UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| x | QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
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. 0-26770
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.) |
|
|
|
20 Firstfield Road, Gaithersburg, MD |
|
20878 |
(Address of principal executive offices) |
|
(Zip code) |
(240) 268-2000
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 ¨
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted 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 and post such files). Yes x
No ¨
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x |
Accelerated filer ¨ |
Non-accelerated filer ¨ |
Smaller reporting company ¨ |
|
|
(Do not check if a smaller reporting company) |
|
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 269,858,393 as of October 31, 2015.
NOVAVAX, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NOVAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
information)
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(unaudited) | | |
| |
ASSETS |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 138,144 | | |
$ | 32,335 | |
Marketable securities | |
| 152,042 | | |
| 135,721 | |
Restricted cash | |
| — | | |
| 297 | |
Accounts receivable – billed | |
| 2,197 | | |
| 7,510 | |
Account receivable – unbilled | |
| 2,137 | | |
| 3,100 | |
Prepaid expenses and other current
assets | |
| 15,582 | | |
| 9,195 | |
Total current assets | |
| 310,102 | | |
| 188,158 | |
Property and equipment, net | |
| 29,421 | | |
| 19,737 | |
Intangible assets, net | |
| 11,005 | | |
| 12,577 | |
Goodwill | |
| 53,062 | | |
| 54,612 | |
Other non-current assets | |
| 1,044 | | |
| 918 | |
Total assets | |
$ | 404,634 | | |
$ | 276,002 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 8,201 | | |
$ | 12,908 | |
Accrued expenses | |
| 13,270 | | |
| 19,397 | |
Current portion of notes payable | |
| 493 | | |
| 603 | |
Deferred rent | |
| 1,212 | | |
| 1,138 | |
Other current liabilities | |
| 1,697 | | |
| 70 | |
Total current liabilities | |
| 24,873 | | |
| 34,116 | |
Deferred revenue | |
| 2,500 | | |
| 2,500 | |
Non-current portion of notes payable | |
| 45 | | |
| 395 | |
Deferred rent | |
| 7,106 | | |
| 7,734 | |
Other non-current liabilities | |
| 3,094 | | |
| 1,639 | |
Total liabilities | |
| 37,618 | | |
| 46,384 | |
| |
| | | |
| | |
Commitments and contingences | |
| — | | |
| — | |
| |
| | | |
| | |
Stockholders’ equity: | |
| | | |
| | |
Preferred stock, $0.01 par value, 2,000,000 shares authorized; no shares
issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| — | | |
| — | |
Common stock, $0.01 par value, 600,000,000 shares authorized at September
30, 2015 and 300,000,000 shares authorized at December 31, 2014; 270,274,501 shares issued and 269,819,071 shares outstanding
at September 30, 2015 and 239,287,294 shares issued and 238,831,864 shares outstanding at December 31, 2014 | |
| 2,703 | | |
| 2,393 | |
Additional paid-in capital | |
| 947,055 | | |
| 729,373 | |
Accumulated deficit | |
| (571,224 | ) | |
| (493,093 | ) |
Treasury stock, 455,430 shares, cost basis at both
September 30, 2015 and December 31, 2014 | |
| (2,450 | ) | |
| (2,450 | ) |
Accumulated other comprehensive
loss | |
| (9,068 | ) | |
| (6,605 | ) |
Total stockholders’ equity | |
| 367,016 | | |
| 229,618 | |
Total liabilities and stockholders’
equity | |
$ | 404,634 | | |
$ | 276,002 | |
The accompanying notes are an integral part
of these financial statements.
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, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Revenue: | |
| | | |
| | | |
| | | |
| | |
Government contracts | |
$ | 6,307 | | |
$ | 7,504 | | |
$ | 29,273 | | |
$ | 20,217 | |
Research and development collaborations | |
| 218 | | |
| 710 | | |
| 1,124 | | |
| 3,718 | |
Total revenue | |
| 6,525 | | |
| 8,214 | | |
| 30,397 | | |
| 23,935 | |
| |
| | | |
| | | |
| | | |
| | |
Costs and expenses: | |
| | | |
| | | |
| | | |
| | |
Cost of government contracts revenue | |
| 2,747 | | |
| 4,027 | | |
| 8,054 | | |
| 12,150 | |
Research and development | |
| 27,917 | | |
| 19,219 | | |
| 78,686 | | |
| 48,940 | |
General and administrative | |
| 9,060 | | |
| 4,757 | | |
| 21,991 | | |
| 14,871 | |
Total costs and expenses | |
| 39,724 | | |
| 28,003 | | |
| 108,731 | | |
| 75,961 | |
Loss from operations | |
| (33,199 | ) | |
| (19,789 | ) | |
| (78,334 | ) | |
| (52,026 | ) |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Investment income | |
| 194 | | |
| 128 | | |
| 450 | | |
| 160 | |
Interest expense | |
| (64 | ) | |
| (47 | ) | |
| (126 | ) | |
| (150 | ) |
Other expense | |
| (51 | ) | |
| (19 | ) | |
| (121 | ) | |
| ― | |
Realized gains on marketable
securities | |
| ― | | |
| ― | | |
| ― | | |
| 615 | |
Net loss | |
$ | (33,120 | ) | |
$ | (19,727 | ) | |
$ | (78,131 | ) | |
$ | (51,401 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net loss per
share | |
$ | (0.12 | ) | |
$ | (0.08 | ) | |
$ | (0.30 | ) | |
$ | (0.23 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average
number of common shares outstanding | |
| 269,554 | | |
| 238,304 | | |
| 259,703 | | |
| 221,578 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
(in thousands)
(unaudited)
| |
For the Three Months
Ended September 30, | | |
For the Nine Months
Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Net loss | |
$ | (33,120 | ) | |
$ | (19,727 | ) | |
$ | (78,131 | ) | |
$ | (51,401 | ) |
Other comprehensive income (loss): | |
| | | |
| | | |
| | | |
| | |
Net unrealized gains (losses) on investments available-for-sale | |
| 48 | | |
| (54 | ) | |
| 95 | | |
| (28 | ) |
Reclassification adjustment for gains included in
net loss | |
| ― | | |
| ― | | |
| ― | | |
| (615 | ) |
Foreign currency translation
adjustment | |
| (406 | ) | |
| (2,764 | ) | |
| (2,558 | ) | |
| (4,307 | ) |
Other comprehensive loss | |
| (358 | ) | |
| (2,818 | ) | |
| (2,463 | ) | |
| (4,950 | ) |
Comprehensive loss | |
$ | (33,478 | ) | |
$ | (22,545 | ) | |
$ | (80,594 | ) | |
$ | (56,351 | ) |
The accompanying notes are an integral part
of these financial statements.
NOVAVAX, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
(unaudited)
| |
For the Nine Months
Ended September 30, | |
| |
2015 | | |
2014 | |
Operating Activities: | |
| | | |
| | |
Net loss | |
$ | (78,131 | ) | |
$ | (51,401 | ) |
Reconciliation of net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 4,347 | | |
| 2,995 | |
Amortization of net premiums on marketable securities | |
| 955 | | |
| 106 | |
Deferred rent | |
| (554 | ) | |
| (302 | ) |
Non-cash stock-based compensation | |
| 9,278 | | |
| 4,583 | |
Realized gains on marketable securities | |
| ― | | |
| (615 | ) |
Other | |
| 140 | | |
| (13 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Restricted cash | |
| 297 | | |
| 1,417 | |
Accounts receivable – billed | |
| 5,503 | | |
| (999 | ) |
Accounts receivable – unbilled | |
| 963 | | |
| 755 | |
Prepaid expenses and other assets | |
| (6,536 | ) | |
| (3,348 | ) |
Accounts payable and accrued expenses | |
| (7,706 | ) | |
| (164 | ) |
Deferred revenue | |
| 105 | | |
| (260 | ) |
Net cash used in operating activities | |
| (71,339 | ) | |
| (47,246 | ) |
| |
| | | |
| | |
Investing Activities: | |
| | | |
| | |
Capital expenditures | |
| (13,648 | ) | |
| (4,877 | ) |
Proceeds from disposal of property and equipment | |
| ― | | |
| 39 | |
Proceeds from maturities of marketable securities | |
| 137,107 | | |
| 18,440 | |
Purchases of marketable securities | |
| (154,288 | ) | |
| (160,782 | ) |
Net cash used in investing activities | |
| (30,829 | ) | |
| (147,180 | ) |
| |
| | | |
| | |
Financing Activities: | |
| | | |
| | |
Principal payments on capital leases | |
| (49 | ) | |
| (58 | ) |
Principal payments on notes payable | |
| (458 | ) | |
| (505 | ) |
Changes in restricted cash | |
| (126 | ) | |
| (1 | ) |
Cash paid with the Novavax AB acquisition | |
| ― | | |
| (171 | ) |
Net proceeds from sales of common stock | |
| 204,275 | | |
| 107,896 | |
Proceeds from the exercise of stock options and employee
stock purchases | |
| 4,440 | | |
| 2,288 | |
Net cash provided by financing activities | |
| 208,082 | | |
| 109,449 | |
Effect of exchange rate on cash and cash equivalents | |
| (105 | ) | |
| (21 | ) |
Net increase (decrease) in cash and cash equivalents | |
| 105,809 | | |
| (84,998 | ) |
Cash and cash equivalents at beginning of period | |
| 32,335 | | |
| 119,471 | |
Cash and cash equivalents at end of period | |
$ | 138,144 | | |
$ | 34,473 | |
| |
| | | |
| | |
Supplemental disclosure of non-cash activities: | |
| | | |
| | |
Property and equipment purchases included in accounts
payable and accrued expenses | |
$ | 2,390 | | |
$ | 999 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash payments of interest | |
$ | 79 | | |
$ | 143 | |
The accompanying notes are an integral part
of these financial statements.
NOVAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)
Note 1 – Organization
Novavax, Inc. (“Novavax,”
and together with its wholly owned subsidiary “Novavax AB,” the “Company”) is a clinical-stage vaccine
company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. The Company’s
product pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical development for respiratory
syncytial virus (“RSV”), seasonal influenza, pandemic influenza and Ebola virus (“EBOV”). The Company
has additional preclinical stage programs in a variety of infectious diseases, including Middle East Respiratory Syndrome (“MERS”).
Note 2 – Operations
The Company’s vaccine
candidates currently under development, some of which include adjuvants, will require significant additional research and development
efforts that include extensive preclinical studies and clinical testing, and regulatory approval prior to commercial use.
As a clinical-stage vaccine
company, the Company has primarily funded its operations from proceeds through the sale of its common stock in equity offerings
and revenue under its contract with the Department of Health and Human Services, Biomedical Advanced Research and Development
Authority (“HHS BARDA”) and, to a lesser degree, revenue under its prior contract with PATH Vaccine Solutions (“PATH”).
Management regularly reviews the Company’s cash and cash equivalents and marketable securities relative to its operating
budget and forecast to monitor the sufficiency of the Company’s working capital, and anticipates continuing to draw upon
available sources of capital to support its product development activities.
Note 3 – Summary
of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting principles generally accepted 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, 2015, the consolidated statements of operations and the
consolidated statements of comprehensive loss for the three and nine months ended September 30, 2015 and 2014 and the consolidated
statements of cash flows for the nine months ended September 30, 2015 and 2014 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 and cash flows, respectively, for the periods presented. Although the Company believes that the disclosures
in these 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 subsidiary, Novavax AB. All intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying 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). The translation of assets and liabilities of Novavax AB 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 consolidated balance sheets. The foreign currency translation adjustment
balance included in accumulated other comprehensive loss was $9.1 million and $6.5 million at September 30, 2015 and December
31, 2014, 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, 2014. 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.
Use of Estimates
The preparation of the
consolidated financial statements in conformity with accounting principles generally accepted in the United States, 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,
2015 | | |
December 31,
2014 | |
Cash | |
$ | 5,682 | | |
$ | 4,481 | |
Money market funds | |
| 71,205 | | |
| 20,354 | |
Government-backed security | |
| 28,000 | | |
| 7,500 | |
Asset-backed securities | |
| 4,061 | | |
| ― | |
Corporate debt securities | |
| 29,196 | | |
| ― | |
Cash and cash equivalents | |
$ | 138,144 | | |
$ | 32,335 | |
Cash equivalents are recorded
at cost plus accrued interest, which approximate fair value due to their short-term nature.
Fair Value Measurements
The Company applies Accounting
Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, for financial and non-financial
assets and liabilities.
ASC 820 discusses valuation
techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash
flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following
is a brief description of those three levels:
| · | Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical
assets or liabilities. |
| · | Level
2: Inputs other than quoted prices that are observable for the asset or liability, either
directly or indirectly. These include quoted prices for similar assets or liabilities
in active markets and quoted prices for identical or similar assets or liabilities in
markets that are not active. |
| · | Level
3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
Marketable Securities
Marketable securities
consist of commercial paper, asset-backed securities and corporate notes. 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 is 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
holding 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 until market recovery, to predict whether the loss
in value is other-than-temporary. If a decline in value is determined to be other-than-temporary, the value of the security is
reduced and the impairment is recorded as other income, net in the consolidated statements of operations.
Restricted Cash
The Company’s current
restricted cash at December 31, 2014 includes payments received under the prior PATH agreement (See Note 9) until such time as
the Company has paid for the outside services performed under the agreement, which occurred during the nine months ended September
30, 2015. In addition, the Company’s non-current restricted cash with respect to its manufacturing, laboratory and office
spaces in Gaithersburg, Maryland functions as collateral for letters of credit, which serve as security deposits for the duration
of the leases. At September 30, 2015 and December 31, 2014, non-current restricted cash is $0.9 million and $0.8 million, respectively,
and is recorded as other non-current assets on the consolidated balance sheets.
Revenue Recognition
The Company performs research
and development for U.S. Government agencies and other collaborators under cost reimbursable and fixed price contracts, including
license and clinical development agreements. The Company recognizes revenue under research contracts when a contract has been
executed, the contract price is fixed or determinable, delivery of services or products has occurred and collection of the contract
price is reasonably assured. Payments received in advance of work performed are recorded as deferred revenue and losses on contracts,
if any, are recognized in the period in which they become known.
Under cost reimbursable
contracts, the Company is reimbursed and recognizes revenue as allowable costs are incurred plus a portion of the fixed-fee earned.
The Company considers fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred
in performance of the work as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement
of the proportional performance of the work completed. Under its HHS BARDA contract, certain activities must be pre-approved by
HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursable contracts
are recorded as cost of government contracts revenue. The Company’s HHS BARDA contract provides the U.S. government the
ability to terminate the contract for convenience or to terminate for default if the Company fails to meet its obligations as
set forth in the statement of work. The Company believes that if the government were to terminate the HHS BARDA contract for convenience,
the costs incurred through the effective date of such termination and any settlement costs resulting from such termination would
be allowable costs. Payments to the Company under cost reimbursable contracts with agencies of the U.S. Government, such as the
HHS BARDA contract, are provisional payments subject to adjustment upon annual audit by the government. An audit of fiscal year
2013 has been initiated, but has not been completed as of the date of this filing. Management believes that revenue for periods
not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. When the final
determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period
that the adjustments are known and collection is probable.
The Company’s collaborative
research and development agreements may include an upfront payment, payments for research and development services, milestone
payments and royalties. Agreements with multiple deliverables are evaluated to determine if the deliverables can be divided into
more than one unit of accounting. A deliverable can generally be considered a separate unit of accounting if both of the following
criteria are met: (1) the delivered item(s) has value to the customer on a stand-alone basis; and (2) if the arrangement includes
a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered
probable and substantially in control of the Company. Deliverables that cannot be divided into separate units are combined and
treated as one unit of accounting. Consideration received is allocated among the separate units of accounting based on the relative
selling price method. Deliverables under these arrangements typically include rights to intellectual property, research and development
services and involvement by the parties in steering committees. Historically, deliverables under the Company’s collaborative
research and development agreements have been deemed to have no stand-alone value and as a result have been treated as a single
unit of accounting. In addition, the Company analyzes its contracts and collaborative agreements to determine whether the payments
received should be recorded as revenue or as a reduction to research and development expenses. In reaching this determination,
management considers a number of factors, including whether the Company is principal under the arrangement, and whether the arrangement
is significant to, and part of, the Company’s core operations. Historically, payments received under its contracts and collaborative
agreements have been recognized as revenue since the Company acts as a principal in the arrangement and the activities are core
to its operations.
When the performance under
a fixed price contract can be reasonably estimated, revenue for fixed price contracts is recognized under
the proportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared
to total estimated contract costs. Costs incurred under fixed price contracts represent a reasonable measurement of proportional
performance of the work. Direct costs incurred under collaborative research and development agreements are recorded as research
and development expenses. If the performance under a fixed price contract cannot be reasonably estimated, the Company recognizes
the revenue on a straight-line basis over the contract term.
Revenue associated with
upfront payments under arrangements is recognized over the contract term or when all obligations associated with the upfront payment
have been satisfied.
Revenue from the achievement
of research and development milestones, if deemed substantive, is recognized as revenue when the milestones are achieved and the
milestone payments are due and collectible. If not deemed substantive, the Company would recognize such milestone as revenue upon
its achievement on a straight-line basis over the remaining expected term of the research and development period. Milestones are
considered substantive if all of the following conditions are met: (1) the milestone is non-refundable; (2) there is substantive
uncertainty of achievement of the milestone at the inception of the arrangement; (3) substantive effort is involved to achieve
the milestone and such achievement relates to past performance; and (4) the amount of the milestone appears reasonable in relation
to the effort expended and all of the deliverables and payment terms in the arrangement.
Net Loss per Share
Net loss per share is
computed using the weighted average number of shares of common stock outstanding. All outstanding stock options and unvested restricted
stock awards totaling 23,159,206 and 17,018,180 at September 30, 2015 and 2014, respectively, are excluded from the computation,
as their effect is antidilutive.
Recent Accounting Pronouncements
In May 2014, the Financial
Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09”), which supersedes nearly all existing revenue recognition guidance under Topic 605, Revenue Recognition.
The new standard requires a company to recognize revenue when it transfers goods and services to customers in an amount that reflects
the consideration that the company expects to receive for those goods or services. ASU 2014-09 defines a five-step process that
includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the
transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when
(or as) the entity satisfies the performance obligations. In July 2015, the FASB approved a one-year deferral of the effective
date of the new standard to 2018 for public companies, with an option that would permit companies to adopt the new standard as
early as the original effective date of 2017. Early adoption prior to the original effective date is not permitted. The Company
is evaluating the potential impact that ASU 2014-09 will have on its consolidated financial position and results of operations.
Note 4 – Fair Value Measurements
The
following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair
value on a recurring basis (in thousands):
| |
Fair Value at September 30, 2015 | | |
Fair Value at December 31, 2014 | |
Assets | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Money market funds | |
$ | 71,205 | | |
$ | ― | | |
$ | ― | | |
$ | 20,354 | | |
$ | ― | | |
$ | ― | |
Government-backed security | |
| ― | | |
| 28,000 | | |
| ― | | |
| ― | | |
| 7,500 | | |
| ― | |
Asset-backed securities | |
| ― | | |
| 17,501 | | |
| ― | | |
| ― | | |
| 46,624 | | |
| ― | |
Corporate debt securities | |
| ― | | |
| 167,798 | | |
| ― | | |
| ― | | |
| 89,097 | | |
| ― | |
Total cash equivalents and marketable
securities | |
$ | 71,205 | | |
$ | 213,299 | | |
$ | ― | | |
$ | 20,354 | | |
$ | 143,221 | | |
$ | ― | |
During
the nine months ended September 30, 2015, the Company did not have any transfers between levels.
The amounts in the Company’s
consolidated balance sheet for accounts receivable – billed, accounts receivable – unbilled and accounts payable approximate
fair value due to their short-term nature. Based on borrowing rates available to the Company, the fair value of capital lease
and notes payable approximates their carrying value. The Company’s milestone payment due to Wyeth (See Note 11) approximates
its fair value at September 30, 2015, as the liability has been calculated based on an anticipated future payment date discounted
at borrowing rates available to the Company.
Note 5 – Marketable Securities
Marketable securities
classified as available-for-sale as of September 30, 2015 and December 31, 2014 were comprised of (in thousands):
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
Amortized Cost | | |
Gross Unrealized
Gains | | |
Gross Unrealized
Losses | | |
Fair Value | | |
Amortized Cost | | |
Gross Unrealized
Gains | | |
Gross Unrealized
Losses | | |
Fair Value | |
Asset-backed securities | |
$ | 13,441 | | |
$ | ― | | |
$ | (1 | ) | |
$ | 13,440 | | |
$ | 46,660 | | |
$ | — | | |
$ | (36 | ) | |
$ | 46,624 | |
Corporate debt securities | |
| 138,569 | | |
| 47 | | |
| (14 | ) | |
| 138,602 | | |
| 89,126 | | |
| 8 | | |
| (37 | ) | |
| 89,097 | |
Total | |
$ | 152,010 | | |
$ | 47 | | |
$ | (15 | ) | |
$ | 152,042 | | |
$ | 135,786 | | |
$ | 8 | | |
$ | (73 | ) | |
$ | 135,721 | |
Marketable Securities –
Unrealized Losses
The Company owned 51 available-for-sale
securities as of September 30, 2015. Of these 51 securities, 27 had combined unrealized losses of less than $0.1 million as of
September 30, 2015. The Company did not have any investments in a loss position for greater than 12 months as of September 30,
2015. The Company has evaluated its marketable securities and has determined that none of these investments has an other-than-temporary
impairment, as it has no intent to sell securities with unrealized losses and it is not more likely than not that the Company
will be required to sell any securities with unrealized losses, given the Company’s current and anticipated financial position.
Note 6 – Goodwill and Other Intangible Assets
Goodwill
The change in the carrying
amounts of goodwill for the nine months ended September 30, 2015 was as follows (in thousands):
| |
Amount | |
Balance at December 31, 2014 | |
$ | 54,612 | |
Currency translation adjustments | |
| (1,550 | ) |
Balance at September 30, 2015 | |
$ | 53,062 | |
Identifiable Intangible Assets
Purchased intangible assets consisted of the
following as of September 30, 2015 and December 31, 2014 (in thousands):
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
Gross Carrying
Amount | | |
Accumulated Amortization | | |
Intangible Assets, Net | | |
Gross Carrying
Amount | | |
Accumulated Amortization | | |
Intangible Assets, Net | |
Finite-lived intangible assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Proprietary adjuvant technology | |
$ | 8,857 | | |
$ | (959 | ) | |
$ | 7,898 | | |
$ | 9,565 | | |
$ | (678 | ) | |
$ | 8,887 | |
Collaboration agreements | |
| 3,999 | | |
| (892 | ) | |
| 3,107 | | |
| 4,319 | | |
| (629 | ) | |
| 3,690 | |
Total identifiable intangible
assets | |
$ | 12,856 | | |
$ | (1,851 | ) | |
$ | 11,005 | | |
$ | 13,884 | | |
$ | (1,307 | ) | |
$ | 12,577 | |
Amortization expense for
the nine months ended September 30, 2015 and 2014 was $0.6 million and $0.8 million, respectively.
