nvax-20210331

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 March 31, 2021

☐ 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)


Delaware			22-2816046
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

21 Firstfield Road	Gaithersburg	MD	20878
(Address of principal executive offices)			(Zip code)

(240) 268-2000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

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

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

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


Large accelerated filer	x	Accelerated Filer	o

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	☐

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 74,094,435 as of April 30, 2021.

Table of Contents

NOVAVAX, INC.

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION		1
Item 1.	Consolidated Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	1
	Unaudited Consolidated Statements of Operations and Unaudited Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020	2
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020	3
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 3 1 , 2021 and 2020	4
	Notes to the Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION		30
Item 1 .	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 5 .	Other Information	30
Item 6.	Exhibits	32
SIGNATURES		33

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NOVAVAX, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)


	March 31, 2021		December 31, 2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,995,482	$	553,398
Marketable securities	2,250		157,649
Restricted cash	32,128		93,880
Accounts receivable	56,898		262,012
Unbilled services	45,295		—
Prepaid expenses and other current assets	114,731		181,264
Total current assets	2,246,784		1,248,203
Restricted cash	1,460		1,460
Property and equipment, net	192,044		179,954
Intangible assets, net	5,270		5,725
Goodwill	130,879		135,379
Other non-current assets	31,929		11,758
Total assets	$	2,608,366	$	1,582,479

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	113,605	$	54,332
Accrued expenses	148,611		142,468

Deferred revenue	822,809		273,228
Current portion of finance lease liabilities	121,144		105,862
Other current liabilities	2,386		3,782
Total current liabilities	1,208,555		579,672
Convertible notes payable	322,390		322,035
Non-current finance lease liabilities	16,696		40,083
Other non-current liabilities	21,598		13,480
Total liabilities	1,569,239		955,270

Commitments and contingencies

Preferred stock, $0.01 par value, 2,000,000 shares authorized at March 31, 2021 and December 31, 2020; no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	—		—

Stockholders' equity:
Common stock, $0.01 par value, 600,000,000 shares authorized at March 31, 2021 and December 31, 2020; and 74,470,583 shares issued and 74,061,594 shares outstanding at March 31, 2021 and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020	745		714
Additional paid-in capital	3,180,114		2,535,476
Accumulated deficit	(2,096,918)		(1,874,199)
Treasury stock, 408,989 shares, cost basis at March 31, 2021 and 396,626 shares, cost basis at December 31, 2020	(44,457)		(41,806)
Accumulated other comprehensive (loss) income	(357)		7,024
Total stockholders’ equity	1,039,127		627,209
Total liabilities and stockholders’ equity	$	2,608,366	$	1,582,479

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

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NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

(unaudited)


	For the Three Months Ended March 31,
	2021		2020

Revenue:
Government contracts	$	382,704	$	—
Grant and other	64,525		3,377
Total revenue	447,229		3,377

Expenses:
Research and development	592,671		16,895
General and administrative	63,190		9,379
Total expenses	655,861		26,274
Loss from operations	(208,632)		(22,897)
Other income (expense):
Investment income	362		436
Interest expense	(4,839)		(3,403)
Other expense	(6,593)		—
Net loss before income tax expense	$	(219,702)	$	(25,864)
Income tax expense	3,017		—
Net loss	$	(222,719)	$	(25,864)

Basic and diluted net loss per share	$	(3.05)	$	(0.58)

Basic and diluted weighted average number of common shares outstanding	73,035		44,421

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)


	For the Three Months Ended March 31,
	2021		2020

Net loss	$	(222,719)	$	(25,864)
Other comprehensive income (loss):
Net unrealized losses on marketable securities available-for-sale, net of reclassifications	(9)		(132)
Foreign currency translation adjustment	(7,372)		(1,846)
Other comprehensive loss	(7,381)		(1,978)
Comprehensive loss	$	(230,100)	$	(27,842)

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

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NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Three Months Ended March 31, 2021 and 2020

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Other Comprehensive Income (Loss)		Stockholders' Equity (Deficit)
	Shares	Amount
	(in thousands, except share information)
Balance at December 31, 2020	71,350,365	$	714	$	2,535,476	$	(1,874,199)	$	(41,806)	$	7,024	$	627,209
Non-cash stock-based compensation	—	—		53,060		—		—		—		53,060
Stock issued under incentive programs	541,251	5		26,745		—		(2,651)		—		24,099
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	—	—		—		—		—		(7,372)		(7,372)
Net loss	—	—		—		(222,719)		—		—		(222,719)
Balance at March 31, 2021	74,470,583	$	745	$	3,180,114	$	(2,096,918)	$	(44,457)	$	(357)	$	1,039,127

