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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 000-26770
NOVAVAX, INC.
(Exact name of registrant as specified in its charter)
Delaware22-2816046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
21 Firstfield Road
GaithersburgMD20878
(Address of principal executive offices)(Zip code)
(240) 268-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common Stock, Par Value $0.01 per shareNVAXThe 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 filerxAccelerated Filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x
The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, was 78,503,952 as of October 31, 2022.


NOVAVAX, INC.
TABLE OF CONTENTS
Page No.
Item 1A.
Item 5.
Other Information

i

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
1

NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2022202120222021
Revenue:
Product sales$626,091 $ $1,267,174 $ 
Grants106,273 135,007 313,348 854,390 
Royalties and other2,213 43,837 43,951 69,700 
Total revenue734,577 178,844 1,624,473 924,090 
Expenses:
Cost of sales434,593  720,874  
Research and development304,297 408,195 977,428 1,571,551 
Selling, general, and administrative122,876 77,793 327,028 214,144 
Total expenses861,766 485,988 2,025,330 1,785,695 
Loss from operations(127,189)(307,144)(400,857)(861,605)
Other expense:
Interest expense(4,169)(5,182)(15,279)(15,989)
Other expense(34,783)(4,064)(53,002)(7,267)
Loss before income tax expense(166,141)(316,390)(469,138)(884,861)
Income tax expense2,472 6,041 6,552 12,606 
Net loss$(168,613)$(322,431)$(475,690)$(897,467)
Net loss per share:
Basic and diluted$(2.15)$(4.31)$(6.13)$(12.13)
Weighted average number of common shares outstanding
Basic and diluted78,274 74,745 77,631 73,972 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2022202120222021
Net loss$(168,613)$(322,431)$(475,690)$(897,467)
Other comprehensive loss:
Net unrealized losses on marketable securities available-for-sale, net of reclassifications   (9)
Foreign currency translation adjustment(12,924)(3,309)(22,441)(6,154)
Other comprehensive loss(12,924)(3,309)(22,441)(6,163)
Comprehensive loss$(181,537)$(325,740)$(498,131)$(903,630)
The accompanying notes are an integral part of these financial statements.
2


NOVAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
September 30,
2022
December 31,
2021
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$1,280,581 $1,515,116 
Restricted cash10,785 11,490 
Accounts receivable111,645 454,993 
Inventory82,432 8,872 
Prepaid expenses and other current assets274,522 164,648 
Total current assets1,759,965 2,155,119 
Property and equipment, net255,532 228,696 
Right of use asset, net 108,543 40,123 
Intangible assets, net8,456 4,770 
Goodwill117,535 131,479 
Other non-current assets17,406 16,566 
Total assets$2,267,437 $2,576,753 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable$144,997 $127,050 
Accrued expenses551,069 673,731 
Deferred revenue404,776 1,422,944 
Current portion of finance lease liabilities82,095 130,533 
Convertible notes payable324,525  
Other current liabilities160,499 36,061 
Total current liabilities1,667,961 2,390,319 
Deferred revenue1,035,418 172,528 
Convertible notes payable 323,458 
Non-current finance lease liabilities31,474  
Other non-current liabilities98,569 42,121 
Total liabilities2,833,422 2,928,426 
Commitments and contingencies (Note 14)
Stockholders' equity (deficit):
Common stock, $0.01 par value, 600,000,000 shares authorized at September 30, 2022 and December 31, 2021; and 79,204,509 shares issued and 78,476,814 shares outstanding at September 30, 2022 and 76,433,151 shares issued and 75,841,171 shares outstanding at December 31, 2021
792 764 
Additional paid-in capital3,640,597 3,351,967 
Accumulated deficit(4,093,640)(3,617,950)
Treasury stock, cost basis, 727,695 shares at September 30, 2022 and 591,980 shares at December 31, 2021
(89,940)(85,101)
Accumulated other comprehensive loss(23,794)(1,353)
Total stockholders’ deficit(565,985)(351,673)
Total liabilities and stockholders’ deficit$2,267,437 $2,576,753 
The accompanying notes are an integral part of these financial statements.
3

NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Three and Nine Months Ended September 30, 2022 and 2021
(in thousands, except share information)
(unaudited)

Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Accumulated Other
Comprehensive
Income (Loss)
Total Stockholders'
Equity (Deficit)
SharesAmount
Balance at June 30, 202278,776,234 $788 $3,604,614 $(3,925,027)$(86,455)$(10,870)$(416,950)
Stock-based compensation— — 33,386 — — — 33,386 
Stock issued under incentive programs428,275 4 2,597 — (3,485)— (884)
Foreign currency translation adjustment— — — — — (12,924)(12,924)
Net loss— — — (168,613)— — (168,613)
Balance at September 30, 202279,204,509 $792 $3,640,597 $(4,093,640)$(89,940)$(23,794)$(565,985)
Balance at June 30, 202174,672,351 $747 $3,237,085 $(2,449,235)$(47,205)$4,170 $745,562 
Stock-based compensation— — 45,274 — — — 45,274 
Stock issued under incentive programs1,301,172 13 28,154 — (31,927)— (3,760)
Foreign currency translation adjustment— — — — — (3,309)(3,309)
Net loss— — — (322,431)— — (322,431)
Balance at September 30, 202175,973,523 $760 $3,310,513 $(2,771,666)$(79,132)$861 $461,336 
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Accumulated Other
Comprehensive
Income (Loss)
Total Stockholders'
Equity (Deficit)
SharesAmount
Balance at December 31, 202176,433,151 $764 $3,351,967 $(3,617,950)$(85,101)$(1,353)$(351,673)
Stock-based compensation— — 104,367 — — — 104,367 
Stock issued under incentive programs573,960 6 4,900 — (4,839)— 67 
Issuance of common stock, net of issuance costs of $2,311
2,197,398 22 179,363 — — — 179,385 
Foreign currency translation adjustment— — — — — (22,441)(22,441)
Net loss— — — (475,690)— — (475,690)
Balance at September 30, 202279,204,509 $792 $3,640,597 $(4,093,640)$(89,940)$(23,794)$(565,985)
Balance at December 31, 202071,350,365 $714 $2,535,476 $(1,874,199)$(41,806)$7,024 $627,209 
Stock-based compensation— — 151,457 — — — 151,457 
Stock issued under incentive programs2,044,191 20 58,747 — (37,326)— 21,441 
Issuance of common stock, net of issuance costs of $7,292
2,578,967 26 564,833 — — — 564,859 
Unrealized loss on marketable securities— — — — — (9)(9)
Foreign currency translation adjustment— — — — — (6,154)(6,154)
Net loss— — — (897,467)— — (897,467)
Balance at September 30, 202175,973,523 $760 $3,310,513 $(2,771,666)$(79,132)$861 $461,336 
The accompanying notes are an integral part of these financial statements.




NOVAVAX, INC.
4

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Operating Activities:
Net loss$(475,690)$(897,467)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Depreciation and amortization21,832 8,989 
Non-cash stock-based compensation102,525 151,457 
Provision for excess and obsolete inventory358,075  
Right-of-use assets expensed, net of credits received40,187 17,117 
Other items, net(25,059)2,739 
Changes in operating assets and liabilities:
Inventory(426,466) 
Accounts receivable, prepaid expenses, and other assets171,325 209,221 
Accounts payable, accrued expenses, and other liabilities90,418 180,708 
Deferred revenue(155,268)992,590 
Net cash provided by (used in) operating activities(298,121)665,354 
Investing Activities:
Purchases of property and equipment(66,033)(41,122)
Internal-use software development costs(4,888) 
Purchases of marketable securities (2,167)
Proceeds from maturities and sale of marketable securities 159,807 
Net cash provided by (used in) investing activities(70,921)116,518 
Financing Activities:
Net proceeds from sales of common stock179,385 564,859 
Net proceeds from the exercise of stock-based awards67 21,441 
Finance lease payments(45,904)(63,876)
Net cash provided by financing activities133,548 522,424 
Effect of exchange rate on cash, cash equivalents, and restricted cash257 (6,208)
Net increase (decrease) in cash, cash equivalents, and restricted cash(235,237)1,298,088 
Cash, cash equivalents, and restricted cash at beginning of period1,528,259 648,738 
Cash, cash equivalents, and restricted cash at end of period$1,293,022 $1,946,826 
Supplemental disclosure of non-cash activities:
Right-of-use assets from new lease agreements$118,262 $34,914 
Capital expenditures included in accounts payable and accrued expenses$11,984 $7,884 
Supplemental disclosure of cash flow information:
Cash interest payments$17,260 $17,768 
Cash paid for income taxes$17,843 $6,041 
    
The accompanying notes are an integral part of these financial statements.
5

NOVAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(unaudited)
Note 1 – Organization and Business

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.

As of September 30, 2022, the Company had 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.

