Novavax
Annual Report 2013

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2013OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission File No. 0-26770 NOVAVAX, INC.(Exact name of Registrant as specified in its charter) Delaware 20 Firstfield RoadGarthersburg, Maryland 20878 22-2816046(State of incorporation) (Address of principal executive offices) (I.R.S. Employer Identification No.)Registrant’s telephone number, including area code: (240) 268-2000Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, Par Value $0.01 per share The NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: Not Applicable Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes x No oIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.Yes o No xIndicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submit and post such files).Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smallerreporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act. (Check one): Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company)Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No xThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant (based on the lastreported sale price of Registrants common stock on June 30, 2013 on the NASDAQ Global Select Market) was $246,500,000.As of March 6, 2014, there were 209,056,800 shares of the Registrant’s common stock outstanding.Portions of the Registrant’s Definitive Proxy Statement to be filed no later than 120 days after the fiscal year ended December 31, 2013 inconnection with the Registrant’s 2014 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.  TABLE OF CONTENTSTABLE OF CONTENTS PagePART I Item 1.BUSINESS 1 Item 1A.RISK FACTORS 15 Item 2.PROPERTIES 36 Item 3.LEGAL PROCEEDINGS 36 Item 4.MINE SAFETY DISCLOSURES 36 PART II Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATEDSTOCKHOLDER MATTERS 37 Item 6.SELECTED FINANCIAL DATA 39 Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS 40 Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK 57 Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 57 Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE 57 Item 9A.CONTROLS AND PROCEDURES 57 Item 9B.OTHER INFORMATION 58 PART III Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 59 Item 11.EXECUTIVE COMPENSATION 59 Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS 59 Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE 59 Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES 59 PART IV Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 60 When used in this Annual Report on Form 10-K, except where the context otherwise requires, the terms “we,” “us,” “our,” “Novavax” and“the Company” refer to Novavax, Inc.i  TABLE OF CONTENTSPART IItem 1.BUSINESSThis Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities LitigationReform Act that involve risks and uncertainties. In some cases, forward-looking statements are identified by words such as “believe,”“anticipate,” “intend,” “plan,” “will,” “may” and similar expressions. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. All of these forward-looking statements are based on informationavailable to us at this time, and we assume no obligation to update any of these statements. Actual results could differ from thoseprojected in these forward-looking statements as a result of many factors, including those identified in the section titled “RiskFactors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere. We urge youto review and consider the various disclosures made by us in this report, and those detailed from time to time in our filings with theSecurities and Exchange Commission (SEC), that attempt to advise you of the risks and factors that may affect our future results.Program OverviewNovavax, Inc. (“Novavax,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on the discovery,development and commercialization of recombinant nanoparticle vaccines and adjuvants. Our vaccine technology platform is based onproprietary recombinant nanoparticle vaccine technology that includes both virus-like particles (VLPs) and protein nanoparticle vaccinecandidates. Our vaccine candidates are genetically engineered three-dimensional nanostructures that incorporate immunologically importantproteins. Our vaccine product pipeline targets a variety of infectious diseases with candidates currently in clinical development forrespiratory syncytial virus (RSV), seasonal influenza, and pandemic influenza. Further, CPL Biologics Private Limited (CPLB), our jointventure company in India, is actively developing a number of vaccine candidates that were genetically engineered by Novavax. Theseinclude its seasonal and pandemic influenza vaccine candidates that have completed Phase 1/2 clinical trials in India in 2012, and its rabiesvaccine that began a Phase 1/2 clinical trial in India in early 2014.Respiratory Syncytial Virus (RSV)RSV is a widespread disease that causes infections of the lower respiratory tract. While RSV affects persons of all ages, it acutelyimpacts infants, young children, the elderly, and others with compromised immune systems. A current study indicated that RSV isresponsible for over 30 million new acute lower respiratory infection episodes and between 150,000 and 200,000 deaths in children underfive years old.1 In the U.S., nearly all children become infected with RSV before they are two years old; it has been associated with 20% ofhospitalizations and 15% of office visits for acute respiratory infection in young children.2 The World Health Organization (WHO)estimates that the global disease burden for RSV is 64 million cases. Because there is no approved prophylactic vaccine, the unmet need ofan RSV vaccine has the potential to protect millions of patients from this far-reaching disease.We are developing a vaccine candidate to prevent RSV and are looking at three susceptible target populations: infants (receivingprotection through antibodies transferred from their mothers who would be immunized during the last trimester of pregnancy), the elderlyand young children.RSV Maternal Immunization ProgramIn April 2013, we announced top-line data from a Phase 2 dose-ranging clinical trial in women of childbearing age that were similar to,or exceeded, immune responses seen in our first Phase 1 clinical trial. This randomized, blinded, placebo-controlled Phase 2 clinical trialevaluated the safety and immunogenicity of two dose levels of our RSV vaccine candidate, with and without an aluminum phosphateadjuvant, in 330 women of childbearing age. We further reported that the vaccine candidate was well-tolerated, the two-dose alum-adjuvantedgroups showed a 13- to 16-fold rise in anti-F IgG antibodies to the F protein compared to a six- to ten-fold rise in the non-alum groups, andpalivizumab-like antibody titers rose eight-fold to nine-fold with four-fold rises in 92% of subjects in the two-dose alum-adjuvanted groups.1 Nair, H., et al., (2010) Lancet. 