Novavax(US:NVAX)2024-11-12 21:08PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements The company reported a significantly reduced net loss of $106.5 million for the nine months ended September 30, 2024, driven by lower expenses and Sanofi licensing revenue Consolidated Statements of Operations Novavax reported $84.5 million in Q3 2024 revenue and a $121.3 million net loss, with the nine-month net loss narrowing to $106.5 million Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $84,512 | $186,986 | $593,851 | $692,363 | | Product sales | $38,210 | $2,231 | $140,438 | $279,937 | | Licensing, royalties, and other | $46,302 | $19,833 | $453,413 | $23,046 | | Grants | $0 | $164,922 | $0 | $389,380 | | Total Expenses | $218,530 | $312,618 | $711,702 | $1,075,306 | | Cost of sales | $60,619 | $98,929 | $166,070 | $188,792 | | Research and development | $87,164 | $106,229 | $286,789 | $572,805 | | Selling, general, and administrative | $70,747 | $107,460 | $258,843 | $313,709 | | Net Loss | ($121,300) | ($130,776) | ($106,469) | ($366,673) | | Net Loss Per Share (Basic & Diluted) | ($0.76) | ($1.26) | ($0.71) | ($3.94) | Consolidated Balance Sheets Total assets were $1.71 billion as of September 30, 2024, with improved stockholders' deficit due to capital raises and the Sanofi agreement Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2024 (unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,103,680 | $1,143,888 | | Cash and cash equivalents | $573,630 | $568,505 | | Marketable securities | $335,901 | $0 | | Accounts receivable | $94,962 | $297,240 | | Inventory | $8,638 | $41,696 | | Total Assets | $1,712,483 | $1,797,490 | | Total Current Liabilities | $1,180,999 | $1,635,138 | | Deferred revenue (current) | $613,418 | $241,310 | | Total Liabilities | $2,238,919 | $2,514,417 | | Total Stockholders' Deficit | ($526,436) | ($716,927) | Consolidated Statements of Cash Flows Net cash from operations significantly improved to $85.9 million for the nine months ended September 30, 2024, driven by the Sanofi payment Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $85,900 | ($537,186) | | Net cash used in investing activities | ($348,045) | ($49,728) | | Net cash provided by (used in) financing activities | $264,005 | ($95,923) | | Net increase (decrease) in cash | $4,777 | ($682,482) | | Cash at end of period | $588,587 | $666,363 | Notes to the Consolidated Financial Statements Notes detail the Sanofi partnership alleviating going concern doubts, along with settlements, restructuring, and ongoing risks with APAs - The collaboration and licensing agreement with Sanofi, combined with cost reductions and liability settlements, has alleviated the substantial doubt about the company's ability to continue as a going concern that existed at the end of 202325 - The company faces risks with its Advance Purchase Agreements. The Canada APA may be terminated if regulatory approval for vaccine from the BMC facility is not received by Dec 31, 2024. The Australia APA value may be reduced by ~$240 million due to expected delays in TGA approval. The New Zealand APA was terminated, with a refund request under discussion515253 - In a subsequent event, the company settled with the UK Health Security Agency, agreeing to refund $123.8 million in quarterly installments over three years, resolving a dispute over a previous upfront payment121122 - Subsequent to the quarter end, the U.S. FDA lifted a clinical hold on the company's Investigational New Drug Application for its COVID-19-Influenza Combination (CIC) and stand-alone influenza vaccine candidates120 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strategic shift driven by the Sanofi partnership, improved liquidity, reduced net loss, and ongoing APA risks Overview and Business Highlights The company's operating model focuses on the Sanofi partnership, pipeline, and Matrix-M™ technology, achieving cost reductions and FDA approvals - The company's strategy is now focused on four value drivers: the Sanofi partnership, the late-stage CIC and influenza pipeline, leveraging the Matrix-M™ technology platform, and a new early-stage pipeline128 - The U.S. FDA lifted the clinical hold on the IND application for the company's CIC and stand-alone influenza vaccine candidates, allowing the Phase 3 trial to proceed157 - The company is on track with its cost reduction plan, achieving an approximate 26% reduction in combined R&D and SG&A expenses in Q3 2024 compared to Q3 2023160 - The updated COVID-19 vaccine (Nuvaxovid™) received EUA from the U.S. FDA and is available in a pre-filled syringe presentation at over 30,000 locations160161 Results of Operations Q3 2024 revenue decreased to $84.5 million, but lower expenses reduced net loss; nine-month revenue