Action or (ii) the defendants would file a motion to stay the case by January 23, 2023. The plaintiffs filed an amended complaint on December 30, 2022. On January 23, 2023, defendants filed a motion to stay the Kirst action. On February 22, 2023, the parties in the Kirst Action filed for the Court’s approval of a stipulation staying the Kirst Action pending the resolution of defendants’ motion to dismiss in the Second Consolidated Derivative Action. On March 22, 2023, the Court entered an order staying the Kirst Action pending resolution of the Motion to Dismiss in the Second Consolidated Derivative Action.

On August 30, 2022, the Mesa Action was filed. On October 3, 2022, the Delaware Court entered an order granting the parties’ request to stay all proceedings and deadlines in the Mesa Action pending the earlier of dismissal of the Sinnathurai Action or the filing of an answer to the operative complaint in the Sinnathurai Action. On January 9, 2023, the court entered an order granting the parties’ request to set a briefing schedule in connection with a motion to stay that defendants intended to file. Pursuant to the order, defendants filed a motion to stay on January 18, 2023. The plaintiff filed his opposition on February 8, 2023. Defendants filed their reply on February 22, 2023. On February 28, 2023, the court granted Defendants’ motion and stayed the Mesa Action pending the entry of a final, non-appealable judgment in the Second Consolidated Derivative Action.

On December 7, 2022, the Acosta Action was filed. On February 6, 2023, defendants accepted service of the complaint and summons in the Acosta action. On March 9, 2023, the court entered an order granting the parties’ request to stay the Acosta Action pending the entry of a final, non-appealable judgment in the Second Consolidated Derivative Action. The financial impact of this claim, as well as the claims discussed above, is not estimable.

On February 26, 2021, a Company stockholder named Thomas Golubinski filed a derivative complaint against members of the Company’s board of directors and members of senior management in the Delaware Court, captioned Thomas Golubinski v. 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 on May 3, 2021. The results of the vote were disclosed in the Company’s Current Report on Form 8-K filed on June 24, 2021. Thereafter, the plaintiff stipulated that, as a result of the outcome of the June 17, 2021 vote, the plaintiff no longer intends to pursue the lawsuit or any claim arising from the April 2020 and June 2020 awards. On August 23, 2021, the plaintiff filed a motion seeking an award of attorneys’ fees and expenses, to which the defendants filed an opposition. On October 18, 2022, the Delaware Court denied the plaintiff’s fee application in its entirety. Under a prior Delaware Court order, the case was automatically dismissed with prejudice upon denial of the plaintiff’s fee application. On November 14, 2022, Golubinski filed a Notice of Appeal in the Supreme Court of the State of Delaware. The plaintiff / appellant filed his opening appellate brief on December 30, 2022. The Company filed its responsive brief on January 30, 2023 and the appellant filed his reply brief on February 14, 2023. The financial impact of this claim, as well as the claims discussed above, is not estimable.

On March 29, 2022, Par submitted a demand for arbitration against the Company with the American Arbitration Association, alleging that the Company breached certain provisions of the Manufacturing and Services Agreement (the “Par MSA”) that the Company entered into with Par in September 2020 to provide fill-finish manufacturing services for NVX-CoV2373. On April 4, 2023, the parties entered into a Settlement Agreement and Release of Claims pursuant to which Novavax agreed to pay $27.0 million to Par, which was fully accrued for as of March 31, 2023. Novavax characterized the payment as a $15.0 million termination fee due under the Par MSA and a $12.0 million settlement payment. Because Par and its parent company, Endo International plc, are parties to Chapter 11 bankruptcy proceedings, the Settlement Agreement and Release of Claims and the payment due thereunder required, and subsequently received, approval from the bankruptcy court. The Company has made the payment required by the Settlement Agreement and Release of Claims, and, subject to the non-occurrence of certain contingencies, the arbitration will be dismissed on or about July 13, 2023.

On November 18, 2022, the Company delivered written notice to Gavi to terminate the Gavi APA based on Gavi’s failure to procure the purchase of 350 million doses of NVX-CoV2373 from the Company as required by the Gavi APA. As of November 18, 2022, the Company had only received orders under the Gavi APA for approximately 2 million doses. On December 2, 2022, Gavi issued a written notice purporting to terminate the Gavi APA based on Gavi’s contention that the Company repudiated the agreement and, therefore, materially breached the Gavi APA. Gavi also contends that, based on its purported termination of the Gavi APA, it is entitled to a refund of the Advance Payment Amount less any amounts that have been credited against the purchase price for binding orders placed by a buyer participating in the COVAX Facility. As of December 31, 2022, the remaining Gavi Advance Payment Amount of $697.4 million, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, was reclassified from Deferred revenue to Other current liabilities in the Company’s consolidated balance sheet. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on the claims described above. The Company filed its Answer and Counterclaims on March 2, 2023. On April 5, 2023, Gavi filed its Reply to the Company’s Counterclaims. Arbitration is inherently uncertain, and while the Company believes that it is entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that it will be required to refund all or a portion of the remaining Advance Payment Amount from Gavi.

The Company is also involved in various other legal proceedings arising in the normal course of business. Although the outcomes of these other legal proceedings are inherently difficult to predict, the Company do not expect the resolution of these other legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flows.