375:1545-1555.2 Hall, CB, et al., (2009) N Engl J Med. 360(6):588-98.1  TABLE OF CONTENTSIn October 2013, we initiated and completed enrollment in a Phase 2 dose-confirmation clinical trial in 720 women of childbearing age.The top-line data from this trial, expected in the second quarter of 2014, will supplement the data from our other clinical trials, and isexpected to support the advancement of our maternal immunization program in pregnant women; we plan to initiate a Phase 2 clinical trial ofour RSV vaccine candidate in pregnant women in the fourth quarter of 2014.In conjunction with our development of an RSV maternal vaccine, in July 2012 we entered into a clinical development agreement withPATH Vaccine Solutions (PATH) to develop our RSV vaccine candidate in low-resource countries. We refer to this as our RSV CollaborationProgram. We were awarded approximately $2.0 million by PATH for initial funding under the agreement to partially support our Phase 2dose-ranging clinical trial in women of childbearing age described above. In October 2013, the funding under this agreement was increasedby $0.4 million to support reproductive toxicology studies, which are necessary before we conduct clinical trials in pregnant women. InDecember 2013, we entered into an amendment with PATH providing an additional $3.5 million in funding to support the Phase 2 dose-confirmation clinical trial in 720 women of childbearing age described above. We retain global rights to commercialize the product and willsupport PATH in its goal to make an RSV maternal vaccine product affordable and available in low-resource countries. To the extent PATHelects to continue to fund 50% of our external clinical development costs for the RSV Collaboration Program, but we do not continuedevelopment, we would then grant PATH a fully-paid license to our RSV vaccine technology for use in pregnant women in such low-resource countries.RSV Elderly ProgramIn July 2013, we announced top-line data from the Phase 1 clinical trial in the elderly that was initiated in October 2012. This clinicaltrial was a randomized, blinded, placebo-controlled Phase 1 clinical trial that evaluated the safety and immunogenicity in 220 enrolledelderly adults, 60 years of age and older, who received a single intramuscular injection of our RSV vaccine candidate (with and withoutalum) or placebo plus a single dose of licensed influenza vaccine or placebo at days 0 and 28. The top-line data further corroborated ourprevious clinical experiences with our RSV vaccine candidate: we reported that the vaccine candidate was well-tolerated, that the higher dosegroups had better overall immune responses than the lower dose groups and that essentially undetectable Day 0 levels of antibodies thatcompete with palivizumab increased to between 80% and 97% of active vaccine recipients by Day 28. Our expected path forward in theelderly would include a dose-confirmation clinical trial in late 2014 or early 2015.RSV Pediatric ProgramWhile the burden of RSV disease falls heavily on newborn infants, RSV is also a prevalent and currently unaddressed problem inpediatric patients. This third market segment for our RSV vaccine candidate remains an important opportunity. We expect to initiate clinicaltrials in pediatric subjects as “step-downs” from our past clinical trials in healthy adults. We also expect that our clinical experience inpregnant women will be equally important to understanding a vaccine for this patient population. Our pre-clinical development effortssupport such a clinical development plan that is expected to be launched in late 2014.InfluenzaWe have significant experience developing recombinant VLP influenza vaccine candidates, including:•nine clinical trials for our seasonal and pandemic influenza vaccine candidates;•administering our seasonal and pandemic influenza VLPs (multiple distinct strains, including both influenza A and B and strainsof avian and swine origin, alone or with saponin-based adjuvants) to more than 5,000 subjects demonstrating vaccine tolerabilityand immunogenicity;•more than sixty (60) distinct batches of VLP vaccine produced under current good manufacturing practices (cGMP); and•capacity to produce vaccine in 1,000 liter single-use bioprocessors.We believe our influenza VLP vaccines have potential immunological advantages over currently available products because ourinfluenza VLPs contain three of the major virus proteins that are important for fighting2  TABLE OF CONTENTSinfluenza: hemagglutinin (HA) and neuraminidase (NA), both of which stimulate the body to produce antibodies that neutralize theinfluenza virus and/or prevent its spread through the cells in the respiratory tract, and matrix 1 (M1), which may stimulate cytotoxic Tlymphocytes to kill cells that are already infected. Our VLPs are not made from live viruses and have no functional genetic material in theirinner core, which render them incapable of replicating and causing disease.Novavax’ insect cell culture based platform production technology, combined with single-use bioprocessing technology employedstrategically throughout the manufacturing process, is a key strength. This distinctive combination of technology has advantages overtraditional vaccine production methods that use chicken eggs or mammalian cells, including: (1) smaller facility footprint to achievecomparable yields to traditional egg-based or mammalian cell-based systems, (2) faster facility commissioning, (3) significantly lowercapital expenditures on facility infrastructure, (4) competitive cost of goods and (5) the potential for advance seed production, which couldprovide a shorter lead time to produce commercial quantities of vaccine than egg-based technology in the face of strain changes.Seasonal Influenza ProgramDeveloping and commercializing a Novavax seasonal influenza vaccine remains an important strategic goal and viable opportunity forus. The Advisory Committee for Immunization Practices of the Center for Disease Control and Prevention (CDC) recommends that allpersons aged six months and older should be vaccinated annually against seasonal influenza. In conjunction with these universalrecommendations, attention from the 2009 influenza H1N1 pandemic, along with reports of cases of avian-based influenza strains, hasincreased public health awareness of the importance of seasonal influenza vaccination, the market for which is expected to continue to growworldwide in both developed and developing global markets.There are currently four quadrivalent (four influenza strains: two influenza A strains and two influenza B strains) influenza vaccineslicensed in the U.S., but in the coming years, additional quadrivalent seasonal influenza vaccines are expected to be produced and licensedwithin and outside of the U.S., as opposed to trivalent (three influenza strains: two influenza A strains and one influenza B strain) influenzavaccines. With two distinct lineages of influenza B viruses circulating, governmental health authorities have advocated for the addition of asecond influenza B strain to provide additional protection. Current estimates for seasonal influenza vaccines growth in the top sevenmarkets (U.S., Japan, France, Germany, Italy, Spain and UK), show potential growth from the current market of approximately $3.2billion (2012/13 season) to $5.3 billion by the 2021/2022 season.3 Recombinant seasonal influenza vaccines, like the candidate we aredeveloping, have an