The Company commenced commercial shipments of NVX-CoV2373 doses under the name “Novavax COVID-19 Vaccine, Adjuvanted” and the brand name “Nuvaxovid™” in 2022.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the periods presented. Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).
The unaudited consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Accumulated other comprehensive loss included a foreign currency translation loss of $23.8 million and $1.4 million as of September 30, 2022 and December 31, 2021, respectively.
The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Results for this or any interim period are not necessarily indicative of results for any future interim period or for the entire year. The Company operates in one business segment.
Reclassifications
Certain amounts reported in prior periods have been reclassified to conform to current period financial statement presentation. These reclassifications have no material effect on previously reported financial position, cash flows, or results of operations.
6

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

Product sales are associated with the Company’s NVX-CoV2373 supply agreements, sometimes referred to as advance purchase agreements (“APAs”), with various international governments. The Company recognizes revenue from product sales based on the transaction price per dose calculated in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) when control of the product transfers to the customer and customer acceptance has occurred, unless such acceptance provisions are deemed perfunctory. If an APA includes a term that may have the effect of decreasing the price per dose of previously delivered shipments, the Company constrains the price until it is probable that a significant reversal in revenue recognized will not occur.
Cost of Sales
Cost of sales includes cost of raw materials, production, and manufacturing overhead costs associated with the Company’s product sales during the period. Cost of sales also includes adjustments for excess, obsolete, or expired inventory; idle capacity; and losses on firm purchase commitments to the extent the cost cannot be recovered based on estimates about future demand. Cost of sales does not include certain expenses related to raw materials, production, and manufacturing overhead costs that were expensed prior to regulatory authorization as described under the caption “Inventory” below.
Inventory

Inventory is recorded at the lower of cost or net realizable value under the First In, First Out (“FIFO”) methodology, taking into consideration the expiration of the inventory item (see Note 7). The Company determines the cost of raw materials using moving average costs and the cost of semi-finished and finished goods using a standard cost method adjusted on a periodic basis to reflect the deviation in the actual cost from the standard cost estimate. Standard costs consist primarily of the cost of manufacturing goods, including direct materials, direct labor, and the services and products of third-party suppliers. Manufacturing overhead costs are applied to semi-finished and finished goods based on expected production levels. The Company utilizes third-party contract manufacturing organizations (“CMOs”), contract development and manufacturing organizations (“CDMOs”), and other suppliers and service organizations to support the procurement and processing of raw materials, management of inventory, packaging, and the delivery process. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolete, or expired inventory through cost of sales.

Prior to initial regulatory authorization for its product candidates, the Company expenses costs relating to raw materials, production, and manufacturing overhead costs as research and development expenses in the consolidated statements of operations, in the period incurred. Subsequent to initial regulatory authorization for a product candidate, the Company capitalizes the costs of production for a particular supply chain as inventory when the Company determines that it has a present right to the economic benefit associated with the product.
Recent Accounting Pronouncements
Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), with amendments in 2018, 2019, 2020, and 2022. The ASU sets forth a “current expected credit loss” (“CECL”) model that requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions. The ASU is effective for the Company beginning on January 1, 2023. Management is currently evaluating the effect of the guidance and does not expect it to have a material impact on the Company’s consolidated financial statements.
7

Adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplified the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts in an entity’s own equity. Specifically, the new standard removed the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It also removed certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and simplified the diluted earnings per share calculation for convertible instruments. The Company adopted ASU 2020-06 on January 1, 2022 using a modified retrospective approach, which did not have a material impact on the Company’s consolidated financial statements.
Note 3 – Revenue
The Company's accounts receivable included $43.6 million and $419.7 million related to amounts that were billed to customers and $68.0 million and $35.3 million related to amounts which had not yet been billed to customers as of September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022, changes in the Company's accounts receivables and deferred revenue balances were as follows (in thousands):
December 31, 2021AdditionsDeductions September 30, 2022
Contract receivables:
Accounts receivable$454,993 1,519,345 (1,862,693)$111,645 
Contract liabilities:
Deferred revenue(1)
$1,595,472 96,298 
(251,576)(2)
$1,440,194 
(1)    Amount is comprised of $404.8 million and $1.4 billion of current Deferred revenue and $1.0 billion and $172.5 million of non-current Deferred revenue as of September 30, 2022 and December 31, 2021, respectively.
(2)    Deductions from Deferred revenue includes $202.5 million that was realized in Revenue and $49.1 million that was reclassified to Other liabilities.
The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties, was approximately $4 billion as of September 30, 2022. Failure to meet regulatory milestones, timely obtain supportive recommendations from governmental advisory committees, or achieve product volume or delivery timing obligations under the Company’s APA agreements may require the Company to refund portions of upfront payments or result in reduced future payments, which could adversely impact the Company’s ability to realize revenue from its unsatisfied performance obligations. The timing to fulfill performance obligations related to grant agreements will depend on the results of the Company's research and development activities, including clinical trials, and delivery of doses. The timing to fulfill performance obligations related to APAs will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype NVX-CoV2373 vaccine under certain of our APAs. The remaining unfilled performance obligations not related to grant agreements or APAs are expected to be fulfilled in less than 12 months.
8

