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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, 2024
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.)
700 Quince Orchard Road,
Gaithersburg,MD20878
(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 160,184,994 as of October 31, 2024.

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

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,
2024202320242023
Revenue:
Product sales$38,210 $2,231 $140,438 $279,937 
Licensing, royalties, and other46,302 19,833 453,413 23,046 
Grants— 164,922 — 389,380 
Total revenue84,512 186,986 593,851 692,363 
Expenses:
Cost of sales60,619 98,929 166,070 188,792 
Research and development87,164 106,229 286,789 572,805 
Selling, general, and administrative70,747 107,460 258,843 313,709 
Total expenses218,530 312,618 711,702 1,075,306 
Loss from operations
(134,018)(125,632)(117,851)(382,943)
Other income (expense):
Interest expense(4,236)(2,859)(12,490)(10,299)
Other income (expense), net
15,922 (2,982)27,307 26,912 
Loss before income tax expense (benefit)
(122,332)(131,473)(103,034)(366,330)
Income tax expense (benefit) (1,032)(697)3,435 343 
Net loss
$(121,300)$(130,776)$(106,469)$(366,673)
Net loss per share:
Basic and diluted$(0.76)$(1.26)$(0.71)$(3.94)
Weighted average number of common shares outstanding:
Basic and diluted160,049 103,429 149,486 93,046 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
2024202320242023
Net loss
$(121,300)$(130,776)$(106,469)$(366,673)
Other comprehensive income (loss):
Net unrealized gain on available-for-sale marketable securities
393 — 243 — 
Foreign currency translation adjustment13,713 (3,686)633 (5,486)
Other comprehensive income (loss)
14,106 (3,686)876 (5,486)
Comprehensive loss
$(107,194)$(134,462)$(105,593)$(372,159)
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,
2024		December 31,
2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$573,630 $568,505 
Marketable securities335,901 — 
Restricted cash10,547 10,424 
Accounts receivable94,962 297,240 
Inventory8,638 41,696 
Prepaid expenses and other current assets80,002 226,023 
Total current assets1,103,680 1,143,888 
Property and equipment, net285,724 305,771 
Right of use asset, net 165,766 185,218 
Goodwill126,766 127,454 
Other non-current assets30,547 35,159 
Total assets$1,712,483 $1,797,490 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable$57,517 $132,610 
Accrued expenses218,674 394,668 
Deferred revenue613,418 241,310 
Current portion of finance lease liabilities9,675 5,142 
Other current liabilities281,715 861,408 
Total current liabilities1,180,999 1,635,138 
Deferred revenue515,370 622,210 
Convertible notes payable169,265 168,016 
Non-current finance lease liabilities54,368 55,923 
Other non-current liabilities318,917 33,130 
Total liabilities2,238,919 2,514,417 
Commitments and contingencies (Note 14)
Preferred stock, $0.01 par value, 2,000,000 shares authorized at September 30, 2024 and December 31, 2023; no shares issued and outstanding at September 30, 2024 and December 31, 2023
— — 
Stockholders' deficit:
Common stock, $0.01 par value, 600,000,000 shares authorized at September 30, 2024 and December 31, 2023; 161,558,247 shares issued and 160,148,088 shares outstanding at September 30, 2024 and 140,506,093 shares issued and 139,505,770 shares outstanding at December 31, 2023
1,616 1,405 
Additional paid-in capital4,490,630 4,192,164 
Accumulated deficit(4,927,420)(4,820,951)
Treasury stock, cost basis, 1,410,159 shares at September 30, 2024 and 1,000,323 shares at December 31, 2023
(94,860)(92,267)
Accumulated other comprehensive income
3,598 2,722 
Total stockholders’ deficit(526,436)(716,927)
Total liabilities and stockholders’ deficit$1,712,483 $1,797,490 
The accompanying notes are an integral part of these financial statements.
3

NOVAVAX, INC.    
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Three and Nine Months Ended September 30, 2024 and 2023
(in thousands, except share information)
(unaudited)
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Treasury
Stock
Accumulated Other
Comprehensive
Income (Loss)
Total Stockholders'
Deficit
SharesAmount
Balance at June 30, 2024161,267,120 $1,613 $4,477,748 $(4,806,120)$(94,439)$(10,508)$(431,706)
Stock-based compensation— — 12,049 — — — 12,049 
Stock issued under incentive programs291,127 3 833 — (421)— 415 
Unrealized gain on available-for-sale marketable securities
— — — — — 393 393 
Foreign currency translation adjustment— — — — 13,713 13,713 
Net loss
— — — (121,300)— — (121,300)
Balance at September 30, 2024161,558,247 $1,616 $4,490,630 $(4,927,420)$(94,860)$3,598 $(526,436)
Balance at June 30, 202395,183,750 $952 $3,855,916 $(4,511,786)$(91,424)$(8,177)$(754,519)
Stock-based compensation— — 21,254 — — — 21,254 
Stock issued under incentive programs176,329 2 634 — (282)— 354 
Issuance of common stock, net of issuance costs of $3,063
24,281,588 242 188,781 — — — 189,023 
Foreign currency translation adjustment— — — — — (3,686)(3,686)
Net loss
— — — (130,776)— — (130,776)
Balance at September 30, 2023119,641,667 $1,196 $4,066,585 $(4,642,562)$(91,706)$(11,863)$(678,350)

                            
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Treasury
Stock		Accumulated Other
Comprehensive
Income (Loss)
Total Stockholders'
Deficit
SharesAmount
Balance at December 31, 2023140,506,093 $1,405 $4,192,164 $(4,820,951)$(92,267)$2,722 $(716,927)
Stock-based compensation— — 37,704 — — — 37,704 
Stock issued under incentive programs1,958,757 20 4,544 — (2,593)— 1,971 
Issuance of common stock, net of issuance costs of $3,830
19,093,397 191 256,218 — — — 256,409 
Unrealized gain on available-for-sale marketable securities
— — — — — 243 243 
Foreign currency translation adjustment— — — — — 633 633 
Net loss
— — — (106,469)— — (106,469)
Balance at September 30, 2024161,558,247 $1,616 $4,490,630 $(4,927,420)$(94,860)$3,598 $(526,436)
Balance at December 31, 202286,806,554 $868 $3,737,979 $(4,275,889)$(90,659)$(6,377)$(634,078)
Stock-based compensation— — 70,193 — — — 70,193 
Stock issued under incentive programs605,571 6 1,740 — (1,047)— 699 
Issuance of common stock, net of issuance costs of $3,924
32,229,542 322 256,673 — — — 256,995 
Foreign currency translation adjustment— — — — — (5,486)(5,486)
Net loss— — — (366,673)— — (366,673)
Balance at September 30, 2023119,641,667 $1,196 $4,066,585 $(4,642,562)$(91,706)$(11,863)$(678,350)
The accompanying notes are an integral part of these financial statements.


4





NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
Nine Months Ended September 30,
20242023
Operating Activities:
Net loss
$(106,469)$(366,673)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization35,979 30,431 
Non-cash stock-based compensation37,704 69,699 
Provision for excess and obsolete inventory19,913 49,533 
Impairment of long-lived assets5,431 10,081 
Other items, net(3,786)(3,015)
Changes in operating assets and liabilities:
Inventory13,103 (82,542)
Accounts receivable, prepaid expenses, and other assets353,176 (34,418)
Accounts payable, accrued expenses, and other liabilities(343,158)(349,261)
Deferred revenue74,007 138,979 
Net cash provided by (used in) operating activities
85,900 (537,186)
Investing Activities:
Capital expenditures(11,125)(44,932)
Purchases of available-for-sale marketable securities
(441,265)— 
Proceeds from maturities of available-for-sale marketable securities
105,607 — 
Internal-use software(1,262)(4,796)
Net cash used in investing activities(348,045)(49,728)
Financing Activities:
Net proceeds from sales of common stock263,272 256,995 
Net proceeds from the exercise of stock-based awards1,971 699 
Finance lease payments(1,238)(25,026)
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 activities264,005 (95,923)
Effect of exchange rate on cash, cash equivalents, and restricted cash2,917 355 
Net increase (decrease) in cash, cash equivalents, and restricted cash4,777 (682,482)
Cash, cash equivalents, and restricted cash at beginning of period583,810 1,348,845 
Cash, cash equivalents, and restricted cash at end of period$588,587 $666,363 
Supplemental disclosure of non-cash activities:
Right-of-use asset leases, net of tenant improvement allowance on facility leases
$(4,302)$96,492 
Capital expenditures included in accounts payable and accrued expenses$1,607 $2,394 
Internal-use software included in accounts payable and accrued expenses
$320 $167 
Supplemental disclosure of cash flow information:
Cash interest payments, net of amounts capitalized$8,500 $11,751 
Cash paid for income taxes, net of refunds
$641 $128 
    The accompanying notes are an integral part of these financial statements.
5

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(unaudited)
Note 1 – Organization and Business
Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, the “Company”) is a global company focused on driving value via its proven technology platform, which includes a combination of a recombinant protein approach, innovative nanoparticle technology, and patented Matrix-M™ adjuvant, through partnerships and research and development. The Company continues to evolve its operating model to leverage four key drivers of value: a partnership with Sanofi Pasteur Inc. (“Sanofi”) announced in May 2024, a late-stage pipeline focuses on its COVID-19-Influenza Combination (“CIC”) and stand-alone influenza vaccine candidates, leveraging its proven technology platform to drive additional partnerships and deals, and its emerging early-stage pipeline.

In May 2024, Novavax entered into a collaboration and licensing agreement (the “Sanofi CLA”) with Sanofi. The agreement includes a co-exclusive license to co-commercialize Novavax’s COVID-19 vaccine following the end of the 2024-2025 vaccination season, a sole license to Novavax’s COVID-19 vaccine for use in combination with Sanofi’s influenza vaccines, a non-exclusive license to develop and commercialize other vaccine products selected by Sanofi that include the Company's Matrix-MTM adjuvant in vaccine products (See Note 6).
Novavax’s program includes the Company’s prototype COVID-19 vaccine (“NVX-CoV2373,” or “prototype vaccine”), the Company’s XBB COVID-19 vaccine (“NVX-CoV2601”), and the Company’s updated vaccine for the 2024-2025 vaccination season (“NVX-CoV2705” or “updated vaccine” and, collectively with NVX-CoV2373 and NVX-CoV2601, the Company’s “COVID-19 Vaccine” or “COVID-19 Program”). Local regulatory authorities have also specified nomenclature for the labeling of NVX-CoV2373 and NVX-CoV2601 within their territories (e.g., “Novavax COVID-19 Vaccine, Adjuvanted”, “Novavax COVID-19, Adjuvanted (2023-2024 Formula),” respectively, for the U.S., and “Nuvaxovid™” for ex-US territories).
Currently, the Company significantly depends on its supply agreement with Serum Institute of India Pvt. Ltd. (“SII”) and its subsidiary, Serum Life Sciences Limited (“SLS” and together with SII, “Serum”), for co-formulation, filling, and finishing.
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 accompanying unaudited consolidated financial statements 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’ 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 accompanying 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. The aggregate foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency were a $1.2 million loss and a $7.9 million loss, and a $12.2 million loss and $3.9 million gain for the three and nine months ended September 30, 2024 and 2023, respectively, which are reflected in Other income (expense), net.
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, 2023. 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.
6

Liquidity and Going Concern
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 and contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The accompanying unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainty described below.