Note 16 – Subsequent Events

In December 2020, the Company entered into an APA with the Commonwealth of Australia for the purchase of doses of NVX-CoV2373 (the “Australia APA”). In April 2023, the Company entered into an amendment to the Australia APA that reduced the number of doses to be delivered under the Australia APA with a commensurate increase in the per-dose price, such that the total contract value of the Australia APA was maintained, with doses to be delivered through 2024.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations about the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Forward-looking statements involve estimates, assumptions, risks, and uncertainties that could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, and, therefore, you should not place considerable reliance on any such forward-looking statements. Such risks and uncertainties include, without limitation, challenges satisfying, alone or together with partners, various safety, efficacy, and product characterization requirements, including those related to process qualification and assay validation, necessary to satisfy applicable regulatory authorities, such as the U.S. Food and Drug Administration (“FDA”), the World Health Organization (“WHO”), United Kingdom (“UK”) Medicines and Healthcare Products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”), the Republic of Korea’s Ministry of Food and Drug Safety, or Japan’s Ministry of Health, Labour and Welfare; unanticipated challenges or delays in conducting clinical trials; difficulty obtaining scarce raw materials and supplies; resource constraints, including human capital and manufacturing capacity, constraints on the ability of Novavax to pursue planned regulatory pathways, alone or with partners, in multiple jurisdictions simultaneously, leading to staggering of regulatory filings, and potential regulatory actions; challenges meeting contractual requirements under agreements with multiple commercial, governmental, and other entities; challenges in implementing our global restructuring and cost reduction plan; challenges in obtaining commercial adoption of NVX-CoV2373 or a COVID-19 variant strain-containing formulation; and other risks and uncertainties identified in Part II, Item 1A “Risk Factors” of this Quarterly Report and in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, which may be detailed and modified or updated in other documents filed with the SEC from time to time, and are available at www.sec.gov and at www.novavax.com. You are encouraged to read these filings as they are made.

We cannot guarantee future results, events, level of activity, performance, or achievement. Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate or materially different from actual results. Further, any forward-looking statement speaks only as of the date when it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Information in this Quarterly Report, includes a financial measure that was not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which we refer to as adjusted cost of sales. We are presenting this non-GAAP financial measure to assist an understanding of our business and its performance. Adjusted cost of sales includes an estimate of standard manufacturing costs that were previously expensed to research and development prior to regulatory approvals for NVX-CoV2373 that would otherwise have been capitalized to inventory. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP, and may not be comparable to the calculation of similar measures of other companies.

We are a biotechnology company that promotes improved health globally through the discovery, development, and commercialization of innovative vaccines to prevent serious infectious diseases. Our proprietary recombinant technology platform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticle vaccines designed to address urgent global health needs.

Our vaccine candidates are nanostructures of conformationally correct recombinant proteins that mimic those found on natural pathogens. This technology enables the immune system to recognize target proteins and develop protective antibodies. We believe that our vaccine technology may lead to the induction of a differentiated immune response that may be more efficacious than naturally occurring immunity or some other vaccine approaches. Our vaccine candidates also incorporate our proprietary saponin-based Matrix-M™ adjuvant to enhance the immune response, stimulate higher levels of functional antibodies, and induce a cellular immune response.

We have developed a COVID-19 vaccine (“NVX-CoV2373, “Nuvaxovid™,” “Covovax™,” “Novavax COVID-19 Vaccine, Adjuvanted”), that has received approval, interim authorization, provisional approval, conditional marketing authorization (“CMA”), and emergency use authorization (“EUA”) from multiple regulatory authorities globally for both adult and adolescent populations as a primary series and for both homologous and heterologous booster indications. We are also developing an influenza vaccine candidate, a COVID-19-Influenza Combination (“CIC”) vaccine candidate, as well as COVID-19 variant strain-containing formulation that we intend to provide in a monovalent or bivalent presentation in alignment with public health recommendations. In addition to COVID-19 and seasonal influenza, our other areas of focus include providing Matrix-M™ adjuvant for collaborations investigating the prevention of malaria, including R21/Matrix-M™ adjuvant malaria vaccine, which recently received authorization in several countries.

We intend to focus the organization to align our investments and activities with our top priority of delivering an updated COVID-19 vaccine consistent with public health recommendations for strain composition for the 2023 Fall vaccination season. To maximize our opportunities and mitigate the significant risks and uncertainties of the COVID-19 market, we have taken several cost restructuring measures to reduce spend, extend our cash runway, and operate efficiently to best position the company to deliver longer-term growth. We discuss these cost restructuring strategies in greater detail in Note 2 to our consolidated financial statements in this Quarterly Report.

We believe our recombinant nanoparticle vaccine technology, together with our proprietary Matrix-M™ adjuvant, is well suited for the development and commercialization of vaccine candidates targeting a broad scope of respiratory and other endemic and emerging infectious diseases at scale.

Recombinant Nanoparticle Vaccine Technology

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 (“Sf-/BV”) insect cell-expression system, which enables efficient, large-scale expression of the optimized protein. The Sf-/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.

Matrix-M™ Adjuvant

Our proprietary Matrix-M™ adjuvant is a key differentiator within our platform. This adjuvant has enabled potent, well tolerated, and durable efficacy by stimulating the entry of antigen presenting cells (“APCs”) into the injection site and

We continue to evaluate commercial opportunities for the use of our Matrix-M™ adjuvant alongside vaccine antigens produced by other manufacturers. Matrix-M™ adjuvant is being evaluated in combination with several partner-led malaria vaccine candidates, including for R21/Matrix-M™ adjuvant, a malaria vaccine candidate created by the Jenner Institute, University of Oxford. The R21/Matrix-M™ adjuvant vaccine has been licensed to Serum Institute of India Pvt. Ltd. (“SIIPL”) for commercialization. Our adjuvant technology is also being investigated in veterinary applications and is a key component in equine vaccine to prevent Strangles.