Grants
The Company recognized grant revenue as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
U.S. government partnership (“OWS”)$104,348 $96,215 $311,423 $699,268 
U.S. Department of Defense (“DoD”)1,925 1,287 1,925 21,472 
Coalition for Epidemic Preparedness Innovations (“CEPI”) 37,505  131,022 
Bill & Melinda Gates Foundation (“BMGF”)
   2,628 
Total grant revenue$106,273 $135,007 $313,348 $854,390 
U.S. Government
The Company’s U.S. government partnership consists of an agreement (the “OWS Agreement”) with Advanced Technology International, the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed (“OWS”). In July 2022, the Company entered into a modification to the OWS Agreement that amended the terms of such agreement to provide for (i) an initial delivery to the U.S. government of approximately 3 million doses of NVX-CoV2373 and (ii) any additional manufacture and delivery to the U.S. government up to an aggregate of 100 million doses of NVX-CoV2373 contemplated by the original OWS Agreement (inclusive of the initial batch of approximately 3 million doses) dependent on U.S. government demand, FDA guidance on strain selection, agreement between the parties on the price of such doses, and available funding. The 3 million initial doses were delivered in July 2022. Additionally, in July 2022, the Company modified its existing agreement with the DoD and delivered 0.2 million doses of NVX-CoV2373 after receipt of EUA approval from the FDA, with delivery of the remaining 9.8 million doses of NVX-CoV2373 contemplated by the original agreement subject to DoD demand and available funding.
CEPI
The Company’s funding agreement with CEPI, under which CEPI has agreed to provide funding of up to $399.5 million to the Company to support the development of NVX-CoV2373, provides up to $257.0 million in grant funding and up to $142.5 million in forgivable no-interest term loans. These loans are only repayable if NVX-CoV2373 manufactured by the CMO network funded by CEPI is sold under the Company’s APA with Gavi, the Vaccine Alliance (“Gavi”), and such sales cover the Company’s costs of manufacturing the vaccine, not including manufacturing costs funded by CEPI. The timing of any loan repayments is currently uncertain given the timing and quantities of future orders under the Company’s APA with Gavi are unclear, as discussed below.

Royalties and Other
During the three and nine months ended September 30, 2022, the Company recognized $1.3 million and $10.5 million, respectively, in revenue related to sales-based royalties. During the three months ended June 30, 2022, the Company recognized a $20.0 million milestone payment upon the sale of NVX-CoV2373 in Japan. During the three and nine months ended September 30, 2021, the Company recognized $39.9 million and $63.4 million, respectively, in revenue related to sales-based royalties. During the three and nine months ended September 30, 2021, the Company did not recognize any revenue related to milestone payments.
9