Estimated amortization
expense for existing intangible assets for the remainder of 2015 and for each of the five succeeding years ending December 31
will be as follows (in thousands):
Year | |
Amount | |
2015 (remainder) | |
$ | 214 | |
2016 | |
| 854 | |
2017 | |
| 854 | |
2018 | |
| 854 | |
2019 | |
| 854 | |
2020 | |
| 729 | |
Note 7 – Stockholders’ Equity
On June 18, 2015, the
Company’s stockholders of record as of April 20, 2015 approved the amendment to the Company’s Amended and Restated
Certificate of Incorporation (the “Charter Amendment”) to increase the total number of shares of common stock that
the Company is authorized to issue from 300,000,000 shares to 600,000,000 shares.
In March 2015, the Company
completed a public offering of 27,758,620 shares of its common stock, including 3,620,689 shares of common stock that were issued
upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $7.25 per share
resulting in proceeds, net of offering costs of $11.6 million, of approximately $190 million.
In 2012, the Company entered
into an At Market Issuance Sales Agreement (“Sales Agreement”), under which the Board of Directors of the Company
(the “Board”) approved the Company’s sale of up to an aggregate of $50 million in gross proceeds of its common
stock. These shares of common stock were offered pursuant to a shelf registration statement filed with the SEC in March 2013,
which replaced the previous shelf registration statement filed in 2010. The Board’s standing Finance Committee (the “Committee”)
assisted with its responsibilities to monitor, provide advice to the Company’s senior management and approve all capital
raising activities. In doing so, the Committee set the amount of shares to be sold, the period of time during which such sales
may occur and the minimum sales price per share. During the nine months ended September 30, 2015, the Company sold 1.4 million
shares at an average sales price of $10.63 per share, resulting in $14.6 million in net proceeds. The Sales Agreement has now
been fully utilized.
Note 8 – Stock-Based
Compensation
Stock Options
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
outstanding awards will continue in accordance with their terms. The Board adopted the 2015 Stock Incentive Plan (“2015
Plan”) in March 2015 and, consistent with historical practice, granted annual and new equity awards prior to the Company’s
annual meeting of stockholders in June 2015 under the 2015 Plan; however, these awards were contingent upon stockholder approval
of both the 2015 Plan and the Company’s Charter Amendment (See Note 7), both of which were 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 25,000,000 shares of common stock under equity awards granted under the plan. All such shares authorized for issuance under
the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.
The 2015 Plan permits
and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation
rights, and restricted stock units. 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 10 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 six months to four years.
Stock Options Awards
The following is a summary of option activity
under the 2015 Plan, 2005 Plan and the 1995 Stock Option Plan (“1995 Plan”) for the nine months ended September 30,
2015:
| |
2015 Plan | | |
2005 Plan | | |
1995 Plan | |
| |
Stock Options | | |
Weighted- Average
Exercise Price | | |
Stock Options | | |
Weighted- Average
Exercise Price | | |
Stock Options | | |
Weighted- Average
Exercise Price | |
Outstanding at January 1, 2015 | |
| — | | |
$ | — | | |
| 16,928,098 | | |
$ | 3.24 | | |
| 35,000 | | |
$ | 2.21 | |
Granted | |
| 7,661,441 | | |
$ | 9.02 | | |
| 22,500 | | |
$ | 6.70 | | |
| — | | |
$ | — | |
Exercised | |
| — | | |
$ | — | | |
| (1,159,395 | ) | |
$ | 2.30 | | |
| (35,000 | ) | |
$ | 2.21 | |
Canceled | |
| (102,188 | ) | |
$ | 9.00 | | |
| (191,250 | ) | |
$ | 3.71 | | |
| — | | |
$ | — | |
Outstanding at September 30, 2015 | |
| 7,559,253 | | |
$ | 9.02 | | |
| 15,599,953 | | |
$ | 3.30 | | |
| — | | |
$ | — | |
Shares exercisable at September 30, 2015 | |
| 240,000 | | |
$ | 8.94 | | |
| 8,275,828 | | |
$ | 2.53 | | |
| — | | |
$ | — | |
Shares available for grant at September 30, 2015 | |
| 17,440,747 | | |
| | | |
| | | |
| | | |
| | | |
| | |
As discussed in the “Stock
Options” section above, prior to the Company’s annual meeting of stockholders in June 2015, the Company granted
7,014,441 stock options with a weighted-average exercise price of $8.94 under the 2015 Plan. Since the 2015 Plan and the Charter
Amendment were approved at the Company’s annual meeting of stockholders in June 2015, the Company began to record stock-based
compensation expense for these awards at that time.
The fair value of stock
options granted under the 2015 Plan and 2005 Plan was estimated at the date of grant or the date upon which the 2015 Plan was
approved by the Company’s stockholders for stock options granted prior to that time using the Black-Scholes option-pricing
model with the following assumptions:
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Weighted-average Black-Scholes fair value
of stock options granted | |
$4.70 | |
$1.92 | |
$4.43 | |
$2.41 |
Risk-free interest rate | |
1.32%-1.39% | |
1.43%-1.51% | |
1.19%-2.13% | |
1.24%-2.22% |
Dividend yield | |
0% | |
0% | |
0% | |
0% |
Volatility | |
54.93%-57.17% | |
52.75%-54.25% | |
53.58%-68.39% | |
52.47%-67.93% |
Expected term (in years) | |
4.27-4.60 | |
4.10-4.27 | |
3.98-7.34 | |
4.04-6.96 |
Expected forfeiture rate | |
14.18%-16.33% | |
14.18%-16.33% | |
0%-16.33% | |
0%-23.15% |
The total aggregate intrinsic
value and weighted-average remaining contractual term of stock options outstanding under the 2015 Plan and 2005 Plan as of September
30, 2015 was approximately $58.8 million and 7.9 years, respectively. The total aggregate intrinsic value and weighted-average
remaining contractual term of stock options exercisable under the 2015 Plan and 2005 Plan as of September 30, 2015 was approximately
$37.5 million and 6.5 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 options) that would have been received by the option holders had all option holders exercised their options
on September 30, 2015. This amount is subject to change based on changes to the closing price of the Company’s common stock.
The aggregate intrinsic value of options exercised and vesting of restricted stock awards for the nine months ended September
30, 2015 and 2014 was $9.0 million and $1.8 million, respectively.
Employee Stock Purchase Plan
In April 2013, the Company
adopted an Employee Stock Purchase Plan (the “ESPP”), which authorized an aggregate of 2,000,000 shares of common
stock to be purchased, which will increase 5% on each anniversary of its adoption up to a maximum of 3,000,000 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). At September 30, 2015, there were 1,090,010 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:
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Range of Black-Scholes fair values of ESPP shares granted | |
$1.20-$3.38 | |
$0.97-$2.08 | |
$1.06-$3.38 | |
$0.78-$2.08 |
Risk-free interest rate | |
0.07%-0.35% | |
0.05%-0.24% | |
0.05%-0.35% | |
0.04%-0.24% |
Dividend yield | |
0% | |
0% | |
0% | |
0% |
Volatility | |
40.79%-64.24% | |
51.10%-67.57% | |
40.79%-64.24% | |
50.80%-67.57% |
Expected term (in years) | |
0.5-2.0 | |
0.5-1.5 | |
0.5-2.0 | |
0.5-1.5 |
Expected forfeiture rate | |
5% | |
5% | |
5% | |
5% |
Restricted Stock Awards
The following is a summary
of restricted stock awards activity for the nine months ended September 30, 2015:
| |
Number of Shares | | |
Per Share Weighted- Average Grant-Date Fair Value | |
Outstanding and Unvested at January 1, 2015 | |
| 15,000 | | |
$ | 4.48 | |
Restricted stock granted | |
| — | | |
$ | — | |
Restricted stock vested | |
| (15,000 | ) | |
$ | 4.48 | |
Restricted stock forfeited | |
| — | | |
$ | — | |
Outstanding and Unvested at September 30, 2015 | |
| ― | | |
$ | ― | |
The Company recorded all stock-based compensation
expense in the consolidated statements of operations as follows (in thousands):
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Research and development | |
$ | 2,240 | | |
$ | 780 | | |
$ | 4,361 | | |
$ | 1,955 | |
General and administrative | |
| 2,525 | | |
| 911 | | |
| 4,917 | | |
| 2,628 | |
Total stock-based compensation expense | |
$ | 4,765 | | |
$ | 1,691 | | |
$ | 9,278 | | |
$ | 4,583 | |
As of September 30, 2015,
there was approximately $33.7 million of total unrecognized compensation expense (net of estimated forfeitures) related to unvested
stock options and ESPP. This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period
of 1.5 years, and will be allocated between 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.
Note 9 – U.S.
Government Agreement, Joint Venture and Collaborations
HHS BARDA Contract
for Recombinant Influenza Vaccines
HHS BARDA initially awarded
the Company a contract in 2011, which funds the development of both the Company’s seasonal and pandemic influenza virus-like
particle (“VLP”) vaccine candidates. The contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses
the Company for allowable direct contract costs incurred plus allowable indirect costs and a fixed-fee earned in the ongoing clinical
development and product scale-up of its multivalent seasonal and monovalent pandemic H7N9 influenza VLP vaccine candidates. In
September 2014, HHS BARDA exercised and initiated a two-year option to the contract, which included scope to support development
activities leading up to planned Phase 3 clinical studies, added $70 million of funding on top of the remainder of the $97 million
base period funding, and extended the contract until September 2016. In June 2015, the contract was amended to increase the funding
by $7.7 million to allow for the recovery of additional costs under the contract relating to the settlement of indirect rates
for fiscal years 2011 and 2012. This additional amount was received and recorded as revenue in the three months ended June 30,
2015. During the three and nine months ended September 30, 2015, the Company recognized revenue of $6.3 million and $29.3 million,
respectively, and has recognized approximately $107 million in revenue since the inception of the contract. Billings under the
contract are based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general
and administrative expenses. These indirect rates are subject to audit by HHS BARDA on an annual basis. An audit of fiscal year
2013 has been initiated, but has not been completed as of the date of this filing. Management believes that revenue for periods
not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. When the final
determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period
that the adjustments are known and collection is probable.
In 2012, HHS BARDA withheld
payment on the outside costs of the Company’s Phase 2 clinical trial of its seasonal quadrivalent influenza VLP vaccine
candidate in Australia (“205 Trial”). Such outside costs were recorded as expenses in the period incurred as a cost
of government contracts revenue and the Company did not record revenue relating to such outside costs prior to the first quarter
of 2015 because collection of the amount was not reasonably assured. In late 2014, the U.S. Food and Drug Administration, Center
for Biologics Evaluation and Research (“FDA”) accepted the data from the 205 Trial as part of the Company’s
investigational new drug (“IND”) application for its seasonal quadrivalent influenza VLP vaccine candidate. In the
first quarter of 2015, HHS BARDA approved the reimbursement of the 205 Trial costs, and the Company recorded revenue of $3.1 million
as collection of the amount became reasonably assured during the period. The Company also collected this amount in 2015.
CPLB Joint Venture
In 2009, the Company formed
a joint venture with Cadila Pharmaceuticals Limited (“Cadila”) named CPL Biologicals Private Limited (“CPLB”)
to develop and manufacture vaccines, biological therapeutics and diagnostics in India. CPLB is owned 20% by the Company and 80%
by Cadila. The Company accounts for its investment in CPLB using the equity method. Because CPLB’s activities and operations
are controlled and funded by Cadila, the Company accounts for its investment using the equity method. Since the carrying value
of the Company’s initial investment was nominal and there is no guarantee or commitment to provide future funding, the Company
has not recorded nor expects to record losses related to this investment in the foreseeable future.
LG Life Sciences, Ltd. (“LGLS”)
License Agreement
In 2011, the Company entered
into a license agreement with LGLS that allows LGLS to use the Company’s technology to develop and commercially sell influenza
vaccines exclusively in South Korea and non-exclusively in certain other specified countries. At its own cost, LGLS is responsible
for funding both its clinical development of the influenza VLP vaccines and a manufacturing facility to produce such vaccines
in South Korea. Under the license agreement, the Company is obligated to provide LGLS with information and materials related to
the manufacture of the licensed products, provide on-going project management and regulatory support and conduct clinical trials
of its influenza vaccines in order to obtain FDA approval in the U.S. The term of the license agreement is expected to terminate
in 2027. Payments to the Company under the license agreement include an upfront payment of $2.5 million, reimbursements of certain
development and product costs, payments related to the achievement of certain milestones and royalty payments in the high single
digits from LGLS’s future commercial sales of influenza VLP vaccines. The upfront payment has been deferred and recorded
in deferred revenue in the consolidated balance sheets and will be recognized when the previously mentioned obligations in the
agreement are satisfied, which may not occur until the end of the term of the agreement. Payments for milestones under the agreement
will be recognized on a straight-line basis over the remaining term of the research and development period upon achievement of
such milestone. Any royalties under the agreement will be recognized as earned.
Bill & Melinda Gates
Foundation (“BMGF”) Grant Agreement
In support of the Company’s
development of its respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”)
for infants via maternal immunization, in September 2015, the Company entered into an agreement (“Grant Agreement”)
with BMGF, under which it was awarded a grant totaling up to $89.1 million (the “Grant”). The Grant will support development
activities, including the Company’s global Phase 3 clinical trial in pregnant women in their third trimester, product licensing
efforts and WHO prequalification of the RSV F Vaccine. The Company concurrently entered into a Global Access Commitments Agreement
(“GACA”) with BMGF as a part of the Grant Agreement. Under the terms of the GACA, among other things, the Company
agreed to make the RSV F Vaccine available and accessible at affordable pricing to people in certain low and middle income countries.
Unless earlier terminated by BMGF, the GACA will continue in effect until the latter of 15 years from its effective date, or 10
years after the first sale of a product under defined circumstances. The term of the GACA may be extended in certain circumstances,
by a period of up to five additional years. Payments received under the Grant Agreement are anticipated to be recognized in the
period in which the research activities are performed. Payments received in advance that are related to future performance are
deferred and recognized as revenue when the research activities are performed. Cash payments received under the Grant are restricted
as to their use until expenditures contemplated in the Grant are incurred. The Company didn’t recognize any revenue under
the Grant Agreement in the three months ended September 30, 2015.
PATH Vaccine Solutions (“PATH”)
Clinical Development Agreement
In 2012, the Company entered
into a clinical development agreement with PATH to develop its RSV F Vaccine for infants via maternal immunization in certain
low-resource countries. Under the terms of the PATH agreement, which expired in April 2015, the Company was awarded $6.8 million
by PATH to partially support Phase 2 clinical trials in women of childbearing age, reproductive toxicology studies and the development
of a Phase 3 clinical trial strategy. The Company recognized revenue of $0.5 million in the nine months ended September 30, 2015
and has recognized $6.8 million in revenue since the inception of the agreement. Revenue under this arrangement was being recognized
under the proportional performance method and earned in proportion to the contract costs incurred in performance of the work as
compared to total estimated contract costs. Costs incurred under this agreement represent a reasonable measurement of proportional
performance of the services being performed.
Note 10 –
Master Services Agreement with Cadila
The Company and Cadila
entered into a master services agreement pursuant to which the Company may request services from Cadila in the areas of biologics
research, preclinical development, clinical development, process development, manufacturing scale-up and general manufacturing
related services in India. In July 2011, and subsequently in March 2013, March 2014 and February 2015, the master services agreement
was amended to extend the term by one year for which services can be provided by Cadila under this agreement. Under the revised
terms, if, by March 31, 2016, the amount of services provided by Cadila is less than $7.5 million, the Company will pay Cadila
the portion of the shortfall amount that is less than or equal to $2.0 million. Through September 30, 2015, the Company has
purchased $7.2 million in services from Cadila pursuant to this agreement, which includes services provided, since the beginning
of 2013, by CPLB to the Company on behalf of Cadila pursuant to an October 2013 amendment authorizing such CPLB services. During
the nine months ended September 30, 2015, the Company purchased $1.5 million in services from Cadila pursuant to this agreement,
all of which were provided by CPLB on behalf of Cadila. As of September 30, 2015, the Company’s remaining obligation to
Cadila under the master services agreement is $0.3 million. The Company has recognized as an expense the entire amount of purchases
to date related to CPLB as the Company has not recorded any equity income (loss) of CPLB (see Note 9).
Note 11 –
License agreement with Wyeth Holding Corporation
In 2007, the Company entered
into an agreement to license certain rights from Wyeth Holding Corporation, a subsidiary of Pfizer Inc. (“Wyeth”).
The Wyeth license is a non-exclusive, worldwide license to a family of patents and patent applications covering VLP technology
for use in human vaccines in certain fields, with expected patent expiration in early 2022. The Wyeth license provides for the
Company to make an upfront payment (previously made), ongoing annual license fees, sublicense payments, milestone payments on
certain development and commercialization activities and royalties on any product sales. Except in certain circumstances in which
the Company continuously markets multiple products in a country within the same vaccine program, the milestone payments are one-time
only payments applicable to each related vaccine program. At present, the Company’s seasonal influenza VLP vaccine program
(including CPLB’s seasonal influenza program) and its pandemic influenza VLP vaccine program are the only two programs to
which the Wyeth license applies. The license may be terminated by Wyeth only for cause and may be terminated by the Company only
after it has provided ninety (90) days’ notice that the Company has absolutely and finally ceased activity, including through
any affiliate or sublicense, related to the manufacturing, development, marketing or sale of products covered by the license.
In September 2015, the Company entered into an amendment to the license agreement with Wyeth. Among other things, the amendment
restructures the $3 million milestone payment (“Milestone”) owed as a result of CPLB’s initiation of a Phase
3 clinical trial for its recombinant trivalent seasonal VLP influenza vaccine candidate in 2014. Under the amendment, the milestone
payment, which may increase slightly over time, shall be due in connection with the initiation of a Phase 3 clinical trial for
the initial seasonal influenza VLP vaccine candidate being developed outside India, but in any case no later than December 31,
2017. The amendment also restructures the final milestone payment to apply to the initial seasonal influenza VLP vaccine
candidate being developed outside India. Thus, the aggregate milestone payments for a seasonal influenza VLP vaccine candidate
developed and commercialized is increased from $14 million to up to $15 million. In connection with the execution of the amendment,
the Company agreed to pay a one-time only, upfront payment to Wyeth. The amendment also increases annual license maintenance fees
associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments under the agreement to Wyeth as of
September 30, 2015 aggregated $7.3 million. The Milestone was accrued for on the consolidated balance sheet in other current
liabilities at December 31, 2014. As a result of the September 2015 amendment discussed above, the Milestone payment is not expected
to occur within the next 12 months. Therefore, the Milestone has been accrued for, on a discounted basis calculated based on its
anticipated future payment date, in other non-current liabilities at September 30, 2015. The milestone was recorded as a research
and development expense in the third quarter of 2014.
Note 12 –
Facility Lease
In August 2015, the Company
amended the lease for its new facility located in Gaithersburg, Maryland to increase the amount of space leased by the Company
to now include the entire facility. The lease has a term expiring in 2026, unless terminated early by the Company in 2023. The
lease contains provisions for future rent increases and periods in which rent payments are reduced (abated). Also, the lease obligates
the Company to pay building operating costs. Under the terms of the amended lease, the landlord shall provide the Company with
a tenant improvement allowance of approximately $3.9 million.
Future minimum rental
commitments under non-cancelable leases are as follows (in thousands) as of September 30, 2015:
Year | |
Amount | |
2015 (remainder) | |
$ | 1,351 | |
2016 | |
| 5,656 | |
2017 | |
| 4,458 | |
2018 | |
| 4,291 | |
2019 | |
| 4,309 | |
Thereafter | |
| 18,457 | |
Total minimum lease payments | |
$ | 38,522 | |
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, about expectations, beliefs, plans, objectives, assumptions or future
events or performance of Novavax, Inc. (“Novavax”, and together with its wholly owned subsidiary Novavax AB, the “Company,”
“we” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements
include, without limitation, statements with respect to our capabilities, goals, expectations regarding future revenue and expense
levels; potential market sizes and demand for our product candidates; the efficacy, safety and intended utilization of our product
candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the
development of our preclinical product candidates; the conduct, timing and potential results from clinical trials and other preclinical
studies; plans for and potential timing of regulatory filings; the expected timing and content of regulatory actions; reimbursement
by Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“HHS BARDA”); payments
under our license with Wyeth Holding Corporation, a subsidiary of Pfizer Inc. (“Wyeth”); payments by the Bill &
Melinda Gates Foundation (“BMGF”); our available cash resources and the availability of financing generally, plans
regarding partnering activities, business development initiatives and the adoption of stock incentive plans, and other factors
referenced herein. You generally can identify these forward-looking statements by 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,” or “assume”
or the negative of these terms, or other comparable terminology, although not all forward-looking statements contain these words.
Accordingly, these
statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed
or implied in them. Any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate or materially
different than actual results.
Because the risk factors
discussed in this Quarterly Report and identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014,
and other risk factors of which we are not aware, could cause actual results or outcomes to differ materially from those expressed
in any forward-looking statements made by or on behalf of us, you should not place undue reliance on any such forward-looking statements.
These statements are subject to risks and uncertainties, known and unknown, which could cause actual results and developments to
differ materially from those expressed or implied in such statements. We have included important factors in the cautionary statements
included in this Quarterly Report, particularly those identified in Part II, Item 1A “Risk Factors,” and in Part I,
Item 1A “Risk Factors” of our Annual Report on Form 10-K, that we believe could cause actual results or events to differ
materially from the forward-looking statements that we make. These and other risks may also be detailed and modified or updated
in our reports and other documents filed with the Securities and Exchange Commission (“SEC”) from time to time. You
are encouraged to read these filings as they are made.
Although we believe
that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels
of activity, performance or achievement. Further, any forward-looking statements speak only as of the date on which 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.
Overview
We are a clinical-stage
vaccine company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants.
Using innovative proprietary recombinant nanoparticle vaccine technology, we produce vaccine candidates to efficiently and effectively
respond to both known and newly emerging diseases. Our vaccine candidates are genetically engineered three-dimensional nanostructures
that incorporate immunologically important proteins. Our product pipeline targets a variety of infectious diseases with vaccine
candidates currently in clinical development for respiratory syncytial virus (“RSV”), seasonal influenza, pandemic
influenza and Ebola virus (“EBOV”). We have additional preclinical stage programs in a variety of infectious diseases,
including Middle East Respiratory Syndrome (“MERS”). Further, CPL Biologics Private Limited (“CPLB”), our
joint venture company with Cadila Pharmaceuticals Limited (“Cadila”) in India, is actively developing a number of vaccine
candidates that were genetically engineered by us, including its trivalent seasonal virus-like particle (“VLP”) influenza
vaccine candidate that successfully completed a Phase 3 clinical trial in India in 2014, and its rabies vaccine that successfully
completed a Phase 1/2 clinical trial in India in 2014. CPLB is owned 20% by us and 80% by Cadila. CPLB operates a manufacturing
facility in India for the production of vaccines.