We are advancing NVX-CoV2373 through multiple regulatory approvals. We have received authorizations in over 40 countries globally from major regulatory agencies including the FDA, the WHO, the EMA, and the MHRA. To date, we have received approval, interim authorization, provisional approval, CMA, and EUA for the adult population, aged 18 and older, the adolescent population, aged 12 to 17 years, and the pediatric population, aged 7 to 11 years in select territories. The regulatory authorizations for NVX-CoV2373 include primary series and both homologous and heterologous booster indications within specific countries. For the territories in which our vaccine has gained authorization, NVX-CoV2373 is marketed under the brand names (i) Nuvaxovid™ (SARS-CoV-2 rS Recombinant, adjuvanted), (ii) Covovax™ (manufacturing and commercialization by SIIPL), or (iii) Novavax COVID-19 Vaccine, Adjuvanted.

Below we highlight the first quarter 2023 and subsequent regulatory authorizations received through the date of this filing on Form 10-Q.

In January 2023, our partner SK bioscience received expanded manufacturing and marketing approval from Korean Ministry of Food and Drug Safety for Nuvaxovid™ for use as a booster in adults aged 18 and older.

We are working to continue to expand our label for heterologous boosting in adults, adolescents, and younger children, and to achieve supportive policy recommendations enabling broad market access. We continue to work closely with governments, regulatory authorities, and non-governmental organizations in our commitment to facilitate global access to our COVID-19 vaccine.

Our clinical pipeline is comprised of vaccine candidates for infectious diseases. Our lead product is our COVID-19 vaccine, NVX-CoV2373, which has received approval, interim authorization, provisional approval, CMA, or EUA for both adult and adolescent populations in over 40 countries. We advanced NVX-CoV2373 through two pivotal Phase 3 clinical trials that demonstrated high efficacy against both the original COVID-19 strain and commonly circulating COVID-19 variants, while maintaining a favorable safety profile. Beyond COVID-19, our clinical pipeline includes seasonal influenza and CIC vaccines, in addition to our Matrix-M™ adjuvant being used for collaborations investigating the prevention of malaria.

We remain focused on expanding our NVX-CoV2373 vaccine label within the booster and adolescent market following global regulatory authorizations. We continue to evaluate vaccine effectiveness through ongoing booster studies in our clinical trials, and we continue to advance development of our COVID-19 variant strain containing monovalent or bivalent formulation. In March 2023, we initiated the Phase 3 COVID-19 Omicron BA.5 clinical trial evaluating our prototype vaccine compared to an Omicron BA.5 vaccine, as well as a bivalent containing vaccine. Topline results are expected mid-year 2023, which we expect will confirm the strain-change approach we anticipate using for future variant vaccine candidate approvals.

Further pediatric development is ongoing in the Phase 2b/3 Hummingbird™ Global Clinical Trial, which is evaluating the safety, immunogenicity, and effectiveness of NVX-CoV2373 in children. The trial includes three age de-escalation cohorts of 1,200 children each. The cohort aged six to 11 years has completed enrollment, and enrollment is ongoing in the cohort aged two to five years. Topline results in the cohort aged six to 11 years are expected mid-year 2023.

We expect to leverage these clinical insights to pursue additional regulatory approvals of our COVID-19 vaccine for primary, booster, and pediatric indications globally, amidst the ongoing COVID-19 landscape.

Additionally, we are developing our quadrivalent nanoparticle influenza vaccine (“qNIV”) candidate, which we advanced through a successful Phase 3 study published in September 2021, demonstrating the utility of a stand-alone influenza vaccine or for use in a combination vaccine. We have subsequently updated our qNIV candidate for further development. We continue to progress a Phase 2 dose-confirming trial evaluating our stand-alone influenza vaccine candidate, qNIV and our CIC vaccine candidate, which combines NVX-CoV2373 and our updated qNIV approach in a single formulation. In January 2023, we completed enrollment of 1,575 participants in the Phase 2 CIC clinical trial. The clinical trial will evaluate safety and immunogenicity of different formulations of CIC and influenza stand-alone vaccine candidates in adults aged 50 to 80 years, with topline results expected by mid-year 2023.

The pipeline chart below summarizes the core clinical development programs that we are focusing on in the near-term.

We remain focused on our top priority of delivering an updated, competitive COVID vaccine consistent with public health recommendations for the 2023 Fall vaccination season.

•Ongoing discussions with global regulators on strain selection guidance and advancement of commercial preparedness for Fall 2023

◦Invited to join the U.S. FDA Technology Working Group to evaluate emerging variants in preparation for strain selection at the June VRBPAC meeting

◦Ongoing development of variant strains “at risk” to support regulatory and commercial readiness

◦Modified U.S. government agreement for up to 1.5 million additional doses of Novavax’s COVID vaccine for delivery in 2023, with initial delivery supplied in five-dose vials in the first quarter of 2023

•Continued expansion of Nuvaxovid label to enable broader uptake in the long-term commercial market

•Completed enrollment and on track to receive topline results mid-2023 for Part 2 of Phase 3 strain change study, which is a regulatory prerequisite for updating our 2023-2024 vaccine composition

•Expect to file U.S. Biologics License Application in second half of 2023

We are focused on significantly reducing our expenses while retaining the key capabilities needed to execute our operating plans.

•Announced a global restructuring and cost reduction plan, which is expected to reduce our annual combined 2024 R&D and SG&A expenses

◦Includes consolidation of facilities and infrastructure and approximately 25% reduction in global workforce

◦2023 R&D and SG&A expense reduction expected to be based on timing of implementation, local laws and regulations and other factors

Priority #3: Leverage our Technology Platform, our Capabilities and our Portfolio of Assets to Drive Additional Value Beyond Nuvaxovid Alone

We continue to leverage our pipeline and technology with the intent of delivering long-term growth and protecting global health.