Advance Purchase Agreements (APAs)
Under the terms of the Company’s supply commitment with Gavi, which includes both Novavax’ APA with Gavi and the supply obligation of its licensed partner, Serum Institute of India Private Limited (“SIIPL”), 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. The Novavax APA contemplates that the Company will manufacture and distribute 350 million doses. Under that agreement with Gavi, the Company received an upfront payment of $350 million from Gavi in 2021 and an additional payment of $350 million in the first quarter of 2022 related to the Company’s achieving WHO Emergency Use Listing. Although Novavax continues to be prepared to deliver the quantities of NVX-CoV2373 doses to Gavi under the terms of the APA, the Company was notified by Gavi of its intent to seek to revise the number and timing of doses of NVX-CoV2373 supplied by Novavax under such agreement. Furthermore, Gavi may seek partial or full recovery of the prior nonrefundable payments it has made to Novavax. The Company’s position is that Gavi has no contractual right to recover prior nonrefundable payments if it fails to order the 350 million doses it committed to order. To date, except for an initial order of approximately 2 million doses, Novavax has not received an order from Gavi and the timing and quantities of future orders to deliver NVX-CoV2373 to the COVAX Facility are unclear.
Under the terms of the Company’s SARS-CoV-2 Vaccine Supply Agreement, originally entered into in October 2020 (the “Original UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland (the “Authority”), the Authority agreed to purchase 60 million doses of NVX-CoV2373. In July 2022, the Company entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (the “Amended and Restated UK Supply Agreement”) with the Authority, under which the Authority agreed to purchase a minimum of 1 million doses and up to an additional 15 million doses of NVX-CoV2373, with the number of additional doses contingent on the Company’s timely achievement of supportive recommendations from the Joint Committee on Vaccination and Immunisation (the “JCVI”). In the event that the Company is unable to achieve the JCVI supportive recommendations, it may have to repay up to $225.0 million related to the upfront payment previously received from the Authority under the Original UK Supply Agreement. As of September 30, 2022, the Company will be required to repay a minimum of $40.0 million related to the upfront payment, which is reflected in Other current liabilities, with the remaining balance of $185.0 million reflected in Deferred revenue. Under the Amended and Restated UK Supply Agreement, the Authority also has the option to purchase up to an additional 44 million doses, in one or more tranches, through 2024.
The Company has an APA with the European Commission (“EC”) acting on behalf of various European Union member states to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the EC to purchase an additional 100 million doses up to a maximum aggregate of 200 million doses in one or more tranches, through 2023. In July and August 2022, the Company was notified by the EC that it was cancelling 5 million doses of its prior commitment originally scheduled for delivery in the first and second quarters of 2022, in accordance with the APA, and reducing the order to 65 million doses. The Company is in the process of finalizing a revised delivery schedule for the remaining 23 million committed doses under the APA that were originally scheduled for delivery during the first and second quarters of 2022.
Note 4 – Collaboration, License, and Supply Agreements
Serum Institute
The Company previously granted SIIPL exclusive and non-exclusive licenses for the development, co-formulation, filling and finishing, registration, and commercialization of NVX-CoV2373. SIIPL agreed to purchase the Company’s Matrix-MTM adjuvant and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373. The Company and SIIPL equally split the revenue from SIIPL’s sale of NVX-CoV2373 in its licensed territory, net of agreed costs. The Company also has a supply agreement with SIIPL and Serum Life Sciences Limited (“SLS”) under which SIIPL and SLS supply the Company with NVX-CoV2373 for commercialization and sale in certain territories, as well as a contract development manufacture agreement with SLS, under which SLS manufactures and supplies finished vaccine product to the Company using antigen drug substance and Matrix-M™ adjuvant supplied by the Company. In May and August 2022, the Company expanded its license and supply arrangements with SIIPL to include its proprietary COVID-19 variant antigen candidate(s), its quadrivalent influenza vaccine candidate, and its CIC vaccine candidate, so that SIIPL can manufacture and commercialize a vaccine targeting COVID-19 variants, including the Omicron subvariants, a quadrivalent influenza vaccine, and CIC vaccine, and supply such vaccines to the Company. In March 2020, the Company granted SIIPL a non-exclusive license for the use of Matrix-M™ adjuvant supplied by the Company to develop, manufacture, and commercialize R21, a malaria candidate developed by the Jenner Institute, University of Oxford.
10