As of September 30, 2024, the Company had $573.6 million in cash and cash equivalents, $335.9 million in marketable securities, and negative working capital of $77.3 million. During the nine months ended September 30, 2024, the Company recognized net loss of $106.5 million, and had net cash flows provided by operating activities of $85.9 million.

In accordance with Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern, the Company evaluated its ability to continue as a going concern within one year after the date that the accompanying unaudited consolidated financial statements are issued. Based on the Company’s current cash, cash equivalents and marketable securities balances and the Company's current cash flow forecast for the one-year going concern look forward period, the Company has concluded that it expects to have sufficient capital available to fund its operations for the one-year period from the date that these financial statements are issued. As of December 31, 2023, the Company had concluded that there was substantial doubt about its ability to continue as a going concern primarily due to significant uncertainty related to its ability to successfully develop, manufacture, distribute, and market its updated vaccine and execute on certain cost-reduction initiatives as described in Note 15. The Sanofi CLA combined with cost reductions and the settlement of certain liabilities, has alleviated the substantial doubt.
Revenue Recognition, Licensing and Transition Services
The terms of the Company’s third-party licensing agreements may contain multiple performance obligations, including licenses and transition services. The Company evaluates licensing agreements under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) to determine the distinct performance obligations. Prior to recognizing revenue, the Company estimates the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. Total consideration may include nonrefundable upfront license fees, transition service fees, other payments based upon the achievement of specified milestones, and royalty payments based on product sales from licensed products.
For multiple performance obligation arrangements, the Company allocates the transaction price to each distinct performance obligation based on its relative stand-alone selling price. The stand-alone selling price is generally determined for each performance obligation based on the prices charged to customers, discounted cash flows, or using expected cost-plus margin. For stand-alone selling prices determined using discounted cash flows, the Company considers discounted, probability-weighted cash flows related to the performance obligation transferred. In developing such estimates, the Company applies judgment in determining the forecasted revenue, expected margins, and the discount rate. These estimates are subjective and require the Company to make assumptions about future cash flows. Revenue related to performance obligations satisfied at a point in time is recognized when the customer obtains control of the promised asset. For performance obligations recognized over time, the Company recognizes revenue using an input method to measure progress by utilizing costs incurred to-date relative to total expected costs. Under this process, the Company considers the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, and indirect administrative costs. Estimating the total cost at completion of the Company’s performance obligation under a contract is subjective and requires the Company to make assumptions about future activity and cost drivers. Changes in these estimates can occur for a variety of reasons and may impact the timing of revenue recognition on the Company’s contracts. Changes in estimates related to the process are recognized in the period when such changes are made on a cumulative catch-up basis. The Company has not experienced any material adjustments as a result of changes in estimates arising from this process.
Use of Estimates
The preparation of the accompanying unaudited 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 accompanying unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
7

Restructuring
The Company recognizes restructuring charges when such costs are incurred. The Company’s restructuring charges consist of employee severance and other termination benefits related to the reduction of its workforce, the consolidation of facilities, and infrastructure and other costs. Termination benefits are expensed on the date the Company notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. Ongoing benefits are expensed when restructuring activities are probable and the benefit estimable.
See Note 15 for additional information on the severance and employee benefit costs for terminated employees and impairment of assets in connection with the Company’s Restructuring Plan as defined in Note 15.
Recent Accounting Pronouncements
Not Yet Adopted
In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, Disclosure Improvements (“ASU 2023-06”), to clarify or improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB ASC with the SEC's regulations. The ASU is effective for the Company’s annual period ended December 31, 2024 and interim periods thereafter. The Company is currently evaluating ASU 2023-06 to determine its impact on the Company’s consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) which expands disclosures for reportable segments made by public entities and requires more detailed information about expenses within each reportable segment. Entities with a single reportable segment are required to provide on both an interim and annual basis, all segment disclosures required in ASC 280, including the new disclosures for reportable segments under the amendments in ASU 2023-07. The amendments do not change the existing guidance on how a public entity identifies and determines its reportable segments. The ASU is effective for the Company’s annual period ended December 31, 2024 and interim periods thereafter. The Company is currently evaluating ASU 2023-07 to determine its impact on the Company's disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The standard enhances transparency in income tax disclosures by requiring, on an annual basis, certain disaggregated information about a reporting entity’s effective tax rate reconciliation and income taxes paid. The ASU also requires disaggregated disclosure related to pre-tax income (or loss) and income tax expense (or benefit) and eliminates certain disclosures related to the balance of an entity’s unrecognized tax benefit and the cumulative amount of certain temporary differences. The ASU is effective for the Company beginning on January 1, 2025. The Company is currently evaluating ASU 2023-09 to determine its impact on the Company's disclosures.
Note 3 – Marketable Securities
Marketable securities were classified as available-for-sale as of September 30, 2024 and comprised of (in thousands):
September 30, 2024December 31, 2023
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair ValueAmortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Corporate debt securities$335,658 $243 $— $335,901 $— $— $— $— 
Total marketable securities$335,658 $243 $— $335,901 $— $— $— $— 

As of September 30, 2024, investments in marketable securities, comprised of corporate debt securities, were due to mature within one year. Based on the Company’s policy under the expected credit loss model, including an assessment of the investment portfolio as of September 30, 2024, the Company concluded that its marketable securities were not attributable to credit and therefore an allowance for credit losses has not been recorded as of September 30, 2024. As of September 30, 2024, the Company held no securities that were in an unrealized loss position for more than 12 months.

8

Note 4– 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, 2024Fair Value at December 31, 2023
AssetsLevel 1Level 2Level 3Level 1Level 2Level 3
Money market funds(1)
$197,911 $— $— $171,824 $— $— 
Government-backed securities(1)
— 225,000 — — 200,000 — 
Treasury securities(1)
— — — — 45,622 — 
Corporate debt securities(2)
— 460,180 — — — — 
Total cash equivalents and marketable securities
$197,911 $685,180 $— $171,824 $245,622 $— 
Liabilities
5.00% Convertible notes due 2027
$—$221,733$—$—$100,909$—
(1)Classified as cash and cash equivalents as of September 30, 2024 and December 31, 2023, respectively, on the consolidated balance sheets.
(2)Includes $124.2 million classified as Cash and cash equivalents and $335.9 million classified as marketable securities as of September 30, 2024, 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 nine months ended September 30, 2024 and 2023, 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.
9

Note 5 – Revenue
The Company's accounts receivable included $88.8 million and $286.4 million related to amounts that were billed to customers and $6.2 million and $10.8 million related to amounts which had not yet been billed to customers as of September 30, 2024 and December 31, 2023, respectively. During the nine months ended September 30, 2024 and 2023, changes in the Company’s accounts receivables, allowance for credit losses, and deferred revenue balances were as follows (in thousands):
Balance, Beginning of PeriodAdditionsDeductions Balance, End of Period
Accounts receivable:
Nine Months Ended September 30, 2024$304,916 $882,979 $(1,085,258)$102,637 
Nine Months Ended September 30, 202396,210 981,305 (946,182)131,333 
Allowance for credit losses(1):
Nine Months Ended September 30, 2024$(7,675)$— $— $(7,675)
Nine Months Ended September 30, 2023(13,835)— 6,160 (7,675)
Deferred revenue:(2)
Nine Months Ended September 30, 2024$863,520 $363,758 $(98,490)$1,128,788 
Nine Months Ended September 30, 2023549,551 422,766 (171,288)801,029 
(1)    There was no allowance for credit losses recorded during the nine months ended September 30, 2024 or 2023. During the nine months ended September 30, 2023, there was a $6.2 million reversal of a credit loss allowance due to the collection of a previously recognized allowance for credit losses. To estimate the allowance for credit losses, 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.
(2) Deductions from Deferred revenue generally related to the recognition of revenue once performance obligations on a contract with a customer are met. During the nine months ended September 30, 2024, deductions included a $33.5 million reclassification of refundable upfront payments previously included in Deferred revenue to Other current liabilities. During the nine months ended September 30, 2024, additions included a $225.0 million reclassification of an upfront payment from Other current liabilities to Deferred revenue related to the settlement with Gavi as discussed below. During the nine months ended September 30, 2023, deductions included a $112.5 million reclassification of refundable upfront payments previously included in Deferred revenue to Other current liabilities.

As of September 30, 2024, the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties and constrained variable consideration, was $1.3 billion, of which $1.1 billion was included in Deferred revenue. Failure to meet regulatory milestones, obtain timely 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 and other 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 APAs will depend on the 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 the Company’s updated vaccine under certain of the Company’s APAs. The timing to fulfill performance obligations related to the Sanofi CLA will depend on the timing of delivery of Sanofi Transition Services and Sanofi Technology Transfer services and delivery of doses and other materials based on Sanofi demand.
Under an APA with Gavi, the Vaccine Alliance (“Gavi”), entered into in May 2021 (the “Gavi APA”), the Company received upfront payments of $700 million from Gavi (the “Advance Payment Amount”) to be applied against purchases of the Company’s prototype vaccine by certain countries participating in the COVAX Facility. As of December 31, 2023, the remaining Gavi Advance Payment Amount was $696.4 million. In February 2024, the Company entered into a Termination and Settlement Agreement with Gavi (the “Gavi Settlement Agreement”) terminating the Gavi APA, settling the arbitration proceedings, and releasing both parties of all claims arising from, under, or otherwise in connection with the Gavi APA. In February 2024, the claims and counterclaims were dismissed with prejudice. Pursuant to the Gavi Settlement Agreement, the Company is responsible for payment to Gavi of (i) an initial settlement payment of $75 million, which the Company paid in February 2024, and (ii) deferred payments, in equal annual amounts of $80 million payable each calendar year through a
10