We are also developing
proprietary technology for the production of immune stimulating saponin-based adjuvants, through our Swedish wholly owned subsidiary,
Novavax AB. Our Matrix™ adjuvant technology utilizes selected quillaja fractions, which form separate matrix structures,
to develop multi-purpose immune-modulating adjuvant products for a broad range of potential vaccine applications. Our lead adjuvant
for human applications, Matrix-M™, has been successfully tested in a Phase 1/2 clinical trial for our pandemic H7N9 influenza
VLP vaccine candidate, conducted under our contract with HHS BARDA, and in a Phase 1 clinical trial for our EBOV vaccine candidate.
Genocea Biosciences, Inc. (“Genocea”) has licensed rights to our Matrix technology and is developing its herpes simplex
2 vaccine candidate using Matrix-M.
Clinical Product Pipeline
A current summary of
our significant research and development programs, along with the programs of our joint venture, CPLB, and status of the related
products in development follows:
Program |
|
Development Stage |
|
Funding Collaborator |
|
|
|
|
|
Respiratory Syncytial Virus (RSV) |
|
|
|
|
·Older Adults |
|
Phase 3 |
|
|
·Maternal Immunization |
|
Phase 2 |
|
BMGF* |
·Pediatrics |
|
Phase 1 |
|
|
|
|
|
|
|
Influenza |
|
|
|
|
·Seasonal Quadrivalent |
|
Phase 2 |
|
HHS BARDA |
·Pandemic H7N9 |
|
Phase 2 |
|
HHS BARDA |
|
|
|
|
|
Other |
|
|
|
|
·Ebola Virus (EBOV) |
|
Phase 1 |
|
|
·Combination (Influenza/RSV) |
|
Preclinical |
|
|
|
|
|
|
|
CPLB Programs (India) |
|
|
|
|
·Seasonal Influenza |
|
Phase 3 |
|
|
·Rabies |
|
Phase 1/2 |
|
|
*As detailed herein, our funding and development
arrangement with PATH expired in April 2015; we entered into a grant agreement with BMGF in September 2015.
Respiratory Syncytial Virus (RSV)
RSV is a major
respiratory pathogen with a significant burden of disease in the very young and in older adults. In healthy adults, RSV
infections are generally mild to moderate in severity, but are typically more severe in infants and young children, as well
as adults over the age of 60.1 Globally, RSV is a
common cause of childhood respiratory infection, with a disease burden of 64 million cases and approximately 160,000 deaths
annually.2 Severe RSV disease results in
3.4 million hospital admissions per year globally3 and
disproportionately affects infants below six months of age. In infants, toddlers and young pre-school and
school-age children, RSV infections result in the need for frequent medical care, including emergency room and office visits
and are associated with increased recurrent wheezing that can persist for years. In the U.S., RSV is the leading cause of
hospitalization of infants.4 Despite the induction
of post-infection immunity, repeat infection and lifelong susceptibility of RSV is common.5 It
is also estimated that approximately 14,000 older and high risk adults die of RSV infection or its complications annually in
the U.S., and as many as 177,000 are hospitalized for serious respiratory symptoms.6 Currently,
there is no approved RSV vaccine available for any of these populations, so an RSV vaccine has the potential to protect
millions of people from this far-reaching unmet medical need.
1
Dawson-Caswell, D, et al., (2011) Am Fam Physician. 83:143 - 146
2
Nair, H., et al., (2010) Lancet. 375:1545 - 1555
3
WHO, (2014) “RSV Vaccine Status;” www.who.int/immunization/research/meetings_workshops/WHO_PDVAC_RSV.pdf
4
Hall, CB, et al., Respiratory Syncytial Virus-Associated hospitalizations Among
Children Less Than 24 Months of Age. Pediatrics, 2013; 132(2): E341-348
5
Glezen, W.P. et al. Risk of primary infection and reinfection with respiratory
syncytial virus. Am J Dis Child, 1986; 140:543-546
6 Falsey,
A., et al., (2014) Infectious Disorders. 12(2): 98-102
We are developing our
respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) for the benefit of
three susceptible target populations: older adults 60 years of age and older, infants via maternal immunization (receiving protection
through antibodies transferred from their mothers who would be immunized during the last trimester of pregnancy) and children between
six months and five years of age (“pediatrics”).
RSV Older Adults
Program
In
August 2015, we announced positive top-line data from a Phase 2 clinical trial of our RSV F Vaccine in 1,600 older adults (≥60
years of age). The clinical trial was designed to prospectively examine the incidence of all symptomatic respiratory illnesses
associated with RSV infection, in community-living older adults who were treated with placebo. The trial also evaluated safety
and immunogenicity of our RSV F Vaccine compared to placebo. Finally, the trial estimated the efficacy of the RSV F Vaccine in
reducing the incidence of respiratory illness due to RSV. The trial was the first to demonstrate efficacy of an active RSV immunization
in any clinical trial population. In the per the protocol population, the clinical trial showed statistically significant vaccine
efficacy in prevention of all symptomatic RSV disease (44%) and, by ad hoc analysis, showed a decrease in RSV disease with symptoms
of lower respiratory tract infection (45%)7 in older
adults. The trial established an attack rate for symptomatic RSV disease of 4.9% in older adults, 95% of which included lower respiratory
track symptoms. Efficacy against more severe RSV illness, defined by the presence of multiple lower respiratory tract symptoms
associated with difficulty breathing, was 64% in ad hoc analyses.
In
November 2015, we announced that we had initiated a pivotal Phase 3 clinical trial of our RSV F Vaccine for which we plan to
enroll up to 11,850 older adults at 60 sites in the U.S. The primary objective of the clinical trial is the prevention of
moderate-severe RSV-associated lower respiratory tract disease, as defined by the presence of multiple lower respiratory
tract symptoms. We expect to provide top-line data from this clinical trial in approximately one year.
In
addition, in October 2015, we announced that we had initiated a Phase 2 rollover clinical trial of our RSV F Vaccine designed to
enroll the same 1,600 older adults who participated in the recently concluded prior Phase 2 clinical trial. The clinical trial
is designed to evaluate safety and immunogenicity in response to immunization with the RSV F Vaccine during a second RSV season
and we expect to provide top-line data in approximately one year.
7 Interim
analysis initially reported 46%; 4 subjects subsequently re-categorized as RSV + URI only, resulting in adjusted number of 45%.
RSV Infants via
Maternal Immunization Program
In September 2015,
we announced positive top-line data from a Phase 2 clinical trial of our RSV F Vaccine in
50 healthy pregnant women in their third trimester. This clinical trial evaluated the safety and immunogenicity of the RSV
F Vaccine in healthy pregnant women; it also assessed the transplacental transfer of maternal antibodies induced by the vaccine,
the impact of maternal immunization on infant safety during the first year of life and RSV-specific antibody levels through the
infants' first six months of life. Immunized women demonstrated geometric mean 14-fold rises in anti-F IgG, 29-fold rise in palivizumab
competing antibodies, and 2-fold rise in microneutralization titers, versus women who received placebo who demonstrated no significant
change in antibody levels. The infants’ antibody levels at delivery, on average, equaled 90-100% of the mothers’ levels.
The estimated half-lives of infant PCA, anti-F IgG, RSV/A and RSV/B microneutralizing antibodies, based on data through day 60,
were 41, 30, 36 and 34 days, respectively. We anticipate that the next steps in the development
of the RSV F Vaccine for the protection of infants via maternal immunization will include the initiation of a pivotal Phase 3 global
clinical trial, with sites located in the U.S. and other countries. Although initiation of this Phase 3 clinical trial may be contingent
on discussions with regulatory authorities, it is our current expectation that we will begin to enroll participants in the first
quarter of 2016. The group-sequential adaptive design of this Phase 3 trial is expected to take between two to four years to complete.
In November 2014, we
announced that the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (“FDA”) had granted
Fast Track Designation to our RSV F Vaccine for protection of infants via maternal immunization. The Fast Track designation, established
by the FDA Modernization Act of 1997, is intended for products that treat serious or life-threatening diseases or conditions, and
that demonstrate the potential to address unmet medical needs for such diseases or conditions. The program is intended to facilitate
development and expedite review of drugs to treat serious and life-threatening conditions so that an approved product can reach
the market expeditiously. Fast Track designation specifically facilitates meetings to discuss all aspects of development to support
licensure and it provides the opportunity to submit sections of a Biologics License Application (“BLA”) on a rolling
basis as data become available, which permits the FDA to review modules of the BLA as they are received instead of waiting for
the entire BLA submission.
Bill & Melinda Gates
Foundation Grant Agreement
In support of our development
of our RSV F Vaccine for infants via maternal immunization, in September 2015, we entered into an agreement (“Grant Agreement”)
with BMGF, under which we were awarded a grant totaling up to $89.1 million (the “Grant”). The Grant will support development
activities, including our global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and
WHO prequalification of our RSV F Vaccine. We concurrently entered into a Global Access Commitments Agreement (“GACA”)
with BMGF as a part of the Grant Agreement. Under the terms of the GACA, among other things, we agreed to make the RSV F Vaccine
available and accessible at affordable pricing to people in certain low and middle income countries. Unless earlier terminated
by BMGF, the GACA will continue in effect until the latter of 15 years from its effective date, or 10 years after the first sale
of a product under defined circumstances. The term of the GACA may be extended in certain circumstances, by a period of up to five
additional years.
PATH Vaccine Solutions
(“PATH”) Clinical Development Agreement for RSV Maternal Program
In 2012, we entered
into a clinical development agreement with PATH to develop our RSV F Vaccine for infants via maternal immunization in certain low-resource
countries. Under the term of the PATH agreement, which expired in April 2015, we were awarded $6.8 million by PATH to partially
support our Phase 2 clinical trials in women of childbearing age, reproductive toxicology studies and the development of a Phase
3 clinical trial strategy.
RSV Pediatrics
Program
In September 2015,
we announced positive top-line data from our Phase 1 clinical trial of our RSV F Vaccine in healthy children between two and six
years of age. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine, with one or two doses, with or
without aluminum phosphate adjuvant. We concluded this trial’s enrollment with a smaller than planned cohort so that dosing
could be completed ahead of the 2014-15 RSV season. We announced that serum samples, collected from 18 immunized children, demonstrated
that the RSV F Vaccine was well-tolerated and highly immunogenic at all formulations and regimens and there were greater than 10-fold
increases in both anti-F IgG and PCA antibody titers in the adjuvanted group and greater than 6-fold increases in anti-F IgG and
PCA antibody titers in the unadjuvanted group. We are assessing the data from this clinical trial and evaluating the next steps
in the development of our RSV F Vaccine for pediatrics.
Influenza
Influenza is a world-wide
infectious disease that causes illness in humans with symptoms ranging from mild to life-threatening; serious illness occurs not
only in susceptible populations such as pediatrics and older adults, but also in the general population because of unique strains
of influenza for which most humans have not developed protective antibodies. Influenza is a major burden on public health worldwide:
estimates of one million deaths each year are attributed to influenza.8
It is further estimated that, each year, influenza attacks between 5% and 10% of adults and 20% to 30% of children, causing significant
levels of illness, hospitalization and death.9
Although a number
of licensed seasonal influenza vaccines are currently commercially available in most geographies, and these manufacturers have
capabilities to develop influenza vaccines that are responsive to unique and emerging influenza strains, we believe our influenza
VLP vaccine candidates have immunological advantages over currently available vaccines. These immunological advantages stem from
the fact that our influenza VLPs contain three of the major structural virus proteins that are important for fighting influenza:
hemagglutinin (“HA”) and neuraminidase (“NA”), both of which stimulate the body to produce antibodies
that neutralize the influenza virus and prevent its spread through the cells in the respiratory tract, and matrix 1 (“M1”),
which stimulates cytotoxic T lymphocytes to kill cells that may already be infected. Our VLPs are not made from live viruses and
have no genetic nucleic material in their inner core, which render them incapable of replicating and causing disease. We also
believe there are inherent advantages to our vaccine platform technology for more rapid and efficient development of new influenza
vaccine candidates.
Seasonal Quadrivalent
Influenza Vaccine
Developing and commercializing
a seasonal influenza vaccine is an important business opportunity and strategic goal for us. The Advisory Committee for Immunization
Practices of the Center for Disease Control and Prevention (“CDC”) recommends that all persons aged six months and
older should be vaccinated annually against seasonal influenza. In conjunction with these universal recommendations, attention
from the 2009 influenza H1N1 pandemic, along with reports of other cases of avian-based influenza strains, has increased public
health awareness of the importance of seasonal influenza vaccination, the market for which is expected to continue to grow worldwide
in both developed and developing global markets.
In recent years,
public health authorities have advocated for the development and licensure of quadrivalent (i.e., four influenza
strains: two influenza A strains and two influenza B strains) influenza vaccines. It is expected that quadrivalent seasonal
influenza vaccines will ultimately replace trivalent seasonal influenza vaccines in the global market. There are currently
four quadrivalent influenza vaccines licensed in the U.S., although additional quadrivalent seasonal influenza vaccines are
expected to be licensed over the next several years. Current estimates for seasonal influenza vaccine growth in the top seven
markets (U.S., Japan, France, Germany, Italy, Spain and UK), show potential growth from approximately $3.2 billion in the
2012/13 season to $5.3 billion by the 2021/2022 season.10 Recombinant seasonal influenza vaccines, like the candidate we are developing, have an important advantage:
once licensed for commercial sale, large quantities of vaccines can be quickly and cost-effectively manufactured without the
use of either the live influenza virus or eggs.
8
Resolution of the World Health Assembly. Prevention and control of influenza pandemics
and annual epidemics. WHA56.19. 28 May 2003
9 WHO.
Vaccines against influenza. WHO position paper – November 2012 Weekly Epidemiol Record 2012;87(47):461–76.
10 Influenza
Vaccines Forecasts. Datamonitor (2013)
In July 2015, we reported
positive data from our Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccine candidate in 400 healthy adults
that we initiated in November 2014 under our contract with HHS BARDA. These data show that our quadrivalent seasonal influenza
VLP vaccine candidate is both safe and well-tolerated, with results that met the immunogenicity targets. These results demonstrate
the potential for our seasonal quadrivalent influenza VLP vaccine candidate to meet the FDA criteria for accelerated approval.
We are assessing these data from this trial, and in conjunction with HHS BARDA, we are evaluating the next steps in the development
of our quadrivalent seasonal influenza VLP vaccine candidate.
Pandemic H7N9 Influenza Vaccine
In the aftermath of
the 2009 pandemic of the A(H1N1) influenza strain, prevention of the potential devastation of a human influenza pandemic remains
a key priority with both governmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1
influenza pandemic led to the production of approximately 126 million doses of monovalent (single strain) vaccine. Public health
awareness and government preparedness for the next potential influenza pandemic are driving development of vaccines that can be
manufactured quickly against a potentially threatening influenza strain. Until the spring of 2013, industry and health experts
focused attention on developing a monovalent H5N1 influenza vaccine as a potential key defense against a future pandemic threat;
however, a significant number of reported cases in China of an avian-based influenza strain, known as A(H7N9), has shifted attention
to the potential development of a monovalent H7N9 influenza vaccine.
In collaboration with
HHS BARDA, we have now developed and delivered compelling safety and immunogenicity data on two pandemic vaccine candidates, H5N1
and H7N9, which provide the U.S. government with alternatives for dealing with future potential threats. In September 2014, we
announced positive results from a Phase 1/2 clinical trial of our H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M
in 610 healthy adults. Under our contract with HHS BARDA, the Phase 1/2 clinical trial was designed as a dose-ranging, randomized,
observer-blinded, placebo-controlled clinical trial, to determine the contribution of Matrix-M to potential antigen dose sparing
regimens. Our H7N9 influenza VLP vaccine candidate, with and without Matrix-M, was well tolerated and demonstrated a safety profile
similar to our prior experience with another saponin-based adjuvant. Matrix-M adjuvanted formulations demonstrated immunogenicity
and dose-sparing benefits relative to unadjuvanted antigen. Hemagglutination-inhibiting antibody titers were generally comparable
to those reported in prior studies with another saponin adjuvant and the vaccine also elicited significant anti-neuraminidase antibodies.
In October 2014, we announced that the FDA had granted fast track designation to our H7N9 influenza VLP vaccine candidate with
Matrix-M. Along with our quadrivalent seasonal influenza vaccine program and in conjunction with HHS BARDA, we are currently evaluating
the next steps in the development our pandemic influenza VLP vaccine candidate.
Potential Accelerated
Approval Pathway for Influenza
According to FDA guidance,
influenza vaccine developers that can demonstrate results that meet or exceed certain specified immunogenicity endpoint criteria
for seroprotection and seroconversion in their clinical trials may, at the FDA’s discretion, be granted a license to market
a product prior to submission of traditional clinical endpoint efficacy trial data. This is referred to as “accelerated approval”
of a BLA (the biologic equivalent to a New Drug Application). It should be noted that FDA licensure based on accelerated approval
requires sponsors to conduct a post-licensure efficacy study to demonstrate the clinical benefit of the vaccine, which would thereby
support traditional approval of the vaccine. Because it is not possible to conduct a clinical endpoint efficacy study for a pandemic
vaccine in advance of a declared pandemic, FDA’s pandemic guidance allows for submission of seasonal influenza clinical efficacy
data for the purpose of confirming clinical benefit of a pandemic vaccine manufactured by the same process. Thus, the demonstration
of efficacy with a seasonal vaccine provides a key link between the seasonal and pandemic programs. Accelerated approval further
necessitates a shortage of influenza vaccine relative to the total population recommended to receive such vaccine, a situation
that persists with seasonal influenza vaccines.
Although we have not
ruled out this accelerated approval approach, particularly for our pandemic influenza program or certain populations within our
seasonal influenza program, we do not expect to pursue accelerated approval of our quadrivalent seasonal influenza VLP vaccine
candidate, largely because of the uncertainty as to whether the accelerated approval pathway will be available to us at the time
of our BLA submission and the unknown ability of current and new influenza strains to meet such accelerated approval criteria.
We are planning, therefore, to pursue traditional licensure of our quadrivalent seasonal influenza VLP vaccine candidate by conducting
a clinical endpoint efficacy study for the purpose of submitting the data within the original BLA. These efficacy data will also
support the requirement for clinical efficacy data for our pandemic vaccine program. We plan to discuss with the FDA our licensure
pathways (both the traditional pathway for seasonal and possible accelerated pathways for pandemic and certain populations within
the seasonal program) during future formal meetings. The likely impact of such an efficacy trial would be an additional year or
more before the FDA grants licensure to our quadrivalent seasonal influenza VLP vaccine candidate.
HHS BARDA Contract
for Recombinant Influenza Vaccines
HHS BARDA awarded us
a contract in 2011, which funds the development of both our multivalent seasonal influenza and pandemic influenza VLP vaccine candidates.
Our contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses us for allowable direct contract costs incurred
plus allowable indirect costs and a fixed-fee earned in the ongoing clinical development and product scale-up of our multivalent
seasonal and monovalent pandemic influenza vaccines. In September 2014, we announced that HHS BARDA had exercised and initiated
a two-year option to our contract, which not only extended the contract until September 2016, but also added scope to support our
development activities leading up to planned Phase 3 clinical studies and $70 million of funding on top of the remainder of the
$97 million base period funding. In June 2015, the contract was amended to increase the funding by $7.7 million to allow for the
recovery of additional costs under the contract relating to the settlement of indirect rates for fiscal years 2011 and 2012. This
additional amount was received and recorded as revenue in the second quarter of 2015. During the nine months ended September 30,
2015, we recognized revenue of $29.3 million and have recognized approximately $107 million in revenue since the inception of the
contract. In recent meetings with HHS BARDA, we have been discussing the next steps in both our seasonal influenza VLP vaccine
program and our pandemic influenza VLP vaccine program, as well as some of the delays associated with our development of both vaccine
candidates. We expect to continue discussions with HHS BARDA into 2016 and to present plans for continued clinical and product
development, although there can be no guarantee that the HHS BARDA contract will not be terminated or will be extended beyond September
2016.
Other
Ebola Virus (EBOV)
Beginning in 2014,
a number of news reports have centered around EBOV, formerly known as Ebola hemorrhagic fever, which is a severe, often fatal illness
in humans. Five strains of EBOV have been identified, the most recent of which, the Makona EBOV strain (formerly referred to as
the 2014 Guinea-based EBOV strain), is associated with a case fatality rate of 50% to 90%. There are currently no licensed treatments
proven to neutralize the virus, but a range of blood, immunological and drug therapies are under development. Despite the development
of such therapies, current vaccine approaches target either a previous strain of the virus or were initially developed to be delivered
by genetic vectors. Our EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) was developed using the Makona EBOV
strain.
In July 2015, we announced
data from our Phase 1 clinical trial of our Ebola GP Vaccine in ascending doses, with and without our Matrix-M adjuvant, in 150
healthy adults that we initiated in February 2015. Participants received either one or two intramuscular injections ranging from
6.5µg to 50µg of antigen. Immunogenicity was assessed at multiple time points, including days 28 and 35. These Phase
1 data show that our Ebola GP Vaccine is highly immunogenic, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant,
resulted in significant antigen dose-sparing. Although the adjuvanted Ebola GP Vaccine was highly immunogenic at all dose levels,
the adjuvanted two-dose regimens induced Ebola anti-GP antibody geometric mean responses between 45,000 and 70,000 ELISA units,
representing a 500 to 750-fold rise over baseline at day 35. In addition, in the first quarter of 2015, we announced successful
data from two separate non-human primate challenge studies of our Ebola GP Vaccine in which,
in both cases, the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected. Large-scale
global clinical trials towards licensure of our Ebola GP Vaccine will be developed based on the published results of our Phase
1 clinical trial and in collaboration with global regulatory authorities and world health agencies.
Combination Respiratory
(Influenza and RSV)
Given the ongoing development
of our quadrivalent seasonal influenza VLP vaccine candidate and our RSV F Vaccine, we see an important opportunity to develop
a combination respiratory vaccine candidate. This opportunity presents itself most evidently in older adults, although we have
not ruled out developing a combination respiratory vaccine for other populations. Early preclinical development efforts have given
us confidence that such a combination vaccine is viable, and in animal models, provides acceptable immunogenicity. We intend to
explore this development opportunity by conducting a Phase 1 clinical trial in such a combination vaccine in the second half of
2016.