Takeda Pharmaceutical Company Limited
The Company has a collaboration and license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) under which the Company granted Takeda an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in Japan. Under the agreement, Takeda purchases the Company’s Matrix-M™ adjuvant to manufacture NVX-CoV2373 and the Company is entitled to receive payments from Takeda based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of NVX-CoV2373 in the low to middle double-digit range. During the three months ended June 30, 2022, the Company recognized a milestone payment of $20.0 million upon the first sale in Japan.
SK bioscience Co., Ltd.
The Company has a collaboration and license agreement with SK bioscience Co., Ltd. (“SK bioscience”) to manufacture and commercialize NVX-CoV2373 for sale to the governments of South Korea, Thailand, and Vietnam. SK bioscience pays a royalty in the low to middle double-digit range. Additionally, the Company has a manufacturing supply arrangement with SK bioscience under which SK bioscience supplies the Company with the antigen component of NVX-CoV2373 for use in the final drug product globally, including product to be distributed by the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. In July 2022, the Company signed an additional agreement with SK bioscience for the technology transfer of the Company’s proprietary COVID-19 variant antigen materials so that SK bioscience can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants. The companies also signed an agreement to manufacture and supply the Novavax COVID-19 vaccine in a prefilled syringe.
Other Supply Agreements
On September 30, 2022, the Company, FUJIFILM Diosynth Biotechnologies UK Limited (“FDBK”), FUJIFILM Diosynth Biotechnologies Texas, LLC (“FDBT”), and FUJIFILM Diosynth Biotechnologies USA, Inc. (“FDBU” and together with FDBK and FDBT, “Fujifilm”) entered into a Confidential Settlement Agreement and Release (the “Fujifilm Settlement Agreement”) regarding amounts due to Fujifilm in connection with the termination of manufacturing activity at FDBT under the Commercial Supply Agreement (the “CSA”) dated August 20, 2021 and Master Services Agreement dated June 30, 2020 and associated statements of work (the “MSA”) by and between the Company and Fujifilm. The MSA and CSA established the general terms and conditions applicable to Fujifilm’s manufacturing and supply activities related to NVX-CoV2373 under the associated statements of work.
Pursuant to the Fujifilm Settlement Agreement, the Company is responsible for payment of up to $185.0 million (the “Settlement Payment”) to Fujifilm in connection with cancellation of manufacturing activity at FDBT under the CSA, of which (i) $47.8 million, constituting the initial reservation fee under the CSA, was credited against the Settlement Payment on September 30, 2022 and (ii) the remaining balance is to be paid in four equal quarterly installments of $34.3 million each beginning March 31, 2023. As of September 30, 2022, $102.9 million of the remaining payment was reflected in Accrued expenses and $34.3 million was reflected in Other non-current liabilities. Under the Fujifilm Settlement Agreement, Fujifilm is required to use commercially reasonable efforts to mitigate the losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT under the CSA, and the final two quarterly installments will be mitigated by any replacement revenue achieved by Fujifilm between July 1, 2023 and December 31, 2023. The Settlement Payment is less than amounts previously recognized as embedded lease expense and reflected in Research and development expense from FDBT manufacturing activity under the CSA prior to the Fujifilm Settlement Agreement and accordingly, during the three and nine months ended September 30, 2022, the Company recorded a benefit of $98.3 million as Research and development expense (see Note 9).
Except with respect to certain limited activities agreed upon by the parties, the MSA terminated with respect to all activities in FDBU and FDBT on October 21, 2022 and the impact of the termination was determined in accordance with the provisions of the MSA. The terms and conditions of the MSA and CSA will remain in full force and effect with respect to the ongoing activities at FDBK. In addition, the Company and Fujifilm mutually released all claims relating to (i) the cancellation of batches to be manufactured at FDBT under the MSA or CSA, (ii) FDBT facility idle time in 2022, (iii) failure to complete product performance qualification testing of batches manufactured by Fujifilm by December 2021, and (iv) any obligation by Fujifilm to reserve capacity or manufacture batches at FDBT for the benefit of the Company under the MSA or CSA.
The Company continues to assess its manufacturing needs and intends to modify its global manufacturing footprint consistent with its contractual obligations to supply, and anticipated demand for, NVX-CoV2373, and in doing so, recognizes that significant costs may be incurred.
11

Note 5 – Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets that sums to the total of such amounts shown in the statements of cash flows (in thousands):

September 30, 2022December 31, 2021
Cash and cash equivalents$1,280,581 $1,515,116 
Restricted cash, current10,785 11,490 
Restricted cash, non-current(1)
1,656 1,653 
Cash, cash equivalents, and restricted cash$1,293,022 $1,528,259 
(1)Classified as Other non-current assets as of September 30, 2022 and December 31, 2021, on the consolidated balance sheets.
Note 6 – Fair Value Measurements
The following table represents the Company’s fair value hierarchy for its financial assets and liabilities (in thousands):
Fair Value at September 30, 2022Fair Value at December 31, 2021
AssetsLevel 1Level 2Level 3Level 1Level 2Level 3
Money market funds(1)
$365,631 $ $ $361,822 $ $ 
Government-backed securities(1)
 261,000   266,250  
Corporate debt securities(1)
 109,914   790,672  
Agency securities(1)
 42,777     
Total cash equivalents$365,631 $413,691 $ $361,822 $1,056,922 $ 
Liabilities
Convertible notes payable$ $317,044 $ $ $447,509 $ 
(1)All investments are classified as Cash and cash equivalents as of September 30, 2022 and December 31, 2021, on the consolidated balance sheets.
Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature. Pricing of the Company's Notes (see Note 10) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates, and credit spreads.
During the nine months ended September 30, 2022 and 2021, the Company did not have any transfers between levels.
Note 7 – Inventory
Inventory consisted of the following (in thousands):
September 30, 2022December 31, 2021
Raw materials$17,557 $8,872 
Semi-finished goods33,030  
Finished goods31,845  
Total inventory$82,432 $8,872 
Inventory write-downs as a result of excess, obsolescence, expiry, or other reasons, and losses on firm purchase commitments are recorded as a component of cost of sales in our consolidated statements of operations. For the three and nine months ended September 30, 2022, inventory write-downs were $202.4 million and $358.1 million, respectively. For the three and nine months ended September 30, 2022, losses on firm purchase commitments were $46.6 million and $146.2 million, respectively. There were no inventory write-downs or losses on firm purchase commitments during 2021.
12

