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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, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 000-26770
NOVAVAX, INC.
(Exact name of registrant as specified in its charter)
Delaware22-2816046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
21 Firstfield Road
GaithersburgMD20878
(Address of principal executive offices)(Zip code)
(240) 268-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common Stock, Par Value $0.01 per shareNVAXThe Nasdaq Global Select Market
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated Filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x
The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, was 75,608,073 as of October 31, 2021.



NOVAVAX, INC.
TABLE OF CONTENTS
Page No.

i

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
NOVAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
September 30,
2021
December 31,
2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$1,936,998 $553,398 
Marketable securities 157,649 
Restricted cash8,175 93,880 
Accounts receivable75,283 262,012 
Unbilled receivable
34,678  
Prepaid expenses and other current assets119,047 181,264 
Total current assets2,174,181 1,248,203 
Restricted cash1,653 1,460 
Property and equipment, net214,751 179,954 
Intangible assets, net5,027 5,725 
Goodwill131,989 135,379 
Other non-current assets38,340 11,758 
Total assets$2,565,941 $1,582,479 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$59,564 $54,332 
Accrued expenses323,867 142,468 
Deferred revenue1,262,360 273,228 
Current portion of finance lease liabilities103,987 105,862 
Other current liabilities3,637 3,782 
Total current liabilities1,753,415 579,672 
Convertible notes payable323,102 322,035 
Non-current finance lease liabilities 40,083 
Other non-current liabilities28,088 13,480 
Total liabilities2,104,605 955,270 
Commitments and contingencies
Preferred stock, $0.01 par value, 2,000,000 shares authorized at September 30, 2021 and December 31, 2020; no shares issued and outstanding at September 30, 2021 and December 31, 2020
  
Stockholders' equity:
Common stock, $0.01 par value, 600,000,000 shares authorized at September 30, 2021 and December 31, 2020; and 75,973,523 shares issued and 75,415,774 shares outstanding at September 30, 2021 and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020
760 714 
Additional paid-in capital3,310,513 2,535,476 
Accumulated deficit(2,771,666)(1,874,199)
Treasury stock, 557,749 shares, cost basis at September 30, 2021 and 396,626 shares, cost basis at December 31, 2020
(79,132)(41,806)
Accumulated other comprehensive income 861 7,024 
Total stockholders’ equity461,336 627,209 
Total liabilities and stockholders’ equity$2,565,941 $1,582,479 
The accompanying notes are an integral part of these 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,
2021202020212020
Revenue:
Government contracts$97,502 $42,938 $720,740 $43,249 
Grant and other41,401 114,086 139,952 152,690 
 Royalties 39,941  63,398  
Total revenue178,844 157,024 924,090 195,939 
Expenses:
Research and development408,195 294,087 1,571,551 345,828 
General and administrative77,793 56,879 214,144 83,977 
Total expenses485,988 350,966 1,785,695 429,805 
Loss from operations(307,144)(193,942)(861,605)(233,866)
Other income (expense):
Investment income330 140 1,061 872 
Interest expense(5,182)(4,460)(15,989)(11,266)
Other income (expense)(4,394)952 (8,328)3,565 
Net loss before income tax expense$(316,390)$(197,310)$(884,861)$(240,695)
Income tax expense6,041  12,606  
Net loss$(322,431)$(197,310)$(897,467)$(240,695)
Basic and diluted net loss per share$(4.31)$(3.21)$(12.13)$(4.39)
Basic and diluted weighted average number of common shares outstanding74,745 61,554 73,972 54,810 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021202020212020
Net loss$(322,431)$(197,310)$(897,467)$(240,695)
Other comprehensive income (loss):
Net unrealized losses on marketable securities available-for-sale, net of reclassifications (26)(9)18 
Foreign currency translation adjustment(3,309)8,226 (6,154)7,495 
Other comprehensive income (loss)(3,309)8,200 (6,163)7,513 
Comprehensive loss$(325,740)$(189,110)$(903,630)$(233,182)
The accompanying notes are an integral part of these financial statements.
2

NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three Months Ended September 30, 2021 and 2020
(in thousands, except share information)
(unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Other
Comprehensive
Income (Loss)
Stockholders'
Equity
SharesAmount
Balance at June 30, 202174,672,351 $747 $3,237,085 $(2,449,235)$(47,205)$4,170 $745,562 
Non-cash stock-based compensation— — 45,274 — — — 45,274 
Stock issued under incentive programs1,301,172 13 28,154 — (31,927)— (3,760)
Foreign currency translation adjustment— — — — — (3,309)(3,309)
Net loss— — — (322,431)— — (322,431)
Balance at September 30, 202175,973,523 $760 $3,310,513 $(2,771,666)$(79,132)$861 $461,336 
Balance at June 30, 202061,262,632 $612 $1,699,072 $(1,499,325)$(2,638)$(13,195)$184,526 
Non-cash stock-based compensation— — 65,705 — — — 65,705 
Stock issued under incentive programs1,534,345 16 26,682 — (38,569)— (11,871)
Issuance of common stock, net of issuance costs of $725
521,911 5 57,185 — — — 57,190 
Unrealized loss on marketable securities— — — — — (26)(26)
Foreign currency translation adjustment— — — — — 8,226 8,226 
Net loss— — — (197,310)— — (197,310)
Balance at September 30, 202063,318,888 $633 $1,848,644 $(1,696,635)$(41,207)$(4,995)$106,440 
The accompanying notes are an integral part of these financial statements.











3

NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 2021 and 2020
(in thousands, except share information)
(unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Other
Comprehensive
Income (Loss)
Stockholders'
Equity
SharesAmount
Balance at December 31, 202071,350,365 $714 $2,535,476 $(1,874,199)$(41,806)$7,024 $627,209 
Non-cash stock-based compensation— — 151,457 — — — 151,457 
Stock issued under incentive programs2,044,191 20 58,747 — (37,326)— 21,441 
Issuance of common stock, net of issuance costs of $7,292
2,578,967 26 564,833 — — — 564,859 
Unrealized loss on marketable securities— — — — — (9)(9)
Foreign currency translation adjustment— — — — — (6,154)(6,154)
Net loss— — — (897,467)— — (897,467)
Balance at September 30, 202175,973,523 $760 $3,310,513 $(2,771,666)$(79,132)$861 $461,336 
Balance at December 31, 201932,399,352 $324 $1,260,551 $(1,431,801)$(2,583)$(12,508)$(186,017)
Preferred stock beneficial conversion feature— — 24,139 (24,139)— —  
Non-cash stock-based compensation— — 77,602 — — — 77,602 
Stock issued under incentive programs1,884,399 19 35,689 — (38,624)— (2,916)
Issuance of common stock, net of issuance costs of $5,870
29,035,137 290 450,663 — — — 450,953 
Unrealized loss on marketable securities— — — — — 18 18 
Foreign currency translation adjustment— — — — — 7,495 7,495 
Net loss— — — (240,695)— — (240,695)
Balance at September 30, 202063,318,888 $633 $1,848,644 $(1,696,635)$(41,207)$(4,995)$106,440 
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,
20212020
Operating Activities:
Net loss$(897,467)$(240,695)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization8,989 3,091 
Non-cash stock-based compensation151,457 77,602 
Right-of-use assets written off17,117 187,193 
Other items, net2,739 (3,051)
Changes in operating assets and liabilities:
Receivables, prepaid expenses and other assets209,221 (78,788)
Accounts payable and accrued expenses180,708 60,540 
Deferred revenue992,590 80,135 
Net cash provided by operating activities665,354 86,027 
Investing Activities:
Capital expenditures(41,122)(12,610)
Acquisition of Novavax CZ, net of cash required (164,204)
Purchases of marketable securities(2,167)(266,330)
Proceeds from maturities and sale of marketable securities159,807 96,488 
Net cash provided by (used in) investing activities116,518 (346,656)
Financing Activities:
Net proceeds from sale of preferred stock 199,822 
Net proceeds from sales of common stock564,859 447,070 
Net proceeds from the exercise of stock-based awards21,441 (1,316)
Finance lease payments(63,876)(65,424)
Net cash provided by financing activities522,424 580,152 
Effect of exchange rate on cash, cash equivalents and restricted cash(6,208)33 
Net increase in cash, cash equivalents and restricted cash1,298,088 319,556 
Cash, cash equivalents and restricted cash at beginning of period648,738 82,180 
Cash, cash equivalents and restricted cash at end of period$1,946,826 $401,736 
Supplemental disclosure of non-cash activities:
Sale of common stock under the Sales Agreement not settled at quarter-end$ $3,883 
Right-of-use assets from new lease agreements$34,914 $188,362 
Capital expenditures included in accounts payable and accrued expenses$7,884 $6,189 
Supplemental disclosure of cash flow information:
Cash interest payments$17,768 $12,188 
Cash paid for income taxes$6,041 $ 
    