•Announced positive Phase 2 COVID-Influenza Combination (CIC) vaccine, standalone influenza, and high-dose COVID vaccine data, which evaluated safety and immunogenicity of different formulations

◦All three vaccine candidates were well-tolerated, demonstrated a reassuring preliminary safety profile, and had reactogenicity comparable to authorized comparators

◦Preliminary topline immune responses for all three vaccine candidates were robust

•Serum Institute of India has received authorizations in Ghana and Nigeria for R21/Matrix-M™ adjuvanted malaria vaccine

◦Vaccine was developed by Jenner Institute, University of Oxford, and formulated with our proprietary Matrix-M™ adjuvant

In June 2021, we entered into an At Market Issuance Sales Agreement (the "June 2021 Sales Agreement"), which allows us to issue and sell up to $500 million in gross proceeds of shares of its common stock. As of March 31, 2023, the remaining balance available under the June 2021 Sales Agreement was approximately $318 million. There were no sales recorded under the June 2021 Sales Agreement during the three months ended March 31, 2023.

During the three months ended March 31, 2022, we sold 2.2 million shares of our common stock resulting in net proceeds of approximately $179 million, under the June 2021 Sales Agreement.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements (unaudited) and the accompanying notes, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our critical accounting policies and estimates are included under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC.

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 March 31,
			2023						2022						Change
Revenue (in thousands):
Product sales			$	(7,457)					$	585,628					$	(593,085)
Grants			87,379						99,301						(11,922)
Royalties and other			1,029						19,042						(18,013)
Total revenue			$	80,951					$	703,971					$	(623,020)

Product sales

Product sales for the three months ended March 31, 2023 were $(7.5) million as compared to $585.6 million during the three months ended March 31, 2022. Product sales in the three months ended March 31, 2023, included a credit of $64.7 million for certain doses delivered in 2022 that qualified for replacement. The credit is the result of a single lot sold to the Australian government that upon pre-planned 6-month stability testing was found to have fallen below the defined specifications and the lot was therefore removed from the market. The geographic distribution of product sales was as follows:

			Three Months Ended March 31,
			2023						2022						Change
North America			$	—					$	64,762					$	(64,762)
Europe			57,267						413,745						(356,478)
Rest of the world			(64,724)						107,121						(171,845)
Total product revenue			$	(7,457)					$	585,628					$	(593,085)

Grants

Grant revenue during the three months ended March 31, 2023 was $87.4 million as compared to $99.3 million during the same period in 2022, a decrease of $11.9 million. Grant revenue for 2023 and 2022, comprised revenue for services performed under the Project Agreement. The decrease was primarily due to the net effect of a cumulative constraint on revenue as a result of the execution of Modification 17 to the Project Agreement during the three months ended March 31, 2023.

Expenses

			Three Months Ended March 31,
			2023						2022						Change
Expenses (in thousands):
Cost of sales			$	34,086					15,204						$	18,882
Research and development			247,101						383,483						(136,382)
Selling, general, and administrative			112,532						95,992						16,540
Total expenses			$	393,719					$	494,679					$	(100,960)

Cost of sales was $34.1 million for the three months ended March 31, 2023, including expense of $20.2 million related to excess, obsolete, or expired inventory and losses on firm purchase commitments. Cost of sales was $15.2 million, or 3% of product sales, for the three months ended March 31, 2022, due to the significant write off of pre-launch inventory as research and development expenses. 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 March 31, 2023, we had approximately $6.4 million of salable 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 March 31, 2023 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 $49.1 million, an adjustment of $15.0 million as compared to cost of sales recognized. If inventory sold for the three months ended March 31, 2022 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $160.0 million, or 27% of product sales, an adjustment of $145.0 million. The cost of sales as a percentage of product sales may fluctuate in the future as a result of changes to our customer pricing mix or standard costs.

Research and Development Expenses

Research and development expenses decreased to $247.1 million for the three months ended March 31, 2023 as compared to $383.5 million for the three months ended March 31, 2022, a decrease of $136.4 million. The decrease was primarily due to a reduction in overall expenditures relating to development activities on coronavirus vaccines, including NVX-CoV2373 and Omicron variant vaccine candidates, bivalent formulations, and CIC, as summarized in the table below (in thousands):

			Three Months Ended March 31,
			2023						2022
Coronavirus vaccines			$	140,014					$	288,933
Influenza vaccine			1,476						1,296
Other vaccine development programs			481						803
Total direct external research and development expense			141,971						291,032
Employee expenses			53,413						43,742
Stock-based compensation expense			13,858						16,887
Facility expenses			19,402						13,208
Other expenses			18,457						18,614
Total research and development expenses			$	247,101					$	383,483

Research and development expenses for coronavirus vaccines for the three months ended March 31, 2023 and 2022, included a benefit of $11.7 million related to previously accelerated manufacturing costs and an expense of $21.0 million related to the acceleration of manufacturing costs, respectively, for leases that we determined were embedded in multiple

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased to $112.5 million for the three months ended March 31, 2023 from $96.0 million for the same period in 2022, an increase of $16.5 million. The increase in selling, general, and administrative expenses is primarily due to an increase in expenses related to the expansion of our commercial sales operations in Europe and other costs in support of our NVX-CoV2373 program, partially offset by certain cost containment measures to reduce our operating spend.

For the remainder of 2023, we plan to restructure our global footprint to reduce our annual combined research and development, and selling, general, and administrative spend.