Note 8 – Intangible Assets and Goodwill
Identifiable Intangible Assets
Purchased intangible assets consisted of the following (in thousands):
September 30, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated 
Amortization
Intangible
Assets, Net
Gross
Carrying
Amount
Accumulated 
Amortization
Intangible
Assets, Net
Finite-lived intangible assets:
Proprietary adjuvant technology$6,911 $(3,069)$3,842 $8,239 $(3,469)$4,770 
Internal-use software(1)
4,888 (274)4,614    
Total identifiable intangible assets$11,799 $(3,343)$8,456 $8,239 $(3,469)$4,770 
(1)As of September 30, 2022, internal-use software included $3.6 million for assets under development.
Amortization expense for the nine months ended September 30, 2022 and 2021 was $0.6 million and $0.3 million, respectively. Estimated amortization expense for existing in-use intangible assets for the remainder of 2022 and for each of the five succeeding years ending December 31 is estimated to be as follows (in thousands):
YearAmount
2022 (remainder)$189 
2023756 
2024740 
2025392 
2026335 
2027335 
Goodwill
The change in the carrying amounts of goodwill for the nine months ended September 30, 2022 was as follows (in thousands):
Amount
Balance at December 31, 2021$131,479 
Currency translation adjustments(13,944)
Balance at September 30, 2022$117,535 
Note 9 - Leases

During the nine months ended September 30, 2022, the Company concluded that changes in facts and circumstances on its CMO and CDMO agreements that had previously been determined to represent embedded lease arrangements resulted in the modification of existing leases and, in accordance with its policy, the Company remeasured and reallocated the remaining consideration in the contracts and reassessed the lease classification as of the effective date of the modification. As a result, during the nine months ended September 30, 2022, the Company recognized a Right-Of-Use (“ROU”) asset and a corresponding long-term operating lease liability of $44.0 million on the remeasurement of its long-term supply agreements using an average incremental borrowing rate of 5%. The Company expensed the ROU asset since it relates to research and development activities for the development of NVX-CoV2373 for which the Company does not have an alternative future use.
13

During the three and nine months ended September 30, 2022, the Company recognized a short-term lease benefit of $46.6 million and expense of $37.3 million, respectively, related to its embedded leases, net of a benefit of $98.3 million related to the Fujifilm Settlement Agreement (see Note 4). During the three and nine months ended September 30, 2022, the Company expensed $24.2 million and $44.0 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement or modification of the lease. During the three and nine months ended September 30, 2021, the Company recognized a short-term lease expense of $111.3 million and $325.5 million, respectively, related to its embedded leases and expensed $4.4 million and $17.1 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement or modification of the lease. During the three and nine months ended September 30, 2022, the Company recognized $0.9 million and $4.3 million of interest expense, respectively, on its finance lease liabilities. During the three and nine months ended September 30, 2021, the Company recognized $1.6 million and $5.6 million of interest expense, respectively, on its finance lease liabilities.
During 2020, the Company entered into a lease agreement for the premises located at 700 Quince Orchard Road, Gaithersburg, Maryland. The lease is for approximately 170,000 square feet of space that the Company intends to use for manufacturing, research and development, and corporate offices. The term of the lease is 15 years with options to extend the lease. The lease provides for an annual base rent of $5.8 million that is subject to future rent increases and obligates the Company to pay building operating costs. During the nine months ended September 30, 2022, the Company obtained the right to direct the use of, and obtain substantially all of the benefit from, certain floors located at the premises and recognized an ROU asset and related lease obligation of $73.2 million as the lease commencement dates for accounting purposes had occurred.
Note 10 – Debt
Convertible Notes
The Company incurred approximately $10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”), which were recorded as a reduction to the Notes on the consolidated balance sheet. The $10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven-year contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method.
Total convertible notes payable consisted of the following (in thousands):
September 30, 2022December 31, 2021
Principal amount of Notes$325,000 $325,000 
Unamortized debt issuance costs(475)(1,542)
Total convertible notes payable(1)
$324,525 $323,458 
(1)    Convertible notes are classified as current liabilities and as non-current liabilities in the consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.
The interest expense incurred in connection with the Notes consisted of the following (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Coupon interest at 3.75%
$3,047 $3,047 $9,141 $9,141 
Amortization of debt issuance costs356 356 1,068 1,068 
Total interest expense on Notes$3,403 $3,403 $10,209 $10,209 
Note 11 – Stockholders' Equity (Deficit)
During the three months ended March 31, 2022, the Company sold 2.2 million of shares of its common stock resulting in net proceeds of approximately $179 million, under its most recent At Market Issuance Sales agreement entered in June 2021 (the “June 2021 Sales Agreement”), which allows it to issue and sell up to $500 million in gross proceeds of shares of its common stock. As of September 30, 2022, the remaining balance under the June 2021 Sales Agreement was approximately $318 million.
14

