Novavax, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 11, 2020. Novavax is a clinical-stage biotechnology company developing vaccines and adjuvants. Its pipeline included NanoFlu, ResVax and the newly advancing COVID-19 candidate NVX-CoV2373. The company reported one business segment.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $3.4 million | $4.0 million; down 15% |
| Research and development expense | $16.9 million | $35.5 million; down 52% |
| General and administrative expense | $9.4 million | $8.7 million; up 7% |
| Total expenses | $26.3 million | $44.2 million |
| Operating loss | $22.9 million | $40.2 million |
| Net loss / loss per share | $25.9 million / $0.58 | $43.2 million / $2.11 |
| Cash used in operations | $23.1 million | $50.6 million |
- Revenue was grant and other revenue, not product sales. Q1 2020 included $2.3 million recognized under the CEPI COVID-19 grant and $0.3 million under the Gates Foundation ResVax grant.
- Gross profit and operating margins are not separately presented; the filing does not provide a clear margin measure applicable to its development-stage operations.
- At March 31, cash and cash equivalents were $179.9 million, marketable securities $57.5 million, and restricted cash $7.3 million: $244.7 million in total. Working capital was $236.3 million.
- Current liabilities were $19.0 million. Convertible notes had $325 million principal, $321.0 million carrying value, a 3.75% coupon and a February 2023 maturity. Total liabilities were $352.0 million; stockholders’ deficit was $24.0 million.
- Financing provided $185.9 million net proceeds, primarily from at-the-market common-stock sales. Shares outstanding were 53.9 million at March 31 and 58.0 million at April 30, versus 32.4 million at December 31, 2019.
Material changes and developments
- Net loss and operating cash use fell substantially year over year, primarily because ResVax development and clinical-trial activity declined, employee-related costs fell, and the Catalent transaction generated cost savings. R&D staffing was 125 at March 31, versus 324 a year earlier.
- R&D reductions were partly offset by increased G&A expense. Weighted-average shares rose to 44.4 million from 20.4 million, reflecting equity issuance.
- In March, Novavax reported positive top-line Phase 3 NanoFlu results: the trial met primary objectives, showed statistical significance on key secondary endpoints, and had a safety profile comparable to the licensed comparator, with a modest increase in local adverse events.
- NVX-CoV2373 was in early development. The company reported encouraging animal immunogenicity results and planned a Phase 1/2 program; the Phase 1 trial was expected to begin in May 2020, with preliminary safety and immunogenicity results anticipated in July.
- After quarter-end, CEPI and Novavax signed a restated agreement for up to $384.5 million in additional NVX-CoV2373 funding, beyond the original $3.9 million. The company also disclosed $73.6 million in net proceeds from additional March 2020 sales-agreement share sales through May 8, with $26.0 million remaining under that agreement.
Outlook, risks and contingencies
- Management expected 2020 revenue to increase significantly, primarily from CEPI and/or other potential non-dilutive funding, while R&D expense, G&A expense and capital expenditures were expected to increase substantially due to NVX-CoV2373 development. No quantified full-year forecast was provided.
- Based on its cash-flow forecast, management believed available capital would fund operating plans for at least 12 months from the filing date. It cautioned that further capital may be needed and that financing may not be available on acceptable terms or at all.
- COVID-19-related risks included delays or disruption to trials, laboratories, suppliers, manufacturing, regulatory review and distribution; uncertainty over vaccine efficacy, funding and demand; competition from better-resourced developers; and possible government actions affecting rights or third-party capacity. Resources directed to COVID-19 could also delay other programs.
- ResVax’s prior Phase 3 trial did not meet its primary efficacy endpoint; regulators recommended another Phase 3 trial to confirm efficacy. NanoFlu’s prospective BLA and accelerated approval pathway remained subject to regulatory requirements and confirmatory studies.
- Novavax disclosed no material off-balance-sheet arrangements. Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether CEPI funding and any other non-dilutive support are received as expected, and how funding conditions affect cash and revenue recognition.
- NVX-CoV2373 clinical results, trial timing, manufacturing scale-up and the effect of pandemic disruptions or competition.
- NanoFlu regulatory submission plans and the status of required manufacturing qualification and lot-consistency work.
- Cash burn and spending growth against management’s stated minimum 12-month runway, including any additional financing or dilution.
- ResVax’s future development and partnering plans in light of its missed primary Phase 3 endpoint.