The accompanying notes are an integral part of these financial statements.
5

NOVAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
Note 1 – Organization

Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, including Novavax AB and Novavax CZ, the “Company”) is a biotechnology company that promotes improved health globally through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases. The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFlu, are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines. NVX-CoV2373 and NanoFlu include the use of the Company's proprietary Matrix-Madjuvant.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of September 30, 2021, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the consolidated statements of changes in stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and the consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’ equity and cash flows, respectively, for the periods presented. Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).
The unaudited consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries, including Novavax AB and Novavax CZ. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements are presented in U.S. dollars. The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona), and the functional currency of Novavax CZ, which is located in the Czech Republic, is the local currency (Czech Koruna). The translation of assets and liabilities of these subsidiaries to U.S. dollars is made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of the statement of operations data is made at the average exchange rate in effect for the period. The translation of operating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction. Translation gains and losses are recognized as a component of accumulated other comprehensive income in the accompanying unaudited consolidated balance sheets. Accumulated other comprehensive income included a foreign currency translation balance of $0.9 million and $7.0 million as of September 30, 2021 and December 31, 2020, respectively.
The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. 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

Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents consist of the following at (in thousands):
September 30,
2021
December 31,
2020
Cash$113,781 $122,312 
Money market funds366,242 96,116 
Government-backed securities197,250 44,250 
Treasury securities99,996 44,052 
Corporate debt securities1,159,729 246,668 
Cash and cash equivalents$1,936,998 $553,398 
Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature.
Marketable Securities
The Company invests in marketable securities that generally consist of debt securities with maturities greater than three months from the date of purchase that include commercial paper, government-backed securities, treasury securities, corporate notes and agency securities. Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company's ability and intent to hold the investment to maturity.
Interest and dividend income are recorded when earned and included in investment income in the consolidated statements of operations. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations. The specific identification method is used in computing realized gains and losses on the sale of the Company's securities.
The Company classifies its marketable securities with readily determinable fair values as “available-for-sale.” Investments in securities that are classified as available-for-sale are measured at fair market value in the consolidated balance sheets, and unrealized gains and losses on marketable securities are reported as a separate component of stockholders' equity until realized. Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company's ability to hold the securities, including whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer's financial condition and business outlook to predict whether the loss in value is other-than-temporary. Realized gains and losses and declines in value determined to be other-than-temporary are recorded as other income (expense) in the consolidated statements of operations.
Restricted Cash
The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements, payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreements and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases. The Company will utilize the CEPI and BMGF funds as it incurs expenses for services performed under these agreements.
As of September 30, 2021, the restricted cash balances (both current and non-current) consisted of $1.2 million for payments received from BMGF, $7.0 million of payments under the CEPI funding agreements and $1.5 million of security
7

deposits. As of December 31, 2020, the restricted cash balances (both current and non-current) consisted of $1.5 million for payments received from BMGF, $92.4 million of payments under the CEPI funding agreements and $1.5 million of security deposits.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows (in thousands):
September 30,
2021
December 31,
2020
Cash and cash equivalents$1,936,998 $553,398 
Restricted cash current8,175 93,880 
Restricted cash non-current1,653 1,460 
Cash, cash equivalents and restricted cash$1,946,826 $648,738 
Pre-Launch Inventory

Prior to an emergency use authorization ("EUA") or regulatory approval of NVX-CoV2373, the Company's policy is to recognize the cost associated with acquiring raw materials and production for preclinical studies, clinical trials and pre-launch inventory, including both internal manufacturing and third-party Contract Manufacturing Organizations ("CMO"), as research and development expense in its consolidated statements of operations, in the period in which the costs are incurred. When the Company believes EUA or regulatory approval and subsequent commercialization of NVX-CoV2373 is probable, and expects future economic benefit from the sales of NVX-CoV2373 to be realized, the Company will then start capitalizing the costs of production as inventory.
Revenue Recognition