During the nine months ended September 30, 2021, the Company sold 2.6 million shares of its common stock resulting in net proceeds of approximately $565 million, under its various At Market Issuance Sales agreements.
Note 12 – Stock-Based Compensation
Equity Plans
The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees, and consultants of and advisors to the Company and any present or future subsidiary.
The 2015 Plan authorizes the issuance of up to 14.8 million shares of common stock under equity awards granted under the 2015 Plan, which includes an increase of 2.4 million shares approved for issuance under the 2015 Plan at the Company's 2022 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025. As of September 30, 2022, there were 4.6 million shares available for issuance under the 2015 Plan.
The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.
The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights (“SARs”), and restricted stock units (“RSUs”). In addition, under the 2015 Plan, unrestricted stock, stock units, and performance awards may be granted. Stock options and SARs generally have a maximum term of ten years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company's common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years.
The Company recorded all stock-based compensation expense in the consolidated statements of operations as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Cost of sales$51 $ $51 $ 
Research and development16,107 21,860 52,692 70,429 
General and administrative15,389 23,414 49,782 81,028 
Total stock-based compensation expense$31,547 $45,274 $102,525 $151,457 
Total stock-based compensation capitalized and included in inventory as of September 30, 2022 was $1.8 million. There was no stock-based compensation capitalized and included in inventory as of December 31, 2021.
As of September 30, 2022, there was approximately $189 million of total unrecognized compensation expense related to unvested stock options, SARs, RSUs, and the Company’s Employee Stock Purchase Plan, as amended (“ESPP”). This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of approximately one year. This estimate does not include the impact of other possible stock-based awards that may be made during future periods.
The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and SARs) that would have been received by the holders had all stock option and SAR holders exercised their stock options and SARs on September 30, 2022. This amount is subject to change based on changes to the closing price of the Company's common stock. The aggregate intrinsic value of stock options and SARs exercises and vesting of RSUs for the nine months ended September 30, 2022 and 2021 was approximately $19 million and $381 million, respectively.
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Stock Options and Stock Appreciation Rights
The following is a summary of stock options and SARs activity under the 2015 Plan and 2005 Plan for the nine months ended September 30, 2022:
2015 Plan2005 Plan
Stock
Options
Weighted-Average
Exercise
Price
Stock
Options
Weighted-Average
Exercise
Price
Outstanding at December 31, 20213,635,837 $42.60 68,225 $109.52 
Granted558,181 71.21   
Exercised(132,420)15.75 (3,000)31.10 
Canceled(61,364)88.58 (1,500)121.00 
Outstanding at September 30, 20224,000,234 $46.78 63,725 $112.94 
Shares exercisable at September 30, 20222,739,565 $39.72 63,725 $112.94 
The fair value of stock options granted under the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Weighted average Black-Scholes fair value of stock options granted
$37.66
$203.51
$60.24
$156.86
Risk-free interest rate
3.0%-3.6%
0.6%-0.9%
1.4%-3.6%
0.5%-1.1%
Dividend yield%%%%
Volatility
122.2%-136.4%
126.4%-140.0%
120.5%-136.7%
124.7%-142.0%
Expected term (in years)
4.0-5.3
4.1-6.1
4.0-6.3
4.1-6.1
The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of September 30, 2022 was approximately $9 million and 7.4 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of September 30, 2022 was approximately $5 million and 7.0 years, respectively.
Restricted Stock Units
The following is a summary of RSU activity for the nine months ended September 30, 2022:
Number of
Shares
Per Share
Weighted-
Average
Fair Value
Outstanding and unvested at December 31, 2021819,828 $