deferred payment term ending December 31, 2028. The deferred payments are due in variable quarterly installments and total $400 million during the deferred payment term. Such deferred payments may be reduced through Gavi’s use of an annual vaccine credit equivalent to the unpaid balance of such deferred payments each year, which may be applied to qualifying sales of any of the Company’s vaccines for supply to certain low-income and lower-middle income countries. The Company has the right to price the vaccines offered to such low-income and lower-middle income countries in its discretion, and, when utilized by Gavi, the Company will credit the actual price per vaccine paid against the applicable credit. The Company intends to price vaccines offered via the tender process, consistent with its shared goal with Gavi to provide equitable access to those countries. Also, pursuant to the Gavi Settlement Agreement, the Company granted Gavi an additional credit of up to $225 million that may be applied against qualifying sales of any of the Company’s vaccines for supply to such low-income and lower-middle income countries that exceed the $80 million deferred payment amount in any calendar year during the deferred payment term. In total, the Gavi settlement agreement is comprised of $700 million of potential consideration, consisting of the $75 million initial settlement payment, deferred payments of up to $400 million that may be reduced through annual vaccine credits, and the additional credit of up to $225 million that may be applied for certain qualifying sales.
The Company recorded the $3.6 million difference between the refund liability recorded as of December 31, 2023 of $696.4 million and the $700 million of total consideration under the arrangement as a reduction to revenue during the nine months ended September 30, 2024. As of September 30, 2024, the remaining amounts included on the Company’s consolidated balance sheet were $225 million in non-current Deferred revenue for the additional credit that may be applied against future qualifying sales, $95.0 million in Other current liabilities, and $290.0 million in Other non-current liabilities. In addition, the Company and Gavi entered into a security agreement pursuant to which Novavax granted Gavi a security interest in accounts receivable from SII under the SII R21 Agreement (see Note 6), which will continue for the deferred payment term of the Gavi Settlement Agreement.
Product Sales
Product sales by the Company’s customer’s geographic location was as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
North America
$33,969 $2,231 $29,214 $2,231 
Europe1,167— 91,75359,322
Rest of the world
3,074— 19,471218,384
Total product sales revenue$38,210 $2,231 $140,438 $279,937 
Product sales in the U.S. are primarily made through large pharmaceutical wholesale distributors at the wholesale acquisition cost (“WAC”). Product sales in the U.S. are recorded net of gross-to-net deductions.
As of September 30, 2024, changes in the Company’s gross-to-net deductions balances were as follows (in thousands):
Wholesale Distributor Fees, Discounts, and Chargebacks
Product Returns
Total
Balance as of December 31, 2023
$21,072 $84,616 $105,688 
Amounts charged against product sales(1)
60,092 80,593 140,685 
Credits/deductions
(56,583)(86,937)(143,520)
Balance as of September 30, 2024
$24,581 $78,272 $102,853 
(1)    Amounts charged against product sales include $4.2 million of net adjustments made to prior period product sales, due primarily to $8.1 million of previously estimated product returns, which are no longer eligible for customer credits and therefore were recognized in product revenue during the nine months ended September 30, 2024, offset by increases to other gross-to-net deductions.

As of September 30, 2024 and December 31, 2023, $3.4 million and $2.6 million of gross-to-net deductions were
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included in Accounts receivable, respectively. As of September 30, 2024 and December 31, 2023, $99.5 million and $103.1 million of gross-to-net deductions were included in Accrued expenses, respectively.
The Company has an APA with the Commonwealth of Australia (“Australia”) for the purchase of doses of COVID-19 Vaccine (the “Australia APA”). In March 2024, the Company and Australia agreed to cancel the COVID-19 Vaccine doses previously scheduled for delivery in the fourth quarter of 2023. As a result of the cancellation, the total contract value was reduced by $54.0 million, including $6.0 million of deferred revenue related to the cancelled doses that will be applied as a credit towards future deliveries of doses. Australia is not required to purchase updated vaccine doses until the Company receives authorization from Therapeutic Goods Administration (“TGA”). The Company does not expect approval in time for product delivery in 2024 which could result in a loss or deferral of approximately $240 million of contract value. The Company plans to seek an amendment to the Australia APA which may not be achievable on acceptable terms or at all. As of September 30, 2024, $119.1 million was classified as current Deferred revenue and $14.7 million was classified as non-current Deferred revenue with respect to the Australia APA in the Company’s consolidated balance sheet. If the Company is unable to satisfy its obligations under the amended Australia APA, $92.5 million of deferred revenue may become refundable and approximately $225 million of remaining funds under the contract may no longer be available.
The Company has an APA with His Majesty the King in Right of Canada as represented by the Minister of Public Works and Government Services, as successor in interest to Her Majesty the Queen in Right of Canada, as represented by the Minister of Public Works and Government Services (the “Canadian government”), for the purchase of doses of COVID-19 Vaccine (the “Canada APA”). The Canadian government may terminate the Canada APA, as amended, if the Company fails to receive regulatory approval for its COVID-19 Vaccine using bulk antigen produced at Biologics Manufacturing Centre (“BMC”) Inc. on or before December 31, 2024. The Company does not expect to receive regulatory approval of its COVID-19 Vaccine using bulk antigen produced at BMC on or before December 31, 2024. Therefore, the Company plans to seek an amendment to the Canada APA to address possible alternatives, which may not be achievable on acceptable terms or at all. As of September 30, 2024, $452.1 million was classified as current Deferred revenue and $136.1 million was classified as non-current Deferred revenue with respect to the Canadian APA in the Company’s consolidated balance sheet. If the Canadian government terminates the Canada APA, $28.0 million of the deferred revenue would become refundable and approximately $224 million of the contract value related to future deliverables would no longer be available.

In July 2024, the Pharmaceutical Management Agency (“Pharmac”), a New Zealand Crown entity, provided notice of its termination of its APA (the “New Zealand APA”). Pharmac has requested a refund of certain advanced payments, and the Company is in discussion with Pharmac regarding whether a refund of the advanced payments is appropriate under the New Zealand APA. As of September 30, 2024, $31.3 million was reclassified from current Deferred revenue to Other current liabilities in the Company’s consolidated balance sheet. Approximately $125 million of the contract value related to future deliverables may no longer be available if the New Zealand APA is terminated. The Company responded to Pharmac in September 2024 indicating it does not believe Pharmac has the right to unilaterally terminate the contract or receive a refund of any part of the remaining upfront payment.

Licensing, Royalties, and Other
Licensing, royalties, and other includes licensing payments, transition services revenue, and technology transfer revenue from the Sanofi CLA; royalty milestone payments; sales-based royalties; and Matrix-M™ adjuvant sales.
During the three and nine months ended September 30, 2024, respectively, the Company recognized $9.9 million and $400.1 million in revenue related to license fees and sales-based royalties and $2.3 million and $11.9 million in revenue related to Matrix-M™ adjuvant sales, respectively. During the three and nine months ended September 30, 2024, the Company recognized $32.7 million and $39.4 million of transition services revenue and technology transfer revenue, respectively.
During the three and nine months ended September 30, 2023, the Company recognized $13.8 million and $17.0 million in revenue related to Matrix-M™ adjuvant sales. During the three and nine months ended September 30, 2023, the Company recognized $6.0 million in revenue related related to sales-based royalties.
Grants
The Company’s U.S. government agreement consisted 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 together with the Project Agreement the “USG Agreement”). As of December 31, 2023, the Company recognized the full $1.8 billion funding in revenue.
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Note 6 – Collaboration, License, and Supply Agreements
As of September 30, 2024, the Company’s material collaborations, license and supply agreements were as follows:
Serum
The Company previously granted SII exclusive and non-exclusive licenses for the development, co-formulation, filling and finishing, registration, and commercialization of its prototype vaccine, NVX-CoV2601, its updated vaccine, and its CIC vaccine candidate. SII agreed to purchase the Company's Matrix-M™ adjuvant and the Company granted SII a non-exclusive license to manufacture the antigen drug substance component of the Company’s COVID-19 Vaccine in SII’s licensed territory solely for use in the manufacture of COVID-19 Vaccine. The Company and SII equally split the revenue from SII’s sale of COVID-19 Vaccine in its licensed territory, net of agreed costs. In May 2024, the Company and SLS entered into a supply agreement (the “SLS Supply Agreement”) under which SLS agreed to supply the Company with antigen drug substance and finished COVID-19 Vaccine doses. The SLS Supply Agreement includes the general terms and conditions of supply orders between the Company and SLS. The Company and SLS execute firm purchase orders, which include specific quantities to be delivered under the SLS Supply Agreement. The Company agreed to supply SLS with all Matrix-M™ adjuvant needed to manufacture finished COVID-19 Vaccine doses. In March 2020, the Company entered into an agreement with SII that granted SII a non-exclusive license for the use of Matrix-M™ adjuvant supplied by the Company to develop, manufacture, and commercialize R21/Matrix-M™ adjuvant (“SII R21 Agreement”), a malaria vaccine created by the Jenner Institute, University of Oxford (“R21/Matrix-M™”). In December 2023, R21/Matrix-M™ received prequalification by the World Health Organization (“WHO”). Under the SII R21 Agreement, SII purchases the Company's Matrix-M™ adjuvant for use in development activities at cost and for commercial purposes at a tiered commercial supply price, and pays a royalty in the single-to low- double-digit range based on vaccine sales for a period of 15 years after the first commercial sale of the vaccine 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 the Company’s COVID-19 Vaccine in Japan. Under the agreement, Takeda purchases Matrix-M™ adjuvant from the Company to manufacture doses of COVID-19 Vaccine, and the Company is entitled to receive milestone and sales-based royalty 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 COVID-19 Vaccine. 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 its prototype vaccine. In February 2023, MHLW canceled the remainder of doses under its agreement with Takeda. As a result, it is uncertain whether the Company will receive future sales-based royalty payments from Takeda under the terms and conditions of their current collaboration and licensing agreement.
Sanofi
In May 2024, the Company entered into the Sanofi CLA under which the Company granted and Sanofi received the following:

i)    A co-exclusive license to commercialize the Company’s current stand-alone COVID-19 Vaccine, including the Company’s prototype vaccine and updated vaccines, that address seasonal variants throughout the world (the “COVID-19 Vaccine Products”);
ii)    A sole license to develop and commercialize combination products containing a potential combination of the Company’s COVID-19 Vaccine and Sanofi’s seasonal influenza vaccine (“COVID-19 and influenza Combination Products” or “CIC Products”);
iii)    A non-exclusive license to develop and commercialize combination products containing both the Company’s COVID-19 Vaccine and one or more non-influenza vaccines (“Other Combination Products” and together with the COVID-19 Vaccine Products, CIC Products, and Other Combination Products, “Licensed COVID-19 Products”); and
iv)    A non-exclusive license to develop and commercialize other vaccine products selected by Sanofi that include the Company’s Matrix-M™ adjuvant (as described below, the “Adjuvant Products”).
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The Company is also responsible for performing services related to the technology transfer of its manufacturing process for the COVID-19 Vaccine Products and Matrix-M™ components to Sanofi. Until the successful completion of such transfer, the Company will supply Sanofi with both COVID-19 Vaccine Products and Matrix-M™ intermediary components for Sanofi’s use and is eligible for reimbursement of such costs from Sanofi. In addition, the Company is responsible for certain research and development and medical affairs services related to the COVID-19 Vaccine.
Under the Sanofi CLA, the Company will continue to commercialize its updated vaccine. Beginning in 2025 and continuing during the term of the Sanofi CLA, Sanofi and the Company will commercialize the COVID-19 Vaccine Products worldwide in accordance with a commercialization plan agreed by the Company and Sanofi, under which the Company will continue to supply its existing APA customers and strategic partners, including Takeda and SII. Upon completion of the existing APAs, the Company and Sanofi will jointly agree on commercialization activities of each party in each jurisdiction.
Pursuant to the Sanofi CLA, the Company received a non-refundable upfront payment of $500 million in the second quarter of 2024. In addition, the Company is eligible to receive development, technology transfer, launch, and sales milestone payments totaling up to $700 million in the aggregate with respect to the COVID-19 Vaccine Products and royalty payments on Sanofi’s sales of such licensed products. Milestone payments are comprised of a payment of $175 million upon the approval of the marketing authorization for a COVID-19 Vaccine Product in a pre-filled syringe from the U.S. Food and Drug Administration (“U.S. FDA”), $25 million upon the transfer of such approval to Sanofi, $25 million upon the transfer of EMA approval of a COVID-19 Vaccine Product in a pre-filled syringe to Sanofi, $50 million upon database lock of an existing Phase 2/3 clinical trial (identifier 2019nCoV-503), $75 million upon the completion of the technology transfer of the Company’s manufacturing process for the COVID-19 Vaccine Products to Sanofi, and up to $350 million in CIC Product-related development and launch milestones.
The Company is also eligible to receive development, launch, and sales milestone payments of up to $200 million for each of the first four Adjuvant Products and $210 million for each Adjuvant Product thereafter, and royalty payments on Sanofi’s sales of all such licensed products. In addition, a portion of the technology transfer costs and research and development costs incurred by the Company will be reimbursed by Sanofi in accordance with agreed upon plans and budgets.
The Company assessed whether the Sanofi CLA fell within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) based on whether the arrangement involved joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. The Company determined that the Sanofi CLA did not fall within the scope of ASC 808, as the Company does not share in the significant financial risks of Sanofi's development or commercialization activities. The Company then analyzed the arrangement pursuant to the provisions of ASC 606 and determined that the arrangement represents a contract with a customer and is therefore within the scope of ASC 606.
The Company identified the following performance obligations in the Sanofi CLA and determined that they were within the scope of ASC 606: delivery of (i) the licenses described above (the COVID-19 Vaccine license, CIC Products license, Other Combination Product license, and Adjuvant Products license) (collectively the “Sanofi CLA Licenses’), (ii) research and development transition services that support further regulatory approval and development of the COVID-19 Vaccine, referred to as the “Sanofi Transition Services”, and (iii) technology transfer of the existing manufacturing process for the COVID-19 Vaccine Products and Matrix-M™ adjuvant, referred to as the “Sanofi Technology Transfer.”
The Company also evaluated whether certain options outlined in the Sanofi Agreement represented material rights that would give rise to a performance obligation and concluded that none of the options convey a material right to Sanofi and therefore are not considered separate performance obligations within the Sanofi CLA.
The Sanofi CLA Licenses performance obligations are considered functional intellectual property and distinct from other promises under the contract as Sanofi can benefit from the licenses on their own or together with other readily available resources. Also, the Sanofi Transition Services provide a distinct benefit to Sanofi within the context of the contract, separate from the licenses, as the services could be provided by Sanofi or another third party without the Company’s assistance. The Sanofi Technology Transfer obligation is distinct as Sanofi can benefit from the Sanofi CLA Licenses transferred by the Company at the inception of the agreement with other readily available resources. Therefore, each represents a separate performance obligation within the contract with a customer under the scope of ASC 606 at contract inception.
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The Company determined the initial transaction price at inception of the Sanofi CLA to be $620.2 million, consisting of (i) fixed consideration (the $500 million upfront nonrefundable fee), (ii) and $120.2 million of variable consideration attributed to a $50.0 million clinical milestone and $70.2 million of estimated cost reimbursement related to Sanofi Transition Services and Sanofi Technology Transfer. Since the clinical milestone allocated to Sanofi Transition Services is entirely within the Company’s control, and the cost reimbursement variable consideration allocated to Sanofi Transition Services and Sanofi Technology Transfer would be recognized as revenue only as the costs are incurred, the Company determined it is not probable that a significant reversal of cumulative revenue would occur. The Company utilized the expected value method to determine the amount of these payments. The Company excluded certain regulatory and technology transfer milestones from the transaction price that were determined to be inherently uncertain of achievement and are highly susceptible to factors outside of the Company’s control. Sales-based royalties and launch milestones are related to the license of the intellectual property rights and the Company will recognize revenue for these in the period when subsequent sales are made or sale-based milestones are achieved pursuant to the sales-based royalty exception under ASC 606. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.
The Company allocated the fixed consideration (i.e., the $500 million nonrefundable upfront fee) to the performance obligations in the Sanofi CLA based on each performance obligation’s relative stand-alone selling price, or SSP, as follows:
•$389.6 million for the upfront transfer of the licenses;
•$106.9 million for Sanofi Transition Services; and
•$3.5 million for Sanofi Technology Transfer.
The SSP for the licenses were determined using an approach that considered discounted, probability-weighted cash flows related to the license transferred. In developing such estimates, the Company applied judgment in determining the forecasted revenues expected margins, and the discount rate. The SSP for the ongoing Sanofi Transition Services and Sanofi Technology Transfer were based on estimates of the associated effort and cost of these services, adjusted for a reasonable gross profit margin that would be expected to be realized under similar contracts.
The Company recognized revenue related to the licenses at a point in time upon transfer of the rights and control of the license to Sanofi during the second quarter 2024. The Sanofi Transition Services and Sanofi Technology Transfer are recognized in revenue over time using an input method to measure progress by utilizing costs incurred to-date relative to total expected costs. Revenue recognized related to Sanofi Transition Services and Sanofi Technology Transfer for the three and nine month period ended September 30, 2024 was $32.7 million and $39.4 million, respectively. The Company’s consolidated balance sheet as of September 30, 2024 includes a deferred revenue balance of $70.0 million ($29.8 million included in Deferred revenue, current portion and $40.2 million included in Deferred revenue, non-current portion) related to Sanofi Transition Services and Sanofi Technology Transfer.
The Company recognized an asset for $35.0 million of direct costs incurred to obtain the Sanofi CLA. These costs are amortized to expense over the expected period of the benefit in a manner that is consistent with the transfer of the related goods and services in the Sanofi CLA. The Company recognized $0.9 million and $28.0 million of amortization expense related to the asset in Selling, general, and administrative expense for the three and nine months ended September 30, 2024, respectively.
In May 2024, the Company also entered into the Subscription Agreement, pursuant to which the Company sold and issued to Sanofi, in a private placement, 6.9 million shares of the Company’s common stock, at a price of $10.00 per share for aggregate gross proceeds to the Company of $68.8 million. The opening price of the Company’s common stock on the date of the sale approximated $10.00 per share and therefore all gross proceeds were allocated to stockholders’ deficit.
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Bill & Melinda Gates Medical Research Institute
In May 2023, the Company entered into a three-year agreement with the Bill & Melinda Gates Medical Research Institute to provide the Company’s Matrix-M™ adjuvant for use in preclinical vaccine research.
Other Supply Agreements
In March 2024, 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 “Settlement Agreement”) to resolve disputes regarding amounts that Fujifilm claimed were due under a prior Confidential Settlement Agreement and Release effective September 30, 2022 (the “CSAR”) by and between the Company and Fujifilm.
Under the CSAR, the Company agreed to pay up to $185.0 million to Fujifilm in connection with the cancellation of manufacturing activity at FDBT. The final two quarterly installments due to Fujifilm in 2023 under the CSAR, totaling $68.6 million, were subject to Fujifilm’s obligation to use commercially reasonable efforts to mitigate losses associated with the vacant manufacturing capacity caused by the termination of manufacturing activities at FDBT. In October 2023, the Company sent Fujifilm a notice of breach and refused to pay the final two installments based on its contention that Fujifilm had not used commercially reasonable efforts to mitigate losses and should have offset some portion of the final two payments. In October 2023, Fujifilm filed a demand for arbitration with Judicial Arbitration and Mediation Services (“JAMS”) seeking payment of the full amount (the “Fujifilm Arbitration”).
Pursuant to the Settlement Agreement, in March 2024, the Company paid $42.0 million to Fujifilm, the parties agreed to a mutual release of claims arising from, under or otherwise in connection with the CSAR, and Fujifilm agreed to dismiss the Fujifilm Arbitration. This payment is less than amounts previously accrued for and reflected in Research and development expense, and accordingly, the Company recorded a benefit of $26.6 million as Research and development expense during the nine months ended September 30, 2024 upon the execution of the Settlement Agreement.
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, its COVID-19 Program, and in doing so, recognizes that significant costs may be incurred.
Note 7 – 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 consolidated statements of cash flows (in thousands):
September 30, 2024December 31, 2023
Cash and cash equivalents$573,630 $568,505 
Restricted cash, current10,547 10,424 
Restricted cash, non-current(1)
4,410 4,881 
Cash, cash equivalents, and restricted cash$588,587 $583,810 
(1)Classified as Other non-current assets as of September 30, 2024 and December 31, 2023, on the consolidated balance sheets.
Note 8 – Inventory
Inventory consisted of the following (in thousands):
September 30, 2024December 31, 2023
Raw materials$1,603 $6,614 
Semi-finished goods5,405 7,392 
Finished goods1,630 27,690 
Total inventory$8,638 $41,696 
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Inventory write-downs as a result of excess, obsolescence, expiry, or other reasons, and losses on firm purchase commitments, offset by recoveries of such commitments, are recorded as a component of cost of sales in the Company’s consolidated statements of operations. For the three and nine months ended September 30, 2024, inventory write-downs were $1.4 million and $19.9 million, respectively, and losses on firm purchase commitments were $4.8 million and $6.5 million, respectively. For the three and nine months ended September 30, 2024, the Company recorded recoveries on firm purchase commitments of $0.7 million related primarily to negotiated reductions to previously recognized firm purchase commitments. Also, for the three and nine months ended September 30, 2024, the Company recorded an impairment charge of $3.8 million in Cost of sales related to an embedded lease agreement with a CMO for production capacity in excess of production needs. For the three and nine months ended September 30, 2023, inventory write-downs were $18.1 million and $49.6 million, respectively, and losses on firm purchase commitments were $63.5 million and $71.9 million. In addition, for the three and nine months ended September 30, 2023, the Company recorded recoveries on firm purchase commitments of $21.5 million and $40.3 million, respectively, related primarily to negotiated reductions to previously recognized firm purchase commitments.
Note 9 – Goodwill
The Company has one reporting unit, which has a negative carrying amount as of September 30, 2024 and December 31, 2023. The change in the carrying amounts of goodwill for the nine months ended September 30, 2024 was as follows (in thousands):
Amount
Balance at December 31, 2023$127,454 
Currency translation adjustments(688)
Balance at September 30, 2024$126,766 
Note 10 – Long-Term Debt
Total convertible notes payable consisted of the following (in thousands):
September 30, 2024December 31, 2023
5.00% Convertible notes due 2027
$175,250 $175,250 
Unamortized debt issuance costs(5,985)(7,234)
Total convertible notes payable
$169,265 $168,016 
The effective interest rate of the 2027 Convertible notes is 6.2%. During the nine months ended September 30, 2023, the Company repaid the outstanding principal amount of $325.0 million on its 3.75% Convertible notes due in 2023, together with accrued but unpaid interest on the maturity date.
The interest expense incurred in connection with the convertible notes payable consisted of the following (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Coupon interest $2,192 $2,191 $6,576 $7,588 
Amortization of debt issuance costs416 395 1,248 1,295 
Total interest expense on convertible notes payable$2,608 $2,586 $7,824 $8,883 
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Note 11 – Stockholders’ Deficit
In August 2023, the Company entered into an At Market Issuance Sales Agreement (the “August 2023 Sales Agreement”), which allows it to issue and sell up to $500 million in gross proceeds of shares of its common stock, and terminated its then-existing At Market Issuance Sales agreement entered in June 2021 (the “June 2021 Sales Agreement”). During the nine months ended September 30, 2024, the Company sold 12.2 million shares of its common stock under its August 2023 Sales Agreement resulting in net proceeds of approximately $188 million. There were no sales recorded under the August 2023 Sales Agreement during the three months ended September 30, 2024. As of September 30, 2024, the remaining balance available under the August 2023 Sales Agreement was approximately $51 million.
During the nine months ended September 30, 2023, the Company sold 25.7 million shares of its common stock under its June 2021 and August 2023 Sales Agreement, resulting in net proceeds of approximately $211 million. During the three months ended September 30, 2023, the Company sold 17.8 million shares of its common stock under its August 2023 Sales Agreement, resulting in net proceeds of approximately $143 million.
In May 2024, the Company also entered into the Subscription Agreement, pursuant to which the Company sold and issued to Sanofi, in a private placement, 6.9 million shares of the Company’s common stock, par value $0.01 per share at a price of $10.00 per share, for aggregate gross proceeds to the Company of $68.8 million.
In August 2023, the Company entered into a Securities Subscription Agreement with SK bioscience Co., Ltd. (“SK”), pursuant to which the Company agreed to sell and issue to SK 6.5 million shares of the Company’s common stock at a price of $13.00 per share (the “SK Shares”) in a private placement (the “Private Placement”) for aggregate gross proceeds to the Company of approximately $84.5 million. The Company recognized the SK Shares at the settlement date fair value of $46.5 million. The closing of the Private Placement occurred on August 10, 2023.
Note 12 – Stock-Based Compensation
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 grants under the 2023 Inducement Plan. As of September 30, 2024, there were 0.2 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 27.5 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 April 18, 2034. As of September 30, 2024, there were 10.7 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.
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The Company recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Cost of sales$942 $767 $2,640 $2,283 
Research and development5,166 10,022 16,848 33,826 
Selling, general, and administrative5,941 9,971 18,216 33,590 
Total stock-based compensation expense$12,049 $20,760 $37,704 $69,699 
During the three and nine months ended September 30, 2024 there was no stock-based compensation expense capitalized into inventory. During the three and nine months ended September 30, 2023, total stock-based compensation capitalized in inventory was $0.5 million.
As of September 30, 2024, there was approximately $55 million of total unrecognized compensation expense related to unvested stock options, SARs, RSUs, and the Company’s Employee Stock Purchase Plan (“ESPP”). This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of approximately one year and will be allocated between cost of sales, research and development, and general and administrative expenses accordingly. 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, 2024. 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, 2024 and 2023 was approximately $10 million and $3 million, respectively.
Stock Options and Stock Appreciation Rights
The following is a summary of stock options and SARs activity under the 2023 Inducement Plan, 2015 Plan, and 2005 Plan for the nine months ended September 30, 2024:
2023 Inducement Plan2015 Plan2005 Plan
Stock
Options		Weighted-Average
Exercise
Price		Stock
Options		Weighted-Average
Exercise
Price		Stock
Options		Weighted-Average
Exercise
Price
Outstanding at December 31, 2023422,800 $10.67 4,787,042 $38.10 58,275 $119.79 
Granted— — 703,777 7.02 — — 
Exercised— — (379,082)7.83 — — 
Canceled— — (1,388,350)45.07 (57,981)119.80 
Outstanding at September 30, 2024422,800 $10.67 3,723,387 $32.70 294 $118.40 
Shares exercisable at September 30, 2024162,636 $10.84 2,304,516 $43.54 294 $118.40 
The fair value of stock options granted under the 2023 Inducement Plan and the 2015 Plan was estimated at the date of
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grant using the Black-Scholes option-pricing model with the following assumptions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Weighted average Black-Scholes fair value of stock options granted$—$7.84
$5.86
$7.27
Risk-free interest rate—%
4.3%-4.4%
4.3%
3.5%-4.4%
Dividend yield—%—%—%—%
Volatility—%
128.7%-130.3%
114.3%-121.8%
120.4%-140.3%
Expected term (in years)—
3.9-5.1
3.9-6.3
3.9-6.3
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 September 30, 2024 was $11.6 million and 7.1 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 September 30, 2024 was $3.7 million and 6.0 years, respectively.
Restricted Stock Units
The following is a summary of RSU activity for the nine months ended September 30, 2024:
2023 Inducement Plan2015 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, 2023363,990 $10.66 3,714,870 $19.43 
Granted— — 4,507,556 5.67 
Vested(121,331)10.66 (990,190)27.70 
Forfeited— — (1,146,527)13.95 
Outstanding and unvested at September 30, 2024242,659 $10.66 6,085,709 $8.92 
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 2.2 million shares of common stock to be purchased, and the aggregate number of shares will continue to increase 5% on January 1 of each year up to a maximum of 3.5 million shares. The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15% of their compensation, at 85% of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate). As of September 30, 2024, there were 1.0 million shares available for issuance under the ESPP.
Note 13 – Income Taxes
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. Significant pieces of objective evidence evaluated by the Company were the cumulative loss incurred over the three-year period ended September 30, 2024 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 September 30, 2024, 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.