The Company has various arrangements that include a right for a third party to use the Company's intellectual property as a functional license. These licensing arrangements include sales-based royalties, as well as certain development and commercial milestone payments, and the license is deemed to be the predominant item to which the sales-based royalties or milestone payments relate. For arrangements that include a development or regulatory milestone payment, the Company evaluates whether the associated event is considered probable of achievement and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within the Company or licensee's control, such as those dependent upon receipt of regulatory approval, are not considered probable of achievement until the triggering event occurs. At the end of each reporting period, the Company reevaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis and affect revenue and results of operations in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or predominant item to which the payments relate, the Company recognizes revenue on the satisfaction (or partial satisfaction) of its performance obligation to which some or all of the payment has been allocated, which is normally on the occurrence of the related sales. As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price for the variable consideration that represents sales-based royalties under the licensing arrangements. Consideration for optional goods and/or services is excluded from the transaction price at contract inception. During the three and nine months ended September 30, 2021, the Company recognized sales-based royalties of $39.9 million and $63.4 million, respectively.
Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards.

The Company has historically generated significant federal, state and foreign tax net operating losses, which may be subject to limitation in future periods. Management has fully reserved the related deferred tax assets with a valuation allowance in the current reporting period as more likely than not the related benefit will not be realized. The Company is currently subject to examination in all open tax years.

During the three and nine months ended September 30, 2021, the Company recognized $6.0 million and $12.6 million, respectively, of income tax expense related to foreign withholding tax on royalties.

Net Loss per Share
8

Net loss per share is computed using the weighted average number of shares of common stock outstanding. As of September 30, 2021 and 2020, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 4,911,656 and 6,623,466, respectively.
As of September 30, 2021, the Company’s Notes (see Note 7) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $136.20 or higher. These shares, after giving effect to the add back of interest expense and unamortized debt issuance costs on the Notes and any shares due to the Company upon settlement of its capped call transactions, are excluded from the computation, as their effect is antidilutive.
Recent Accounting Pronouncements
Not Yet Adopted
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts in an entity’s own equity. Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It will also remove certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and will simplify the diluted earnings per share calculation for convertible instruments. ASU 2020-06 will be effective January 1, 2022 for the Company and may be applied using a full or modified retrospective approach. Management has evaluated the impact of adopting ASU 2020-06 and has determined that it will not have a material impact on the Company’s consolidated financial statements.
Note 3 – Fair Value Measurements
The following table represents the Company's fair value hierarchy for its financial assets and liabilities (in thousands):
Fair Value at September 30, 2021Fair Value at December 31, 2020
AssetsLevel 1Level 2Level 3Level 1Level 2Level 3
Money market funds(1)$366,242 $ $ $96,116 $ $ 
Government-backed securities(1) 197,250   44,250  
Treasury securities(2) 99,996   54,088  
Corporate debt securities(3) 1,159,729   373,681  
Agency securities    20,600  
Total cash equivalents and marketable securities$366,242 $1,456,975 $ $96,116 $492,619 $ 
Liabilities
Convertible notes payable$ $559,722 $ $ $407,238 $ 
(1)Classified as cash and cash equivalents as of September 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.
(2)Includes $99,996 and $44,052 classified as cash and cash equivalents as of September 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.
(3)Includes $1,159,729 and $246,668 classified as cash and cash equivalents as of September 30, 2021 and December 31, 2020, respectively, on the consolidated balance sheets.
Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor's valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Pricing of the Company's Notes (see Note 7) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates and credit spreads among others.
During the nine months ended September 30, 2021 and 2020, the Company did not have any transfers between levels.
9

Note 4 – Marketable Securities
The Company had no marketable securities classified as available-for-sale as of September 30, 2021 as all of the Company's investments were in securities classified as cash and cash equivalents. Marketable securities were classified as available-for-sale as of December 31, 2020 were comprised of (in thousands):
December 31, 2020
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Treasury securities$10,038 $ $(2)$10,036 
Corporate debt securities127,003 13 (3)127,013 
Agency securities20,599 1  20,600 
Total marketable securities$157,640 $14 $(5)$157,649 
The primary objective of the Company's investment policy is the preservation of capital; thus, the Company's investment policy limits investments to certain types of instruments with high-grade credit ratings, places restrictions on maturities and concentrations in certain industries and requires the Company to maintain a certain level of liquidity.
Note 5 – Goodwill and Other Intangible Assets
Goodwill
The change in the carrying amounts of goodwill for the nine months ended September 30, 2021 was as follows (in thousands):
Amount
Balance at December 31, 2020$135,379 
Currency translation adjustments(3,390)
Balance at September 30, 2021$131,989 