important advantage: once licensed for commercial sale, large quantities of vaccines can be quickly and cost-effectivelymanufactured without the use of either the live influenza virus or eggs.Top-line data from our most recent Phase 2 clinical trial for our quadrivalent influenza vaccine candidate were announced in July 2012.In that clinical trial, our quadrivalent VLP vaccine candidate demonstrated immunogenicity against all four viral strains based on HAIresponses at day 21, and was also well-tolerated, as evidenced by the absence of any observed vaccine-related serious adverse events (SAEs)and an acceptable reactogenicity profile. Our vaccine candidate met the FDA accelerated approval seroprotection rates criterion for all fourviral strains. The potential to fulfill the seroconversion rates criterion was demonstrated for three of the four viral strains. The fourth strain,B/Brisbane/60/08, despite fulfilling the seroprotection criterion, failed to demonstrate a satisfactory seroconversion rate. Following our lastPhase 2 clinical trial, we have focused our seasonal influenza vaccine candidate activities on a manufacturing process that ensuresconsistent and enhanced immune responses in all strains. We completed these activities in September 2013 and have begun manufacturing Aand B strain influenza VLPs for the next Phase 2 clinical trial with our quadrivalent vaccine candidate, which we expect to initiate in thefourth quarter of 2014.Pandemic Influenza ProgramAn influenza pandemic refers to a situation where there is a significant and geographically widespread disease outbreak in humansacross multiple age groups, typically resulting from an influenza virus for which the majority of the population has little or no immunity.Pandemic influenza strains are a major concern to world health groups because such diseases can quickly and easily spread worldwide andcan cause serious3 Influenza Vaccines Forecasts. Datamonitor (2013)3  TABLE OF CONTENTSillness or death before vaccines are available to limit the spread of the disease. There have been notorious examples of pandemic influenzacrises. In 2009, the World Health Organization (WHO) declared a pandemic of the H1N1 strain of influenza. In the aftermath of the 2009H1N1 influenza pandemic, recognition of the potential devastation of a human influenza pandemic remains a key priority with bothgovernmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1 pandemic led to the production ofapproximately 126 million doses of monovalent (single strain) vaccine. Public health awareness and government preparedness for the nextpotential influenza pandemic are driving development of vaccines that can be manufactured quickly against a potentially threateninginfluenza strain. Until the spring of 2013, industry and health experts focused attention on developing a monovalent H5N1 influenzavaccine as a potential key defense against a future pandemic threat; however, a rising number of reported cases in China of an avianinfluenza strain of A(H7N9) has shifted attention to the potential development of an H7N9 influenza vaccine.In October 2012, under our collaboration with the Department of Health and Human Services, Biomedical Advanced Research andDevelopment Authority (HHS BARDA), we reported positive results from two Phase 1 clinical trials of our pandemic (H5N1) vaccinecandidate in combination with two different adjuvants, both of which are designed to improve the immunogenicity of vaccines at lowerdoses and thus provide antigen dose-sparing. The top-line data demonstrated safety and immunogenicity of varying dose-levels of thevaccine, with and without adjuvant, and further demonstrated statistically significant robust adjuvant effects on immune response.In April 2013, we initiated manufacturing of a new monovalent influenza vaccine candidate against the prototype A(H7N9) strain. Thisstrain was first recognized by Chinese health authorities as a potential pandemic influenza threat in late March 2013. In a three monthperiod, we developed a recombinant baculovirus expressing the published A(H7N9) viral HA and NA gene sequences, developed andpurified a VLP vaccine antigen, conducted multiple animal studies and initiated a Phase 1 clinical trial in Australia independent of our HHSBARDA contract. In November 2013, we announced the publication of the clinical results from the Phase 1 clinical trial in The NewEngland Journal of Medicine. The publication highlighted the fact that 81% of subjects treated with 5ug of adjuvanted vaccine doseachieved protective HAI levels, and 97% of subjects showed an anti-neuraminidase antibody response. We achieved protective levels fromvaccinations within 116 days of the announcement of the H7N9 outbreak from the industry’s first clinical trial of a vaccine against anA(H7N9) influenza strain.In February 2014, we modified our contract with HHS BARDA to focus our development of a monovalent pandemic influenza vaccineagainst the A(H7N9) strain with a Phase 1/2 clinical trial with our H7N9 candidate and our Matrix-MTM adjuvant, which began in thefirst quarter of 2014 and for which, top-line data is scheduled to be released in the second half of 2014; however, HHS BARDA has alsoindicated that our H5N1 vaccine program remains a viable development opportunity under our contract.Potential Accelerated Approval Pathway for InfluenzaIn the past, we have referenced attainment of accelerated approval immunogenicity endpoints for seroprotection and seroconversion as apotential pathway for licensure of our influenza vaccines. The criteria for granting such accelerated approval of a Biologics LicenseApplication (BLA, the biologic equivalent to a New Drug Application or NDA) for new seasonal and pandemic influenza vaccines waspublished by the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (FDA). Under FDA guidance,developers that can demonstrate results that meet or exceed certain specified immunogenicity endpoint criteria in their clinical trials may, atthe FDA’s discretion, be granted a license to market a product prior to submission of traditional clinical endpoint efficacy trial data. Itshould be noted that FDA licensure based on accelerated approval nevertheless requires sponsors to conduct a post-licensure efficacy studyto demonstrate the clinical benefit of the vaccine, which would thereby support traditional approval of the vaccine. Because it is not possibleto conduct a clinical endpoint efficacy study for a pandemic vaccine in advance of a declared pandemic, FDA’s pandemic guidance allowsfor submission of seasonal influenza clinical efficacy data for the purpose of confirming clinical benefit of a pandemic vaccinemanufactured by the same process. Thus, the demonstration of efficacy with a seasonal vaccine provides a key link between the4  TABLE OF CONTENTSseasonal and pandemic programs. Accelerated approval further necessitates a shortage of influenza vaccine relative to the total populationrecommended to receive such vaccine, a situation that persists with seasonal influenza vaccines.Although we have not ruled out this accelerated approval approach, particularly for our pandemic program or certain subjectpopulations within the seasonal