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During the three months ended September 30, 2024 and 2023, the Company recognized $1.3 million and $0.7 million of federal, state, and foreign income tax benefit, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $3.1 million and $0.3 million of federal, state, and foreign income tax expense, respectively. During the three and nine months ended September 30, 2024, the company recognized $0.3 million of foreign withholding tax expense. During the three and nine months ended September 30, 2023, the company did not recognize any foreign withholding tax expense.
Note 14 – Commitments and Contingencies
Legal Matters
Stockholder Litigation
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”). The parties ultimately negotiated a settlement, which the Maryland Court approved on May 23, 2024. The Maryland Court closed the Sinnathurai Action on May 24, 2024. Upon the Maryland Court’s final approval, the Company relieved the $47 million estimated settlement liability within Accrued expenses and the $47 million estimated insurance recovery within Prepaid expenses and other current assets on the consolidated balance sheet.

After the Sinnathurai Action was filed, eight 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. C-15-CV-21-000618 (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., No. 2022-0770-NAC (the “Mesa Action”), (vii) Sean Acosta v. Stanley C. Erck, et al., No. 2022-1133-NAC (the “Acosta Action”), and (viii) Jared Needelman v. Stanley C. Erck, et al., No. C-15-CV-23-001550 (the “Needelman 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 Needleman Action was also filed in the Circuit Court for Montgomery County, Maryland. 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.
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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. Defendants filed their reply brief in further support of their motion to dismiss on May 11, 2023. On August 21, 2023, the court entered an order granting in part and denying in part the motion to dismiss. On September 5, 2023, the Company filed an Answer to the consolidated amended complaint. On September 6, 2023, the court entered an order granting the individual defendants an extension of time to file their answer until November 6, 2023. On October 6, 2023, the Board of Directors of the Company formed a Special Litigation Committee (“SLC”) with full and exclusive power and authority of the Board to, among other things, investigate, review, and analyze the facts and circumstances surrounding the claims asserted in the pending derivative actions, including the claims that remain following the court’s order on the motion to dismiss in the Second Consolidated Derivative Action. On November 7, 2023, the court entered an order granting the parties’ request to stay the Second Consolidated Derivative Action for up to six months from the date of entry of the order, and, on April 15, 2024, the court entered a further order extending the stay until June 6, 2024. On June 7, 2024, the court entered another order extending the stay until August 5, 2024. On August 19, 2024, the court entered another order extending the stay until November 4, 2024, to allow the SLC and the parties to continue then-ongoing mediation efforts. On November 1, 2024, the parties notified the court that a settlement in principle had been reached and requested the stay to be extended until the definitive settlement agreement is filed. On November 4, 2024, the Maryland Court ordered the parties to file the settlement agreement or a joint status report by November 18, 2024.
The Kirst Action was filed on December 28, 2021, and the defendants immediately removed the case to the Maryland Court. On July 21, 2022, the Maryland Court issued a memorandum opinion and order remanding the Kirst Action to state court. 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 the parties’ stipulated stay of 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, following the ruling on the motion to dismiss the Sinnathurai Action, the Delaware Court entered an order granting the Mesa Action parties’ request to set a briefing schedule in connection with a motion to stay by defendants. On February 28, 2023, the court granted the defendants’ motion and stayed the Mesa Action pending the entry of a final, non-appealable judgment in the Second Consolidated Derivative Action. On August 31, 2023, the Mesa plaintiffs filed a motion to lift the stay in the Mesa Action. On October 6, 2023, the Company filed an opposition to plaintiff’s motion to lift the stay. Plaintiff filed his reply on October 17, 2023. On December 27, 2023, the parties filed a letter informing the Court that the Second Consolidated Derivative Action had been stayed for a period of six months and asked the Court to stay further proceedings in the Mesa Action until expiration of that stay.
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. On October 13, 2023, the parties filed, and the Delaware Court entered, a stipulated order providing that (i) if the Delaware Court declines to lift the stay in the Mesa Action, the Acosta Action will also remain stayed, and (ii) if the Delaware Court lifts the stay in the Mesa Action, the stay in the Acosta Action will also be lifted.
On April 17, 2023, the Needelman Action was filed. On July 12, 2023, the parties filed a stipulation and proposed order to stay the Needelman Action pending the Maryland Court’s decision on the motion to dismiss in the Second Consolidated Derivative Action. The court entered that order on July 17, 2023.
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On November 30, 2023, the court entered an order consolidating the Kirst and Needelman Actions. On December 14, 2023, the parties filed a stipulation (i) extending the plaintiffs’ deadline to file a consolidated complaint until January 29, 2024, and (ii) otherwise staying all other proceedings in the case (including the defendants’ deadline to respond to the consolidated complaint) until February 12, 2024. On May 3, 2024, the plaintiffs filed a consolidated complaint. On May 14, 2024, the parties filed a stipulation staying the action until June 6, 2024. On July 12, 2024, the court entered an order staying the action until August 5, 2024. On September 24, 2024, the court entered another order staying the action until November 4, 2024. On November 4, 2024, the parties filed a stipulation requesting a status conference with the court and further requesting that the action remain stayed until such status conference takes place.
The financial impact of the above derivative claims is not reasonably estimable.
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 does 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 15 – Restructuring
In May 2023, the Company announced a global restructuring and cost reduction plan (the “2023 Restructuring Plan”), which includes a more focused investment in its COVID-19 Vaccine, reduction to its pipeline spending, the continued rationalization of its manufacturing network, a reduction to the Company’s global workforce, as well as the consolidation of facilities and infrastructure. In January 2024, the Company announced further reductions to its global workforce, which supplemented the 2023 Restructuring Plan, jointly referred to as the “Restructuring Plan.”
The Company recorded the following restructuring charge related to the Restructuring Plan in the consolidated statements of operations (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Severance and employee benefit costs$4,245 $— $9,765 $4,503 
Impairment of assets— — 1,669 10,081 
Total Restructuring charge (1)
$4,245 $— $11,434 $14,584 
(1)    Restructuring charges of $0.4 million and $3.8 million are included in Research and development and Selling, general, and administrative expenses, respectively, in the Consolidated Statements of Operations for the three months ended September 30, 2024. Restructuring charges of $0.5 million, $2.3 million and $8.6 million are included in Cost of sales, Research and development and Selling, general, and administrative expenses, respectively, in the Consolidated Statements of Operations for the nine months ended September 30, 2024. Restructuring charges of $0.5 million, $2.3 million and $11.5 million are included in Cost of sales, Research and development and Selling, general, and administrative expenses, respectively, in the Consolidated Statements of Operations for the nine months ended September 30, 2023.
Severance and employee benefit costs
Employees affected by the reduction in force under the Restructuring Plan are entitled to receive severance payments and certain termination benefits. The Company recorded a severance and termination benefit cost in full for employees who were notified of their termination during the reporting period and had no requirements for future service. The Company paid a total of $8.2 million and $4.3 million for the severance and employee benefit costs during the nine months ended September 30, 2024 and September 30, 2023, respectively, and had a remaining liability of $1.6 million as of September 30, 2024. The Company had no remaining liability as of December 31, 2023.
Impairment of assets
In connection with the Restructuring Plan, the Company evaluated its long-lived assets for impairment including certain leased laboratory and office spaces located in Gaithersburg, Maryland. The Company performed an impairment evaluation for the applicable long-lived assets, which is subject to judgment and actual results may vary from the estimates, resulting in potential future adjustments to amounts recorded. During the nine months ended September 30, 2024, the Company recorded an impairment charge of $1.7 million related to the impairment of capitalized internal-use software. During the nine months ended September 30, 2023, the Company recorded an impairment charge of $10.1 million related to the impairment of
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long-lived assets, including $5.9 million related to ROU assets for facility leases. The Company did not recognize any impairment of assets related restructuring charges during the three months ended September 30, 2024 and 2023.
Note 16 – Subsequent Events
On October 16, 2024, Novavax disclosed that the U.S. FDA had placed a clinical hold on Novavax’s Investigational New Drug Application for its COVID-19-Influenza Combination and stand-alone influenza vaccine candidates. On November 11, 2024, Novavax announced that the U.S. FDA has lifted the previously disclosed clinical hold for Novavax’s COVID-19-Influenza Combination and stand-alone influenza vaccine candidates.

