Novavax, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; comparative period is Q1 2014. Novavax is a clinical-stage vaccine and adjuvant developer. Its candidates include RSV, seasonal and pandemic influenza, and Ebola vaccines; it also has preclinical programs including MERS. Amounts below are U.S. dollars.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 or comparison |
|---|---|---|
| Revenue | $9.9 million | $7.5 million; up 32% |
| Operating loss | $24.3 million | $14.4 million |
| Net loss | $24.4 million; $0.10 per share | $13.8 million; $0.07 per share |
| Operating cash used | $30.5 million | $20.4 million |
| Cash and cash equivalents plus marketable securities | $327.7 million at March 31, 2015 | $168.1 million at December 31, 2014 |
| Working capital | $321.3 million at March 31, 2015 | |
| Notes payable | About $0.8 million total |
Revenue was primarily from government contracts, principally HHS BARDA. The filing reports no product sales or commercialized Novavax vaccine. Cash flow from investing activities was $17.8 million provided, including marketable-security maturities; financing activities provided $195.5 million. Capital expenditures were $4.9 million. The company reported total assets of $438.8 million and total liabilities of $39.1 million at quarter-end.
Changes versus Q1 2014
- Research and development expense increased 78% to $25.9 million, mainly from RSV clinical trials, initiation of the Ebola vaccine trial, and higher employee costs. General and administrative expense rose 36% to $5.8 million.
- Total costs and expenses increased to $34.2 million from $21.8 million; government-contract costs declined 19% to $2.5 million.
- Revenue increased $2.4 million, primarily because HHS BARDA approved reimbursement of $3.1 million in previously incurred 205 Trial costs in Australia.
- Operating cash use increased by $10.1 million, reflecting increased development spending, employee costs, and payment timing. The net loss widened by $10.6 million.
- Comprehensive loss was $27.5 million, including a $3.2 million foreign currency translation loss, compared with $14.6 million in Q1 2014.
Funding, outlook, and material developments
- In March, Novavax raised approximately $190 million net through a public offering of 27.8 million shares at $7.25 per share. It also received about $4 million net from its at-the-market sales program. These financings substantially increased cash but diluted existing shareholders.
- Management said available cash and securities, anticipated BARDA revenue, and other resources were expected to fund operating plans for at least the next 12 months. Further capital may be needed; equity financing could be dilutive, and financing availability is not assured.
- Management expected 2015 revenue and government-contract costs to rise with increased BARDA-funded development. It also expected significantly higher R&D expense, higher G&A expense, and capital spending above 2014 levels. The filing does not provide a specific full-year numerical forecast.
- BARDA’s influenza contract was extended to September 2016 and received an additional $70 million of funding beyond the remaining $97 million base-period funding. BARDA payments are subject to allowable-cost audits; the FY2013 audit had begun but was not complete.
- Key clinical milestones expected in Q3 2015 included preliminary data from Phase 2 RSV elderly and maternal studies, the seasonal quadrivalent influenza Phase 2 study, and the Phase 1 Ebola study. Novavax also planned to explore a Phase 1 influenza/RSV combination study in 2015. These are expectations, not assured outcomes.
- The PATH RSV agreement expired in April 2015. Novavax was discussing possible support with the Gates Foundation, with no assurance an arrangement would be completed.
- A $3.0 million Wyeth milestone for a CPLB seasonal influenza Phase 3 trial remained accrued; the company was discussing a possible amendment to restructure payment. Under its Cadila services agreement, a shortfall payment of up to $2.0 million could be due if purchases were below $7.5 million by March 31, 2016; the reported remaining obligation was $1.2 million.
- Stockholders were to vote in June 2015 on increasing authorized common shares from 300 million to 600 million and approving the 2015 Stock Incentive Plan. Certain 2015-plan awards were contingent on approval, and the company warned failure to approve could hinder hiring and retention.
- Additional disclosed risks include clinical and regulatory uncertainty, reliance on BARDA contract performance and access to capital, potential dilution, and cybersecurity and data-breach exposure. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Progress, safety, immunogenicity, and timing of the expected clinical readouts; no vaccine candidate was commercially marketed by Novavax in this filing.
- BARDA reimbursement, contract performance, and the status and outcome of the pending FY2013 cost audit.
- Cash burn, capital expenditure needs, and whether the stated at-least-12-month funding outlook remains sufficient as development programs advance.
- Results of the June 2015 stockholder votes on authorized shares and the 2015 Stock Incentive Plan, and the resulting potential for dilution.
- Resolution and payment timing of the Wyeth milestone, the Cadila services shortfall obligation, and replacement funding for the expired PATH agreement.