influenza program, we do not expect to pursue accelerated approval of our quadrivalent seasonal influenzavaccine, largely because of the uncertainty as to whether the accelerated approval pathway will be available to us at the time of our BLAsubmissions and the unknown ability of current and new influenza strains to meet such accelerated approval criteria. We are planning,therefore, to pursue traditional licensure of our quadrivalent seasonal influenza vaccine by conducting a clinical endpoint efficacy study forthe purpose of submitting the data within the original BLA. These efficacy data will also support the requirement for clinical efficacy datafor our pandemic vaccine program. We plan to discuss with the FDA our licensure pathways (both the traditional pathway for seasonal andpossible accelerated pathways for pandemic and certain subject populations within the seasonal program) during future formal meetings.The likely impact of such an efficacy trial would be an additional year or more before the FDA grants licensure to our seasonal influenzavaccine.HHS BARDA Contract for Recombinant Influenza VaccinesHHS BARDA awarded us a contract in February 2011, which funds the development of both our seasonal and pandemic influenzavaccine candidates. Our contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses us for allowable direct contractcosts incurred plus allowable indirect costs and a fixed-fee earned in the ongoing clinical development and product scale-up of ourmultivalent seasonal and monovalent pandemic influenza vaccines. During 2013, we recognized revenue of approximately $17.4 million andhave recognized approximately $52 million in revenue since the inception of the contract. The contract, valued at $97 million for the firstthree-year base-period, was extended in February 2014 by approximately seven months to September 2014; this extension is intended toallow us to continue to access the remainder of the base-period funding. In addition, the contract provides $79 million for an HHS BARDAoptional two-year period.Although HHS BARDA originally directed us to develop our monovalent pandemic influenza vaccine against the A(H5N1) strain, afterachieving positive results with our H7N9 vaccine candidate last year, HHS BARDA has directed us to develop our monovalent pandemicinfluenza vaccine against the A(H7N9) strain. Nevertheless, our H5N1 vaccine program remains a viable development opportunity underthe contract.Combination Respiratory Vaccine (Influenza and RSV)Given the ongoing development of our seasonal influenza vaccine candidate and our RSV vaccine candidate, we see an importantopportunity to develop a combination respiratory vaccine. This opportunity presents itself most evidently in the elderly population, althoughwe have not ruled out developing a combination respiratory vaccine for younger persons, including children. Early pre-clinical developmentefforts have given us confidence that such a combination vaccine is viable and, in animal models, provides acceptable immunogenicity. Weintend to explore this development opportunity by conducting a Phase 1 clinical trial in such a combination vaccine in late 2014 or early2015.RabiesRabies is a disease that causes acute encephalitis, or swelling of the brain, in warm-blooded animals, including humans. The diseasecan be transmitted from one species of animal to another, such as from dogs to humans, most commonly by a bite from an infected animal.For humans, rabies left untreated is almost invariably fatal. In Asia and Africa, estimates show a combined 55,000 annual human deathsfrom endemic canine rabies, with annual treatment costs approaching $600 million, although human deaths from rabies may beunderreported in a number of countries, particularly in the youngest age groups. In India alone, 20,000 deaths are estimated to occurannually. Internal market data of vaccine manufacturers suggest that at the global level, greater than 15 million people receive rabiesprophylaxis annually, the majority of whom live in China and India. It is estimated that in the absence of post-exposure prophylaxis, about327,000 persons would die from rabies in Asia and Africa each year. Marketed rabies vaccine is mostly used for post-exposure prophylaxisthat requires generally between four and five administrations of vaccine. Pre-exposure prophylaxis5  TABLE OF CONTENTSis recommended for anyone who will be at increased risk to the rabies virus, including travelers with extensive outdoor exposure in ruralhigh-risk areas.4CPLB is developing a rabies G protein vaccine candidate that we genetically engineered and has initiated a Phase 1/2 clinical trial inIndia in January 2014. Our common objective with CPLB is to develop a recombinant vaccine that can be administered both as a pre-exposure prophylaxis for residents of certain higher-risk geographies, as well as travelers to such locations, and also has potential to providepost-exposure prophylaxis with fewer doses. Pre-clinical results have demonstrated that this vaccine candidate has the potential to evokeantibody responses which are active in the neutralization of the rabies virus and could prevent the virus from entering the central nervoussystem, thus preventing death. The CPLB candidate protects mice from rabies in an assay known as the NIH potency test, which is usedas one predictor of the clinical effect of rabies vaccines.Discovery ProgramsOur vaccine platform technology provides an efficient system to rapidly develop antigens to selected targets, refine manufacturingprocesses and optimize development across multiple vaccine candidates. In addition to our RSV, seasonal influenza, pandemic influenzaand rabies vaccine candidates, we currently have a number of undisclosed discovery programs, some of which are being tested in pre-clinical models. In addition, we pay close attention to global reports of emerging diseases for which there do not appear to be immediate curesand where a vaccine protocol could offer potential protection. In addition to our response to the A(H7N9) influenza strain (see discussionabove), we have been monitoring reports concerning the Middle East Respiratory Syndrome Coronavirus (MERS), a novel coronavirus firstidentified in September 2012 by an Egyptian virologist. Beginning in 2013, MERS became an emerging threat, with more than 50confirmed cases of infection and 30 deaths. The MERS virus is a part of the coronavirus family that includes the severe acute respiratorysyndrome coronavirus (SARS). Because of the public health priority given to MERS, within weeks of getting the virus’ sequence, wesuccessfully produced a vaccine candidate designed to provide protection against MERS. This vaccine candidate, which was made usingour recombinant nanoparticle vaccine technology, is based on the major surface spike protein, which we had earlier identified as the antigenof choice in our work with a SARS vaccine candidate. Although the development of this vaccine candidate currently remains a pre-clinicalprogram, we believe that our MERS vaccine candidate offers a viable option to interested global public health authorities.Vaccine Platform TechnologiesWe believe that our platform technology