In November 2024, the Company and The Secretary of State for Health and Social Care, acting as part of the Crown, through the UK Health Security Agency (the “Authority”), entered into a Termination and Settlement Agreement (the “Settlement Agreement”) and a Letter of Amendment to the Settlement Agreement (the “Settlement Agreement Amendment”), relating to the Amended and Restated SARS-COV-2 Vaccine Supply Agreement effective July 1, 2022 (the “Amended and Restated Supply Agreement”) by and between the Company and the UK Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the Crown, settling the disputes regarding the Amended and Restated Supply Agreement and releasing both parties of all claims arising out of or connected with the Amended and Restated Supply Agreement.

Under the terms of the Settlement Agreement, the Authority and the Company agreed to terminate the Amended and Restated Supply Agreement and to fully settle the outstanding amount under dispute related to upfront payment of $112.5 million, which is reflected in Other current liabilities on the consolidated balance sheet, previously received by the Company from the Authority under the Amended and Restated Supply Agreement. Pursuant to the Settlement Agreement, the Company agreed to pay a refund of $123.8 million (the “Settlement Payment”) to the Authority in equal quarterly installments of $10.3 million over a three year period, ending in June 2027. The Settlement Payment amount includes a $11.3 million provision for interest over the period and may be avoided if the Company chooses to accelerate payments. Under the terms of the Settlement Agreement Amendment, the Authority and the Company agreed to the date of payment for the first quarterly installment to be November 30, 2024.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Any statements in the discussion below and elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) about expectations, beliefs, plans, objectives, assumptions, or future events or performance of Novavax, Inc. (“Novavax,” together with its wholly owned subsidiaries, the “Company,” “we,” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements about our capabilities, goals, expectations regarding future revenue and expense levels, and capital raising activities; our operating plans and prospects, including our ability to continue as a going concern through one year from the date of our unaudited financial statements for the period ended September 30, 2024 are issued; our global restructuring and cost reduction plan (“Restructuring Plan”), which includes a more focused investment in our COVID-19 program (which currently includes our prototype COVID-19 vaccine ("NVX-CoV2373” or “prototype vaccine”), our XBB COVID-19 vaccine (“NVX-CoV2601”) and our updated vaccine for the 2024-2025 vaccination season (“NVX-CoV2705,” or “updated vaccine” and, collectively with NVX-CoV2373 and NVX-CoV2601, our “COVID-19 Vaccine” or “COVID-19 Program”), local regulatory authorities have also specified nomenclature for the labeling of NVX-CoV2373 and NVX-CoV2601 within their territories (e.g., “Novavax COVID-19 Vaccine, Adjuvanted”, “Novavax COVID-19, Adjuvanted (2023-2024 Formula),” respectively, for the U.S., and “Nuvaxovid™” for ex-US territories)); our cash flow forecast and projected revenue, including potential royalties and milestones pursuant to our collaboration and license agreement (the “Sanofi CLA”) with Sanofi Pasteur Inc. (“Sanofi”); potential market sizes and demand for our products and product candidates; the efficacy, safety, and intended utilization of our products and product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the development of our preclinical product candidates; our expectations related to enrollment in our clinical trials; the conduct, timing, and potential results from clinical trials and other preclinical studies; plans for and potential timing of regulatory filings; our expectation of manufacturing capacity, timing, production, distribution, and delivery for our COVID-19 Vaccine by us and our partners; our expectations with respect to the anticipated ongoing development and commercialization or licensure of the COVID-19 Vaccine; our expectations with respect to the anticipated ongoing development of COVID-19 variant strain-containing monovalent or bivalent formulations, including the Phase 2b/3 Hummingbird™ trial, and our CIC vaccine candidate and our stand-alone influenza vaccine candidate including partnership efforts for our CIC vaccine candidate and stand-alone influenza vaccine candidate to advance towards a Biologics License Application ("BLA") filing and commercialization; efforts to expand the COVID-19 Vaccine label worldwide as a booster, and to various age groups and geographic locations; the expected timing, content, and outcomes of regulatory actions; funding under our advance purchase agreements (“APAs”) and supply agreements and amendments to, termination of, discussion regarding, or legal disputes relating to any such agreement; our available cash resources and usage and the availability of financing generally; plans regarding partnering activities and business development initiatives; our plans regarding APA amendments; and other matters referenced herein. Generally, forward-looking statements can be identified through the use of words or phrases such as “believe,” “may,” “could,” “will,” “would,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “should,” “would,” “aim,” or “assume,” the negative of these terms, or other comparable terminology, although not all forward-looking statements contain these words.
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, our ability to successfully and timely manufacture, market, distribute, or deliver our COVID-19 Vaccine and the impact of our not having received a BLA from the U.S. Food and Drug Administration (“U.S. FDA”) for the 2024-2025 vaccination season; challenges related to our partnership with Sanofi and in pursuing additional partnership opportunities; challenges satisfying, alone or together with partners, various safety, efficacy, and product characterization requirements, including those related to process qualification, assay validation, and stability testing, necessary to satisfy applicable regulatory authorities; challenges or delays in conducting clinical trials or studies for our product candidates; challenges or delays in obtaining regulatory authorization for our product candidates, including for future COVID-19 variant strain changes, our COVID-19-Influenza (“CIC”) vaccine candidate, our stand-alone influenza vaccine candidate or other product candidates; manufacturing, distribution or export delays or challenges; our substantial dependence on Serum Institute of India Pvt. Ltd. (“SII”) and Serum Life Sciences Limited (“SLS” and together with SII, “Serum”) for co-formulation and filling our COVID-19 Vaccine and the impact of any delays or disruptions in their operations; difficulty obtaining scarce raw materials and supplies, including for our proprietary adjuvant; resource constraints, including human capital and manufacturing capacity, constraints on our ability to pursue planned regulatory pathways, alone or with partners, in multiple jurisdictions simultaneously, leading to staggering of regulatory filings, and potential regulatory actions; challenges in implementing the Restructuring Plan; our ability to timely deliver doses; challenges in obtaining commercial adoption and market acceptance of our COVID-19 Vaccine or any COVID-19 variant strain containing formulation, or our CIC vaccine candidates, stand-alone influenza vaccine candidates or other candidates; challenges meeting contractual requirements under
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agreements with multiple commercial, governmental, and other entities including requirements to deliver doses that may require us to refund portions of upfront and other payments previously received or result in reduced future payments pursuant to such agreements; challenges related to the seasonality of vaccinations against COVID-19; challenges related to the demand for vaccinations against COVID-19 or influenza; challenges in identifying and successfully pursuing innovation expansion opportunities; our expectation as to expenses and cash needs may prove not to be correct for reasons such as changes in plans or actual events being different than our assumptions and other risks and uncertainties identified in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 and this Quarterly Report on Form 10-Q, 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 our COVID-19 Vaccine 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.
Overview
We are a global company focused on driving value via our proven technology platform (which includes a combination of a recombinant protein approach, innovative nanoparticle technology, and patented Matrix-M™ adjuvant) through partnerships and research and development. We continue to evolve our operating model to leverage four key drivers of value: a partnership with Sanofi announced in May 2024, a late-stage pipeline focuses on our CIC and standalone influenza vaccine candidates, leveraging our Matrix-M technology, and a new early-stage pipeline.

Our proprietary recombinant technology platform harnesses the power and speed of genetic engineering to efficiently produce highly immunogenic nanoparticle vaccines designed to address global health needs.
Our vaccine candidates are nanostructures of conformationally correct recombinant proteins that mimic those found on pathogens. This technology enables the immune system to recognize target proteins and develop protective immune responses. 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 and manufactured our updated vaccine for the 2024-2025 vaccination season for use in individuals aged 12 and older. Our updated vaccine received Emergency Use Authorization (“EUA”) from the U.S. FDA in August 2024, Marketing Authorization in the European Union (“EU”) in September 2024 and approval from the Taiwan Food and Drug Administration in October 2024.

In the U.S., we were notified by the U.S. FDA that our BLA for our prototype vaccine and for NVX-CoV2601 was accepted for review with a Prescription Drug User Fee Act (“PDUFA”) date of April 2025.