Identifiable Intangible Assets
Purchased intangible assets consisted of the following as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated 
Amortization
Intangible
Assets, Net
Gross
Carrying
Amount
Accumulated 
Amortization
Intangible
Assets, Net
Finite-lived intangible assets:
Proprietary adjuvant technology$8,496 $(3,469)$5,027 $9,099 $(3,374)$5,725 
Collaboration agreements3,836 (3,836) 4,109 (4,109) 
Total identifiable intangible assets$12,332 $(7,305)$5,027 $13,208 $(7,483)$5,725 
Amortization expense for the nine months ended September 30, 2021 and 2020 was $0.3 million and $0.5 million, respectively.
10

Estimated amortization expense for existing intangible assets for the remainder of 2021 and for each of the five succeeding years ending December 31 will be as follows (in thousands):
YearAmount
2021 (remainder)$106 
2022425 
2023425 
2024425 
2025425 
2026425 
Note 6 - Leases
During the third quarter of 2021, the Company entered into a supply agreement with a CMO that modified existing short-term embedded leases under ASC Topic 842, Leases (“ASC 842”) as the Company continues to have the exclusive use of, and control over, a portion of manufacturing facilities and equipment of the supplier during the contractual term of the new arrangement. The modifications did not result in a change in lease classification and, in accordance with the Company's election to apply the practical expedient in ASC 842, it did not recognize a Right-Of-Use ("ROU") asset or lease liability but instead, will recognize lease payments as an expense on a straight-line basis over the modified lease term and variable lease payments that do not depend on an index or rate, are recognized as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements.

During the second quarter of 2021, the Company evaluated the impact of changes in facts and circumstances on its CMOs and contract development and manufacturing organizations agreements that had previously been determined to represent embedded lease arrangements. The Company concluded that the impact resulted in the modification of existing leases and, in accordance with its policy, the Company remeasured and reallocated the remaining consideration in the contracts and reassessed the lease classification as of the effective date of the modification. As a result, the Company recognized a ROU asset and a corresponding long-term operating lease liability of $11.4 million on the remeasurement of one of its long-term supply agreements using an incremental borrowing rate of 6.5%. The Company expensed the ROU asset since it relates to research and development activities for the development of NVX-CoV2373 for which the Company does not have an alternative future use. Modifications to leases with a lease term of 12 months or less at the commencement date did not result in a change in lease classification and in accordance with the Company's election, it applied the practical expedient in ASC 842, as described above.
During the three and nine months ended September 30, 2021, the Company recognized a short-term lease expense of $111.3 million and $325.5 million, respectively, related to its embedded leases and expensed $4.4 million and $17.1 million, respectively, of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement of lease. The Company recognized a short-term lease expense of $19.4 million related to embedded leases and expensed $187.2 million of ROU assets that represented assets acquired for research and development activities that did not have an alternative future use at the commencement of lease during the three and nine months ended September 30, 2020.
During the three and nine months ended September 30, 2021, the Company recognized $1.6 million and $5.6 million of interest expenses, respectively, on its finance lease liabilities. The Company recognized $1.0 million of interest expense related to finance lease liabilities during the three and nine months ended September 30, 2020.
During the nine months ended September 30, 2021, the Company entered into or extended the term of certain of its existing research and development facility and offices leases, giving rise to additional ROU assets and related operating lease liabilities of $17.8 million.
Note 7 – Long-Term Debt
Convertible Notes
The Company incurred approximately $10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”), which were recorded as a reduction to the Notes on the consolidated balance sheet. The $10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven year contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method.
Total convertible notes payable consisted of the following at (in thousands):
11

September 30,
2021
December 31,
2020
Principal amount of Notes$325,000 $325,000 
Unamortized debt issuance costs(1,898)(2,965)
Total convertible notes payable$323,102 $322,035 
The interest expense incurred in connection with the Notes consisted of the following (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Coupon interest at 3.75%
$3,047 $3,047 $9,141 $9,141 
Amortization of debt issuance costs356 356 1,068 1,068 
Total interest expense on Notes$3,403 $3,403 $10,209 $10,209 

Note 8 – Stockholders' Equity
During the nine months ended September 30, 2021 and 2020, the Company sold 2.6 million and 29.1 million, respectively, of shares of its common stock resulting in net proceeds of approximately $565 million and $446 million, respectively, under its various At Market Issuance Sales agreements.