offers time-saving advantages both in terms of production time against traditional egg-basevaccine manufacturing, and in terms of establishing a vaccine production facility (either as a new green-field project or through a retrofit ofan existing facility). Currently approved influenza vaccines are typically produced by growing virus in chicken eggs, from which the virusis extracted and further processed. This 50-year-old egg-based production method requires four to six months of lead time for production ofa new strain of virus and significant investment in fixed production facilities. Moreover, there can be additional delays becausemanufacturers must modify the selected influenza virus strain in order for it to be produced efficiently in the egg. The vaccine shortageduring the 2004 influenza season (caused in part by a contamination issue at a facility in the United Kingdom) highlighted the limitations ofcurrent production methods and the need for increased vaccine manufacturing capacity. It also heightened concerns regardingmanufacturers’ capacity to respond to a pandemic, when the number of vaccine doses required will be higher than the number required forseasonal influenza vaccines and manufacturing lead times will be even shorter. This concern was borne out again in the 2009 H1N1influenza pandemic as, “despite an intensive effort to develop a pandemic vaccine, the 2009 H1N1 vaccine arrived too late to have asignificant effect on the dynamics of the fall disease wave.”5 Compared with traditional vaccine production, we believe our processes allowfor faster production of vaccine. Because our process uses genetic information and not the virus itself, we can quickly construct clones ofthe virus as soon as the genetic information is available. This factor alone can shorten the time for creating new vaccine by several weekscompared to traditional egg-based manufacturing.4 Yousaf, et al. Virology Journal (2012) 9:505 BARDA Strategic Plan 2011 – 2016 (2010)6  TABLE OF CONTENTSImportantly, we also believe that a manufacturing facility that produces our vaccines can be implemented and validated in significantlyless time than traditional cell-based vaccine manufacturing facilities and without the costly containment features associated with handlinglive viruses. We produce our vaccine candidates using a baculovirus expression system in insect cells with lower-cost equipment that can bereadily deployed both nationally and internationally. By not requiring significant production batch sizes, production capacity can beemployed quickly. We estimate the time to qualify a facility that utilizes our processes can be six to nine months faster than a fixed-pipebioreactor facility used in cell-based manufacturing.Virus-Like ParticlesOur VLP vaccine technology platform is based on self-assembling protein structures that visually resemble viruses. However, these arenon-infectious particles that, for many viral diseases, have been shown in animal studies and clinical trials to make effective vaccines.VLPs closely mimic natural virus particles with repeating protein structures that can elicit broad and strong antibody and cellular immuneresponses, but lack the genetic material required for replication. VLP technology is a proven technology that is employed in currentlymarketed products such as Merck’s Gardasil®. Our proprietary VLPs are more advanced than earlier approaches and they include multipleproteins and lipids and can be tailored to induce robust and broad immune responses similar to natural infections. Our advanced VLPtechnology has the potential to develop vaccines for a wide range of human infectious diseases where there are significant unmet medicalneeds, some of which have not been addressed by other technologies. We have used formal criteria based upon medical need, technicalfeasibility and commercial value to select vaccine candidates for development.We believe that our influenza vaccines are designed to address many of the significant unmet needs related to seasonal and pandemicinfluenza. There are several points of differentiation of our influenza vaccines when compared to traditional egg-based, or new mammalian-based approaches that form the basis to address unmet medical needs and capitalize on commercial opportunities. Our influenza VLPscontain components that provide a broad and robust immune response. Specifically, the VLPs contain the viral components HA, NA andM1. Traditional egg-based vaccines contain meaningful levels of HA, but not of NA or M1. The HA sequence in our VLPs is the same asin the wild-type virus and could prove to be more effective/immunogenic than influenza vaccines produced using egg or mammalian cell-lines, which alter HA. In addition, the NA and M1 in our VLPs may play a role in reducing the severity of the disease by inducingantibody responses and cell mediated immunity. NA and M1 are both highly conserved, and immunity to these viral components may helpprovide additional protection throughout an entire influenza season, even as strains mutate. Data from our seasonal influenza Phase 2aclinical trial in healthy adults showed that 50 to 73% of the volunteers immunized with our VLP vaccine had a four-fold increase in theantibody that blocks NA activity. Finally, because of the VLP structure and components, they may have greater immunogenicity in twovulnerable populations — the pediatric and elderly.Protein Nanoparticle VaccinesOur protein nanoparticle vaccine technology is also based on self-assembling protein structures, which differ from traditional VLPs inthat these particles do not generally occur in nature and can be made from proteins from any pathogenic organism including viruses,bacteria, parasites or even cancer cells. Protein nanoparticles closely resemble the natural structure of surface antigens of disease organisms,but lack the genetic material required for replication and therefore are not infectious. An advantage of this technology is that the formation ofnanoparticles is done in vitro thereby making it possible to assemble nanoparticles from one or more highly purified proteins. This resultsin high purity vaccines with certain manufacturing advantages over more traditional products. Potential immunological advantages ofprotein nanoparticle vaccines are presentation of epitopes (antibody binding sites) in a more native configuration for improved efficacy,efficient recognition by the immune system’s antigen presenting cells (APCs) and triggering robust immune responses. Recognition of thenanoparticle vaccine’s repeating protein patterns by the APCs toll-like receptors to stimulate innate immunity and the high purity and lack ofsynthetic material adds to the potential safety of recombinant nanoparticle vaccines. Protein nanoparticle vaccine technology has expandedour early-stage vaccines in development to include both virus and non-virus disease targets. Our most advanced protein nanoparticle vaccinecandidate is our RSV fusion (F) protein vaccine candidate, which is manufactured from highly purified F protein.7  TABLE OF CONTENTSMatrix Adjuvant TechnologyDuring 2013, we acquired Isconova AB (now Novavax AB), a company located in Uppsala, Sweden that produces