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In May 2024, we entered into the Sanofi CLA with Sanofi, to co-commercialize our COVID-19 Vaccine, including future updated versions that address seasonal COVID-19 variants. We will continue commercialization of our updated vaccine for the 2024-2025 vaccination season. Beginning in 2025 and continuing during the term of the Sanofi CLA, we and Sanofi will commercialize the COVID-19 Vaccine worldwide in accordance with a commercialization plan agreed by us and Sanofi, under which we will continue to supply its existing APA customers and strategic partners, including Takeda and SII. Upon completion of the existing APAs, we and Sanofi will jointly agree on commercialization activities of each party in each jurisdiction. Additionally, Sanofi has the right to develop novel influenza-COVID-19 combination vaccines utilizing our COVID-19 Vaccine and Sanofi’s seasonal influenza vaccine, combination products containing our COVID-19 Vaccine and one or more non-influenza vaccines, and multiple new vaccines utilizing our Matrix-MTM adjuvant. We are eligible to receive royalties and milestones associated with the ongoing sales of our COVID-19 Vaccine and Sanofi’s influenza-COVID-19 combination vaccine and any other combination vaccines Sanofi may develop, as well as ongoing product royalties for vaccines developed with our Matrix-MTM adjuvant. This partnership provides the opportunity for us to focus more on research and development and pipeline expansion. We discuss this agreement in further detail in Note 6 to our accompanying unaudited consolidated financial statements.
Additionally, our near-term focus is on developing a CIC vaccine candidate, as well as a stand-alone influenza vaccine candidate. We intend to begin enrolling our Phase 3 immunogenicity trial as soon as possible. We intend to explore opportunities to engage in strategic partnerships to advance the candidates to a BLA filing and commercialization. Furthermore, we provide our Matrix-M™ adjuvant for collaborations, including in R21/Matrix-M™ adjuvant malaria vaccine, which is authorized in several countries, as well as other preclinical vaccine research with our Matrix-M™ adjuvant, including through a partnership with the Bill & Melinda Gates Medical Research Institute.

We intend to focus our organization to align our investments and activities with our top priorities of prioritizing the successful transition to our new partnership with Sanofi, executing our Phase 3 programs for the CIC and stand-alone influenza vaccine candidates, and delivering our updated vaccine. To maximize our opportunities and mitigate the significant risks and uncertainties of the COVID-19 market, we have progressed our cost restructuring measures to reduce spend, extend our cash runway, and operate efficiently to seek the best position for us to deliver longer-term growth. We discuss these cost restructuring strategies in greater detail in Note 15 to our accompanying unaudited consolidated financial statements.
Technology Overview
We believe our recombinant nanoparticle vaccine technology and our proprietary Matrix-M™ adjuvant are well suited for the development and commercialization of vaccine candidates targeting areas both within and beyond the infectious disease space.

Recombinant Nanoparticle Vaccine Technology
Once a target of interest has been identified, the genetic sequence encoding an antigen is selected for 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 protein-based antigens that are properly folded and modified, which can be critical for functional, protective immunity. 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 enhancing antigen presentation in local lymph nodes. This in turn activates APCs, T-cell and B-cell populations, and plasma cells, which promote the production of high affinity antibodies, an immune boosting response. This potent mechanism of action enables a lower dose of antigen to achieve the desired immune response, thereby contributing to increased vaccine supply and manufacturing capacity. These immune-boosting and dose-sparing capabilities contribute to the adjuvant’s highly unique profile.

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 SII for commercialization, and in December
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2023, received prequalification by the World Health Organization (“WHO”). In July 2024, first commercial doses of the R21/Matrix-M™ adjuvant malaria vaccine were administered to children in Cote d’Ivoire and South Sudan. Additionally, in May 2023, we entered into a three-year agreement with the Bill & Melinda Gates Medical Research Institute to provide our Matrix-M™ adjuvant for use in preclinical vaccine research. In June 2023, we signed a material transfer agreement with SK bioscience Co., Ltd. (“SK”) for use of our Matrix-M™ adjuvant in preclinical vaccine experiments for shingles, influenza, and pan-COVID-19. Our adjuvant technology is also being used by commercial partners as a key component in veterinary vaccines against equine influenza and Strangles, as well as the manufacture of black-widow anti-venom. In May 2024, pursuant to the Sanofi CLA, Sanofi received a non-exclusive license to develop and commercialize other vaccine products that include our Matrix-M™ adjuvant.

COVID-19 Vaccine Regulatory and Licensure

For our updated vaccine for the 2024-2025 vaccination season, in August 2024, we received EUA from the U.S. FDA for active immunization to prevent COVID-19 in individuals aged 12 and older. Our updated vaccine is included in the recommendations issued by the U.S. Centers for Disease Control and Prevention in June 2024.

In October 2024, we were granted Marketing Authorization by the European Commission for our updated vaccine for use in individuals aged 12 and older for the prevention of COVID-19 in the EU. This decision followed the positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency (“EMA”).

Additionally, in October 2024, we received approval by the Taiwan Food and Drug Administration for our updated vaccine for use in individuals aged 12 and older.

We are working to continue to expand our label for primary and re-vaccination in 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.

Product Pipeline
Our clinical pipeline encompasses vaccine candidates for infectious diseases. Our COVID-19 vaccine, partnered with Sanofi, is our most advanced product. We will continue to commercialize our JN.1 COVID vaccine through the end of the 2024-2025 vaccination season. Beyond our COVID-19 vaccine, our clinical pipeline includes a CIC vaccine candidate and a stand-alone influenza vaccine candidate. Additionally, we intend to develop an early-stage pipeline based on our proven technology platform, moving forward with pandemic influenza and respiratory syncytial virus (“RSV”) combinations. Beyond our own pipeline, our Matrix-M™ adjuvant is being used for collaboration in R21/Matrix-M™ adjuvant malaria vaccine as well as, licensing rights to Sanofi for development of vaccines using our Matrix-M™ adjuvant or in combination with our existing COVID-19 product.

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Pipeline (2024.11.08).jpg
(1)     Authorized in select geographies under trade names Novavax COVID-19 Vaccine, Adjuvanted; Covovax™; and Nuvaxovid™, and authorized in the U.S. under trade name, Novavax COVID-19 Vaccine, Adjuvanted (2024-2025 Formula); Ongoing post-authorization Phase 3 strain change trial.
(2)     Commercialized by SII; Granted prequalification by the WHO and distributed by UNICEF to endemic countries in Africa.

Coronavirus Vaccine Clinical Development
We continue efforts to expand our COVID-19 vaccine label within the adolescent and pediatric indications. Additionally, we continue to evaluate vaccine safety, immunogenicity, and effectiveness through ongoing clinical trials and collaborative evidence-generating real-world studies.
Phase 3 Strain-Change and Re-vaccination Studies
In October 2024, we initiated and fully enrolled Study 315 to evaluate safety and immunogenicity of a single dose of the JN.1 subvariant vaccine NVX-CoV2705 in previously vaccinated adults. Topline data is expected in the first quarter of 2025 and is expected to support regulatory submissions in the U.S. and other territories for this and future variant strain formulations.

In July 2024, we locked the database for 338 participants aged 18 and older in Part 2 of the Study 313, which will evaluate the immunogenicity of a single dose of the XBB.1.5 subvariant vaccine NVX-CoV2601 in previously unvaccinated individuals. Data from Study 313 are intended to support BLA supplements and similar regulatory submissions in other territories for future variant strain formulations.
Phase 2b/3 Pediatric Hummingbird™ Study
In August 2023, we announced topline results from our Phase 2b/3 Hummingbird™ trial that met its primary endpoints in children aged 6 through 11 years demonstrating both tolerability and immunologic responses. This ongoing trial is evaluating the safety, effectiveness (immunogenicity), and efficacy of two doses of our prototype vaccine (NVX-CoV2373), followed by a booster 6 months after the primary vaccination series. The trial completed enrollment in September 2023 and includes three age de-escalation cohorts of 1,200 children each. In previous consultations with the U.S. FDA, the filing strategy included filing a supplemental BLA for children in these age cohorts once the initial BLA is approved. We are in discussion with the U.S. FDA regarding additional immunogenicity studies in light of the progressive increase in the number of children with baseline COVID-19 natural immunity during the enrollment period, which began in August 2022.
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COVID-Influenza Combination and Stand-alone Influenza Program
In October 2024, the U.S. FDA placed a clinical hold on the Investigational New Drug (“IND”) for our CIC and stand-alone influenza vaccine candidates. The U.S. FDA’s clinical hold resulted from a spontaneous report of a serious adverse event in a participant who received the CIC vaccine in a Phase 2 trial that completed in 2023. The U.S. FDA had requested additional information on this event, initially reported as motor neuropathy. The additional information included a change in the event term to amyotrophic lateral sclerosis, a condition that is not known to be immune-mediated or associated with vaccination, which in this event was assessed as not related to vaccination. In November 2024, the U.S. FDA removed the clinical hold on the IND for our CIC and stand-alone influenza vaccine candidates following the determination that we satisfactorily addressed all clinical hold issues. The information provided to the FDA supported our assessment that the serious adverse event was not related to our vaccine. We intend to begin enrolling our Phase 3 immunogenicity trial as soon as possible.

We continue to invest in development of our pipeline that uses our recombinant nanoparticle technology platform and Matrix-M adjuvant. We continue to believe these assets are key value drivers and intend to partner these assets towards a BLA filing. In addition, they may also be attractive from a pandemic preparedness perspective, and similar performance in terms of comparative immunogenicity may be expected for influenza pandemic strains.

High-dose COVID-19 Vaccine Study
In August 2024, we locked the database for a Phase 2 trial to evaluate our high-dose COVID-19 vaccine for annual vaccination in 994 adults ages 50 years and older. The trial measured immunogenicity levels of 5 micrograms of NVX-CoV2373 and of 5 micrograms, 35 micrograms, and 50 micrograms of NVX-CoV2601 matched with different levels of Matrix-MTM adjuvant. Analysis of the complete dataset is ongoing to determine the utility of pursuing a high dose formulation.
R21/Matrix-M™ Adjuvant Malaria Vaccine
R21/Matrix-M™ adjuvant malaria vaccine, formulated with our Matrix-M™ adjuvant is developed by our partner, the Jenner Institute, University of Oxford, and manufactured by SII. We have an agreement with SII related to its manufacture of R21/Matrix-M™ adjuvant malaria vaccine under which SII purchases our Matrix-M™ adjuvant for use in development activities at cost and for commercial purposes at a tiered commercial supply price, and pays a royalty in the single- to low-double digit range based on vaccine sales for a period of 15 years after the first commercial sale of the vaccine in each country.
In December 2023, the WHO announced it prequalified the R21/Matrix-MTM adjuvant malaria vaccine to prevent malaria disease in children caused by the P. falciparum parasite in endemic areas. In July 2024, first commercial doses of R21/Matrix-M™ adjuvant malaria vaccine have been administered to children in Cote d’Ivoire and South Sudan. As part of the WHO malaria program, at their discretion, the vaccine is expected to be included in countries such as Central African Republic, Chad, Democratic Republic of Congo, Mozambique, Nigeria and Uganda.