CPLB Programs (India)
Seasonal Influenza
CPLB successfully completed
its Phase 3 clinical trial of its recombinant trivalent seasonal VLP influenza vaccine candidate in 2014 and filed for regulatory
market authorization, the Indian equivalent of a BLA, in the second quarter of 2015. As part of its strategy to establish a regulatory
pathway for the recombinant trivalent seasonal VLP influenza vaccine, CPLB had previously completed a Phase 3 clinical trial of
its monovalent H1N1 seasonal influenza vaccine in 2014, and subsequently filed for and received regulatory approval in the first
quarter of 2015. While this marks the first approval of a Novavax VLP vaccine, the market for seasonal influenza vaccines is dominated
by multivalent vaccines and there are no current expectations for sales from CPLB’s monovalent H1N1 seasonal product.
Rabies
CPLB successfully completed
Stage II of its Phase 1/2 clinical trial in India of a rabies G protein vaccine candidate that we genetically engineered. The objective
was to develop a recombinant vaccine that can be administered both as a pre-exposure prophylaxis for residents of certain higher-risk
geographies and travelers to such locations, and as a post-exposure prophylaxis using fewer doses than the current standard of
care. In October 2014, CPLB presented clinical results from Stage I of the Phase 1/2 clinical trial, demonstrating that all vaccine
recipients, at various doses levels and schedules, showed seroprotective antibody levels at day 14 that were sustained through
day 180. The vaccine candidate, which was found to be safe and well-tolerated, also induced seroprotective levels with two-dose
and three-dose regimens. CPLB filed an application to initiate a Phase 3 clinical trial in the third quarter of 2015, which would
likely initiate in 2016.
Discovery Programs
Our vaccine platform
technology provides an efficient system to rapidly develop antigens to selected targets, refine manufacturing processes and optimize
development across multiple vaccine candidates. We pay close attention to global reports of emerging diseases for which there do
not appear to be immediate cures and where a vaccine protocol could offer potential protection. In addition to our response to
the A(H7N9) influenza strain (as previously discussed), we have been monitoring reports concerning MERS, a novel coronavirus first
identified in 2012. MERS became a potential emerging threat in 2013 and is currently being monitored by global health agencies,
with the WHO reporting significant confirmed cases of infection and deaths. The MERS virus is a part of the coronavirus family
that includes the severe acute respiratory syndrome coronavirus (“SARS”). Because of the public health priority given
to MERS, within weeks of getting the virus’ sequence, we successfully produced a vaccine candidate designed to provide protection
against MERS. This vaccine candidate, which was made using our recombinant nanoparticle vaccine technology, is based on the major
surface spike protein, which we had earlier identified as the antigen of choice in our work with a SARS vaccine candidate. In April
2014, in collaboration with the University of Maryland, School of Medicine, we published results that showed our investigational
vaccine candidates against both MERS and SARS blocked infection in laboratory studies. Although the development of a MERS vaccine
candidate currently remains a preclinical program, we believe that our MERS vaccine candidate offers a viable option to interested
global public health authorities.
Sales of Common Stock
In March 2015, we completed
a public offering of 27,758,620 shares of our common stock, including 3,620,689 shares of common stock that were issued upon the
exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $7.25 per share resulting
in net proceeds of approximately $190 million.
In June 2014, we completed
a public offering of 28,750,000 shares of our common stock, including 3,750,000 shares of common stock that were issued upon the
exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $4.00 per share resulting
in net proceeds of approximately $108 million.
In 2012, we entered
into an At Market Issuance Sales Agreement (“Sales Agreement”), under which our Board of Directors (the “Board”)
approved the sale of up to an aggregate of $50 million in gross proceeds of our common stock. The shares of common stock have been
offered pursuant to a shelf registration statement filed with the SEC in March 2013, which replaced the previous shelf registration
statement filed in 2010. The Board’s standing Finance Committee (the “Committee”) assisted with its responsibilities
to monitor, provide advice to our senior management and approve all capital raising activities. In doing so, the Committee set
the amount of shares to be sold, the period of time during which such sales may occur and the minimum sales price per share. During
the nine months ended September 30, 2015, we sold 1.4 million shares at an average sales price of $10.63 per share, resulting in
approximately $15 million in net proceeds. The Sales Agreement has now been fully utilized.
Critical Accounting
Policies and Use of Estimates
There are no material
changes to our critical accounting policies as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014, as filed with the SEC.
Recent Accounting
Pronouncements Not Yet Adopted
We have considered
the applicability and impact of all Financial Accounting Standards Board’s (“FASB”) Accounting Standards Updates
(ASUs). In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”),
which supersedes nearly all existing revenue recognition guidance under Topic 605, Revenue Recognition. The new standard
requires a company to recognize revenue when it transfers goods and services to customers in an amount that reflects the consideration
that the company expects to receive for those goods or services. ASU 2014-09 defines a five-step process that includes identifying
the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating
the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies
the performance obligations. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard
to 2018 for public companies, with an option that would permit companies to adopt the new standard as early as the original effective
date of 2017. Early adoption prior to the original effective date is not permitted. We are evaluating the potential impact that
ASU 2014-09 will have on our consolidated financial position and results of operations.
Results of Operations
The following is a
discussion of the historical financial condition and results of operations of the Company and should be read in conjunction with
the financial statements and notes thereto set forth in this Quarterly Report.
Three Months Ended September 30, 2015
and 2014 (amounts in tables are presented in thousands, except per share information)
Revenue:
| |
Three Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Revenue: | |
| | | |
| | | |
| | |
Total revenue | |
$ | 6,525 | | |
$ | 8,214 | | |
$ | (1,689 | ) |
Revenue for the three
months ended September 30, 2015 was $6.5 million as compared to $8.2 million for the same period in 2014, a decrease of $1.7 million
or 21%. Revenue for the three months ended September 30, 2015 and 2014 is primarily comprised of services performed under the HHS
BARDA contract, and to a much lesser extent, the prior PATH clinical development agreement. The decrease in revenue is due to a
lower level of activity in the three months ended September 30, 2015 associated with our Phase 2 seasonal influenza clinical trial
as compared to our Phase 1/2 clinical trial of our H7N9 pandemic VLP candidate in the same period in 2014 under the HHS BARDA contract.
For 2015, we expect
an increase in revenue primarily due to the recovery of additional costs under the HHS BARDA contract for the settlement of indirect
rates for fiscal years 2011 and 2012, which occurred in the second quarter of 2015, and development activities under the BMGF grant
agreement.
Costs and Expenses:
| |
Three Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Costs and Expenses: | |
| | | |
| | | |
| | |
Cost of government contracts revenue | |
$ | 2,747 | | |
$ | 4,027 | | |
$ | (1,280 | ) |
Research and development | |
| 27,917 | | |
| 19,219 | | |
| 8,698 | |
General and administrative | |
| 9,060 | | |
| 4,757 | | |
| 4,303 | |
Total costs and expenses | |
$ | 39,724 | | |
$ | 28,003 | | |
$ | 11,721 | |
Cost
of Government Contracts Revenue
Cost of government
contracts revenue includes direct costs of salaries, laboratory supplies, consultants and subcontractors and other direct costs
associated with our process development, manufacturing, clinical, regulatory and quality assurance activities under research contracts.
Cost of government contracts revenue decreased to $2.7 million for the three months ended September 30, 2015 from $4.0 million
for the same period in 2014, a decrease of $1.3 million, or 32%. The decrease in cost of government contracts revenue is primarily
related to a lower level of activity in the three months ended September 30, 2015 associated with our Phase 2 seasonal influenza
clinical trial as compared to our Phase 1/2 clinical trial of our H7N9 pandemic VLP candidate in the same period in 2014. For 2015,
we expect a decrease in cost of government contracts revenue primarily due to lower level of project development activities under
our HHS BARDA contract in 2015 as compared to 2014.
Research and
Development Expenses
Research and development
expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associated with our process development,
manufacturing, clinical, regulatory and quality assurance activities for internally funded programs. In addition, indirect costs,
such as fringe benefits and overhead expenses, are also included in research and development expenses. Research and development
expenses increased to $27.9 million for the three months ended September 30, 2015 from $19.2 million for the same period in 2014,
an increase of $8.7 million, or 45%. The increase in research and development expenses was primarily due to increased costs associated
with our ongoing and planned RSV F Vaccine clinical trials and higher employee-related costs, including non-cash stock-based compensation,
as compared to the same period in 2014. These increases were partially offset by the milestone payment accrued under the Wyeth
agreement in the three months ended September 30, 2014. For 2015, we expect a significant increase in research and development
expenses primarily due to additional RSV F Vaccine clinical trials, the EBOV GP vaccine clinical trial and employee-related and
facility costs to support product development of our RSV F Vaccine and other potential vaccine candidates.
Costs and Expenses
by Functional Area
We track our cost of
government contracts revenue and research and development expenses by the type of costs incurred in identifying, developing, manufacturing
and testing vaccine candidates. We evaluate and prioritize our activities according to functional area and therefore believe that
project-by-project information would not form a reasonable basis for disclosure to our investors. At September 30, 2015, we had
332 employees dedicated to our research and development programs versus 230 employees as of September 30, 2014. Historically, we
did not account for internal research and development expenses by project, since our employees work time is spread across multiple
programs, and our internal manufacturing clean-room facility produces multiple vaccine candidates.
The following summarizes
our cost of government contracts revenue and research and development expenses by functional area for the three months ended September
30 (in millions).
| |
2015 | | |
2014 | |
Manufacturing | |
$ | 22.1 | | |
$ | 12.8 | |
Vaccine Discovery | |
| 1.5 | | |
| 1.7 | |
Clinical and Regulatory | |
| 7.1 | | |
| 8.7 | |
Total cost of government contracts revenue and research and development expenses | |
$ | 30.7 | | |
$ | 23.2 | |
We do not provide forward-looking
estimates of costs and time to complete our research programs due to the many uncertainties associated with vaccine development.
As we obtain data from preclinical studies and clinical trials, we may elect to discontinue or delay clinical trials in order to
focus our resources on more promising vaccine candidates. Completion of clinical trials may take several years or more, but the
length of time can vary substantially depending upon the phase, size of clinical trial, primary and secondary endpoints and the
intended use of the vaccine candidate. The cost of clinical trials may vary significantly over the life of a project as a result
of a variety of factors, including: the number of patients who participate in the clinical trials and the specific patient population;
the number of sites included in the clinical trials; whether clinical trial locations are domestic, international or both; the
time to enroll patients; the duration of treatment and follow-up; the safety and efficacy profile of the vaccine candidate; and
the cost and timing of, and the ability to secure, regulatory approvals.
As a result of these
uncertainties, we are unable to determine with any significant degree of certainty the duration and completion costs of our research
and development projects or when, and to what extent, we will generate future cash flows from our research projects.
General
and Administrative Expenses
General and administrative
expenses increased to $9.1 million for the three months ended September 30, 2015 from $4.8 million for the same period in 2014,
an increase of $4.3 million, or 90%. The increase was primarily due to higher employee-related costs, including non-cash stock-based
compensation, and professional fees for pre-commercialization activities, as compared to the same period in 2014. At September
30, 2015, we had 46 employees dedicated to general and administrative functions versus 33 employees as of September 30, 2014. For
2015, we expect general and administrative expenses to continue to increase primarily due to increased employee costs and pre-commercialization
activities.
Other Income (Expense):
| |
Three Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Other Income (Expense): | |
| | | |
| | | |
| | |
Investment income | |
$ | 194 | | |
$ | 128 | | |
$ | 66 | |
Interest expense | |
| (64 | ) | |
| (47 | ) | |
| (17 | ) |
Other expense | |
| (51 | ) | |
| (19 | ) | |
| (32 | ) |
Total other income (expense) | |
$ | 79 | | |
$ | 62 | | |
$ | 17 | |
We had total other
income of $0.1 million for the three months ended September 30, 2015 and 2014.
Net Loss:
| |
Three Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Net Loss: | |
| | | |
| | | |
| | |
Net loss | |
$ | (33,120 | ) | |
$ | (19,727 | ) | |
$ | (13,393 | ) |
Net loss per share | |
$ | (0.12 | ) | |
$ | (0.08 | ) | |
$ | (0.04 | ) |
Weighted shares outstanding | |
| 269,554 | | |
| 238,304 | | |
| 31,250 | |
Net loss for the three
months ended September 30, 2015 was $33.1 million, or $0.12 per share, as compared to $19.7 million, or $0.08 per share, for the
same period in 2014, an increased net loss of $13.4 million. The increased net loss was primarily due to higher research and development
spending, including increased costs relating to clinical trials of our RSV F Vaccine and higher employee-related costs, as compared
to the same period in 2014.
The increase in weighted
average shares outstanding for the three months ended September 30, 2015 as compared to the same period in 2014 is primarily a
result of sales of our common stock in 2015 and 2014.
Nine Months Ended September 30, 2015
and 2014 (amounts in tables are presented in thousands, except per share information)
Revenue:
| |
Nine Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Revenue: | |
| | | |
| | | |
| | |
Total revenue | |
$ | 30,397 | | |
$ | 23,935 | | |
$ | 6,462 | |
Revenue for the nine
months ended September 30, 2015 was $30.4 million as compared to $23.9 million for the same period in 2014, an increase of $6.5
million or 27%. Revenue for the nine months ended September 30, 2015 and 2014 is primarily comprised of services performed under
the HHS BARDA contract, and to a much lesser extent, the prior PATH clinical development agreement. The increase in revenue is
primarily due to revenue of $7.7 million relating to the recovery of additional costs for the settlement of indirect rates for
fiscal years 2011 and 2012 under the HHS BARDA contract in the second quarter of 2015 and revenue of $3.1 million relating to our
Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccine candidate in Australia (“205 Trial”) as collection
of the amount became reasonably assured in the first quarter of 2015. These increases in revenue were partially offset by a lower
level of activity in the nine months ended September 30, 2015 associated with our Phase 2 seasonal influenza clinical trial as
compared to our Phase 1/2 clinical trial of our H7N9 pandemic VLP candidate in the same period in 2014 under the HHS BARDA contract
and a decrease in revenue under the prior PATH clinical development agreement.
In 2012, HHS BARDA
withheld payment on the outside costs of the 205 Trial. Such outside costs were recorded as expenses in the period incurred as
a cost of government contracts revenue and the Company did not record revenue relating to such outside costs prior to the first
quarter of 2015 because collection of the amount was not reasonably assured. In late 2014, the FDA accepted the data from the 205
Trial as part of the Company’s investigational new drug (“IND”) application for its seasonal quadrivalent influenza
VLP vaccine candidate. In the first quarter of 2015, HHS BARDA approved the reimbursement of the 205 Trial costs. We also collected
this amount in 2015.
Costs and Expenses:
| |
Nine Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Costs and Expenses: | |
| | | |
| | | |
| | |
Cost of government contracts revenue | |
$ | 8,054 | | |
$ | 12,150 | | |
$ | (4,096 | ) |
Research and development | |
| 78,686 | | |
| 48,940 | | |
| 29,746 | |
General and administrative | |
| 21,991 | | |
| 14,871 | | |
| 7,120 | |
Total costs and expenses | |
$ | 108,731 | | |
$ | 75,961 | | |
$ | 32,770 | |
Cost
of Government Contracts Revenue
Cost of government
contracts revenue includes direct costs of salaries, laboratory supplies, consultants and subcontractors and other direct costs
associated with our process development, manufacturing, clinical, regulatory and quality assurance activities under research contracts.
Cost of government contracts revenue decreased to $8.1 million for the nine months ended September 30, 2015 from $12.2 million
for the same period in 2014, a decrease of $4.1 million, or 34%. The decrease in cost of government contracts revenue is primarily
related to a lower level of activity in the nine months ended September 30, 2015 associated with our Phase 2 seasonal influenza
clinical trial as compared to our Phase 1/2 clinical trial of our H7N9 pandemic VLP candidate in the same period in 2014.
Research and
Development Expenses
Research and development
expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associated with our process development,
manufacturing, clinical, regulatory and quality assurance activities for internally funded programs. In addition, indirect costs,
such as fringe benefits and overhead expenses, are also included in research and development expenses. Research and development
expenses increased to $78.7 million for the nine months ended September 30, 2015 from $48.9 million for the same period in 2014,
an increase of $29.7 million, or 61%. The increase in research and development expenses was primarily due to increased costs associated
with our ongoing and anticipated RSV F Vaccine clinical trials and our EBOV GP vaccine clinical trial and higher employee-related
costs, including non-cash stock-based compensation, as compared to the same period in 2014. These increases were partially offset
by the milestone payment accrued under the Wyeth agreement in the nine months ended September 30, 2014. At September 30, 2015,
we had 332 employees dedicated to our research and development programs versus 230 employees as of September 30, 2014.
Costs and Expenses
by Functional Area
The following summarizes
our cost of government contracts revenue and research and development expenses by functional area for the nine months ended September
30 (in millions).
| |
2015 | | |
2014 | |
Manufacturing | |
$ | 57.6 | | |
$ | 35.5 | |
Vaccine Discovery | |
| 4.7 | | |
| 4.4 | |
Clinical and Regulatory | |
| 24.4 | | |
| 21.2 | |
Total cost of government contracts revenue and research and development expenses | |
$ | 86.7 | | |
$ | 61.1 | |
General
and Administrative Expenses
General and administrative
expenses increased to 22.0 million for the nine months ended September 30, 2015 from $14.9 million for the same period in 2014,
an increase of $7.1 million, or 48%. The increase was primarily due to higher employee-related costs, including non-cash stock-based
compensation, and professional fees for pre-commercialization activities, as compared to the same period in 2014. At September
30, 2015, we had 46 employees dedicated to general and administrative functions versus 33 employees as of September 30, 2014.
Other Income (Expense):
| |
Nine Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Other Income (Expense): | |
| | | |
| | | |
| | |
Investment income | |
$ | 450 | | |
$ | 160 | | |
$ | 290 | |
Interest expense | |
| (126 | ) | |
| (150 | ) | |
| 24 | |
Other expense | |
| (121 | ) | |
| ― | | |
| (121 | ) |
Realized gains on marketable securities | |
| ― | | |
| 615 | | |
| (615 | ) |
Total other income (expense) | |
$ | 203 | | |
$ | 625 | | |
$ | (422 | ) |
We had total other
income of $0.2 million for the nine months ended September 30, 2015 as compared to total other income of $0.6 million for
the same period in 2014. For the nine months ended September 30, 2014, we sold our remaining auction rate security and received
proceeds of $1.8 million resulting in a realized gain of $0.6 million.
Net Loss:
| |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Net Loss: | |
| | | |
| | | |
| | |
Net loss | |
$ | (78,131 | ) | |
$ | (51,401 | ) | |
$ | (26,730 | ) |
Net loss per share | |
$ | (0.30 | ) | |
$ | (0.23 | ) | |
$ | (0.07 | ) |
Weighted shares outstanding | |
| 259,703 | | |
| 221,578 | | |
| 38,125 | |
Net loss for the nine
months ended September 30, 2015 was $78.1 million, or $0.30 per share, as compared to $51.4 million, or $0.23 per share, for the
same period in 2014, an increased net loss of $26.7 million. The increased net loss was primarily due to higher research and development
spending, including increased costs relating to clinical trials of our RSV F Vaccine and a clinical trial of our EBOV GP vaccine
candidate and higher employee-related costs, as compared to the same period in 2014.
The increase in weighted
average shares outstanding for the nine months ended September 30, 2015 as compared to the same period in 2014 is primarily a result
of sales of our common stock in 2015 and 2014.
Liquidity Matters
and Capital Resources
Our future capital
requirements depend on numerous factors including, but not limited to, the commitments and progress of our research and development
programs, the progress of preclinical and clinical testing, the time and costs involved in obtaining regulatory approvals, the
costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights and manufacturing costs.
We plan to continue to have multiple vaccines and products in various stages of development, and we believe our operating expenses
and capital requirements will fluctuate depending upon the timing of certain events, such as the scope, initiation, rate and progress
of our preclinical studies and clinical trials and other research and development activities.
As of September 30,
2015, we had $290.2 million in cash and cash equivalents and marketable securities as compared to $168.1 million as of December
31, 2014. These amounts consisted of $138.1 million in cash and cash equivalents and $152.0 million in marketable securities as
of September 30, 2015 as compared to $32.3 million in cash and cash equivalents and $135.7 million in marketable securities, as
described in Note 3 under section “Marketable Securities,” as of December 31, 2014.
The following table
summarizes cash flows for the nine months ended September 30, 2015 and 2014 (in thousands):
| |
Nine Months Ended September
30, | |
| |
2015 | | |
2014 | | |
Change
2014 to 2015 | |
Summary of Cash Flows: | |
| | | |
| | | |
| | |
Net cash (used in) provided by: | |
| | | |
| | | |
| | |
Operating activities | |
$ | (71,339 | ) | |
$ | (47,246 | ) | |
$ | (24,093 | ) |
Investing activities | |
| (30,829 | ) | |
| (147,180 | ) | |
| 116,351 | |
Financing activities | |
| 208,082 | | |
| 109,449 | | |
| 98,633 | |
Effect on exchange rate on cash and cash equivalents | |
| (105 | ) | |
| (21 | ) | |
| (84 | ) |
Net increase (decrease) in cash and cash equivalents | |
| 105,809 | | |
| (84,998 | ) | |
| 190,807 | |
Cash and cash equivalents at beginning of period | |
| 32,335 | | |
| 119,471 | | |
| (87,136 | ) |
Cash and cash equivalents at end of period | |
$ | 138,144 | | |
$ | 34,473 | | |
$ | 103,671 | |
Net cash used in operating
activities increased to $71.3 million for the nine months ended September 30, 2015 as compared to $47.2 million for the same period
in 2014. The increase in cash usage was primarily due to increased costs relating to our RSV F Vaccine and EBOV GP vaccine candidate,
higher employee-related costs and timing of customer and vendor payments.
During the nine months
ended September 30, 2015 and 2014, our investing activities consisted primarily of purchases and maturities of marketable securities
and capital expenditures. Capital expenditures for the nine months ended September 30, 2015 and 2014 were $13.6 million and $4.9
million, respectively. The increase in capital expenditures was primarily due to the purchase of laboratory equipment for process
development, analytical development and manufacturing scale-up required to support our maturing product portfolio. In 2015, we
expect our level of capital expenditures to be significantly higher than our 2014 spending as we continue to scale up our capacity
in anticipation of Phase 3 clinical trials and related regulatory obligations in the upcoming years.
Our financing activities
consisted primarily of sales of our common stock, and to a lesser extent, stock option exercises and purchases under our employee
stock purchase plan. In the nine months ended September 30, 2015, we received net proceeds of approximately $190 million through
our public offering at $7.25 per share and approximately $15 million through our Sales Agreement at an average sales price of $10.63
per share. In the nine months ended September 30, 2014, we received net proceeds of approximately $108 million through our public
offering at $4.00 per share. We sold the remaining common stock under the Sales Agreement in July 2015. The Sales Agreement has
now been fully utilized.