proprietary saponin-based adjuvants. Adjuvants are mostly used as an additional component in various vaccines in order to enable the vaccine to induce astrong immune response for protection against virus and bacterial infections. Novavax AB has developed a number of adjuvantformulations, all based on our proprietary MatrixTM technology. These adjuvant formulations possess excellent immunostimulatory featureswith the ability to improve, i.e. increase and prolong, the effects of vaccines. Our research and development over the years have resulted in arange of high-quality products on the international veterinary vaccine market, and more recently, into the human vaccine market.The goals of our adjuvant technology are strong antibody and cell-mediated immune responses induced by low antigen doses, long-duration immune responses, with low risk for allergic reactions or other adverse events. We believe these qualities give our Matrix adjuvantsa number of important advantages over many other types of adjuvants, where novel, less well-characterized substances are often hamperedby safety concerns or limited efficacy. Our new-generation Matrix-M adjuvant provides a potent adjuvant effect that has been well toleratedin clinical trials. We also believe that the strong immune response and opportunity to reduce the quantity of antigen dose can significantlyreduce the production cost of our vaccines. This means that our Matrix-M adjuvant has the potential to be of immense value when there isinadequate vaccine manufacturing capacity during an emerging threat such as an influenza pandemic.Competition in RSV and Influenza VaccinesThe biopharmaceutical industry and the vaccine market are intensely competitive and are characterized by rapid technological progress.Our technology is based upon utilizing the baculovirus expression system in insect cells to make VLPs and protein nanoparticle vaccines.We believe this system offers many advantages when compared to other technologies and is uniquely suited for developing an RSV vaccine,seasonal and pandemic influenza vaccines, as well as other infectious diseases.There is currently no approved RSV vaccine for sale in the world; however, a number of vaccine manufacturers, academic institutionsand other organizations currently have, or have had, programs to develop such a vaccine. In addition, many other companies are developingproducts to prevent disease caused by RSV using a variety of technology platforms, including various viral vector technologies andcompetitive VLP technologies. Although early in clinical development, we believe that our RSV vaccine candidate, utilizing recombinant F-protein antigens, could be more effective than RSV vaccine candidates in development by our competitors; however, such efficaciousnesscannot be guaranteed. Although we are not aware of all our competitors’ efforts, we believe that MedImmune LLC, a subsidiary ofAstraZeneca PLC, may have the most advanced RSV vaccine program after Novavax, as it has reported testing in Phase 1 and Phase 1/2clinical trials, in an intranasal, recombinant, live attenuated, RSV vaccine for the prevention of lower respiratory tract disease caused byRSV, as well as a combination intranasal vaccine for the prevention of several infant respiratory illnesses, including RSV. Additional entitieshave also entered into early clinical trials including GlaxoSmithKline and the National Institute of Allergy and Infectious Diseases, aninstitute under the U.S. National Institute of Health.Unlike the low level of competition in the development of an RSV vaccine, there are a number of companies developing and sellingvaccines for seasonal and pandemic influenza employing historic vaccine technology, as well as new technologies. The table below providesa list of major vaccine competitors and corresponding licensed influenza vaccine technologies. Company Competing Technology DescriptionSanofi Pasteur, SA Inactivated sub-unit (egg-based)MedImmune, LLC (a subsidiary of AstraZeneca PLC) Nasal, live attenuated (egg-based)GlaxoSmithKline plc Inactivated split-vaccine (egg-based)Novartis, Inc. Inactivated sub-unit (cell and egg-based)Merck & Co., Inc. Inactivated sub-unit (egg-based)Protein Sciences Corporation Recombinant HA trivalent (insect cell-based)8  TABLE OF CONTENTSThere are many seasonal influenza vaccines currently approved and marketed, and most of these are marketed by major pharmaceuticalcompanies that have significantly greater financial and technical resources, experience and expertise than we have. Competition in the sale ofthese seasonal influenza vaccines is intense. Therefore, newly developed and approved products must be differentiated from existingvaccines in order to have commercial success. In order to show differentiation in the seasonal influenza market, a product should be moreefficacious and/or be less expensive and quicker to manufacture. Many of our competitors are working on new products and newgenerations of current products, some by adding an adjuvant that is used to increase the immunogenicity of that product, each of which isintended to be more efficacious than currently marketed products. Another differentiating factor is recombinant manufacturing, which webelieve can be quicker and less-expensive than traditional egg-based manufacturing. In January 2013, the FDA approved the firstrecombinant seasonal influenza vaccine called “Flublok” manufactured by Protein Sciences Corporation.Despite the significant competition and advancing technologies, some of which are similar to our own, we believe that our seasonalinfluenza product will be as efficacious as, or more so than, current products or products being developed by our competitors, and that ourmanufacturing system provides savings in both time and money; however, there can be no guarantee that our seasonal influenza vaccinewill prove to be efficacious or that our manufacturing system will prove to be sufficiently effective and differentiated to ensure commercialsuccess.In general, competition among pharmaceutical products is based in part on product efficacy, safety, reliability, availability, price andpatent position. An important factor is the relative timing of the market introduction of our products and our competitors’ products.Accordingly, the speed with which we can develop products, complete the clinical trials and approval processes and supply commercialquantities of the products to the market is an important competitive factor. Our competitive position also depends upon our ability to showdifferentiation with a product that is more efficacious, particularly in the relevant target populations and/or be less expensive and quicker tomanufacture. It also depends upon our ability to attract and retain qualified personnel, obtain patent protection or otherwise developproprietary products or processes and secure sufficient capital resources for the often substantial period between technological conceptionand commercial sale.Patents and Proprietary RightsWe generally seek patent protection for our technology and product candidates in the U.S. and abroad. The patent position ofbiopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. Our