Novavax, Inc. — Q2 2012 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2012; filed August 9, 2012. Novavax was a clinical-stage vaccine developer with no commercial vaccine sales reported. Its pipeline included influenza, RSV and a rabies program through its India joint venture.
Financial results and liquidity
| Metric | Q2 2012 | Q2 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Contract revenue | $7.1 million | $3.0 million | $11.7 million | $3.8 million |
| Operating loss | $5.9 million | $5.9 million | $13.3 million | $13.4 million |
| Net loss | $5.9 million | $5.0 million | $13.3 million | $12.4 million |
| Net loss per share | $0.05 | $0.04 | $0.11 | $0.11 |
- Revenue was primarily from the HHS BARDA cost-plus-fixed-fee contract. Contract costs were $5.1 million in Q2 and $8.9 million for the half year, reflecting increased development and clinical-trial activity.
- At June 30, cash and cash equivalents were $15.3 million and short-term investments were $11.2 million, for $26.5 million combined. Working capital was $25.6 million. Total assets were $77.0 million and total liabilities $15.9 million.
- Six-month operating cash use was $10.3 million, versus $17.4 million in 2011. Investing activities used $7.8 million; financing provided $19.4 million, chiefly from common-stock sales. Cash increased $1.2 million during the period.
- Notes payable totaled $0.4 million; the company stated it had no material debt. The $0.4 million warrant liability remained outstanding.
- Common shares outstanding were 132.2 million at June 30 and 133.7 million at July 31. The company raised $20.0 million net from stock sales in the first half, including a $12.1 million private placement and $7.1 million under its at-the-market program.
Changes, outlook and notable items
- First-half revenue rose 206% year over year as BARDA-supported activity increased. The first-half net loss widened by $0.8 million, mainly because 2011 included a $1.2 million gain from the change in fair value of the warrant liability; the 2012 period had no such gain.
- Management said existing resources, expected BARDA receipts, potential at-the-market proceeds and facility improvement funding should support planned operations for at least the next 12 months. It also said additional capital will be required for development, manufacturing and commercialization. No assurance was given that future financing would be available on acceptable terms.
- Management expected significant 2012 BARDA revenue and contract costs, a modest increase in R&D expense, moderate increases in general and administrative expense, and higher capital expenditures for manufacturing-facility scale-up.
- The 205 seasonal-influenza trial included a quadrivalent candidate, but related outside trial costs will not be submitted for BARDA reimbursement or recognized as revenue until data are submitted with the Quadrivalent IND. Approximately $2.4 million of an expected $3.1 million in outside costs had been incurred by June 30. The next quadrivalent Phase II trial and the related IND filing were delayed to 2013.
- July-reported 205 Trial results met primary safety and immunogenicity endpoints and FDA seroprotection rates for all four strains, but met seroconversion rates for only three. The comparator licensed vaccine generally produced higher HAI levels. These trial results and the delay were reported after quarter-end.
- In July, PATH awarded approximately $2.0 million for initial support of an RSV Phase II trial in women of childbearing age; further collaboration and funding are subject to future elections. Novavax retained global commercialization rights and committed to affordability and availability in low-resource countries.
- Liquidity and execution risks include dependence on BARDA performance and reimbursement timing, market access for further equity issuance, facility-allowance compliance, and the possibility that inadequate funding could force program delays, reductions or organizational downsizing. The company also reported $7.8 million unpaid under certain outside-provider agreements if services are completed in 2012, subject to termination provisions.
- Short-term investments included three auction-rate securities with $5.1 million par value and $4.3 million fair value, alongside $6.9 million of corporate debt securities. Management classified these investments as current and reported $0.9 million of unrealized gains on the auction-rate securities.
Key facts for investors to verify
- Whether BARDA reimburses the delayed 205 Trial costs after Quadrivalent IND data submission, and how the timing affects reported revenue and cash receipts.
- Progress and timing of the delayed quadrivalent influenza trial and IND, alongside results and milestones for H5N1 and RSV programs.
- Actual cash burn, BARDA collections, facility-allowance funding and capital-expenditure needs relative to management’s stated 12-month liquidity assessment.
- Remaining availability under the at-the-market agreement and the dilution implications of further stock sales; by July 31, 23.1 million of the authorized 25 million shares had been sold under that agreement.
- Liquidity and valuation developments for auction-rate securities, and the effect of provider commitments and facility lease obligations on future cash needs.