Other Expense

			Three Months Ended March 31,
			2023						2022						Change
Other income (expense):
Interest expense			$	(4,316)					$	(4,876)					$	560
Other income			24,362						1,654						22,708
Total other income (expense), net			$	20,046					$	(3,222)					$	23,268

Total other income, net was $20.0 million for the three months ended March 31, 2023 as compared to a total other expense, net of $3.2 million for the same period in 2022. The increase in other income is due to the favorable impact of exchange rates on foreign currency denominated balances and an increase in investment income due to higher interest rates.

During the three months ended March 31, 2023 and 2022, we recognized $1.2 million and $2.7 million, respectively, of income tax expense related to federal, state, and foreign income taxes and foreign withholding tax expense on royalties.

			Three Months Ended March 31,
			2023						2022						Change
Net Income (Loss) (in thousands, except per share information):
Net income (loss)			$	(293,905)					$	203,408					$	(497,313)
Net income (loss) per share, basic			$	(3.41)					$	2.66					$	(6.07)
Net income (loss) per share, dilutive			$	(3.41)					$	2.56					$	(5.97)
Weighted average shares outstanding, basic			86,158						76,457						9,701
Weighted average shares outstanding, dilutive			86,158						80,711						5,447

Net loss for the three months ended March 31, 2023 was $293.9 million, or $3.41 per share, basic, as compared to net income of $203.4 million, or $2.66 per share, basic, for the same period in 2022. The decrease in income during the three months ended March 31, 2023, was primarily due to the decline in commercial sales of NVX-CoV2373 in the three months ended March 31, 2023, offset by a decrease in research and development expenses.

The increase in weighted average shares outstanding for the three months ended March 31, 2023 was primarily a result of the sale of common stock and exercises of stock-based awards.

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 and repayments under our grant

We have entered into supply agreements, sometimes referred to as APAs, with Gavi, the Vaccine Alliance (“Gavi”); the European Commission (“EC”); and various countries globally. We also have grant and license agreements. As of March 31, 2023, the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties under the license agreements, our advance purchase agreement with Gavi (the “Gavi APA”) and the reduction in doses related to the Amended and Restated UK Supply Agreement (as defined below), was approximately $3 billion, of which $689.8 million is included in Deferred revenue in our Consolidated balance sheet. Failure to meet regulatory milestones, timely obtain supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under our APAs may require us to refund portions of upfront payments or result in reduced future payments, which could adversely impact our ability to realize revenue from our unsatisfied performance obligations. The timing to fulfill performance obligations related to grant agreements will depend on the results of our research and development activities, including clinical trials, and delivery of doses. The timing to fulfill performance obligations related to supply agreements will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype NVX-CoV2373 vaccine under certain of our APAs. The supply agreements typically contain terms that include upfront payments intended to assist us in funding investments related to building out and operating our manufacturing and distribution network, among other expenses, in support of our global supply commitment, and are applied to billings upon delivery of NVX-CoV2373. Such upfront payments generally become non-refundable upon our achievement of certain development, regulatory, and commercial milestones.

Pursuant to the Fujifilm Settlement Agreement, we are responsible for a Settlement Payment of up to $185.0 million to Fujifilm in connection with the cancellation of manufacturing activity at FDBT under the Fujifilm 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. We paid the first installment of $34.3 million during the three months ended March 31, 2023 and the remaining balance of $102.9 million is reflected in Accrued expenses (see Note 4 to our consolidated financial statements in this Quarterly Report).

During April 2023, we made a payment of $27.0 million to Par Sterile Products, LLC (“Par”) under the Settlement Agreement and Release of Claims (see Note 15 to our consolidated financial statements in this Quarterly Report).

In addition, we continue to assess our manufacturing needs and 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.

Under the terms of the Gavi APA, we received an upfront payment of $350.0 million from Gavi in 2021 and an additional payment of $350.0 million in 2022 related to our achieving an emergency use license for NVX-CoV2373 by the WHO (the “Advance Payment Amount”). On November 18, 2022, we delivered written notice to Gavi to terminate the Gavi APA on the basis of Gavi’s failure to procure the purchase of 350 million doses of NVX-CoV2373 from us as required by the Gavi APA. As of November 18, 2022, we had only received orders under the Gavi APA for approximately 2 million doses. On December 2, 2022, Gavi issued a written notice purporting to terminate the Gavi APA based on Gavi’s contention that the Company repudiated the agreement and, therefore, materially breached the Gavi APA. Gavi also contends that, based on its purported termination of the Gavi APA, it is entitled to a refund of the Advance Payment Amount less any amounts that have been credited against the purchase price for binding orders placed by a buyer participating in the COVAX Facility. As of December 31, 2022, the remaining Gavi Advance Payment Amount of $697.4 million, pending resolution of the dispute with Gavi related to a return of the remaining Advance Payment Amount, was reclassified from Deferred revenue to Other current liabilities in our consolidated balance sheet. On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration based on the claims described above. We filed our Answer and Counterclaims on March 2, 2023. On April 5, 2023, Gavi filed its Reply to our Counterclaims. Arbitration is inherently uncertain, and while we believe that we are entitled to retain the remaining Advance Payment Amount received from Gavi, it is possible that we will be required to refund all or a portion of the remaining Advance Payment Amount from Gavi.

In February 2023, in connection with the execution of Modification 17 to the USG Agreement, the U.S. government indicated to us that the award may not be extended past its current period of performance. If the USG Agreement is not amended, as we had previously expected, then we may not receive all of the remaining $336.4 million in funding we had previously anticipated pursuant to the USG Agreement. Modification 17 included provisions requiring that the payment of $60.0 million of consideration associated with manufacturing work now be contingent upon meeting certain milestones, including the delivery of up to 1.5 million doses of NVX-CoV2373 and development and regulatory milestones related to commercial readiness, expansion of the EUA and development of multiple vial presentations.