success will depend, in part,on whether we can:•obtain patents to protect our own technologies and product candidates;•obtain licenses to use the technologies of third-parties, which may be protected by patents;•protect our trade secrets and know-how; and•operate without infringing the intellectual property and proprietary rights of others.Patent rights; licenses. We have intellectual property (patents, licenses, know-how) related to our vaccines, manufacturing processand other technologies. Currently, we have or have rights to over 100 U.S. patents and corresponding foreign patents and patent applicationsrelating to vaccines and biologics. Our core vaccine-related intellectual property extends beyond the year 2025.In July 2007, we entered into a non-exclusive license agreement with Wyeth Holdings Corporation, a subsidiary of Pfizer Inc. (Wyeth), toobtain rights to a family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, withexpected patent expiration in early 2022.In July 2010, U.S. Patent No. 7,763,450 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent & TrademarkOffice. The patent covers, in part, the use of influenza gene sequences for high-yield production of consistent influenza VLP vaccines toprotect against current and future seasonal and pandemic strains of influenza viruses. In December 2011, European Patent No. 1644037was issued by the European Patent Office covering this technology.9  TABLE OF CONTENTSIn December 2011, U.S. Patent No. 8,080,255 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent &Trademark Office. The patent covers, in part, methods of inducing substantial immunity to an influenza virus infection in a human andadministering to the human a VLP comprising M1, HA and NA proteins. The M1 protein is derived from a particular avian influenzastrain, A/Indonesia/5/05.In April 2013, European Patent No. 2343084 for Functional Influenza Virus-Like Particles was issued by the European Patent Office.The patent covers, in part, vaccine compositions containing VLPs that contain M1, HA, and NA proteins. The VLPs are self-assembledfrom host cells.In August 2013, U.S Patent No. 8,506,967 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent & TrademarkOffice. The patent covers, in part, methods of inducing substantial immunity to an influenza virus infection in a human and administeringto the human a VLP comprising M1, HA and NA proteins. The M1 protein is from an avian influenza M1 protein from a different strain ofinfluenza virus than the influenza HA protein and the influenza NA protein.In October 2013, U.S Patent No. 8,551,756 for Avian influenza chimeric VLPs was issued by the U.S. Patent & Trademark Office.The patent covers, in part, methods of increasing the efficiency of VLP production using M1 proteins derived from strain A/Indonesia/5/05.In November 2013, U.S Patent No. 8,592,197 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent &Trademark Office. The patent covers, in part, influenza VLP vaccines containing M1, HA, and NA proteins where the M1 protein is froma different stain than the HA and NA proteins.The Federal Technology Transfer Act of 1986 and related statutory guidance encourages the dissemination of science and technologyinnovation. While our recent contract with HHS BARDA provides us with the right to retain ownership in our inventions that may ariseduring performance of that contract, with respect to certain other collaborative research efforts with the U.S. government, certaindevelopments and results that may have commercial potential are to be freely published, not treated as confidential and we may be requiredto negotiate a license to developments and results in order to commercialize products. There can be no assurance that we will be able tosuccessfully obtain any such license at a reasonable cost, or that such development and results will not be made available to our competitorson an exclusive or non-exclusive basis.Trade secrets. To a more limited extent, we rely on trade secret protection and confidentiality agreements to protect our interests. It is ourpolicy to require employees, consultants, contractors, manufacturers, collaborators and other advisors to execute confidentiality agreementsupon the commencement of employment, consulting or collaborative relationships with us. We also require confidentiality agreements fromany entity that is to receive confidential information from us. With respect to employees, consultants and contractors, the agreementsgenerally provide that all inventions made by the individual while rendering services to us shall be assigned to us as our property.Government RegulationsThe development, production and marketing of biological products, which included the vaccine candidates being developed byNovavax or our collaborators, are subject to regulation for safety, efficacy and quality by numerous governmental authorities in the U.S.and other countries. As a U.S. based company, we focus on the U.S. regulatory process and the standards imposed by the FDA and otheragencies because we believe, for the most part, meeting U.S. standards will allow us to meet other international standards and satisfyregulatory agencies in other countries where we intend to do business. In the U.S., the development, manufacturing and marketing of humanpharmaceuticals and vaccines are subject to extensive regulation under the Federal Food, Drug, and Cosmetic Act, and biological productsare subject to regulation under provisions of that Act and the Public Health Service Act. The FDA not only assesses the safety and efficacyof these products but it also regulates, among other things, the testing, manufacture, labeling, storage, record-keeping, advertising andpromotion of such products. The process of obtaining FDA approval for a new vaccine is costly and time-consuming.Vaccine clinical development follows the same general regulatory pathway as drugs and other biologics. Before applying for FDAapproval to market any new vaccine candidate, we must first submit an investigational new drug application (IND) that explains to theFDA, among other things, the results of pre-clinical testing conducted in laboratory animals, the method of manufacture, quality controltests for10  TABLE OF CONTENTSrelease and what we propose to do for human testing. At this stage, the FDA decides whether it is reasonably safe to move forward withtesting the vaccine in humans. We must then conduct Phase 1 clinical trials and larger-scale Phase 2 and 3 clinical trials that demonstratethe safety and efficacy of our vaccine candidate to the satisfaction of the FDA. Once these trials are complete, a BLA can be filed with theFDA requesting approval of the vaccine for marketing based on the vaccine’s effectiveness and safety.During the FDA’s review of a BLA, the proposed manufacturing facility undergoes a pre-approval inspection during which the FDAexamines in detail the production of the vaccine as it is in progress. Vaccine approval also requires the provision of adequate productlabeling to allow health care providers to understand the vaccine’s proper use, including its potential benefits and risks, to communicatewith patients and parents, and to safely