In June 2021, the Company entered into an At Market Issuance Sales Agreement (the "June 2021 Sales Agreement"), which allows it to issue and sell up to $500 million in gross proceeds of shares of its common stock, and terminated its existing At Market Issuance Sales agreement. As of September 30, 2021, no shares had been sold under the June 2021 Sales Agreement.
Note 9 – Stock-Based Compensation
Equity Plans
The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary.
The 2015 Plan authorizes the issuance of up to 12.4 million shares of common stock under equity awards granted under the 2015 Plan, including an increase of 1.5 million shares approved for issuance under the 2015 Plan at the Company's 2021 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.
The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.
The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, SARs and RSUs. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of ten years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company's common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years.
Stock Options and Stock Appreciation Rights
The following is a summary of stock options and SARs activity under the 2015 Plan and 2005 Plan for the nine months ended September 30, 2021:
12

2015 Plan2005 Plan
Stock
Options and SARs
Weighted-Average
Exercise
Price
Stock
Options
Weighted-Average
Exercise
Price
Outstanding at January 1, 20215,420,463 $38.05 214,186 $88.11 
Granted73,091 $176.39  $ 
Exercised(1,420,550)$32.49 (140,580)$80.03 
Canceled(80,799)$119.36  $ 
Outstanding at September 30, 20213,992,205 $40.92 73,606 $103.56 
Shares exercisable at September 30, 20211,286,515 $48.62 73,606 $103.56 
Shares available for grant at September 30, 20213,788,799 
The fair value of stock options granted under the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Weighted average Black-Scholes fair value of stock options granted$203.51$102.41$156.86$78.78
Risk-free interest rate
0.6%-0.9%
0.2%-0.4%
0.5%-1.1%
0.2%-1.5%
Dividend yield%%%%
Volatility
126.4%-140.0%
135.4%-152.2%
124.7%-142.0%
116.0%-152.2%
Expected term (in years)
4.1-6.1
4.0-5.3
4.1-6.1
4.0-7.6
The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs outstanding under the 2015 Plan and 2005 Plan as of September 30, 2021 was approximately $673 million and 7.9 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and SARs exercisable under the 2015 Plan and 2005 Plan as of September 30, 2021 was approximately $212 million and 7.0 years, respectively. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and 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, 2021. 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, 2021 and 2020 was approximately $381 million and $164 million, respectively.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan, as amended (the “ESPP”), was approved at the Company's annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 600,000 shares of common stock to be purchased. 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, 2021, there were 164,495 shares available for issuance under the ESPP.
The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
13

Three Months Ended
September 30,
Nine Months Ended
 September 30,
2021202020212020
Range of Black-Scholes fair values of ESPP shares granted
$83.47-$152.11
$3.08-$92.67
$83.47-$238.85
$2.57-$92.67
Risk-free interest rate
0.1%-0.2%
0.2%-2.5%
0.1%-0.2%
0.2%-2.6%
Dividend yield%%%%
Volatility
114.9%-150.6%
77.5%-189.7%
114.9%-159.4%
66.6%-189.7%
Expected term (in years)
0.5-2.0
0.5-2.0
0.5-2.0
0.5-2.0
Restricted Stock Units
The following is a summary of RSUs activity for the nine months ended September 30, 2021:
Number of
Shares
Per Share
Weighted-
Average
Fair Value
Outstanding and Unvested at January 1, 20201,044,980 $72.59 
Restricted stock units granted225,424 $196.93 
Restricted stock units vested(391,960)$57.81 
Restricted stock units forfeited(32,599)$131.95 
Outstanding and Unvested at September 30, 2021845,845 $110.68 
The Company recorded all stock-based compensation expense in the consolidated statements of operations as follows (in thousands):