Novavax, Inc. — 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012; the filing also reports unaudited fourth-quarter results. Novavax is a clinical-stage vaccine developer with no approved products or product-sales revenue. Its programs include seasonal and pandemic influenza, RSV, and candidates developed through its India joint venture.
Financial performance and liquidity
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Revenue | $22.1 million | $14.7 million |
| Net loss | $28.5 million | $19.4 million |
| Net loss per share | $0.22 | $0.17 |
| Operating cash flow | $(18.2) million | $(23.6) million |
| Cash and investments at year-end | $50.3 million | $18.3 million |
| Working capital | $38.7 million | $18.5 million |
- Revenue increased 50%, primarily from the HHS BARDA influenza development contract. Government-contract revenue was $20.7 million; collaboration revenue was $1.4 million.
- Costs and expenses rose to $51.7 million from $36.3 million. Research and development expense increased 46% to $26.1 million, reflecting RSV trials, staffing, and the new manufacturing facility. Cost of government-contract revenue was $14.7 million.
- Net loss widened by $9.1 million. Operating loss was $29.7 million; positive other income, including $0.9 million in realized investment gains, partly reduced the loss. Conventional profit margins are not meaningful for this loss-making, pre-commercial company.
- Year-end cash and investments included $17.4 million cash and cash equivalents and $32.9 million investments. Current assets were $50.4 million against current liabilities of $11.7 million.
- Debt was modest relative to liquidity: notes payable totaled $0.9 million and capital-lease obligations had a $0.3 million carrying value. Total contractual obligations were $39.8 million, including operating leases and $6.9 million of Cadila purchase obligations.
- Common-stock sales generated $54.0 million net proceeds in 2012; shares outstanding increased substantially. This financing supported liquidity but diluted existing holders.
Fourth-quarter results and changes
- Q4 2012 revenue was $4.6 million versus $5.8 million in Q4 2011; net loss was $8.0 million versus $3.7 million, and loss per share was $0.06 versus $0.03.
- For the full year, revenue rose sharply from 2011, but the loss increased as R&D and manufacturing-related spending grew. Operating cash use declined from 2011, partly due to lease-improvement funding and payment timing.
Outlook, developments, and risks
- Management expected available resources, anticipated BARDA revenue, potential at-the-market share sales, and current operations to fund planned activity for approximately 24 months. This is an estimate, not a guarantee; further capital will be needed to advance candidates.
- For 2013, management expected a slight increase in revenue, government-contract costs roughly flat, significantly higher R&D expense, relatively flat general and administrative expense, and lower capital expenditures.
- The BARDA contract provides up to $97 million for a three-year base period and an optional $82 million extension. BARDA continued support after its December 2012 review, with notification in January 2013; reimbursement remains subject to allowable-cost rules, performance, audits, and the optional extension.
- Seasonal influenza Phase II results met the seroprotection criterion for all four strains, but did not show satisfactory seroconversion for one B strain. The next trial depended on manufacturing-process improvements. H5N1 Phase I results showed safety and immunogenicity and a robust adjuvant effect. RSV Phase I/II studies were underway, with results expected in the first half of 2013.
- The Gaithersburg manufacturing facility required equipment installation and validation before production; delays could affect clinical development. The company also faced potential costs from leasing both Gaithersburg and Rockville facilities.
- Key risks include continuing losses and financing needs, clinical or regulatory setbacks, manufacturing scale-up and approval, dependence on BARDA and collaborators, competition, intellectual-property disputes, and possible dilution from future equity sales. The filing reports no legal proceedings. The auditor issued an unqualified opinion, and management and the auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Cash runway assumptions and whether BARDA reimbursements, at-the-market sales, or other financing are available on expected terms.
- Progress on the seasonal influenza manufacturing process and resolution of the B-strain seroconversion issue.
- Clinical results and subsequent development plans for RSV and H5N1 programs.
- Timing, validation, and operating costs of the Gaithersburg facility, plus potential Rockville lease costs.
- Cadila service-purchase obligations, BARDA cost reimbursement conditions, and the effect of further share issuance on ownership.