Business Highlights
Successful Execution of Sanofi Partnership
•Advanced preparation for Sanofi to assume lead commercial responsibility of Nuvaxovid™ COVID-19 vaccine for 2025-2026 vaccination season in the U.S., Europe and select major markets not currently subject to our APAs or existing partnership agreements.

•On track for our pediatric clinical trial database lock for the first cohort in the fourth quarter of 2024, achievement triggers a $50 million milestone payment.

Drive Incremental Value from our Proven Technology Platform

•In November 2024, the U.S. FDA removed the clinical hold on our IND application for our CIC and stand-alone influenza vaccine candidates. We are working to initiate the Phase 3 immunogenicity clinical trial for CIC and stand-alone influenza candidates as soon as possible.

•Signed a Matrix-M™ adjuvant related agreement with a leading pharmaceutical company to enable exploration of our technology for the potential advancement of their pipeline candidates.

•Outlined guiding principles of new Research & Development (“R&D”) strategy based on its proven technology platform and announced the appointment of Ruxandra Draghia-Akli, MD, PhD as Executive Vice President and Head
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of R&D.

•Continued to advance pandemic influenza and RSV pre-clinical programs towards IND readiness, with a focus on RSV-combination options.

Continue Evolution of our Company and Reduce Operating Expenses

•On track with cost structure improvements, including an approximate 26% reduction in combined R&D and Selling, General and Administrative expenses in the third quarter of 2024 compared to the same period for 2023.

Deliver an Updated COVID-19 Vaccine for the 2024-2025 Vaccination Season

U.S. Market:

•Received EUA from the U.S. FDA in individuals aged 12 and older.

•Entered the market with an improved product presentation and broader access - Nuvaxovid™ available in pre-filled syringe presentation in over 30,000 locations across major pharmacy retailers and regional grocers in the U.S.

•Our COVID-19 vaccine BLA PDUFA with an action date of April 2025 and updated to include both JN.1 variant and pre-filled syringe presentation. Achievement of BLA approval triggers a $175 million milestone payment from Sanofi.

Global Markets:

•Received global authorizations including in the European Union, Canada, and Taiwan.

Sales of Common Stock
In August 2023, we entered into an At Market Issuance Sales Agreement (the “August 2023 Sales Agreement”), which allows us to issue and sell up to $500 million in gross proceeds of shares of our common stock, and terminated our then-existing At Market Issuance Sales agreement entered into in June 2021 (the “June 2021 Sales Agreement”). During the nine months ended September 30, 2024, we sold 12.2 million shares of our common stock under the August 2023 Sales Agreement, resulting in net proceeds of approximately $188 million. There were no sales recorded under the August 2023 Sales Agreement during the three months ended September 30, 2024. As of September 30, 2024, the remaining balance available under the August 2023 Sales Agreement was approximately $51 million.
During the nine months ended September 30, 2023, we sold 25.7 million shares of our common stock under our June 2021 Sales Agreement and August 2023 Sales Agreement resulting in net proceeds of approximately $211 million. During the three months ended September 30, 2023, we sold 17.8 million shares of our common stock under our August 2023 Sales Agreement resulting in net proceeds of approximately $143 million.
In May 2024, we also entered into a securities subscription agreement (the “Subscription Agreement”) with Sanofi, pursuant to which we sold and issued to Sanofi, in a private placement, 6.9 million shares of our common stock at a price of $10.00 per share for aggregate gross proceeds to us of $68.8 million.
In August 2023, we entered into a Securities Subscription Agreement with SK, pursuant to which the we agreed to sell and issue to SK 6.5 million shares of our common stock at a price of $13.00 per share (the “SK Shares”) in a private placement (the “Private Placement”) for aggregate gross proceeds of approximately $84.5 million. We recognized the SK Shares at the settlement date fair value of $46.5 million. The closing of the Private Placement occurred on August 10, 2023.
Critical Accounting Policies and Use of Estimates
The discussion and analysis of our financial condition and results of operations are based upon our accompanying unaudited financial statements and the unaudited 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, 2023, as filed with the SEC and are updated below to incorporate revenue recognition from licensing and transition services
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included in Licensing, royalties and other in our accompanying unaudited consolidated financial statements.
Revenue Recognition, Licensing and Transition Services
The terms of licensing agreements may contain multiple performance obligations, which may include licenses and transition services. We evaluate licensing agreements under ASC 606, Revenue from Contracts with Customers (“ASC 606”), to determine the distinct performance obligations. Prior to recognizing revenue, we estimate the transaction price, including variable consideration that is subject to a constraint. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. Total consideration may include nonrefundable upfront license fees, transition service fees, other payments based upon the achievement of specified milestones, and royalty payments based on product sales from licensed products.
For multiple distinct performance obligation arrangements, we allocate the transaction price to each distinct performance obligation based on its relative stand-alone selling price. The stand-alone selling price is generally determined for each performance obligation based on the prices charged to customers, discounted cash flows, or using expected cost-plus margin. For stand-alone selling prices determined using discounted cash flows, we consider discounted, probability-weighted cash flows related to the performance obligation transferred. In developing such estimates, we apply judgment in determining the forecasted revenues expected margins, and the discount rate. These estimates are subjective and require us any to make assumptions about future cash flows. Revenue related to performance obligations satisfied at a point in time is recognized when the customer obtains control of the promised asset. For performance obligations recognized over time, we recognize revenue using an input method to measure progress by utilizing costs incurred to-date relative to total expected costs. Under this process, we consider the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs, and other identified risks. Estimating the total cost at completion of our performance obligation under a contract is subjective and requires us to make assumptions about future activity and cost drivers. Changes in these estimates can occur for a variety of reasons and may impact the timing of revenue recognition on our contracts. Changes in estimates related to the process are recognized in the period when such changes are made on a cumulative catch-up basis. We have not experienced any material adjustments as a result of changes in estimates arising from this process.
Recent Accounting Pronouncements Not Yet Adopted
See “Note 2―Summary of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (Unaudited) (under the caption “Recent Accounting Pronouncements”).
Results of Operations
The following is a discussion of the historical financial condition and results of our operations that should be read in conjunction with the unaudited consolidated financial statements and notes set forth in this Quarterly Report.
Three Months Ended September 30, 2024 and 2023
Revenue
Three Months Ended September 30,
20242023Change
Revenue (in thousands):
Product sales$38,210 $2,231 $35,979 
Licensing, royalties, and other46,302 19,833 26,469 
Grants
— 164,922 (164,922)
Total revenue$84,512 $186,986 $(102,474)
Revenue for the three months ended September 30, 2024 was $84.5 million as compared to $187.0 million for the same period in 2023, a decrease of $102.5 million. Revenue for the three months ended September 30, 2024 was primarily comprised of revenue from product sales of COVID-19 Vaccine and revenue from transition services and technology transfer under the Sanofi Collaboration and Licensing Agreement (“Sanofi CLA”). Revenue for the three months ended September 30, 2023 was primarily comprised of services performed under our U.S. government agreement with Advanced Technology
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International (“USG Agreement”), 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 decrease in revenue is primarily due to a decrease in revenue under the USG Agreement during the three months ended September 30, 2024 because we recognized the full contract funding in revenue by the end of 2023, partially offset by an increase in the quantity of dose sales of COVID-19 Vaccine and licensing, royalties, and other revenue from the Sanofi CLA.
Product sales
Product sales for the three months ended September 30, 2024 were $38.2 million as compared to $2.2 million during the three months ended September 30, 2023. Our product sales related to revenue from commercial sales of COVID-19 Vaccine, which commenced in 2022.
The geographic distribution of product sales was as follows:
Three Months Ended September 30,
20242023Change
North America
$33,969 $2,231 $31,738 
Europe1,167 — 1,167 
Rest of the world
3,074 — 3,074 
Total product sales
$38,210 $2,231 $35,979 
Licensing, royalties, and other
Licensing, royalties, and other includes licensing payments, transition services and technology transfer revenue under the Sanofi CLA; royalty milestone payments; sales-based royalties; and Matrix-M™ adjuvant sales. Licensing, royalties, and other revenue during the three months ended September 30, 2024 was $46.3 million as compared to $19.8 million during the same period in 2023, an increase of $26.5 million. The increase was primarily due to $32.7 million of revenue from transition services and technology transfer under the Sanofi CLA, partially offset by a decrease of Matrix-M™ adjuvant sales and sales-based royalties.
Grants
We did not have any Grant revenue during the three months ended September 30, 2024, as compared to $164.9 million during the same period in 2023, a decrease of $164.9 million. Grant revenue for the three months ended September 30, 2023 was comprised of revenue for services performed under our USG Agreement. As of December 31, 2023, we had recognized the full contract funding under the USG Agreement in revenue.
Expenses
Three Months Ended September 30,
20242023Change
Expenses (in thousands):
Cost of sales$60,619 $98,929 $(38,310)
Research and development 87,164 106,229 (19,065)
Selling, general, and administrative70,747 107,460 (36,713)
Total expenses$218,530 $312,618 $(94,088)
Cost of Sales
Cost of sales was $60.6 million for the three months ended September 30, 2024, including expenses of $6.2 million related to excess, obsolete, or expired inventory and losses on certain firm purchase commitments, $3.8 million ROU asset impairment charges for Contract Manufacturing Organization ("CMO") manufacturing capacity of excess quantities, $18.2 million related to unutilized manufacturing capacity, and a credit of $0.7 million related to certain negotiated reductions to previously recognized firm purchase commitments. Cost of sales was $98.9 million for the three months ended September 30, 2023, including expense of $81.6 million related to excess, obsolete, or expired inventory and losses on firm purchase
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commitments and $14.3 million related to unutilized manufacturing capacity, partially offset by $21.5 million of negotiated reductions to certain previously recognized firm purchase commitments. Prior to receiving regulatory approval, we expensed manufacturing costs as research and development expenses. After receiving regulatory approval, we capitalize the costs of production for a particular supply chain when we determine that we have a present right to the economic benefit associated with the product. While we tracked the quantities of our manufactured vaccine product and components, we did not track pre-approval manufacturing costs and therefore the manufacturing cost of our pre-launch inventory produced prior to approval is not reasonably determinable. If inventory sold for the three months ended September 30, 2024 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 $60.9 million, an adjustment of $0.3 million as compared to cost of sales recognized. If inventory sold for the three months ended September 30, 2023 was valued at expected standard cost, adjusted cost of sales for the period would have been approximately $103.2 million, an adjustment of $4.3 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 were $87.2 million for the three months ended September 30, 2024 as compared to $106.2 million for the three months ended September 30, 2023, a decrease of $19.1 million. The decrease was primarily due to a reduction in overall expenditures relating to development activities on coronavirus vaccines, including our COVID-19 Program, and CIC, as summarized in the table below (in thousands):
Three Months Ended September 30,
20242023
Coronavirus vaccines $21,798 $41,263 
Other vaccine development programs
2,660 753 
Total direct external research and development expense24,458 42,016 
Employee expenses33,504 33,957 
Stock-based compensation expense5,166 10,022 
Facility expenses13,855 12,360 
Other expenses10,181 7,874 
Total research and development expenses$87,164 $106,229