decreased, offset by Sanofi licensing Revenue Comparison - Three Months Ended Sep 30 (in thousands) | Revenue Source | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Product sales | $38,210 | $2,231 | $35,979 | | Licensing, royalties, and other | $46,302 | $19,833 | $26,469 | | Grants | $0 | $164,922 | ($164,922) | | Total Revenue | $84,512 | $186,986 | ($102,474) | Expense Comparison - Three Months Ended Sep 30 (in thousands) | Expense Category | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Cost of sales | $60,619 | $98,929 | ($38,310) | | Research and development | $87,164 | $106,229 | ($19,065) | | Selling, general, and administrative | $70,747 | $107,460 | ($36,713) | | Total Expenses | $218,530 | $312,618 | ($94,088) | Revenue Comparison - Nine Months Ended Sep 30 (in thousands) | Revenue Source | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Product sales | $140,438 | $279,937 | ($139,499) | | Licensing, royalties, and other | $453,413 | $23,046 | $430,367 | | Grants | $0 | $389,380 | ($389,380) | | Total Revenue | $593,851 | $692,363 | ($98,512) | Expense Comparison - Nine Months Ended Sep 30 (in thousands) | Expense Category | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Cost of sales | $166,070 | $188,792 | ($22,722) | | Research and development | $286,789 | $572,805 | ($286,016) | | Selling, general, and administrative | $258,843 | $313,709 | ($54,866) | | Total Expenses | $711,702 | $1,075,306 | ($363,604) | Liquidity Matters and Capital Resources Liquidity improved to $924.5 million from Sanofi payment and stock sales, resolving going concern doubts, though APA risks remain - As of September 30, 2024, the company had $924.5 million in cash, cash equivalents, restricted cash, and marketable securities, a substantial increase from $583.8 million at year-end 2023223 - The company received a $500 million non-refundable upfront payment from Sanofi and is eligible for up to $700 million in milestones for COVID-19 products, plus additional milestones and royalties for other adjuvant-based products203 - The company has evaluated its ability to continue as a going concern and concluded it has sufficient capital to fund operations for at least one year from the financial statement issuance date228 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from foreign currency fluctuations, with a 10% decline potentially reducing stockholders' deficit by $60 million - The company's primary market risks are foreign currency exchange rate fluctuations (primarily USD vs. EUR, GBP, SEK, CZK) and interest rate risk on its investment portfolio229230 - A 10% decline in foreign exchange rates related to foreign subsidiaries would result in an approximate $60 million decline in stockholders' equity (deficit) as of September 30, 2024231 Item 4. Controls and Procedures Management concluded disclosure controls were effective as of September 30, 2024, with no material changes to internal financial reporting controls - As of September 30, 2024, the company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level237 - There were no material changes to the company's internal control over financial reporting during the quarter ended September 30, 2024238 PART II. OTHER INFORMATION Item 1. Legal Proceedings The securities class action was settled in May 2024, while eight related derivative lawsuits remain ongoing, with a settlement in principle reached for one - The main securities class action, Sinnathurai v. Novavax, Inc., was settled and officially closed by the court on May 24, 2024239 - Eight derivative lawsuits, stemming from similar allegations as the Sinnathurai Action, remain active. A settlement in principle was reached in the primary consolidated derivative action as of November 1, 2024, with parties requesting a stay to finalize the agreement240242 Item 1A. Risk Factors Significant risks exist with advance purchase agreements (APAs), where failure to meet obligations could lead to termination, reduced commitments, or refund demands - A key risk is the potential for termination or reduction of APAs if performance obligations are not met, which could require the company to refund advance payments251252 - The risk has materialized with the UK agreement, which was amended due to delays and ultimately settled with a refund obligation. Similar risks exist with the Australia and Canada APAs, where failure to meet regulatory or delivery terms could lead to significant loss of contract value and potential refund liabilities254255256 Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the third quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the three months ended September 30, 2024257 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and Inline XBRL financial statements