Our funding agreements currently include funding from the Coalition for Epidemic Preparedness Innovations (“CEPI”) in the form of one or more forgivable no interest term loans (“CEPI Forgivable Loan Funding”). Payments received under the CEPI Forgivable Loan Funding are only repayable if NVX-CoV2373 manufactured by the CMO network funded by CEPI is sold to one or more third parties (which would have previously included, but is not limited to, any sales under our Gavi APA prior to its termination), and such sales cover our costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI. The timing and amount of any loan repayments is currently uncertain.

As of March 31, 2023, we had $636.9 million in cash and cash equivalents and restricted cash as compared to $1.3 billion as of December 31, 2022.

We funded our operations for the three months ended March 31, 2023 with cash and cash equivalents and revenue from product sales, together with revenue under the USG Agreement that support our NVX-CoV2373 vaccine development

			Three Months Ended March 31,
			2023						2022						Change
Net cash provided by (used in):
Operating activities			$	(325,593)					$	(88,510)					$	(237,083)
Investing activities			(23,558)						(16,826)						(6,732)
Financing activities			(354,379)						159,865						(514,244)
Effect on exchange rate on cash, cash equivalents, and restricted cash			(8,372)						1,312						(9,684)
Net increase (decrease) in cash, cash equivalents, and restricted cash			(711,902)						55,841						(767,743)
Cash, cash equivalents, and restricted cash at beginning of period			1,348,845						1,528,259						(179,414)
Cash, cash equivalents, and restricted cash at end of period			$	636,943					$	1,584,100					$	(947,157)

Net cash used in operating activities was $325.6 million for the three months ended March 31, 2023, as compared to $88.5 million for the same period in 2022. The increase in cash used in operating activities is primarily due to a decrease in upfront payments received under our APAs, partially offset by the timing of payments to vendors.

Net cash used in investing activities was $23.6 million for the three months ended March 31, 2023, as compared to $16.8 million for the same period in 2022. The increase in cash used in investing activities is primarily due to an increase in internal use software expenditure.

Net cash used in finance activities was $354.4 million for the three months ended March 31, 2023, as compared to net cash provided by finance activities of $159.9 million for the same period in 2022. The increase in cash used in financing activities is primarily due to the $325 million repayment of our 3.75% Convertible notes during 2023 and net proceeds of approximately $179 million from the sales of our common stock under our June 2021 Sales Agreement during 2022.

Going Concern

The accompanying unaudited consolidated financial statements in Part I, Item 1, “Consolidated Financial Statements” of this Quarterly Report have been prepared assuming that we will continue as a going concern within one year after the date that the financial statements are issued. At March 31, 2023, we had $636.9 million in cash and cash equivalents and restricted cash. During the three months ended March 31, 2023, we incurred a net loss of $293.9 million and had net cash flows used in operating activities of $325.6 million.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

We are subject to certain risks that may affect our results of operations, cash flows, and fair values of assets and liabilities, including volatility in foreign currency exchange rates and interest rate movements.

Foreign Currency Exchange Risk

Although we are headquartered in the U.S. our results of operations, including our foreign subsidiaries’ operations, are subject to foreign currency exchange rate fluctuations, primarily the U.S. dollar against the Euro, Pound Sterling, Swedish Krona, and Czech Koruna. This exchange exposure may have a material effect on our cash and cash equivalents, cash flows, and results of operations, particularly in cases of revenue generated under APAs that include provisions that impact our and our counterparty’s currency exchange exposure. To date, we have not entered into any foreign currency hedging contracts, although we may do so in the future.

We also face foreign currency exchange exposure that arises from translating the results of our global operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. While the financial results of our global activities are reported in U.S. dollars, the functional currency for our foreign subsidiaries is generally their respective local currency. Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our operating results, often in ways that are difficult to predict. A 10% decline in the foreign exchange rates (primarily against the U.S. dollar) relating to our foreign subsidiaries would result in a decline of stockholders’ equity (deficit) of approximately $14 million as of March 31, 2023.

Market and Interest Rate Risk

The primary objective of our investment activities is preservation of capital, with the secondary objective of maximizing income.

Our exposure to interest rate risk is primarily confined to our investment portfolio, which historically has been classified as available-for-sale. We do not believe that a change in the market rates of interest would have any significant impact on the realizable value of our investment portfolio. Changes in interest rates may affect the investment income we earn on our marketable securities when they mature and the proceeds are reinvested into new marketable securities and, therefore, could impact our cash flows and results of operations.

Interest and dividend income is recorded when earned and included in investment income. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income. The specific identification method is used in computing realized gains and losses on the sale of our securities.

Our convertible senior unsecured notes have a fixed interest rate, and we have no additional material debt. As such, we do not believe that we are exposed to any material interest rate risk as a result of our borrowing activities.

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 March 31, 2023. 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 March 31, 2023, 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 March 31, 2023, 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 (the “Maryland Court”) 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 Maryland Court entered an order designating David Truong, Nuggehalli Balmukund Nandkumar, and Jeffrey Gabbert as co-lead plaintiffs in the Sinnathurai Action. The co-lead plaintiffs filed a consolidated amended complaint on March 11, 2022, alleging that the defendants made certain purportedly false and misleading statements concerning the Company’s ability to manufacture NVX-CoV2373 on a commercial scale and to secure the NVX-CoV2373’s regulatory approval. The 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 December 12, 2022, the Maryland Court issued a ruling granting in part and denying in part defendants’ motion to dismiss. The Maryland Court dismissed all claims against two individual defendants and claims based on certain public statements challenged in the consolidated amended complaint. The Maryland Court denied the motion to dismiss as to the remaining claims and defendants, and directed the Company and other remaining defendants to answer within fourteen days. On December 27, 2022, the Company filed its answer and affirmative defenses.