In August 2015, we
amended the lease for our new facility located in Gaithersburg, Maryland to increase the amount of space leased by us to now include
the entire facility. Under the terms of the amended lease, the landlord shall provide us with a tenant improvement allowance of
approximately $3.9 million. We have not utilized the tenant improvement allowance as of September 30, 2015.
In 2007, we entered
into an agreement to license certain rights from Wyeth. The Wyeth license is a non-exclusive, worldwide license to a family of
patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration
in early 2022. The Wyeth license provides for us to make an upfront payment (previously made), ongoing annual license fees, sublicense
payments, milestone payments on certain development and commercialization activities and royalties on any product sales. Except
in certain circumstances in which we continuously market multiple products in a country within the same vaccine program, the milestone
payments are one-time only payments applicable to each related vaccine program. At present, our seasonal influenza VLP vaccine
program (including CPLB’s seasonal influenza program) and our pandemic influenza VLP vaccine program are the only two programs
to which the Wyeth license applies. The license may be terminated by Wyeth only for cause and may be terminated by us only after
we have provided ninety (90) days’ notice that we have absolutely and finally ceased activity, including through any affiliate
or sublicense, related to the manufacturing, development, marketing or sale of products covered by the license. In September 2015,
we amended the license agreement with Wyeth. Among other things, the amendment restructures the $3 million milestone payment (“Milestone”)
owed as a result of CPLB’s initiation of a Phase 3 clinical trial for its recombinant trivalent seasonal VLP influenza vaccine
candidate in 2014. Under the amendment, the milestone payment, which may increase slightly over time, shall be due in connection
with the initiation of a Phase 3 clinical trial for the initial seasonal influenza VLP vaccine candidate being developed outside
India, but in any case no later than December 31, 2017. The amendment also restructures the final milestone payment
to apply to the initial seasonal influenza VLP vaccine candidate being developed outside India. Thus, the aggregate milestone payments
for a seasonal influenza VLP vaccine candidate developed and commercialized is increased from $14 million to up to $15 million.
In connection with the execution of the amendment, we agreed to pay a one-time only, upfront payment to Wyeth. The amendment also
increases annual license maintenance fees associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments
under the agreement to Wyeth as of September 30, 2015 aggregated $7.3 million. The Milestone was accrued for on the consolidated
balance sheet in other current liabilities at December 31, 2014. As a result of the September 2015 amendment discussed above, the
Milestone payment is not expected to occur within the next 12 months. Therefore, the Milestone has been accrued for, on a discounted
basis calculated based on the anticipated future payment date, in other non-current liabilities at September 30, 2015. The milestone
was recorded as a research and development expense in the third quarter of 2014.
In connection with
CPLB, we entered into a master services agreement with Cadila, which we and Cadila amended in July 2011, March 2013, March 2014
and February 2015, in each case to extend the term by one year for which services can be provided by Cadila under this agreement.
Under the revised terms, if, by March 2016, the amount of services provided by Cadila under the master services agreement is less
than $7.5 million, we will pay Cadila the portion of the shortfall amount that is less than or equal to $2.0 million. The Company
and Cadila have also agreed to an amendment that allows CPLB, as of the beginning of 2013, to provide services on behalf of Cadila.
Through September 30, 2015, we have purchased $7.2 million in services from Cadila pursuant to this agreement, including amounts
in which CPLB provided the services on behalf of Cadila.
Based on our September
30, 2015 cash and cash equivalents and marketable securities balances, along with anticipated revenue under the contract with HHS
BARDA and grant agreement with BMGF and other resources, we believe we have adequate capital to fund our operating plans for a
minimum of twelve months. Additional capital may be required in the future to develop our vaccine candidates through clinical development,
manufacturing and commercialization. Our ability to obtain such additional capital will likely be subject to various factors, including
our ability to perform and thus generate revenue under the HHS BARDA contract and BMGF grant agreement, our overall business performance
and market conditions.
Any capital raised
by an equity offering will likely be substantially dilutive to the existing stockholders and any licensing or development arrangement
may require us to give up rights to a product or technology at less than its full potential value. We cannot provide any assurance
that new financing will be available on commercially acceptable terms, if at all. If we are unable to perform under the HHS BARDA
contract and BMGF grant agreement or obtain additional capital, we will assess our capital resources and may be required to delay,
reduce the scope of, or eliminate one or more of our product research and development programs, and/or downsize our organization,
including our general and administrative infrastructure.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
The primary objective
of our investment activities is preservation of capital, with the secondary objective of maximizing income. As of September 30,
2015, we had cash and cash equivalents of $138.1 million, marketable securities of $152.0 million, all of which are short-term,
and working capital of $285.2 million.
Our exposure to market
risk is primarily confined to our investment portfolio. As of September 30, 2015, our investments were classified as available-for-sale.
We do not believe that a change in the market rates of interest would have any significant impact on the realizable value of our
investment portfolio. Changes in interest rates may affect the investment income we earn on our marketable securities when they
mature and the proceeds are reinvested into new marketable securities and, therefore, could impact our cash flows and results of
operations.
Interest and dividend
income is recorded when earned and included in investment income. Premiums and discounts, if any, on marketable securities are
amortized or accreted to maturity and included in investment income. The specific identification method is used in computing realized
gains and losses on the sale of our securities.
We are headquartered
in the U.S. where we conduct the vast majority of our business activities. We have one foreign consolidated subsidiary, Novavax
AB, which is located in Sweden. A 10% decline in the exchange rate between the U.S. dollar and Swedish Krona would result in a
reduction of stockholders’ equity of approximately $2.8 million at September 30, 2015.
We do not have material
debt and, as such, do not believe that we are exposed to any material interest rate risk as a result of our borrowing activities.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with
the assistance of our chief executive officer and chief financial officer, has reviewed and evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)
as of September 30, 2015. Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable
assurance of achieving such control objectives. Based on the evaluation of our disclosure controls and procedures as of September
30, 2015, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and
procedures were effective.
Changes in Internal Control over Financial Reporting
Our management, including
our chief executive officer and chief financial officer, has evaluated any changes in our internal control over financial reporting
that occurred during the quarterly period ended September 30, 2015, and has concluded that there was no change that occurred during
the quarterly period ended September 30, 2015 that materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. Risk Factors
Other than the additional
risk factors disclosed below, there are no material changes to the Company’s risk factors as described in Item 1A of the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
Security breaches
and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation
to suffer.
In the ordinary course
of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and
data about our clinical subjects, suppliers, and business partners, and personally identifiable information. The secure maintenance
of this information is critical to our operations and business strategy. Some of this information could be an attractive target
of criminal attack by malicious third parties with a wide range of motives and expertise, including organized criminal groups,
“hactivists,” patient groups, disgruntled current or former employees, and others. Hacker attacks are of ever-increasing
levels of sophistication, and despite our security measures, our information technology and infrastructure may be vulnerable to
such attacks or may be breached due to employee error or malfeasance. Any such breach could compromise our networks and the information
stored there could be accessed, publicly disclosed, lost or stolen. Furthermore, if our systems become compromised, we may not
promptly discover the intrusion. Like other companies in our industry, we have experienced attacks to our data and systems, including
malware and computer viruses. Attacks could have a material impact on our business, operations or financial results. Any access,
disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy
of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.
Item 6. Exhibits
3.1 |
Second Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed August 10, 2015) |
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3.2 |
Amended and Restated By-Laws of the Company (Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed March 12, 2013) |
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10.1*** |
Grant Agreement between Bill and Melinda Gates Foundation and Novavax, Inc., dated as of September 25, 2015 |
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10.2*** |
Global Access Commitments Agreement between Bill and Melinda Gates Foundation and Novavax, Inc., dated as of September 25, 2015 |
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10.3*** |
Second Amendment to License Agreement between Wyeth Holdings LLC and Novavax, Inc., dated as of September 1, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed September 8, 2015) |
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10.4 |
Lease Agreement for space at 21 Firstfield Road between Firstfield Holdco, LLC and Novavax, Inc., dated as of February 4, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed August 21, 2015) |
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10.5 |
First Amendment to
Lease Agreement for space at 21 Firstfield Road between Firstfield Holdco, LLC and Novavax, Inc., dated as of August 17, 2015
(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed August 21, 2015) |
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31.1* |
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act |
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31.2* |
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act |
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32.1* |
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2* |
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101 |
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014, (ii) the Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2015 and 2014, (iii) the Consolidated Statements of Comprehensive Loss for the three and nine-month periods ended September 30, 2015 and 2014, (iv) the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2015 and 2014, and (v) the Notes to Consolidated Financial Statements. |
* Filed herewith.
** Confidential treatment has been requested
for portions of exhibit.
*** Confidential treatment has been
granted for portions of exhibit.
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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NOVAVAX, INC. |
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Date: November 9, 2015 |
By: |
/s/ Stanley C. Erck |
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President and Chief Executive Officer and Director |
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(Principal Executive Officer) |
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Date: November 9, 2015 |
By: |
/s/ Barclay A. Phillips |
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Senior Vice President, Chief Financial Officer and Treasurer |
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(Principal Financial and Accounting Officer) |
Exhibit 10.1
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
GRANT AGREEMENT
Investment ID OPP1127647
AGREEMENT SUMMARY & SIGNATURE PAGE
Name: |
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Novavax, Inc. |
Tax Status: |
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Not exempt from federal income tax under U.S. IRC § 501(c)(3). You confirm that the above information is correct and agree to notify the Foundation immediately of any change. |
Expenditure Responsibility: |
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This Grant Agreement is subject to "expenditure responsibility" requirements under the U.S. Internal Revenue Code. |
Mailing Address: |
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20 Firstfield Road
Gaithersburg, MD, 20878 |
Primary Contact: |
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Russell Wilson, Senior Vice President, Business Development, rwilson@novavax.com |
Mailing Address: |
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P. O. Box 23350, Seattle, WA 98102, U.S.A. |
Primary Contact: |
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Niteen Wairagkar, Senior Program Officer, Pneumonia
Niteen.Wairagkar@gatesfoundation.org |
Title: |
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Advancing the development of a maternally-administered RSV vaccine candidate to licensure and WHO prequalification |
"Charitable Purpose": |
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To advance to WHO Pre-Qualification the development of a respiratory syncytial virus (RSV) vaccine for maternal immunization to reduce the burden of RSV disease in infants less than six months of age in developing countries. |
"Start Date": |
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Date of last signature |
"End Date": |
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December 31, 2021 |
This Grant Agreement includes and incorporates by this reference: |
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This Grant Agreement Summary & Signature Page and:
● Grant Amount and Reporting & Payment Schedule
(Attachment A)
● Terms and Conditions (Attachment B)
● Project Governance Plan (Appendix C)
● Global Access Commitments Agreement (“GACA”)
(Attachment D)
● Proposal Narrative (date submitted September 8,
2015)
● Budget (date submitted June 22, 2015)
● Vaccine – Target Product Profile (date submitted
June 17, 2015)
● Integrated Product Development Plan (IPDP) (date
submitted May 29, 2015)
● IPDP Executive Summary (updated September 10,
2015)
● Product Development (PD) Workbook (date submitted
June 17, 2015)
● Investment Guidelines (date submitted July 23,
2015) |
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
THIS AGREEMENT is between Novavax,
Inc. ("You" or "Grantee") and the Bill & Melinda Gates Foundation ("Foundation"),
and is effective as of the date of last signature. Each party to the Agreement may be referred to individually as a "Party"
and together as the "Parties." As a condition of this grant, the Parties enter into this Agreement by having their
authorized representatives sign below.
BILL & MELINDA GATES FOUNDATION |
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NOVAVAX, INC. |
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/s/ Sue Desmond-Hellmann |
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/s/ Stanley C. Erck |
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Sue Desmond-Hellmann |
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Stanley Erck |
Chief Executive Officer |
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President and Chief Executive Officer |
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September 18, 2015 |
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September 25, 2015 |
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Date |
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Date |
[Remainder of page left intentionally
blank]
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
GRANT AGREEMENT
Investment ID OPP1127647
ATTACHMENT A
GRANT AMOUNT AND REPORTING & PAYMENT SCHEDULE
GRANT AMOUNT
The Foundation will pay You up to the total
grant amount specified in the Reporting & Payment Schedule below. The Foundation’s Primary Contact must approve in writing
any Budget cost category change of more than 10%.
PAYMENTS
The Foundation will make payments according
to the Reporting & Payment Schedule and, where specified, contingent on Your completion of the applicable target, milestone,
or reporting deliverable as well as compliance with this Grant Agreement and the Global Access Commitments Agreement. The Foundation
may approve changes to the schedule from time to time, and will confirm any such changes in writing. Specific subsequent payment
amounts will be decided by the Foundation, based upon actual financial information reported to the Foundation in Expenditure Responsibility
reports.
REPORTING
You will submit reports according to the Reporting
& Payment Schedule using the Foundation's templates or forms, which the Foundation will make available to You and which may
be modified from time to time. For a progress or final report to be considered satisfactory, it must demonstrate meaningful progress
against the targets or milestones for that investment period. If meaningful progress has not been made, the report should explain
why not and what adjustments You are making to get back on track. Please notify the Foundation's Primary Contact if You need to
add or modify any targets or milestones. The Foundation must approve any such changes in writing. You agree to submit other reports
the Foundation may reasonably request.
ACCOUNTING FOR PERSONNEL TIME
You agree to track the time of all employees,
contingent workers, and any other compensated individuals whose compensation will be paid in part by Grant Funds. Such individuals
will keep timesheets that will track actual time worked on the Project in increments of sixty minutes or less and will include
brief descriptions of tasks performed. You will report actual time worked consistent with those timesheets in Your progress and
final budget reports. You will submit copies of timesheets to the Foundation upon request.
[Remainder of page left intentionally blank]
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
REPORTING & PAYMENT SCHEDULE
Investment
Period |
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Target, Milestone, or
Reporting Deliverable |
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Due By |
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Payment Date |
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Payment
Amount (U.S.$) |
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Countersigned Grant Agreement and Global Access Commitments Agreement |
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Go/No-Go Milestone 1:
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1 The results of the Go/No-Go Milestone
are expected to be available by the due date listed above. For this and all other Stage Gates, the Foundation will then determine,
in its sole discretion, whether to provide continued funding under this Grant Agreement. If the Foundation determines that it will
not provide continued funding for the remainder of the proposed work, the Project will be terminated. To the extent that there
is any inconsistency between the Proposal and the Grant Agreement on this issue, the Grant Agreement shall govern.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
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Total Grant Amount |
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Up to $89,083,312.00 |
UPDATES TO REPORTING & PAYMENT
SCHEDULE
You acknowledge and agree that all
payments under this grant are subject to your achievement of any go/no-go milestones, the Foundation’s approval of the Milestones,
Deliverables and Reports in Reporting & Payment Schedule, compliance with the Global Access Commitments Agreement set forth
at Attachment D and your compliance with this Grant Agreement (including any Attachments, Appendices or Schedules). From time to
time the Foundation may update the Payment & Reporting Schedule to reflect actual payments and/or update payment dates or milestones,
and you agree to cooperate to revise this Grant Agreement accordingly as well as execute an amendment to this Grant Agreement reflecting
any such changes. If requested by the Foundation, You agree to update Your proposal narrative, budget and/or other Project documentation
(including IPDP) to reflect activities under the Project.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
GRANT AGREEMENT
Investment ID OPP1127647
ATTACHMENT B
TERMS & CONDITIONS
This Grant Agreement is subject to the following terms and conditions.
PROJECT SUPPORT
PROJECT DESCRIPTION AND CHARITABLE PURPOSE
The Foundation is awarding You this
grant to carry out the project described in the Proposal Narrative, IPDP, and PD Workbook (collectively, "Project")
in order to further the Charitable Purpose.
MANAGEMENT
OF FUNDS
USE OF FUNDS
You may not use funds provided under
this Grant Agreement ("Grant Funds") for any purpose other than the Project. You may not use Grant Funds to reimburse
any expenses You incurred prior to the Start Date.
INVESTMENT OF FUNDS
You must invest Grant Funds in accordance
with the Investment Guidelines. You must provide the Foundation with 30 days' prior written notice before making any changes to
the Investment Guidelines. Together with any progress or final reports required under this Grant Agreement, You must report investment
activities and the amount of any currency conversion gains (or losses) and the amount of any interest, or other income generated
by the Grant Funds (collectively "Income"). Any Income must be used for the Project.
SEGREGATION OF FUNDS
You must maintain Grant Funds in
a physically separate bank account or a separate bookkeeping account maintained as part of Your financial records and dedicated
to the Project.
GLOBAL
ACCESS
GLOBAL ACCESS COMMITMENT
You will conduct and manage the
Project and the Funded Developments in a manner that ensures Global Access. Your Global Access commitments will survive the term
of this Grant Agreement. “Funded Developments” means the products, services, processes, technologies, materials,
software, data, other innovations, and intellectual property resulting from the Project (including modifications, improvements,
and further developments to Background Technology). “Background Technology” means any and all products, services,
processes, technologies, materials, software, data, or other innovations, and intellectual property created by You or a third party
prior to or outside of the Project used as part of the Project. “Global Access” means: (a) the knowledge and
information gained from the Project will be promptly and broadly disseminated; and (b) the Funded Developments will be made available
and accessible at an affordable price (i) to people most in need within developing countries, or (ii) in support of the U.S. educational
system and public libraries, as applicable to the Project.
GLOBAL ACCESS MILESTONES
In order to further define Your
Global Access commitments, You agree to the terms and conditions set out in the Global Access Commitments Agreement set
forth in Attachment D. In the event of any conflict between this Global Access section of this Grant Agreement and the Global Access
Commitments Agreement, the Global Access Commitments Agreement shall control.
You may not materially change the
plans and strategies contained in any Global Access Commitments Agreement without the Foundation’s prior written approval.
Upon request of the Foundation, You will provide the Foundation with progress updates evidencing your progress to attain Your the
Global Access Commitments.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
PUBLICATION
For the purpose of achieving Global
Access, You will seek prompt publication of any Funded Developments consisting of data and results in a peer-reviewed journal,
treatise, or trade publication, as applicable, consistent with the Global Access Commitments Agreement. Publication may be delayed
for a reasonable period for the sole purpose of seeking patent protection, provided the patent application is drafted, filed, and
managed in a manner that best furthers the Charitable Purpose. You will also use good faith efforts to ensure that Your subcontractors,
agents, and affiliates, as applicable, likewise seek prompt publication of any Funded Developments consisting of data and results.
PUBLICATION IN PEER-REVIEWED
JOURNALS
If
You seek publication of Funded Developments in a peer-reviewed journal, such publication shall be under “open access”
terms and conditions consistent with the Foundation’s Open Access Policy available at: www.gatesfoundation.org/How-We-Work/General-Information/Open-Access-Policy,
which may be modified from time to time.
INTELLECTUAL PROPERTY REPORTING
During the term of this Grant Agreement
and for 5 years after, You will submit upon request annual intellectual property reports related to the Funded Developments, Background
Technology, and any related agreements using the Foundation’s templates or forms, which the Foundation may modify from time
to time.
SUBGRANTS
AND SUBCONTRACTS
SUBGRANTS AND SUBCONTRACTS
You may not make subgrants under
this Grant Agreement. You have the exclusive right to select subcontractors to assist with the Project.
RESPONSIBILITY FOR OTHERS
You are responsible for (a) all
acts and omissions of any of Your trustees, directors, officers, employees, subgrantees, subcontractors, contingent workers, agents,
and affiliates assisting with the Project, and (b) ensuring their compliance with the terms of this Grant Agreement and the Global
Access Commitments Agreement.
PROHIBITED
ACTIVITIES
ANTI-TERRORISM
You will not use funds provided
under this Grant Agreement, directly or indirectly, in support of activities (a) prohibited by U.S. laws related to combatting
terrorism; (b) with persons on the List of Specially Designated Nationals (www.treasury.gov/sdn) or entities owned or controlled
by such persons; or (c) with countries against which the U.S. maintains comprehensive or targeted sanctions (currently, Cuba,
Iran, (North) Sudan, Syria, North Korea, Russia and Ukraine), unless such activities are fully authorized by the U.S. government
under applicable law and specifically approved by the Foundation in its sole discretion.
ANTI-CORRUPTION; ANTI-BRIBERY
You will not offer or provide money,
gifts, or any other things of value directly or indirectly to anyone in order to improperly influence any act or decision relating
to the Foundation or the Project, including by assisting any party to secure an improper advantage. Training and information on
compliance with these requirements are available at www.learnfoundationlaw.org.
POLITICAL ACTIVITY AND ADVOCACY
You may not use Grant Funds to influence
the outcome of any election for public office or to carry on any voter registration drive. You may not use Grant Funds to support
lobbying activity or to otherwise support attempts to influence local, state, federal, or foreign legislation. Your strategies
and activities, and any materials produced with Grant Funds, must comply with applicable local, state, federal, or foreign lobbying
law. You agree to comply with lobbying, gift, and ethics rules applicable to the Project.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
REGULATED
ACTIVITIES
INSURANCE
You will maintain sufficient insurance
coverage including general liability and other coverage, as applicable (such as clinical trial insurance, product liability, medical
malpractice, workers compensation, or otherwise) to address the risks, activities and/or omissions applicable to the Project.
CLINICAL TRIALS
Since the Project will involve clinical
trials on human subjects, a condition of this grant is Your agreement that the appropriate Institutional Review Boards (“IRBs”)
and ethical committees will review and approve the clinical protocols prior to trial initiation. You further agree to conduct clinical
trials associated with the Project under the generally accepted principles of “Good Clinical Practices” as defined
by the International Conference on Harmonization (ICH) E-6 Standard, the United States Food and Drug Administration (FDA) or the
European Agency for the Evaluation of Medicinal Products (EMEA), as applicable. You acknowledge and agree that, as between You
and the Foundation, You take and will have full responsibility for all compliance, data safety, monitoring, and audit requirements
of the relevant regulatory agencies, both for Yourself and all other sites included in the Project, including those activities
conducted through subgrants, subcontracts or other collaborative efforts. You acknowledge and agree that any activities by the
Foundation as the grantor funding the Project, including its review of the Proposal Narrative and PD Workbook or suggested modifications
to the Project, does not modify the provisions of this paragraph or constitute the basis for any claim by You against the Foundation.
COVERAGE FOR ALL SITES
You agree that for each venue in
which any part of the Project is conducted (either by Your organization or a subgrantee or subcontractor) all legal and regulatory
approvals for the activities being conducted will be obtained in advance of commencing the regulated activity. You further specifically
agree that no funds will be expended to enroll human subjects until the necessary regulatory and ethical bodies’ approvals
are obtained.
