Novavax, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012; balance-sheet figures are as of March 31, 2012, compared with December 31, 2011. Novavax was a clinical-stage vaccine developer, with candidates targeting influenza and RSV. Revenue was primarily from its HHS BARDA contract, not commercial vaccine sales.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 / prior date |
|---|---|---|
| Contract revenue | $4.642 million | $0.834 million |
| Cost of contract revenue | $3.786 million | $0.343 million |
| Research and development | $5.077 million | $5.071 million |
| General and administrative | $3.246 million | $2.850 million |
| Operating loss | $(7.467) million | $(7.430) million |
| Net loss | $(7.336) million; $(0.06) per share | $(7.453) million; $(0.07) per share |
| Operating cash flow | $(4.220) million | $(9.041) million |
| Cash and cash equivalents | $13.873 million | $14.104 million |
| Short-term investments | $6.847 million | $4.205 million |
| Working capital | $18.6 million | Not stated for prior period |
Cash, cash equivalents, and short-term investments totaled approximately $20.7 million at quarter-end. Total liabilities were $14.3 million, including notes payable of about $0.4 million; management described debt as not material. The company reported no product-level or overall gross-margin measure; contract revenue less contract costs was approximately $0.9 million, before R&D and G&A.
Changes versus the comparable period
- Revenue rose $3.8 million, mainly from increased HHS BARDA-funded work. Cost of contract revenue increased $3.4 million alongside that work.
- R&D was essentially unchanged; G&A increased $0.4 million, primarily due to non-cash costs associated with the new facility and higher professional fees.
- Net loss narrowed by $0.1 million, while weighted-average shares increased to 120.6 million from 111.2 million, primarily reflecting at-the-market stock sales.
- Operating cash use declined by $4.8 million, mainly due to timing of BARDA receipts and vendor payments and receipt of facility improvement-allowance funds. Financing provided $7.3 million, including $7.9 million net proceeds from stock sales; investing used $3.3 million.
Outlook, commentary, and risks
- Management said available resources, anticipated BARDA revenue, possible at-the-market offering proceeds, and facility allowance funding should support planned operations for at least 12 months. Additional capital will be needed for further development and commercialization; future financing is not assured and equity financing could substantially dilute shareholders.
- Management expected significant 2012 BARDA revenue and contract costs from clinical trials, process development, and clinical-material manufacturing; modestly higher R&D, partly for two planned RSV Phase II trials; moderately higher G&A; and increased capital expenditures for the new facility.
- The 205 seasonal-influenza trial’s outside costs were expected to total about $3.1 million, with $1.7 million incurred by March 31. Under discussions with BARDA, those costs would not be submitted for reimbursement or recognized as revenue until trial data were submitted under the planned Quadrivalent IND, expected in the second half of 2012. The company recorded unreimbursed trial costs as contract costs in the interim.
- Development remained uncertain: H5N1 was in Phase II, seasonal influenza in Phase II, RSV in Phase I, and rabies in preclinical development through the joint venture. Management reported launching an H5N1 Phase I trial in May 2012 and expected a second trial shortly; these are subsequent-period outlook statements, not Q1 results.
- Liquidity depends partly on BARDA performance and reimbursement timing, market access for stock sales, and compliance with lease terms. Failure to obtain funding could force reductions, delays, or elimination of development programs.
- The company held three auction-rate securities with $5.1 million par value and $4.3 million fair value; accumulated unrealized gains were $1.0 million. These current investments may be needed to fund operations.
- The Gaithersburg facility covers approximately 74,000 square feet, with rent to the landlord scheduled to begin April 1, 2014. The company received $1.6 million under the improvement allowance during Q1. It also disclosed $4.8 million unpaid under certain outside-provider agreements if services are completed in 2012, and a potential payment to Cadila if service-purchase thresholds are not met by March 2013.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during Q1. It reported no material changes to the risk factors in its 2011 Form 10-K.
Important facts for investors to verify
- Timing, eligibility, and collection of BARDA reimbursement, especially for the 205 Trial; confirm later filings show the expected data submission and revenue recognition.
- Actual cash burn, operating runway, and financing needs against management’s 12-month liquidity assessment.
- Remaining capacity and potential dilution under the at-the-market stock-sale agreement.
- Clinical-trial progress, safety and efficacy results, regulatory submissions, and whether projected milestones and trial plans were achieved.
- Facility costs and obligations, improvement-allowance conditions, provider commitments, and any Cadila shortfall payment.
- Liquidity and valuation of auction-rate securities and any subsequent impairment or sale.