After the Sinnathurai Action was filed, seven 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”), (vi) Diego J. Mesa v. Stanley C. Erck, et al. (the “Mesa Action”), and (vii) Sean Acosta v. Stanley C. Erck, et al. (the “Acosta Action”). The Meyer, Yung, Snyder, and Blackburn Actions were filed in the Maryland Court. The Kirst Action was filed in the Circuit Court for Montgomery County, Maryland, and shortly thereafter removed to the Maryland Court by the defendants. The Mesa and Acosta Actions were filed in the Delaware Court of Chancery (the “Delaware Court”). The derivative lawsuits name members of the Company’s 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 7, 2022, the Maryland Court entered an order consolidating the Meyer and Yung Actions (the “First Consolidated Derivative Action”). The plaintiffs in the First Consolidated Derivative Action filed their consolidated derivative complaint on April 25, 2022. On May 10, 2022, the Maryland Court entered an order granting the parties’ request to stay all proceedings and deadlines pending the earlier of dismissal or the filing of an answer in the Sinnathurai Action. On June 10, 2022, the Snyder and Blackburn Actions were filed. On October 5, 2022, the Maryland Court entered an order granting a request by the plaintiffs in the First Consolidated Derivative Action and the Snyder and Blackburn Actions to consolidate all three actions and appoint co-lead plaintiffs and co-lead and liaison counsel (the “Second Consolidated Derivative Action”). The co-lead plaintiffs in the Second Consolidated Derivative Action filed a consolidated amended complaint on November 21, 2022. On February 10, 2023, defendants filed a motion to dismiss the Second Consolidated Derivative Action. The plaintiffs filed their opposition to the motion to dismiss on April 11, 2023. Defendant’s reply brief in further support of their motion to dismiss is due by May 11, 2023.

On July 21, 2022, the Maryland Court issued a memorandum opinion and order remanding the Kirst Action to state court. On December 6, 2022, the parties to the Kirst Action filed a stipulated schedule pursuant to which the plaintiffs were expected to file an amended complaint on December 22, 2022, and either (i) the parties would file a stipulated stay of the Kirst Action or (ii) the defendants would file a motion to stay the case by January 23, 2023. The plaintiffs filed an amended complaint on December 30, 2022. On January 23, 2023, defendants filed a motion to stay the Kirst action. On February 22, 2023, the parties in the Kirst Action filed for the Court’s approval of a stipulation staying the Kirst Action pending the resolution of defendants’ motion to dismiss in the Second Consolidated Derivative Action. On March 22, 2023, the Court entered an order staying the Kirst Action pending resolution of the Motion to Dismiss in the Second Consolidated Derivative Action.

On August 30, 2022, the Mesa Action was filed. On October 3, 2022, the Delaware Court entered an order granting the parties’ request to stay all proceedings and deadlines in the Mesa Action pending the earlier of dismissal of the Sinnathurai Action or the filing of an answer to the operative complaint in the Sinnathurai Action. On January 9, 2023, the court entered an order granting the parties’ request to set a briefing schedule in connection with a motion to stay that defendants intended to file. Pursuant to the order, defendants filed a motion to stay on January 18, 2023. The plaintiff filed his opposition on February 8, 2023. Defendants filed their reply on February 22, 2023. On February 28, 2023, the court granted Defendants’ motion and stayed the Mesa Action pending the entry of a final, non-appealable judgment in the Second Consolidated Derivative Action.

On December 7, 2022, the Acosta Action was filed. On February 6, 2023, defendants accepted service of the complaint and summons in the Acosta action. On March 9, 2023, the court entered an order granting the parties’ request to stay the Acosta Action pending the entry of a final, non-appealable judgment in the Second Consolidated Derivative Action. The financial impact of this claim, as well as the claims discussed above, is not estimable.

The steps generally required by the FDA before our proposed investigational products may be marketed in the U.S. include:

• performance of preclinical (animal and laboratory) tests;

• submission to the FDA of an Investigational New Drug Application, which must become effective before clinical trials may commence;

• performance of adequate and well controlled clinical trials to establish the safety and efficacy of the investigational product in the intended target population;

• performance of a consistent and reproducible manufacturing process at commercial scale capable of passing FDA inspection;

• submission to the FDA of a Biologics License Application (“BLA”) or a New Drug Application; and

• FDA approval of the BLA or NDA before any commercial sale or shipment of the product.

These processes are expensive and can take many years to complete, and we may not be able to demonstrate the safety, purity, potency and efficacy of our vaccine candidates to the satisfaction of regulatory authorities. The start of clinical trials can be delayed or take longer than anticipated for many and varied reasons, many of which are out of our control. Safety concerns may emerge that could lengthen the ongoing clinical trials or require additional clinical trials to be conducted. Promising results in early clinical trials may not be replicated in subsequent clinical trials. For example, the first batch of top line results from our Phase 2 CIC clinical trial evaluating safety and immunogenicity of different formulations of CIC and influenza stand-alone vaccine candidates, may not be consistent with top line results from subsequent batches in such trial. Regulatory authorities may also require additional testing, and we may be required to demonstrate that our proposed products represent an improved form of treatment over existing therapies, which we may be unable to do without conducting further clinical trials. Moreover, if a regulatory authority grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect to its distribution. Expanded or additional indications for approved products may not be approved, which could limit our revenue. Foreign regulatory authorities may apply similar limitations or may refuse to grant any approval. Consequently, even if we believe that preclinical and clinical data are sufficient to support regulatory approval for our vaccine candidates, the FDA and foreign regulatory authorities ultimately may not grant approval for commercial sale in their applicable jurisdiction, or may impose regulatory requirements that make further pursuit of approval uneconomical in one or more jurisdictions. If our vaccine candidates are not approved, our ability to generate revenue will be limited, and our business will be adversely affected.