INSTITUTIONAL REVIEW BOARD (IRB)
AND OTHER ETHICAL COMMITTEE APPROVAL
You agree to obtain the review and
approval of all final protocols by the appropriate IRBs and ethical committees prior to enrollment of the first human subject.
A similar provision applies to Institutional Animal Care and Use Committee approval of studies involving animals, and Institutional
Biosafety Committee for biohazards and recombinant DNA. You agree to provide prompt notice to the Foundation if the facts and circumstances
change regarding the approval status of the IRBs or ethical committees for any final protocol(s).
PROVISION OF CARE FOR HUMAN SUBJECTS
RESEARCH
In keeping with “Good Clinical
Practice” standards, You will disclose to subjects and the IRBs what care and/or referrals will be available through participation
in the study. Institutional policies regarding what care will be provided to personnel who are injured as a result of their work
on the Project should similarly be developed, approved and implemented with notice to the employees.
PUBLICITY
PUBLICITY BY THE FOUNDATION
The Foundation may include information
about the award of this grant, including Your name, in its periodic public reports and may make such information available on its
website and as part of press releases, public reports, speeches, newsletters, tax returns and other public disclosure.
PUBLICITY BY YOU
You
must obtain the Foundation’s prior written approval before: (a) issuing a press release or other public announcement regarding
this grant; and (b) any other public use of the Foundation’s name or logo. Please email Your request to: grantee.comms@gatesfoundation.org
two weeks in advance to provide the Foundation an opportunity to review and comment. Detailed guidelines are available at:
www.gatesfoundation.org/grantseeker/documents/guidelines_communications_for_grantees.doc.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
PUBLICITY BY OTHERS
You and Your subgrantees, subcontractors,
contingent workers, agents, or affiliates may not state or otherwise imply to third parties that the Foundation directly funds
or otherwise endorses their activities.
OTHER
COMPLIANCE WITH LAWS
In carrying out the Project and
activities under the Global Access Commitments Agreement, You will comply with all applicable laws, regulations, and rules and
will not infringe, misappropriate, or violate the intellectual property rights of any third party.
RELIANCE
You acknowledge that the Foundation
is relying on the information You provide in reports and during the course of any due diligence conducted prior to the Start Date
and during the term of this Grant Agreement and Global Access Commitments Agreement. You represent that the Foundation may continue
to rely on this information and on any additional information You provide regarding activities, progress, and Funded Developments.
INDEMNIFICATION
You will indemnify, defend, and
hold harmless the Foundation and its trustees, employees, and agents (“Indemnified Parties”) from and against
any and all demands, claims, actions, suits, losses, damages (including property damage, bodily injury, and wrongful death), arbitration
and legal proceedings, judgments, settlements, or costs or expenses (including reasonable attorneys’ fees and expenses) (collectively,
“Claims”) arising out of or relating to the acts or omissions, actual or alleged, of You or your employees,
subcontractors, contingent workers, agents, and affiliates with respect to the Project, the Product, the Global Access Commitments
Agreement or the Grant Agreement. You agree that any activities by the Foundation in connection with the Project or Product, such
as its review or proposal, input, or suggested modifications to the Project or Product, will not modify or waive the Foundation’s
rights under this paragraph. An Indemnified Party may, at its own expense, employ separate counsel to monitor and participate in
the defense of any Claim.
TERM AND TERMINATION
TERM
This Grant Agreement commences on
the Start Date and continues until the End Date, unless terminated earlier as provided in this Grant Agreement.
TERMINATION
The Foundation may modify, suspend,
or discontinue any payment of Grant Funds or terminate this Grant Agreement if: (a) the Foundation is not reasonably satisfied
with Your progress on the Project; (b) there are significant changes to Your leadership or other factors that the Foundation reasonably
believes may threaten the Project’s success; (c) there is a change in Your control; or (d) You fail to comply with this Grant
Agreement or the Global Access Commitments Agreement.
RETURN OF FUNDS
Any Grant Funds, plus any Income,
that have not been used for, or committed to, the Project upon expiration or termination of this Grant Agreement, must be returned
promptly to the Foundation.
RECORD KEEPING
You will maintain adequate accounting
records and copies of any reports submitted to the Foundation related to the Project. You will retain such records and reports
for 4 years after Grant Funds are fully spent and as set forth in the Global Access Commitments Agreement, and will make such records
and reports available to enable the Foundation to monitor and evaluate how Grant Funds have been used and as otherwise described
in the Global Access Commitment Agreement.
SURVIVAL
A Party’s obligations under
this Grant Agreement will be continuous and survive expiration or termination of this Grant Agreement as expressly provided in
this Grant Agreement or otherwise required by law or intended by their nature. For the avoidance of doubt, the parties intend that
the following sections survive the term of this Grant Agreement: Reporting, Accounting for Personnel Time, Use of Funds, Investment
of Funds (as applicable to any Grant Funds that have not been used for or committed to the Project), Segregation of Funds, Responsibility
for Others, Global Access, Regulated Activities, Publicity, Compliance, Reliance, Indemnification, Termination, Return of Funds,
Record Keeping, Survival and Notice and Approvals, Severability and the entirety of the Global Access Commitments Agreement (Appendix
D).
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
GENERAL
ENTIRE AGREEMENT AND AMENDMENTS
This Grant Agreement together with
all attachments thereto, including the Global Access Commitments Agreement together with the CDA between the parties dated March
26, 2013, amended as of April 29, 2015 (and further amended from time to time as agreed in a signed writing by the parties) contains
the entire agreement of the Parties and supersedes all prior and contemporaneous agreements concerning its subject matter. Except
as specifically permitted in this Agreement, no modification, amendment, or waiver of any provision of this Grant Agreement or
the Global Access Commitments Agreement will be effective unless in writing and signed by authorized representatives of both Parties.
NOTICES AND APPROVALS
Except as to ordinary programmatic
communications (which may be delivered by email), any notices, requests, and approvals under this Grant Agreement or the Global
Access Commitments Agreement must be delivered in writing as set forth in the Notice provision of the Global Access Commitments
Agreement.
SEVERABILITY
Each provision of this Grant Agreement
and the Global Access Commitments Agreement must be interpreted in a way that is enforceable under applicable law. If any provision
is held unenforceable, the rest of the agreement will remain in effect.
ASSIGNMENT
You may not assign, or transfer
by operation of law or court order, any of Your rights or obligations under this Agreement or the Global Access Commitments Agreement
without the Foundation’s prior written approval. This Grant Agreement and the Global Access Commitments Agreement will bind
and benefit any permitted successors and assigns.
COUNTERPARTS
Except as may be prohibited by applicable
law or regulation, this Grant Agreement and the Global Access Commitments Agreement and any amendment(s) thereto may each be signed
in counterparts, delivered by facsimile, PDF, or other electronic means, each counterpart of which will be deemed an original and
all of which when taken together will constitute one agreement.
[Remainder of page left intentionally blank]
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
GRANT AGREEMENT
Investment ID OPP1127647
ATTACHMENT C
Project Governance Plan
Unless otherwise agreed by the parties, governance shall be as follows:
Meetings of the Parties
1) Monthly conference calls
| o | Parties will meet monthly via teleconference calls at which Novavax will provide updates from each functional area (clinical,
regulatory, CMC) along with any new issues and a review of key risks and mitigations. |
| o | These monthly meetings will also be a key opportunity to share relevant data as it emerges, such as enrollment figures, investigator
site updates, manufacturing progress, DSMB feedback, and status of regulatory filings and communications. |
2) Stage Gate Reviews and Annual Project Reviews
| o | In addition, parties will meet in person for Stage Gate Reviews or Annual Project Reviews if the interval between successive
Stage Gates is more than one year. Stage Gate Meetings will be held at each of the Stage Gates identified in the PD Workbook: |
§ [**]
§ [**]
§ [**]
§ [**]
| o | The date for the Stage Gate Review meeting (or Annual Review meeting) will be set by the parties three months in advance. |
| o | Novavax will use reasonable good faith efforts to provide prereading materials approximately six weeks prior to the Stage Gate
Review meeting; Progress Narrative including key new data, updated PDSS, IPDP, cTPP and PD Workbook with milestones tracked and
funding plans. |
| o | Foundation will provide an agenda for the Stage Gate Review focusing on key data and issues four weeks prior to the meeting. |
| o | At the meeting, Novavax will present key data and receive
live feedback. |
| o | After the meeting, Foundation will in a closed session determine whether to fund the next stage of development based on alignment
of cTPP, timelines and development plans with Foundation strategy. |
| o | Within one week of the meeting, Foundation will provide Novavax with a summary of key decisions (i.e. Go, Rework, NoGo), next
steps and action items. |
3) Advisory Committee
| o | Novavax will convene an Advisory Committee, which will include a variety of members with scientific and/or technical expertise.
Thea Foundation may serve as a member. The committee meetings will be convened at least on an annual basis to review, evaluate
and offer guidance and input with respect to implementation of the IPDP and achieving the milestones and deliverables. |
| o | The committee may also be convened on an ad hoc basis as needed. |
Project Monitoring
| · | In addition to the activities and reports set forth in the Grant Agreement
and GACA, joint visits to clinical sites to be arranged from time to time during the Phase 3 study. For the avoidance of doubt,
Foundation’s role in such sites visits is observational only and for informational purposes only. |
Other
| · | As agreed by the parties |
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
GRANT AGREEMENT
Investment ID OPP1127647
ATTACHMENT D
GLOBAL ACCESS COMMITMENTS AGREEMENT (GACA)
GACA attached as separately numbered pages 1-28.
[Remainder of page left intentionally blank]
Exhibit 10.2
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
Execution Version
GLOBAL ACCESS COMMITMENTS AGREEMENT
GRANT AGREEMENT OPP1127647
This Global Access Commitments Agreement
(including all appendices, exhibits and attachments hereto, this “GACA”), is entered into as of date of last
signature below (“Effective Date”) by and between the Bill and Melinda Gates Foundation, a Washington Charitable
Trust (the “Foundation”) and Novavax, Inc., a Delaware corporation based in Maryland (“Novavax”
or the “Company”) in connection with the Foundation making a charitable grant of up to eighty nine million,
eighty three thousand three hundred twelve U.S. dollars ($89,083,312.00) to Company (the “Grant”) and
is subject to the terms and conditions of the Grant Agreement and related documents, including but not limited to this GACA. Each
of the parties named above may be referred to herein as a “Party” and collectively as the “Parties”.
Capitalized terms not defined herein shall have the same meaning as in the Grant Agreement. In consideration of the Foundation
making the grant on the terms and conditions in the Grant Agreement and herein, and for other good and valuable consideration,
the undersigned hereby irrevocably agree as follows:
1. Charitable
Purpose and Use of Funds
The Foundation’s primary purpose
in making the Grant to Company is to further significantly the accomplishment of the Foundation’s charitable purposes, including
its support of the research and development of drugs, vaccines and diagnostics to address diseases that have a disproportionate
impact on people within developing countries. More specifically, the purpose of the Grant is to support development (including
the Phase 3 Clinical Trial) of an affordably-priced RSV vaccine for use in maternal immunization to provide RSV protection to infants
in Developing Countries and other low income countries including as reflected herein and in Company’s proposal submitted
to the Foundation together with other documentation provided to or made available to the Foundation prior to or after submission
of the grant proposal and documents related to the Project (as defined in the Grant Agreement).
Company understands and acknowledges
that a primary organizational objective of the Foundation is to support development of an affordably-priced RSV vaccine for use
in maternal immunization to provide RSV protection to infants in Developing Countries and as otherwise agreed in this GACA further
defines the specific Global Access commitments of Company.
2. Definitions
The following terms shall have the following meanings:
(a) “Affiliate”
means, as to any Person, any other Person that directly or indirectly controls, or is under common control with or is controlled
by such Person.
(b) “Aggregate
Minimum Supply” means [**] Doses.
(c) “Annual
Minimum Supply” has the meaning set forth in Section 3(d)(iii).
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(d) “Change
in Control” means (i) the acquisition after the date of this GACA, directly or indirectly, by any Person or group (within
the meaning of Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities of Company possessing more than
50% of the total combined voting power of all outstanding voting securities of Company; (ii) a merger, consolidation or other similar
transaction involving Company, except for a transaction in which the holders of the outstanding voting securities of Company immediately
prior to such merger, consolidation or other transaction hold, in the aggregate, securities possessing more than 50% of the total
combined voting power of all outstanding voting securities of the surviving entity immediately after such merger, consolidation
or other transaction; or (iii) the sale, transfer or other disposition (in one transaction or a series of related transactions)
of all or substantially all of the assets of Company.
(e) “Charitability
Default” has the meaning set forth in Section 6(a).
(f) “Charitable
Purpose” has the meaning set forth in the Grant Agreement.
(g) “Cure
Period” has the meaning set forth in Section 6.
(h) “cGMPs”
means the then-current standards for good manufacturing practices as promulgated under applicable laws, including the standards
of good manufacturing practices in the United States, as promulgated under 21 CFR Parts 210 and 211 as issued by the United States
Food and Drug Administration (“FDA”), and all applicable regulations promulgated by a relevant foreign regulatory agency
akin to the FDA.
(i)
“Developed Countries” means the countries (each a “Developed Country”) that are not listed
in Appendix A.
(j) “Developing
Countries” means the countries (each a “Developing Country”) listed on Appendix A as Developing
Countries.
(k) “Dose”
(or “Doses” as applicable) means the amount of Released Product required for single administration
of vaccine regardless of where such Released Product is filled, finished, packaged and/or labeled including at one or more different
sites by the Company (or by any contract manufacturing organization (CMO) of Company).
(l) “Exchange
Act” means the U.S. Securities Exchange Act of 1934, as amended.
(m) “Extended
Term” has the meaning in Section 3(d)(v).
(n) “Global
Access Commitments” has the meaning set forth in Section 3.
(o) “Global
Access License” has the meaning set forth in Section 6.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(p) “Grant
Agreement” means the Grant Agreement between Company and the Foundation of even date herewith, to which this GACA is
an Appendix.
(q) “IPDP”
means Integrated Product Development Plan dated as of May 29, 2015 and referenced in the Grant Agreement or as otherwise updated
and mutually agreed by the parties.
(r) “Maternal
Immunization” means a use for the Product for immunization of pregnant women to prevent severe RSV disease in newborns
and infants pursuant to the Minimum TPP.
(s) “Minimum
TPP” means the minimum target product profile described in Appendix B.
(t) “Person”
means any individual, partnership, corporation, limited liability company, association, trust, joint venture, unincorporated organization
or other entity.
(u) “Phase
3 Clinical Trial” means the Phase 3 clinical trial described in the IPDP conducted on a global basis to demonstrate efficacy
of the Product for Maternal Immunization.
(v) “Price
Commitment” has the meaning set forth in Section 3(c).
(w) “Product”
means the Respiratory Syncytial Virus (RSV) fusion (F) recombinant nanoparticle vaccine (including but not limited to candidate
# BV683 or any subsequent modification or alternative version thereof) regardless of whether such vaccine is presented with or
without Aluminum (or other adjuvant) and regardless of the dose of Aluminum (or adjuvant) used. Unless otherwise specified reference
to the term “Product” shall include “Released Product” as defined below.
(x) “Public
Sector Purchaser” means procurement agent of any of the following entities:
Gavi, the Vaccine Alliance (“Gavi”);
The United Nations Children's Fund (“UNICEF”);
The World Health Organization (“WHO”);
Any other United Nations agency;
Governments in Developing Countries,
including government ministries and agencies, together with government-funded institutions, such as hospitals, clinics and prison
services;
NGOs including those recognized
by the applicable local government ministry and UN-related organizations working for or in Developing Countries, including International
Organization for Migration (IOM);
Not-for-profit organizations including
but not limited to Médecins Sans Frontières, Save-the- Children, PATH, OXFAM and the International Committee of the
Red Cross (ICRC);
Funding and/or procurement mechanisms
including GDF, UNITAID, UNFPA, PEPFAR, USAID, DFID, Global Fund, etc. and agencies based outside of a Developing Country but who
are supporting implementation and/or procurement to a Developing Country; and
Any global health finance mechanism
existing or arising during the Term or Extended Term that are applicable to one or more Developing Countries.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(y) “Released
Product” means Product that has met the Specifications set by Novavax and agreed upon by the relevant regulatory agency
with appropriate jurisdiction, ensuring the Product has been manufactured, filled, finished, labeled & packed and is appropriate
for distribution and/or sale and administration to a human.
(z) “Specifications”
means a list of tests, references to analytical procedures, and appropriate acceptance criteria which are numerical limits, ranges,
or other criteria for the tests described that set criteria to which Product at other stages of its manufacture should conform
to be considered acceptable for its intended use.
(aa) “Term”
has the meaning in Section 4.
(bb) “Total
Product Manufacturing Capacity” means the total Doses the Company manufactures on an annual basis for any RSV product,
either directly or through its CMO or Affiliates. The Company will forecast its manufacturing capacity on a rolling quarterly basis,
which forecast will be subsequently trued-up quarterly based on the Total Product Manufacturing Capacity.
(cc) “Transfer”
has the meaning in Section 5.
(dd) “Undemanded
Capacity” has the meaning in Section 3(d)(v).
(ee) “[**]
Costs” means the costs incurred that are necessary to complete
production of Product [**] and are deemed to include [**].
For the avoidance of doubt, [**]Costs will not include [**].
(ff) “Volume
Commitment” shall have the meaning described in Section 3(d).
(gg) “WHOPQ”
means WHO prequalification of medicines.
3. Global
Access Commitments
In furtherance of the Charitable Purpose,
Company agrees to the following “Global Access Commitments”:
(a) Prompt
and Broad Dissemination of Knowledge and Information. Consistent with the Publication provisions of the Grant Agreement, Company
will use reasonable and diligent steps to
(i) publish
(in a customary and reasonable manner as Company sees fit) information related to the Phase 3 Clinical Trial under the Project,
which shall include:
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(A) prospective
registration of clinical trials on a WHO compliant clinical trial registry (e.g., www.who.int/ictrp), with final clinical
trial results publicized within 12 months from the completion date of the trial in accordance with WHO reporting guidelines/recommendations;
(B) publication
of status of each clinical trial conducted under the Project on clintrials.gov within the earlier of 12 months of completion of
each such clinical trial or the date imposed or specified by applicable law; and
(C) publication
of final results of each clinical trial under the Project in one or more applicable peer reviewed open access journals within 12
months from the last subject last visit time point of any such clinical trial, consistent with the provisions in the Grant Agreement.
In the event of an inability to obtain peer reviewed publication, Company agrees to publish in manner that the Foundation determines
in its reasonable discretion satisfies the requirement that such research be published in a form that is “available to the
interested public” as described in Treasury Regulation 1.501(c)(3)- 1(d)(5)(iii)(c)(2) (the “Publication Requirement”).
(ii) provide
to the Foundation (or as applicable in section 3(a)ii)(C), to a technology transfer recipient) with access to information as follows:
(A) in
connection with any stage-gate review under the Grant or related to the Project, access to de-identified data and information regarding
the Project including anticipated Product approval timelines;
(B) upon
the Foundation’s reasonable request (no more frequently than quarterly), access to de-identified data and information regarding
the Project including anticipated Product approval timelines; and
(C) provide
the information and documentation as contemplated in the Technology Transfer provisions set forth in Section 6(d).
(b) Availability
and Accessibility at Affordable Price to People in Developing Countries. Company will use reasonable and diligent steps to:
(i) conduct
all clinical trials specified in the IPDP to meet the Minimum TPP and keep the Foundation promptly informed of any information
impacting the Product’s ability to meet the Minimum TPP thereunder or that is otherwise deemed to impact the Project or timelines
by three (3) months or more;
(ii) obtain
and maintain the regulatory and Project expertise to support Company’s clinical, regulatory and development plans including
with respect to Developing Country plans and WHOPQ;
(iii) conduct
activities set forth in the IPDP; meet specified timelines and criteria included in the IPDP; and keep the Foundation promptly
informed of any information impacting Company’s ability to meet such timelines or criteria by three (3) months or more;
(iv) consider
utilizing WHO’s joint regulatory review mechanism for clinical trial approvals in Developing Countries provided always that
all regulatory activity decisions will be Company’s sole responsibility;
(v) submit
an applicable dossier to WHO for WHOPQ of the Product for Maternal Immunization in Developing Countries by [**];
(vi) develop
Total Product Manufacturing Capacity to a minimum of [**] Doses
of the Released Product by [**];
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(vii) keep
the Foundation promptly informed of the activities related to progress on the Project (including providing the Foundation with
information reasonably requested by the Foundation related to the Product, trials and deliberations of review committees) and Company’s
Global Access Commitments and consult with the Foundation in good faith in connection with Developing Country launch strategic
decisions, including by holding meetings with the Foundation no less often than once every three (3) months;
(viii) consider
in good faith requests for donation of Released Product for Maternal Immunization by global health entities for demonstration studies/trials
or additional research studies/trials supporting regulatory approval and/or demand stimulation in Developing Countries, provided
however that Company’s provision of Released Product for such purposes shall not be deemed a first sale hereunder;
(ix) promptly,
upon WHOPQ or any applicable regulatory approval for distribution of Released Products in a Developing Country for Maternal Immunization,
provide reasonable publicity of the availability of the Product for sale for Maternal Immunization in each applicable Developing
Country including to Public Sector Purchasers (regardless of the location of such Public Sector Purchaser, provided the Released
Product procured is intended for use in or distribution to the applicable Developing Country) and responding to tender offers applicable
to the Released Product for Maternal Immunization, subject to the Price Commitment outlined in Section 3(c) below;
(x) promptly
upon WHOPQ, seek local Developing Country registration, to the extent such Developing Country participates, for Released Product
for Maternal Immunization through the WHO Collaborative Registration Procedure (CRP); and
(xi) provide
the Product to applicable Public Sector Purchasers for Maternal Immunization in accordance with this GACA and any applicable laws
and regulations.
(xii) pursue
applicable regulatory approval of Released Product for Maternal Immunization in those countries listed on Appendix A as “Additional
Countries” after WHOPQ, and, upon such approval, commit to make such Released Product available to Public Sector Purchasers
in such countries at a price per dose to be negotiated in good faith by the parties.
(c) Price
Commitment.
(i) Upon
WHOPQ, and in compliance with applicable laws and regulations, Company will offer and provide to Public Sector Purchasers the Aggregate
Minimum Supply at the Annual Minimum Supply (as set forth in section 3(d)) of the Released Product for Maternal Immunization in
the Developing Countries at a maximum price as reflected in Table A:
TABLE A
“Price
Commitment” is equal to the [**] Costs (as adjusted from
time to time under this section 3(c)) plus[**] mark-up but provided
always that such price does not exceed:
[**]
per Dose (USD) herein after the “[**]”
The
Parties acknowledge and agree that (1) the [**] described in Table
A above is based on principle assumptions about Novavax future manufacturing efficiencies at the time of WHOPQ as set forth on
Appendix C attached hereto and incorporated by reference herein, and (2) to the extent that actual results differ from such Appendix
C principal assumptions, then the Parties shall take such factors causing differing results into account and will thereafter adjust
such [**] pursuant to Section 3(c)(ii).
