Novavax, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing, not a standalone quarterly report; fourth-quarter figures are identified below. Novavax was a clinical-stage biopharmaceutical company developing recombinant vaccines and adjuvants, with no approved products or product sales.
Financial performance and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| Revenue | $20.9 million | $22.1 million |
| Operating expenses | $73.3 million | $51.7 million |
| Net loss | $52.0 million; $0.31 per share | $28.5 million; $0.22 per share |
| Cash used in operating activities | $45.4 million | $18.2 million |
| Cash, cash equivalents and investments at year-end | $133.1 million | $50.3 million |
| Working capital at year-end | $126.1 million | $38.7 million |
| Total notes payable | $1.9 million | $0.9 million |
FY2013 revenue was predominantly from government contracts, including HHS BARDA. Government-contract revenue was $17.7 million; research and development collaboration revenue was $3.2 million. The filing does not present a conventional product gross margin, as the company had no commercial product sales.
In Q4 2013, revenue was $8.7 million, net loss was $14.1 million, and loss per share was $0.07. These quarterly figures are unaudited.
Material changes and notable items
- Revenue declined 5% year over year, while net loss increased by $23.5 million. Research and development expense rose 87% to $50.3 million, primarily due to RSV and H7N9 development, staffing, and the acquired adjuvant business.
- Operating cash use increased by $27.1 million. Financing activities generated $131.0 million, primarily from equity issuance. Novavax sold approximately 60.0 million shares during 2013 across its public offering and at-the-market program, raising about $128.6 million net in total.
- Novavax acquired Isconova AB in July 2013, renaming it Novavax AB and adding its Matrix adjuvant technology. The purchase price was approximately $42.0 million, primarily paid in Novavax shares; the acquisition added $26.2 million of goodwill and $16.6 million of intangible assets.
- Long-term lease commitments were substantial: contractual operating leases totaled $32.4 million, alongside $1.9 million of notes payable and $0.3 million of capital lease obligations.
Pipeline, outlook and risks
- RSV: Phase 2 maternal dose-confirmation enrollment was completed in 2013; results were expected in Q2 2014, with a pregnancy trial planned for Q4 2014. Management also anticipated further elderly and pediatric development.
- Influenza: A new Phase 2 quadrivalent seasonal trial was expected to begin in Q4 2014. The company planned to pursue traditional efficacy-based licensure for seasonal influenza, which management said could add a year or more to the approval timeline. HHS BARDA redirected pandemic development toward H7N9; a Phase 1/2 trial with Matrix-M began in Q1 2014, with results expected in the second half of 2014. The H5N1 program remained a possible opportunity.
- Management expected higher 2014 revenue and contract costs from increased BARDA-funded development activity, as well as higher R&D and administrative expenses. It believed available cash, investments, anticipated BARDA revenue and other resources could fund operations into 2016; additional capital could still be required.
- The BARDA cost-reimbursement contract had a $97 million base-period value, extended in February 2014 through September 2014, and a $79 million optional two-year period. Reimbursement depends on allowable, authorized costs and compliance; the optional period was not guaranteed.
- Key risks include clinical or regulatory failure, manufacturing scale-up and approval delays, reliance on BARDA and collaborators, continued operating losses and future financing needs. Further equity financing could dilute shareholders. Seasonal influenza licensure may require larger, costlier efficacy trials; adjuvant safety and acceptance, integration of Novavax AB, and reliable quillaja supply are additional risks.
- There were no material legal proceedings reported. The financial statements received an unqualified audit opinion. Management reported effective controls, but its assessment excluded Novavax AB, acquired in July 2013.
Important facts for investors to verify
- Whether 2014 RSV and H7N9 trial timelines and results were achieved, and how those results affected subsequent development decisions.
- Actual BARDA reimbursements, remaining base-period funding, and whether the optional two-year period was exercised.
- Cash burn and financing needs against management’s stated runway into 2016; review subsequent equity issuance and dilution.
- Integration and clinical value of Matrix-M, including safety, efficacy, manufacturing readiness, and dependable quillaja extract supply.
- Final purchase-price allocation for Novavax AB and whether acquired goodwill or intangible assets required impairment.