• Revenue: Our near-term revenue depends on our ability to successfully develop, manufacture, distribute, or market an updated monovalent or bivalent formulation of a vaccine candidate for COVID-19 for the Fall 2023 COVID vaccine season, which is inherently uncertain and subject to a number of risks, including regulatory approvals and commercial adoption. We experienced delays in early 2023 in manufacturing our BA.5 clinical trial materials, which has the potential to delay regulatory approval from the FDA for our vaccine candidate for the Fall 2023 COVID vaccine season. In addition, in January 2023, the U.S. Vaccines and Related Biologics Products Advisory Committee announced its intent to provide the industry with its strain protocol guidance in the second quarter of 2023 for the Fall 2023 COVID vaccine season. To meet potential demand for Fall 2023, we have begun manufacturing an updated COVID-19 variant strain-containing formulation prior to the availability of strain protocol guidance. If such formulation is not consistent with the strain protocol guidance, we will not be able to deliver the appropriate vaccine to our customers in sufficient quantities for the Fall 2023 COVID vaccine season and we will have incurred significant costs for a formulation that we will be unable to sell.

• Funding from the U.S. Government: Our USG Agreement will expire by its terms in December 2023. We had anticipated that the U.S. government would extend the USG Agreement until the full $1.8 billion authorized amount had been realized. In February 2023, in connection with the execution of Modification 17 to the USG Agreement, the U.S. government indicated to us that the award may not be extended past its current period of performance. If the USG Agreement is not amended, as we had previously expected, then we may not receive all of the remaining $336.4 million in funding we had previously anticipated pursuant to the USG Agreement.

• Pending Arbitration: On January 24, 2023, Gavi filed a demand for arbitration with the International Court of Arbitration regarding an alleged material breach by us of the Gavi APA. The outcome of that arbitration is inherently uncertain, and it is possible we could be required to refund all or a portion of the remaining advance payments of $697.4 million. See Note 3 and Note 15 to our consolidated financial statements in Part I, Item 1, “Financial Information” of this Quarterly Report on Form 10-Q for additional information related to the arbitration with Gavi.

In May 2023, we announced a global restructuring and cost reduction plan. This plan includes a more focused investment in our NVX-CoV2373 program, reduction to our pipeline spending, the continued rationalization of our manufacturing network, a reduction to our global workforce, as well as the consolidation of facilities and infrastructure. The planned workforce reduction includes an approximately 25% reduction in our global workforce, comprised of an approximately 20% reduction in full-time Novavax employees and the remainder comprised of contractors and consultants. We expect the full annual impact of the cost savings to be realized in 2024 and approximately half of the annual impact to be realized in 2023 due to timing of implementing the measures, and the applicable laws, regulations, and other factors in the jurisdictions in which we operate. We expect to record a charge of approximately $10 million to $15 million related to one-time employee severance and benefit costs, the majority of which is expected to be incurred in the second quarter of 2023 and are evaluating the anticipated costs related to the consolidation of facilities and infrastructure. We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from these efforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the potential development progress and cost savings from the global restructuring and cost reduction plan, including the reduction to our global workforce, our business strategy, operating results and financial condition would be adversely affected. Our workforce reductions could yield unanticipated consequences, such as attrition beyond planned workforce reductions or disruptions in our day-to-day operations. Our global restructuring and cost reduction plan, including the reduction to our global workforce, could also harm our ability to attract and retain qualified management and development personnel who are critical to our business. If we are unable to realize the expected benefits from the restructuring and cost reduction plan, we may decide to undertake additional workforce reductions.

Item 6.    Exhibits

3.1						Second Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’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 Company (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 Company (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 4, 2023 (File No. 000-26770))
3.4						Certificate of Designation of Series A Convertible Preferred Stock of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 19, 2020 (File No. 000- 26770))
10.1*±						Modification No. 17 to Undefinitized Project Agreement No. 1, dated February 6, 2023, between the Company and Advanced Technology International
10.2						Employment Agreement between the Company and John C. Jacobs, dated as of January 5, 2023 (Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 28, 2023 (File No. 000-26770))
10.3						Consulting and Advisory Agreement between the Company and Stanley C. Erck, dated as of January 5, 2023 (Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 28, 2023 (File No. 000-26770))
10.4*						Consulting and Advisory Agreement between the Company and Dr. Gregory M. Glenn, dated as of March 20, 2023
10.5						Novavax, Inc. 2023 Inducement Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 9, 2023 (File No. 000-26770))
10.6						Form of Non-Statutory Stock Option Agreement under the Novavax, Inc. 2023 Inducement Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on January 9, 2023 (File No. 000-26770))
10.7						Form of Restricted Stock Unit Award Agreement under the Novavax, Inc. 2023 Inducement Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on January 9, 2023 (File No. 000-26770))
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 March 31, 2023, formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Consolidated Statements of Operations for the three-month periods ended March 31, 2023 and 2022, (ii) the Consolidated Statements of Comprehensive Income (Loss) for the three-month periods ended March 31, 2023 and 2022, (iii) the Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, (iv) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three-month periods ended March 31, 2023 and 2022, (v) the Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2023 and 2022, and (vi) the Notes to Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed or furnished herewith.

±    Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			NOVAVAX, INC.
Date: May 9, 2023			By:			/s/ John C. Jacobs
						John C. Jacobs President and Chief Executive Officer (Principal Executive Officer)
Date: May 9, 2023			By:			/s/ James P. Kelly
						James P. Kelly Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)