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(ii)
Notwithstanding Table A, within three (3) months prior to the estimated date for WHOPQ, and unless otherwise agreed by the Parties,
at every third anniversary thereafter, coinciding with UNICEF tenders, the Parties shall, in good faith, discuss applicable adjustments
to the Price Commitment (whether upwards or downwards) to proportionately, fairly, and reasonably reflect the factors set forth
in Appendix C, including the impact on such factors caused by external or internal circumstances, including inflation, currency
fluctuations, efficiencies of scale, product demand and yield improvements. In preparation for considering any such price adjustment,
in the event that there are changes in [**] Costs that, in the
aggregate exceed [**] since the last calculation, then Company
shall provide to the Foundation an update to its [**] Costs consistent
with Appendix C and the Foundation’s COGS Principles and Assessment Methodology Handbook, at least sixty (60) days in advance
of such third anniversary and the Parties shall meet in good faith to discuss such changes within sixty (60) days after Company
provides the Foundation with such update. In the event of any conflict between Appendix C of this GACA and the Foundation’s
COGS Principles and Assessment Methodology Handbook, Appendix C of this GACA shall control. Upon agreement of the Parties to any
price adjustment (which shall be reflected in a signed writing by the parties), the applicable price adjustments shall become effective
within three (3) months after such written agreement or in time for the coinciding UNICEF tender, whichever is earlier. In the
event that the Parties are unable to agree on a revised Price Commitment, an independent third-party, with specific expertise in
assessing costs, [**], and with experience with vaccines, reasonably
acceptable to both Parties, shall be appointed to provide analysis of such potential adjustment upon the request of either Party
and the cost of such analysis shall be shared equally by the Parties. That analysis will be shared with Company and the Foundation
who will work together to resolve any adjustments to the Price Commitment. If there is no resolution within forty-five (45) days,
the matter will be referred to Company’s President/CEO and the Foundation’s President of Global Health (or the equivalent
in the event of any reorganization following which such position no longer exists). If these individuals are unable to resolve
the matter of the revised Price Commitment based on this analysis within a further forty-five (45) days, then the price will be
adjusted upwards in event that the third party analysis points to an upward adjustment or downwards if the third party analysis
points to a downward adjustment, in each case, capped as follows: if the parties are unable to agree with respect to the first
adjustment of the [**], then the adjustment shall be [**],
as the case may be (based on the direction of the third party analysis) and if the parties are unable to agree as to any subsequent
adjustments to the [**], then the adjustment shall be [**]
as the case may be (based on the direction of the third party analysis).
(iii)
Upon the written request of the Foundation and not more than once in each calendar year, Company will permit an independent third
party accounting firm, with specific expertise in assessing costs [**]
and with experience with vaccines selected by the Foundation and reasonably acceptable to Company, at Foundation’s expense,
to have access during normal business hours to such of the records of Company as may be reasonably necessary for any year ending
not more than three (3) years prior to the date of such request for the sole purpose of verifying the basis and accuracy of [**]
Cost consistent with Appendix C and the Foundation’s COGS Principles
and Assessment Methodology Handbook, for determining [**] Cost.
Such third party accounting firm shall provide any such report to both the Foundation and Company and if such third party accounting
firm identifies a discrepancy in [**] Cost made during such period,
appropriate adjustments will be determined within ninety (90) days of the date such accounting firm's written report is delivered
to both Parties.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(iv) Multi Dose Vial
Options: Notwithstanding the foregoing, if the Parties agree that to the extent the Company switches to a multi-dose presentation
of the Product that meets WHOPQ requirements and satisfies the Company’s Global Access Commitments, the Price Commitment
shall be appropriately reviewed and may be adjusted by mutual written agreement of the Parties, consistent with the process described
in Section 3(c)(ii) above.
(v) Notwithstanding
section 3(c)(i) above, in the event that Company sells Released Product for Maternal Immunization to a Public Sector Purchaser
in any country (whether a Developing Country or a Developed County) at a lower than the Price Commitment in subsection 3(c)(i)
above, Company will promptly offer such Released Product for sale at such lower price to any Developing Countries in which the
sale, use or marketing of Released Product is authorized by WHOPQ or applicable country registrations. Company will promptly notify
the Foundation of any price decrease of the Released Product for Maternal Immunization.
(d) Volume
Commitment.
(i) In order to provide
the greatest health benefit of the Product, Company desires to address worldwide need for the Product including demand for its
use in Maternal Immunization from Developed and Developing Countries. The Parties recognize that introduction and demand for the
Product occurs over a period of time and that Company may not be fully able to address such demand in the period proximate to introduction
and approval. Notwithstanding the foregoing, the Parties acknowledge that Company’s current and planned Total Product Manufacturing
Capacity may not be sufficient to meet worldwide demand. Accordingly, the Parties desire to define the allocation of Product that
Company intends to reserve to fulfill orders for use in Maternal Immunization in Developing Countries.
(ii) Upon applicable
regulatory approval(s), the Company shall make the Released Product, available and accessible to Public Sector Purchasers for Maternal
Immunization on the terms set forth in this GACA.
(iii) Company
shall ensure Aggregate Minimum Supply is met subject to the Annual Minimum Supply as defined in Table B below in the context of
Timing of First Sales set forth in Table B (“Annual Minimum Supply”). Company shall ensure that this Annual
Minimum Supply is available each year starting at the date of the first sale of Released Product to a Public Sector Purchaser for
a Developing Country and ending upon termination of this GACA, including any Extended Term as described in Section 3(d)(v). Company
shall use reasonable and diligent efforts to manufacture, fill finish, package, label, store and ship the Released Product in accordance
with (a) all tender, purchase and sale agreements with any Public Sector Purchaser(s) up to the Aggregate Minimum Supply, (b) all
applicable safety, legal, ethical, and regulatory requirements, and (c) the terms of this GACA. Shipping terms will be FCA Incoterms
2010, unless agreed in writing otherwise.
[Remainder of page left intentionally blank]
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
TABLE B
Timing of First Sales |
|
Annual Minimum Supply |
|
|
|
If the first sale to a Public Sector Purchaser for Maternal Immunization for a Developing Country (following WHOPQ) is within 0-3* years of first sale in a Developed Country |
|
Annual Minimum Supply shall be the greater of (a) [**] of Company’s Total Product Manufacturing Capacity per year, or (b)[**] Doses of Released Product per year for Maternal Immunization; which Annual Minimum Supply shall apply for the first 3* years after first sale in a Developed Country. |
|
|
|
|
|
After such 3* years, Annual Minimum Supply will increase to the greater of (a) [**] of Company’s Total Product Manufacturing Capacity per year, or (b) [**] Doses of Released Product per year for Maternal Immunization |
|
|
|
If the first sale to a Public Sector Purchaser for Maternal Immunization for a Developing Country (following WHOPQ) is more than 3* years after the first sale in a Developed Country |
|
Annual Minimum Supply is the greater of (a) [**] of Company’s Total Product Manufacturing Capacity per year, or (b) [**] Doses of Released Product per year for Maternal Immunization |
*Novavax shall have the right to
request in writing that such period be extended to 4 years and the Foundation shall reasonably consider in good faith such request
in a timely manner, in light of the current or anticipated demand from Developing Country(ies) and/or Public Sector Purchaser(s)
and in light of factors provided to Foundation by Company.
(iv) Obligation
to Bid on Public Sector Purchaser Tenders. Subject at all times to the Aggregate Minimum Supply and Annual Minimum Supply,
the Volume Commitment requires the Company to use reasonable and diligent efforts to bid on applicable Public Sector Purchaser
tenders in accordance with the Price Commitment for any Public Sector Purchaser purchase order with an effective date that falls
within the Term or Extended Term.
(v) Volume
Commitment Rollover. During the Term of this GACA, in the event that during a calendar year the full amount of the Annual Minimum
Supply is not committed for purchase by applicable Public Sector Purchasers (“Undemanded Capacity”), Company
shall have the right to allocate such Undemanded Capacity as it sees fit and the same amount of Undemanded Capacity shall be rolled
over into one or more extended years, depending on the amount of such Undemanded Capacity, which shall thereby extend the Term
of this GACA (“Extended Term”). During the Extended Term, the terms and conditions of this GACA shall apply,
until the Aggregate Minimum Supply is met. For the avoidance of doubt and notwithstanding any other provision of this GACA, this
volume commitment rollover provides for an Extended Term that ensures that Company provides the Aggregate Minimum Supply over the
Term or Extended Term. Notwithstanding the foregoing, Company may, but will not be obligated to, provide more than the Annual Minimum
Supply to Public Sector Purchasers within any given calendar year during the Term or Extended Term. The Parties agree that in any
event, the Extended Term shall not exceed five (5) additional years at which time the Volume Commitment will be deemed fulfilled.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(vi) Expanded
Capacity. In the event the Foundation desires additional expanded capacity beyond the Aggregate Minimum Supply, the Foundation
may at its full discretion request a proposal from Company detailing whether and how Company would meet such increased capacity
and Company will respond promptly and in good faith with such a proposal; provided, however, that nothing in this paragraph is
or will be deemed a promise of future funding and any such proposal is subject to all internal reviews, processes and approvals
by the Foundation and any applicable laws and regulations, and any such proposal or future funding must be reflected in a definitive
written agreement between the Parties. Nothing in this GACA is a promise or obligation for either Party to enter into any future
agreement.
(e) Representations,
Warranties, Covenants of Company: Company hereby represents, warrants and covenants to the Foundation:
(i) Project
Diligence and Necessary Skill. Company will use reasonable and diligent efforts to meet the Project obligations, develop the
Product, and meet its obligations under the Grant Agreement and this GACA, and Company has, and will maintain, the necessary expertise,
personnel, facilities and equipment to meet the Project obligations, develop the Product, and meet its obligations under the Grant
Agreement and this GACA;
(ii) Compliance
with Applicable Laws & Regulations. Company will comply with all applicable laws, regulations, and rules and will not infringe,
misappropriate, or violate the intellectual property rights of any third party and is in compliance in all material respects with
all applicable laws, regulations, and rules (including all laws and regulations related to clinical trials, human health and safety,
the protection of the environment, research, development and manufacture of vaccines intended for human use) regarding the use,
design, research, development, production, manufacture, licensure, offer-for-sale, sale, distribution, import and export of the
Product as contemplated by the Project, and no action has been filed or commenced against Company alleging any such failure. Company
is in material compliance with all applicable cGMPs, Good Clinical Practices, Good Laboratory Practices and has (or will obtain
prior to any applicable activity) all applicable licenses, approvals and permits related to the foregoing. Company is not aware
of facts that (with or without notice or lapse of time, or both) could reasonably be expected to result in Company being in violation
in any material respect of any law materially applicable to the use, design, research, development, production, manufacture, licensure,
offer-for-sale, sale, distribution, import and export of any Product as contemplated by the Project. Company has in place and shall
continue to maintain during the Term or Extended Term, a compliance program reasonably designed to identify, prevent, and address
any material compliance issues.
(iii) Licenses
and Permits. Company currently holds (or will hold prior to any applicable activities related to the Product): all necessary
foreign, federal, state, local and other governmental licenses, approvals and permits necessary to use, design, develop, produce,
manufacture, offer-for-sale, sell, distribute, import and export the Product for use as contemplated hereunder by the Project and
this GACA.
(iv) Records
Compliance. Company will maintain, in accordance with and for the period required under cGMPs and applicable laws, complete
and adequate records pertaining to the methods, and the facilities, manufacture, procedures, testing and the like, related to the
Products.
(v) No
Conflict. Company will not enter into any agreement or arrangement with any third party which will prevent it from performing
or impair its ability to perform its obligations hereunder.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(vi) IP
Due Diligence. Company currently has (or will have prior to any commercialization of the Product), conducted reasonable due
diligence with respect to the Product, including intellectual property and freedom to operate analyses related to such Product.
(vii) IP
Rights. Company currently has (or will have prior to commercialization of the Product) rights to any and all intellectual property
(including rights in any patents, data, confidential information, know-how or other proprietary right) required to commercialize
(make, have made, sell, offer- for-sale, distribute, import, export and use as contemplated by the Project) the Product.
(viii) Product
Modification. In the event of any injunction or prohibition against Company’s manufacture, licensure, import, export,
sale, offer-for-sale, distribution, or use of the Product by reason of infringement of a patent, proprietary, or intellectual property
right, or if in Company’s opinion the Product is likely to become the subject of a claim of infringement of a patent, proprietary,
or intellectual property right Company will, at its option and at its expense, either: (a) procure (such as by licensing or otherwise)
the right to continue to make, have made, import, export, sell, offer-for-sale, distribute, and use such Product, or (b) replace
or modify such Product so it becomes non-infringing, but is reasonably equivalent or superior in terms of efficacy, quality and
safety. Notwithstanding the previous, Company’s inability to further develop, manufacture, sell or license the Product because
it cannot reasonably procure rights or modify the Product as prescribed hereunder, which limitation has been reasonably verified
by the Foundation, shall not be deemed a Charitability Default provided the Foundation reasonably agrees that such procurement
or modification is not reasonable.
(ix) No
Disputes. The Product, including its commercialization, manufacture, sale, offer-for-sale, distribution, import, export and
use as contemplated by the Project, is not the subject of any current third party intellectual property claims and is not currently
subject to any disputes with a third party. Company agrees to notify the Foundation of any such claims or disputes which arise
during the Term or Extended Term.
(x) Disqualification
and Debarment. Company, its employees or contractors or agents are not and will not be, at the time of performance of any activity
contemplated hereunder, (a) disqualified or debarred by any applicable governmental authority for any purpose pursuant to applicable
law or regulation or threatened with any such disqualification or debarment or (b) charged or convicted for conduct relating to
the development or approval of, or otherwise relating to the regulation of, any product under any applicable law or regulation,
which activity with respect to (a) or (b) could adversely impact the Project or Product or obligations under this GACA.
(xi) Warranty.
The Product is or will be manufactured by Company (and/or its CMOs or Affiliates) in conformity with its regulatory label and package
insert and all applicable laws and regulations.
(xii) Company
is Sponsor. Company is and shall be responsible for all aspects and stages of the Project and Product, including Product research,
development, clinical trials, and commercialization (including any applicable legal, regulatory, and governmental requirements
and/or registrations), including acting as the sponsor of any clinical trials or research studies related thereto. In no event
shall the Company make any representation or statement that the Foundation is a sponsor of any trial, study, Product registration,
or marketing authorization or the like. Except as may be required by law, Company shall not include the Foundation on any document
relating to the foregoing or in any communication with any governmental or regulatory body without the express prior written consent
of the Foundation. Any input, consultation, or communication to Company by the Foundation shall not diminish the foregoing.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
4. Term;
Survival
Except as to any provision subject
to survival and subject to any Extended Term under section 3(d)(v), this GACA and the obligations hereunder will expire at the
later of (a) 15 years after the Effective Date, or (b) 10 years after the first sale of Released Product to a Public Sector Purchaser
for Maternal Immunization for a Developing Country following WHOPQ (“Term”); provided, however the Term may
be lengthened to account for the Extended Term. The following sections will survive the expiration or termination of this GACA:
Sections 1 (Charitable Purposes and Use of Funds), 2 (Definitions), 3(e) (Representations, Warranties, Covenants of Company), 5
(Obligations in the Event of Acquisition of Product or Company by Another), 6 (Global Access License), 7 (Required Reporting),
10 (Waiver), 11 (Further Assurances), 12 (Indemnification of Foundation) 13 (Interpretation), 14 (Counterparts), 17 (Miscellaneous)
and this sentence.
5. Obligations
in the Event of Acquisition of Product or Company by Another
In the event Company, Company assets
necessary to perform Company’s obligations hereunder are licensed to, transferred to, sold to or otherwise acquired by a
third party, including as a result of a Change in Control (any such license, transfer, sale or acquisition, including a Change
in Control, is referred to herein as a “Transfer”), Company will ensure all such obligations are assumed by
the licensee, purchaser, transferee, acquirer or successor in a written agreement reasonably acceptable to the Foundation. Company
will not grant to a third party any rights or enter into any arrangements that would prohibit, prevent or otherwise restrict Company
or any purchaser, transferee, acquirer, or successor of Company assets or Company from fulfilling its obligations hereunder. For
clarity, notwithstanding anything to the contrary herein, the Foundation’s rights hereunder which exist on the date of the
Transfer shall not be terminated by such Transfer. A breach of this provision will constitute a Charitability Default.
6. Global
Access License
(a) “Charitability
Default” means that Company:
(i) fails
to comply with the restrictions on the use of funds or the other related U.S. tax obligations set forth in the Grant Agreement
or the requirements set forth in this GACA;
(ii) commits
a material breach of term of the Grant Agreement or this GACA;
(iii) commits
gross negligence, fraud or willful misconduct; or
(iv) makes
a strategic decision to discontinue the Product development and/or commercialization of the Product which meets the Minimum TPP;
or
(v) experiences
a Change of Control or Transfer in violation of section 5 of this GACA; or
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(vi) experiences
any Force Majeure Event, failure to cure or nonperformance exceeding 150 days, unless otherwise agreed to by the Parties in writing.
(b) Notice
of Charitability Default. Except as to Charitability Default under Section 6(a)(vi), each Party agrees that if it becomes aware
of a Charitability Default it will promptly notify the other Party, and Company shall thereafter provide to the Foundation a proposed
strategy to cure the Charitability Default within forty-five (45) days of notification. Notwithstanding anything in this GACA to
the contrary, the Foundation will not lose any rights or remedies solely as a result of a failure to notify Company after it becomes
aware of a Charitability Default, provided that such failure to notify shall not otherwise impede, prevent, or materially and detrimentally
impact the ability and/or expense associated with Company’s cure of such Charitability Default. In addition, Company agrees
to promptly notify the Foundation of any facts and circumstances which could reasonably cause a Charitability Default hereunder
(including with respect to any Charitability Default under Section 6(a)(i) through (vi)). Subject to Section 15(b), if Company
fails to either cure the Charitability Default within ninety (90) days of notice of a Charitability Default (the “Cure
Period”) or if such Charitability Default requires additional time to be cured as agreed by the parties (“Extended
Cure Period”) and the Company fails to use reasonable and diligent efforts to cure such Charitability Default, then the
Foundation will immediately be granted the Global Access License rights set forth in this Section 6. For the avoidance of doubt,
if the period of the Force Majeure event or any attempt to cure or any nonperformance (including due to Force Majeure) exceeds
one hundred and fifty (150) days from the notice, unless otherwise agreed to by the Parties in writing, the Foundation shall immediately
be granted the Global Access License as set forth in Section 6.
(c) License
Triggers
(i) If
a Charitability Default is not cured by the end of the Cure Period or Extended Cure Period, effective immediately, Company hereby
grants a non-exclusive, irrevocable, perpetual, sublicenseable, royalty-free and fully-paid up, worldwide (subject to Section 6(c)(ii)
below) license to the Foundation to all intellectual property, technology, know-how, and information owned, controlled or used
(subject to reasonably sublicensability by third party licensor(s)) by the Company at the time of such Charitability Default that
are necessary or useful to research, develop, make, have made, offer-for-sale, sell, import, export, distribute or use the Product,
such license solely to research, develop, make, have made, offer-for-sale, sell, import, export, distribute or use Product for
Maternal Immunization intended for the benefit of people in Developing Countries (“Global Access License”).
Upon a Global Access License, Company may reasonably seek to assign any and all such intellectual property rights, including third-party
licenses, to the Foundation or the Foundation’s licensee as appropriate, and the Foundation will reasonably work with the
Company to accept such assignment.
(ii) The
Parties agree and acknowledge that in order to achieve Global Access and make the Product available and accessible in Developing
Countries, certain activities may be required to occur in one or more Developed Countries, such as manufacture, distribution, or
sale (such as to an entity procuring Product for use in Developing Countries). For example, the manufacture of Product (intended
for use in Developing Countries) may occur in a Developed Country. Similarly, certain aspects of the distribution or supply chain
may occur in (or pass through) one or more Developed Countries, e.g. the Product may be transported through a Developed Country
en route to the final destination of the Product in a Developing Country. Similarly, the procurement entities which may purchase
Product (for or on behalf of a Developing Country) may be located in a Developed Country or the sales transactions related thereto
may occur in a Developed Country, even though the final destination of the Product is a Developing Country. Accordingly, the Global
Access License hereunder is intended to permit such Developed Country activities which are incidental or necessary to making the
Product available and accessible in Developing Countries.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(iii) The
provisions of this Section will survive the Term, Extended Term or any earlier termination of this GACA.
(d) Technology
Transfer
(i) In
connection with any Global Access License hereunder, such Global Access License shall be subject to the execution of the following
reasonably acceptable written agreements between the Company and the recipient of the technology transfer (which recipient may
be a Foundation sub-licensee or entities selected by the Foundation): quality agreement, safety data exchange agreement, and other
customary agreements related to technology transfer of the Product; provided always that such entity shall not be required to pay
any royalties, milestones or fees associated with such agreements. Company will cooperate with the Foundation in good faith to
make available to the Foundation (or the entities of the Foundation’s choosing) (including providing electronic copies),
all necessary intellectual property, technology, know-how and other information relating to the Product (including but not limited
to master batch records, SOPs, QA/QC information, detailed bill of materials for the Product and other manufacturing documentation)
for the purpose of permitting the Foundation (or its selected entities) to utilize its Global Access License and to continue to
research and develop and manufacture the Product, and to enable the manufacture, licensure, sale, offer-for-sale, import, export,
distribution, and use of such Product intended for use in the Developing Countries. For the purpose of facilitating Technology
Transfer the Company shall provide electronic copies of all such applicable records and manufacturing documentation related to
the Product for Maternal Immunization and the Foundation (or the entities of the Foundation’s choosing) and will be permitted
to inspect the same for the purpose of assuring complete and accurate technology transfer by Company.
(ii) Company
will continue to meet its Global Access Commitments towards and until completion of all intellectual property, know-how and information
technology transfer associated with a Global Access License herein. Company and the Foundation will cooperate in good faith to
effect an orderly and complete transition of any activities, including the research, development, manufacture, licensure, sale,
offer-for-sale, distribution, import, export and use of the Product to the Foundation or its selected entities.
(iii) Company
shall permit the Foundation (or its sublicenses) the right to access and cross-reference any applicable IND, BLA, WHOPQ or other
regulatory file relating to the Product and shall, upon request, provide an electronic copy of each such file.
(iv) To
the extent applicable, the Parties further agree to take all reasonable and diligent steps to eliminate or reduce any third party
costs or royalties (set forth in Appendix D or otherwise attributable to the Product) associated with such Global Access License,
including negotiation of any third party royalties and to negotiate access to such third party licenses by the Foundation (or its
selected entities).