Balance at December 31, 2019	32,399,352	$	324	$	1,260,551	$	(1,431,801)	$	(2,583)	$	(12,508)	$	(186,017)
Non-cash stock-based compensation	—	—		3,965		—		—		—		3,965
Stock issued under incentive programs	33,239	—		60		—		(55)		—		5
Issuance of common stock, net of issuance costs of $2,498	21,473,731	215		185,703		—		—		—		185,918
Unrealized loss on marketable securities	—	—		—		—		—		(132)		(132)
Foreign currency translation adjustment	—	—		—		—		—		(1,846)		(1,846)
Net loss	—	—		—		(25,864)		—		—		(25,864)
Balance at March 31, 2020	53,906,322	$	539	$	1,450,279	$	(1,457,665)	$	(2,638)	$	(14,486)	$	(23,971)

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

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NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2021		2020

Operating Activities:
Net loss	$	(222,719)	$	(25,864)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization	2,317		925

Non-cash stock-based compensation	53,060		3,965
Right-of-use assets expensed	951		—
Other	6,362		356
Changes in operating assets and liabilities:
Receivables, prepaid expenses and other assets	220,205		4,521
Accounts payable and accrued expenses	53,325		(8,450)
Deferred revenue	549,584		1,437
Net cash provided by (used in) operating activities	663,085		(23,110)

Investing Activities:
Capital expenditures	(13,781)		(122)

Purchases of marketable securities	(2,167)		(57,606)
Proceeds from maturities and sale of marketable securities	157,557		—
Net cash provided by (used in) investing activities	141,609		(57,728)

Financing Activities:

Net proceeds from sales of common stock	564,859		185,918
Proceeds from the exercise of stock-based awards	26,750		5
Treasury stock related to tax withholding on stock-based awards	(2,651)		—
Finance lease payments	(11,971)		—
Net cash provided by financing activities	576,987		185,923
Effect of exchange rate on cash, cash equivalents and restricted cash	(1,349)		(73)
Net increase in cash, cash equivalents and restricted cash	1,380,332		105,012
Cash, cash equivalents and restricted cash at beginning of period	648,738		82,180
Cash, cash equivalents and restricted cash at end of period	$	2,029,070	$	187,192

Supplemental disclosure of non-cash activities:

Capital expenditures included in accounts payable and accrued expenses	$	9,076	$	125
Right-of-use assets from new lease agreements	$	9,770	$	—

Supplemental disclosure of cash flow information:
Cash interest payments	$	7,530	$	6,094
Cash paid for income taxes	$	3,017	$	—

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

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NOVAVAX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Note 1 – Organization

Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, Novavax AB and Novavax CZ, the “Company”) is a biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs. The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFluTM, 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-M™ adjuvant.

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 March 31, 2021, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three months ended March 31, 2021 and 2020, the consolidated statements of changes in stockholders’ equity (deficit) for the three months ended March 31, 2021 and 2020 and the consolidated statements of cash flows for the three months ended March 31, 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 (deficit) 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, 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 loss in the accompanying unaudited consolidated balance sheets. Accumulated other comprehensive (loss) income included a foreign currency translation balance of $(0.4) million and $7.0 million as of March 31, 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.

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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):


	March 31, 2021		December 31, 2020
Cash	$	135,729	$	122,312
Money market funds	233,344		96,116
Government-backed securities	54,250		44,250
Treasury securities	25,022		44,052
Corporate debt securities	1,547,137		246,668
Cash and cash equivalents	$	1,995,482	$	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 (deficit) 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 March 31, 2021, the restricted cash balances (both current and non-current) consisted of $1.2 million for payments received from BMGF, $30.9 million of payments under the CEPI funding agreements and $1.5 million of security

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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 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):


	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	1,995,482	$	553,398
Restricted cash current	32,128		93,880
Restricted cash non-current	1,460		1,460
Cash, cash equivalents and restricted cash	$	2,029,070	$	648,738

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 months ended March 31, 2021, the Company recognized $3.0 million of income tax expense related to foreign withholding tax on an advance payment of a license fee.

Net Loss per Share

Net loss per share is computed using the weighted average number of shares of common stock outstanding. As of March 31, 2021 and 2020, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 6,273,234 and 4,968,953, respectively.

As of March 31, 2021, the Company’s Notes (see Note 8) 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 (see Note 8) 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 FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which 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. Early adoption is permitted, but no earlier than January 1, 2021 for the Company. 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.

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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 March 31, 2021						Fair Value at December 31, 2020
Assets	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Money market funds(1)	$	233,344	$	—	$	—	$	96,116	$	—	$	—
Government-backed securities(1)	—		54,250		—		—

SEC Form 10-Q filed by Novavax, Inc.