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(v) The
provisions of this Section will survive the Term, Extended Term, or any earlier termination of this GACA.
(e) Indemnification
of Company by Technology Transfer Recipient in Connection with Technology Transfer.
(i) Unless
otherwise agreed by the Parties, upon the triggering of a Global Access License and as a condition of technology transfer associated
with the Product, the recipient of the technology transfer (which recipient may be a Foundation sub-licensee or entities selected
by the Foundation) (hereinafter “Technology Transfer Recipient”) will be required to indemnify, hold harmless
and defend Company and its Affiliates and its and their officers, directors, employees and agents (the “Company Indemnified
Parties”) against any and all expenses, costs of defense (including reasonable attorneys’ fees, witness fees, damages,
judgments, fines, and amounts paid in settlement) and any amounts any such indemnitee becomes legally obligated to pay (“Losses”)
because of any Third Party claim or claims against it (“Third Party Claims”) to the extent that such Third Party
Claims arise from or are due or attributable to: (a) any defect in the Product manufactured or produced by the Technology Transfer
Recipient or (b) any act or omission involving the gross negligence, intentional misconduct, or fraud of the Technology Transfer
Recipient related to the Product; except, in each case ((a) or (b)), to the extent such Losses result from: (i) Company’s
manufacture or production of Product (whether directly or by any agent or CMO of Company), (ii) any fraud, gross negligence or
willful misconduct (whether by act or omission) of any Company Indemnified Parties, (iii) the breach by Company of any warranty,
representation or covenant made by Company in this GACA or the Grant Agreement, (iv) any defect in the manufacturing process design
or Product design attributable to Company, (v) Company’s failure to provide complete and accurate technology transfer consistent
with industry standards and consistent with any applicable agreements between the Company and Technology Transfer Recipient; or
(vi) Company’s violation of any applicable laws or regulations related to the Product or technology transfer thereof.
(ii) Notice
& Control of Defense. In the event any Company Indemnified Parties seeks indemnification under this section, the applicable
Company Indemnified Party shall provide the Technology Transfer Recipient with prompt written notice of any such claim, provided
that, any failure to give prompt notice will not waive any rights of any Company Indemnified Party except to the extent the rights
of the Technology Transfer Recipient are actually prejudiced by such failure. The Technology Transfer Recipient will have the right
to conduct the defense of such Third Party Claim at its sole cost and expense provided Company may retain separate counsel at Company
sole cost and expense. Company and Company Indemnified Parties agree to provide reasonable cooperation to Technology Transfer Recipient
in defense of such Third Party Claim.
7. Required
Reporting
In addition to any and all reports
required to be delivered to the Foundation under the Grant Agreement, Company shall furnish, or cause to be furnished, to the Foundation
the following reports, information and certifications:
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(a) Provide
the Foundation with written reports in form and detail reasonably satisfactory to the Foundation and confer with the Foundation
(by teleconference or in scheduled site visits as appropriate) regarding progress with respect to the milestones (under the Grant
Agreement) and the Global Access Commitments herein;
(b) Coordinate
with the Foundation to determine reasonable times for the Foundation’s representatives to make site visits to Company’s
facilities with respect to the Project or Product;
(c) Make
available to the Foundation (or at the Foundation’s election auditors selected by the Foundation and reasonably acceptable
to Company), the Company books and records related to the Project and Product for four years after funds are fully spent and make
such records and reports available to enable the Foundation to monitor and evaluate how funds have been used;
(d) Make
available to the Foundation (or at the Foundation’s election auditors selected by the Foundation and reasonably acceptable
to Company) those Company books and records related to the Project, including records evidencing sales to Public Sector Purchasers
and obligations under this GACA;
(e) Provide
the Foundation with the date upon which Company achieves WHOPQ; and
(f) Provide
the Foundation with the date and location of the first sale to a Public Sector Purchaser for Maternal Immunization for a Developing
Country following WHOPQ.
8. Entire
Agreement; Modification
This GACA and the Grant Agreement,
including all exhibits hereto and thereto, set forth all the covenants, promises, agreements, warranties, representations, conditions
and understandings between the parties with respect to the subject matter, and supersede and terminate all prior agreements, negotiation
and understandings between the parties, whether oral or written, with respect to such subject matter. No subsequent alteration,
modification, amendment, change or addition to this GACA shall be binding upon the Parties unless reduced to writing and signed
by the respective authorized officers of the Parties. In the event of a conflict between the terms of this GACA and the terms of
the Grant Agreement, the terms of this GACA shall control.
9. Authority
Each of Company and the Foundation
covenants, represents and warrants with respect to itself that it has all authority necessary to execute this GACA and that, on
execution, this GACA will be fully binding and enforceable in accordance with its terms, and that no other consents or approvals
of any other Person or third parties are required or necessary for this GACA to be so binding.
10. Waiver
Failure or delay by either Party in exercising
or enforcing any provision, right, or remedy under this GACA, or waiver of any remedy hereunder, in whole or in part, shall not
be deemed a waiver thereof, or prevent the subsequent exercise of that or any other rights or remedy. Other than that arising out
of this GACA or Grant Agreement, in no event will either party have any liability for any indirect, incidental, consequential or
special damages, even if advised of the possibility of such damages.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
11. Further
Assurances
From time to time after the Effective Date,
each Party shall execute, acknowledge and deliver to each other any further documents, assurances, and other matters, and will
take any other action consistent with the terms and conditions of this GACA, that may reasonably be requested by a Party and necessary
or desirable to carry out the purpose of this GACA.
12. Indemnification
of Foundation
Company will indemnify, defend, and hold harmless
the Foundation and its trustees, employees, and agents (“Indemnified Parties”) from and against any and all
demands, claims, actions, suits, losses, damages (including property damage, bodily injury, and wrongful death), arbitration and
legal proceedings, judgments, settlements, or costs or expenses (including reasonable attorneys’ fees and expenses) (collectively,
“Claims”) arising out of or relating to the acts or omissions, actual or alleged, of Company or its employees,
subcontractors, contingent workers, agents, and affiliates with respect to the Project, the Product, this GACA or the Grant Agreement.
Company agree that any activities by the Foundation in connection with the Project or Product, such as its review or proposal,
input, or suggested modifications to the Project or Product, will not modify or waive the Foundation’s rights under this
paragraph. An Indemnified Party may, at its own expense, employ separate counsel to monitor and participate in the defense of any
Claim.
13. Interpretation
The headings contained in this GACA are for
reference purposes only and shall not affect in any way the meaning or interpretation of this GACA. Whenever the words “include,”
“includes” or “including” are used in this GACA, they shall be deemed to be followed by the words “without
limitation.”
14. Counterparts
This GACA may be executed in one or
more counterparts, including by signatures delivered by facsimile or pdfs, each of which shall be deemed an original, but all of
which shall be deemed to be and constitute one and the same instrument.
15. Force
Majeure
(a) If Company
is unable to perform its obligations or enjoy the benefits of this GACA because of the occurrence of any contingency beyond all
reasonable and diligent efforts , including, but not limited to, war (whether a declaration thereof is made or not), terrorism,
sabotage, insurrection, rebellion, riot or other act of civil disobedience, act of a public enemy, act of any government or any
agency or subdivision thereof, judicial action, general strikes, fire, accident, explosion, epidemic, quarantine, restrictions,
storm, flood, earthquake, adverse weather conditions, other natural disasters, Acts of God, unless such occurrence is caused by
Company’s negligent act or omission, (a “Force Majeure Event”), Company shall give prompt written notice to the
Foundation and shall use all reasonable and diligent efforts to resume performance as soon as practicable. Subject to Section 6,
upon receipt of such notice, all obligations affected by such Force Majeure Event under this GACA shall be suspended for the duration
of such Force Majeure Event. Upon the termination of any Force Majeure Event, Company shall be obligated to cure or remedy any
failure to perform by reason of such Force Majeure Event.
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(b) Notwithstanding
anything in this GACA, if the period of the Force Majeure event or any attempt to cure or any nonperformance (including due to
Force Majeure) exceeds one hundred and fifty (150) days from the notice, unless otherwise agreed by the Parties in writing, the
Foundation shall immediately be granted the Global Access License as set forth in Section 6.
16. Dispute
Resolution
Any disputes or conflicts relating
to the Project will first be attempted to be resolved by the Parties designated representatives in a timely manner. In the event
an issue cannot be resolved by the Parties representatives, the President/CEO of the Company and the President of Global Health
of the Foundation will meet within thirty (30) days for the purposes of resolution. Notwithstanding the forgoing, neither party
waives any legal or other remedy it may have in law or equity under the Grant Agreement or this GACA.
17. Miscellaneous
(a) Notice.
Any notice, request, demand, consent or other communication required or permitted hereunder shall be in writing and effectively
given if delivered personally or by FedEx, DHL, or other nationally recognized overnight courier service (with evidence of receipt
thereof), or sent by first class mail, using certified or registered mail, postage prepaid, addressed to the Party for which it
is intended at its address as set out below or as may be designated by notice pursuant hereto.
To
Company: Novavax, Inc.
20 Firstfield Road
Gaithersburg, MD 20878
Fax: 240-268-2100
Attention: General Counsel
To Foundation: Bill & Melinda
Gates Foundation
PO Box 23350
Seattle, WA 98102
Fax: (206) 494-7039
Attn: Director, Pneumonia
with a copy to:
Bill & Melinda Gates Foundation
PO Box 23350
Seattle, WA 98102
Fax: (206) 494-7123
Attn: General Counsel
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
(b) Severability.
If any provision herein is found to be unenforceable, it is the intent of the Parties that such provision be replaced, reformed
or narrowed so that its original business purpose may be accomplished to the extent permitted by law. The invalidity or unenforceability
of any provision of this GACA shall not affect the validity or enforceability of any other provisions of this GACA, which shall
remain in full force and effect.
(c) Amendments.
No supplement, amendment, modification or rescission of this GACA shall be valid or enforceable unless set forth in writing
and signed by both Parties.
(d) Assignment.
The Grant Agreement and this GACA, and all rights and obligations of the Parties hereunder, shall not be assigned or delegated
by either Party without the prior written consent of the other Party; provided, however, that Company may assign this Agreement
to any Affiliate or successor in interest with the consent of the Foundation, not to be unreasonably withheld, provided that such
successor
in interest assume all obligations hereunder. Subject to the foregoing, the Grant Agreement and this GACA shall be binding upon
and shall inure to the benefit of the Parties and their respective successors and assigns.
(e) Governing
Law. This GACA shall be governed by and construed under the laws of the State of New York in all respects as such laws are
applied to agreements among New York residents entered into and performed entirely within New York, without giving effect to conflict
of laws principles thereof. The Parties agree that any action brought by either Party under or in relation to this Agreement, including
to interpret or enforce any provision of this Agreement, shall be brought and filed in, and each Party agrees to and does hereby
submit to the exclusive jurisdiction and venue of, any state or federal court located in the State of New York.
(f) Entire
Agreement. The Grant Agreement and this GACA and all attachments, including any amendments, constitute the entire agreement
between the Parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions,
and negotiations, whether oral or written, express or implied, of the Parties with respect hereto.
(g) Confidentiality.
The Parties acknowledge and agree that the provisions of the Nondisclosure Agreement between them dated as of March 26, 2013 and
amended as of April 29, 2015, (and further amended from time to time as agreed in a signed writing by the parties), shall be deemed
to govern all disclosures of “Confidential Information” (as defined therein) that may occur hereunder. For clarity,
the Grant Agreement, this GACA, and all attachments thereto shall not be deemed Confidential Information, other than those aspects
of such documents that are covered by a CDA between the parties and are granted confidential treatment by the U.S. Securities and
Exchange Commission, as requested by Novavax, provided always that any such Confidential Information relevant to UNICEF, WHO, Gavi
and Public Sector Purchasers will be made available to such entities in preparation for review by the WHO Strategic Advisory Group
of Experts on immunization (SAGE). In addition, Company agrees to collaborate in good faith with the applicable material immunization
experts in order to prepare documentation needed for SAGE review. Following SAGE review, Company agrees to disclose applicable
price and volume information consistent with public sector procurement procedure (which may require public disclosure of such information).
[Signature Page Follows]
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
IN WITNESS WHEREOF, the Parties have caused this Global
Access Commitments Agreement to be executed by their duly authorized representatives as of the Effective Date.
NOVAVAX, INC. |
|
BILL & MELINDA GATES FOUNDATION |
|
|
|
By: |
/s/ Stanley C. Erck |
|
By: |
/s/ Keith Klugman |
Name: |
Stanley Erck |
|
Name: |
Keith Klugman |
Title: |
President and Chief Executive Officer |
|
Title: |
Director, Pneumonia |
Date: |
September 25, 2015 |
|
Date: |
September 18, 2015 |
[Remainder of page left intentionally blank]
[**] = Portions of this exhibit have been omitted
pursuant to a confidential treatment request.
An unredacted version of this exhibit has been
filed separately with the Commission.
APPENDIX A
Developing Countries |
|
Afghanistan |
Ghana |
Nicaragua |
Angola |
Guinea |
Niger |
Armenia |
Guinea Bissau |
Nigeria |
Azerbaijan |
Guyana |
Pakistan |
Bangladesh |
Haiti |
Papua New Guinea |
Benin |
Honduras |
Rwanda |
Bhutan |
India |
Sao Tome e Principe |
Bolivia |
Indonesia |
Senegal |
Burkina Faso |
Kenya |
Sierra Leone |
Burundi |
Kiribati |
Solomon Islands |
Cambodia |
Korea DPR |
Somalia |
Cameroon |
Kyrgyz Republic |
Sri Lanka |
Central African Republic |
Lao PDR |
Republic of Sudan |
Chad |
Lesotho |
South Sudan |
Comoros |
Liberia |
Tajikistan |
Congo Republic |
Madagascar |
Tanzania |
Cote d’Ivoire |
Malawi |
Timor Leste |
Cuba |
Mali |
Togo |
Democratic Republic of Congo |
Mauritania |
Uganda |
Djibouti |
Moldova |
Ukraine |
Eritrea |
Mongolia |
Uzbekistan |
Ethiopia |
Mozambique |
Viet Nam |
Gambia |
Myanmar |
Yemen |
Georgia |
Nepal |
Zambia |
|
|
Zimbabwe |
Certain
countries in this Appendix A may be subject to U.S. comprehensive embargo restrictions at present or in the future. The Parties
acknowledge that such restrictions could preclude one or both Parties’ ability to include such countries in any efforts under
this GACA.
Additional Countries |
|
[**] |
|
[**] |
|
[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request.
An unredacted version of this exhibit has
been filed separately with the Commission.
APPENDIX B
Respiratory Syncytial Virus Vaccine -
Target Product Profile
Executive Summary
Variable |
|
Minimum
The minimal target
should be considered
as a potential go/no go
decision point. |
|
Optimistic
The optimistic target
should reflect
what is
needed to achieve
broader, deeper, quicker
global health impact. |
|
Annotations
For all parameters, include here
the rationale for why this feature
is important and/or for the target
value. |
|
|
|
|
|
|
|
Indication* |
|
Prevention of RSV-
related lower respiratory tract infection associated
with hypoxemia in subjects from birth to 3 months of age |
|
[**] |
|
[**] |
Product
(Maternal Immunization) |
|
Nanoparticle vaccine
containing 120µg of RSV-F and 0.4mg
of aluminum |
|
[**] |
|
[**] |
Target Population* |
|
Pregnant women ≥18
years of age between
[**]
weeks of gestation |
|
[**] |
|
[**] |
Target Countries |
|
United States and Gavi (eligible and graduating) countries |
|
[**] |
|
[**] |
[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.
An unredacted version of this exhibit has
been filed separately with the Commission.
Variable |
|
Minimum
The minimal target
should be considered
as a potential go/no go
decision point. |
|
Optimistic
The optimistic target
should reflect
what is
needed to achieve
broader, deeper, quicker
global health impact. |
|
Annotations
For all parameters, include here
the
rationale for why this feature
is important and/or for the target
value.
|
Efficacy* |
|
≥[**] reduction in RSV-related lower respiratory tract infection associated with hypoxemia over the first 3 months of life |
|
[**]
[**] |
|
[**] |
Duration of
Protection
|
|
3 months |
|
[**] |
|
[**] |
Onset of
Immunity |
|
Documented onset of immune response within [**]weeks of vaccination |
|
[**] |
|
[**] |
[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.
An unredacted version of this exhibit has
been filed separately with the Commission.
Variable |
|
Minimum
The
minimal target
should be considered
as a potential go/no go
decision point. |
|
Optimistic
The optimistic
target
should reflect what is
needed to achieve
broader, deeper, quicker
global health impact. |
|
Annotations
For all
parameters, include here
the rationale for why this feature
is important and/or for the target
value. |
Indirect (Herd) Protection
|
|
Not relevant |
|
[**] |
|
[**] |
Safety* |
|
In Infant Subjects:
• No safety
signal in predefined categories of AEs and SAEs through the first year of life.
• No evidence of vaccine-enhanced
disease.
In Maternal Subjects: No
safety signal in predefined categories of AEs and SAEs, antenatally, intrapartum and for 6 months postpartum. |
|
[**] |
|
[**] |
Co- administration |
|
Safe administration without interference with other
maternal vaccines (e.g., influenza, Tdap, and tetanus toxoid) in accordance with local recommendations |
|
[**] |
|
|
[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.
An unredacted version of this exhibit has
been filed separately with the Commission.
Variable |
|
Minimum
The minimal target
should be considered
as a potential go/no go
decision
point. |
|
Optimistic
The optimistic target
should reflect
what is
needed to achieve
broader, deeper, quicker
global health impact. |
|
Annotations
For all parameters, include here
the
rationale for why this feature
is important and/or for the target
value. |
Presentation
|
|
Single dose vial, liquid formulation |
|
[**] |
|
[**] |
Cold chain volume required |
|
Consistent with
VPPAG Guidance, i.e. Maximum 4.0, 6.5, 13.0, and 15.0 cm3 per
dose for 10-, 5-, 2-, 1-dose vials, respectively |
|
[**] |
|
[**] |
Dosing Schedule and Route of Administration*
|
|
Single intramuscular injection at [**] weeks of gestation |
|
[**] |
|
[**] |
Vaccine Volume
(cm3 /dose) |
|
0.5ml |
|
[**] |
|
|
[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request.
An unredacted version of this exhibit has
been filed separately with the Commission.
Variable |
|
Minimum
The minimal
target
should be considered
as a potential go/no go
decision
point. |
|
Optimistic
The optimistic
target
should reflect what is
needed to achieve
broader, deeper, quicker
global health impact. |
|
Annotations
For all
parameters, include here
the rationale for why this feature
is important and/or for the target
value. |
Stability / Shelf
Life
|
|
Shelf
life of [**] at
2-8°C
Use of vaccine vial monitors and freeze monitors
|
|
[**] |
|
|
Product
Registration Path
|
|
U.S. BLA approval and WHOPQ |
|
[**] |
|
[**] |
Target US BLA
Submission Date |
|
[**] |
|
[**] |
|
|
Target WHO
PSF Submission
Date |
|
Within
[**] of
US BLA approval |
|
[**] |
|
|
Primary Target
Delivery Channel |
|
Through Antenatal
Care (ANC) programs |
|
[**] |
|
[**] |
Price |
|
Consistent with this
GACA |
|
[**] |
|
[**] |
Manufacturing
Capacities
(Candidate TPP Only) |
|
[**] |
|
[**] |
|
[**] |
[**] = Portions of this exhibit have
been omitted pursuant to a confidential treatment request.
An unredacted version of this exhibit
has been filed separately with the Commission.
APPENDIX C
Principal Assumptions for Price
Cap Calculation
The
initial Maximum Price Cap described in Table A is based on the assumptions of Novavax’ US-based facility having the capacity
to produce, [**] by the date of WHOPQ, 120 microgram (120 µg)
Doses of Product annually using up to [**] reactors (or equivalent)
assuming [**] weeks of production per year, an overall batch success
rate of [**] percent [**],
and an average of [**] yield, and [**] percent
[**] overage/loss (averaged over all batches per year). These assumptions
are expected to be a base case for production at the time of WHOPQ. Since a primary objective of this GACA is to assure affordable
and accessible Product to people in Developing Countries, the Company agrees that a decline in the overall batch success rate below
[**] from the base case will not have an upward impact on the Product
cost per Dose nor an upward impact on the [**].
TABLE
C: Components of [**] Cost
Component |
|
Cost |
|
Notes |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
[**] |
|
[**] |
|
[**] |
|
|
|
|
|
Total |
|
[**] |
|
The [**] Total Cost is the sum total of [**] described in this table are for convenience; for the avoidance of doubt, Total Cost is calculated in the aggregate and will not be held to the characterization of any single component or multiple components. |
|
|
|
|
|
Impact of Grant |
|
[**] |
|
The proposed grant would represent a reduction to [**]costs calculated as the $89 million grant, amortized over 10 years, and divided by [**] doses. |
|
|
|
|
|
Subtotal |
|
[**] |
|
The total cost per dose including the grant is the previous
total [**] minus the impact of the grant[**]. |
|
|
|
|
|
Markup |
|
[**] |
|
Represents a [**]
markup over the cost to produce the Product. |
|
|
|
|
|
[**] |
|
[**] |
|
[**] represents the Subtotal plus the Markup |
[Remainder of page left intentionally blank]
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Stanley C. Erck, certify that:
1. I
have reviewed this Quarterly Report on Form 10-Q of Novavax, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluations; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
5. The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: November 9, 2015 |
By: |
/s/ Stanley C. Erck |
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
I, Barclay A. Phillips, certify that:
1. I
have reviewed this Quarterly Report on Form 10-Q of Novavax, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
d) disclosed in this report any
change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: November 9, 2015 |
By: |
/s/ Barclay A. Phillips |
|
Senior Vice President, Chief Financial Officer and Treasurer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT
TO 18 UNITED STATES C. §1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002)
In connection with the
Quarterly Report of Novavax, Inc. (the “Company”) on Form 10-Q for the fiscal period ended September 30, 2015 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley C. Erck, President and Chief
Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1) The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2) The information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the
dates and periods covered by this Report.
Date: November 9, 2015 |
By: |
/s/ Stanley C. Erck |
|
President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
PURSUANT TO 18 UNITED STATES C. §1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002)
In connection with the
Quarterly Report of Novavax, Inc. (the “Company”) on Form 10-Q for the fiscal period ended September 30, 2015 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barclay A. Phillips, Senior Vice
President, Chief Financial Officer and Treasurer, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1) The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2) The information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the
dates and periods covered by this Report.
Date: November 9, 2015 |
By: |
/s/ Barclay A. Phillips |
|
Senior Vice President, Chief Financial Officer and Treasurer |
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