deliver the vaccine to the public. Until a vaccine is given to the general population, all potentialadverse events cannot be anticipated. Thus, many vaccines are required by the FDA to undergo Phase 4 confirmatory clinical trials after theBLA has been approved and the vaccine is on the market.The FDA continues to oversee the production of vaccines after the vaccine and the manufacturing processes are approved, in order toensure continuing safety. For example, monitoring of the vaccine and of production activities, including periodic facility inspections, mustcontinue as long as the manufacturer holds an approved BLA for the product. Manufacturers may also be required to submit to the FDA theresults of their own tests for potency, safety and purity for each vaccine lot, if requested by the FDA. They may also be required to submitsamples of each vaccine lot to the FDA for testing.In addition to obtaining FDA approval for each product, each domestic manufacturing establishment must be registered with the FDA,is subject to FDA inspection and must comply with cGMP regulations. To supply products for use either in the U.S. or outside the U.S.,including clinical trials, U.S. and foreign manufacturing establishments, including third-party facilities, must comply with cGMPregulations and are subject to periodic inspection by the FDA or by corresponding regulatory agencies in their home country.The development process for a biological product, such as a vaccine, typically takes a long period of time to complete. Pre-clinicalstudies may take several years to complete and there is no guarantee that the FDA will permit an IND to become effective and allow theproduct to advance to clinical testing. Clinical trials may take several years to complete. After the completion of the required phases ofclinical trials, if the data indicate that the vaccine is safe and effective, a BLA is filed with the FDA to approve the marketing andcommercial shipment of the vaccine. This process takes substantial time and effort and the FDA may not accept the BLA for filing. Even iffiled and accepted, the FDA might not grant approval. FDA approval of a BLA may take up to two years and may take longer if substantialquestions about the filing arise. The FDA may require post-marketing testing and surveillance to monitor the safety of the applicableproducts.As discussed in the section entitled “Potential Accelerated Approval Pathway for Influenza” on page 4, we do not expect to pursueaccelerated approval of our quadrivalent seasonal influenza vaccine, largely because of the uncertainty as to whether the accelerated approvalpathway will be available to us at the time of our BLA submissions and the unknown ability of current and new influenza strains to meetsuch accelerated approval criteria. We nevertheless expect that our pandemic influenza vaccine may qualify for accelerated approval usingsurrogate endpoints described in published FDA guidance documents. We would thus expect to perform Phase 4 confirmatory clinical trialsthat will demonstrate the clinical benefit of our pandemic influenza vaccine candidate after the BLA is approved. However, there can be noguarantee that the FDA will grant accelerated approval of our pandemic influenza vaccine candidate.In addition to regulatory approvals that must be obtained in the U.S., an investigational product is also subject to regulatory approval inother countries in which it is intended to be marketed. No such product can be marketed in a country until the regulatory authorities of thatcountry have approved an appropriate marketing application. FDA approval does not assure approval by other regulatory authorities. Inaddition, in many countries, the government is involved in the pricing of the product. In such cases, the pricing review period often beginsafter market approval is granted.We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic SubstancesControl Act, the Resource Conservation and Recovery Act and other present and potential federal, state or local regulations. These and otherlaws govern our use, handling and11  TABLE OF CONTENTSdisposal of various biological and chemical substances used in, and waste generated by our operations. Our research and developmentinvolves the controlled use of hazardous materials, chemicals and viruses. Although we believe that our safety procedures for handling anddisposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination orinjury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages thatresult and any such liability could exceed our resources. Additionally, for formulations containing controlled substances, we are subject toDrug Enforcement Act regulations.There have been a number of federal and state legislative changes made over the last few years regarding the pricing of pharmaceuticaland biological products, government control and other changes to the healthcare system of the U.S. It is uncertain how such legislativechanges will be adopted or what actions federal, state or private payers for medical goods and services may take in response to suchlegislation. We cannot predict the effect such healthcare changes will have on our business, and no assurance can be given that any suchreforms will not have a material adverse effect.ManufacturingIn November 2011, we announced that we had entered into a long-term lease arrangement to occupy 74,000 square feet ofmanufacturing, laboratory and office space in two facilities in Gaithersburg, Maryland. During 2013, the main facility, located at 20Firstfield Road in Gaithersburg, Maryland, became the primary late-stage clinical and commercial-scale manufacturing facility forproduction of our vaccines, following modifications that were completed in late 2012 and qualified in 2013. Our corporate offices wereofficially relocated to the same facility at 20 Firstfield Road.Our Rockville, Maryland facility houses our 10,000 square foot cGMP pilot facility that produces clinical trial material.In 2013, we acquired Isconova AB, now renamed Novavax AB, the producer of our Matrix adjuvants. Located in Uppsala, Sweden,Novavax AB has an approximately 15,400 square foot facility comprised of GMP manufacturing, laboratory and administrative space.Sources of SupplyMost of the raw materials and other supplies required in our business are generally available from various suppliers in quantitiesadequate to meet our needs. In some cases, we have only qualified one supplier for certain of our manufacturing components. Wherefeasible, we plan to seek qualification of multiple suppliers for all critical supplies before the time we would put any of our vaccinecandidates into commercial production. Two of our major suppliers are GE Healthcare Company (GEHC), which supplies disposablecomponents used in our manufacturing process, and Xcellerex, Inc., which was acquired by GEHC in 2012, and which supplies oursingle-use bioreactor production system and related supplies. The vendors that supply our key manufacturing materials are or will beaudited for compliance with cGMP standards based on a schedule of when such materials would be needed during our own cGMPbioprocessing efforts.An important component of our Matrix adjuvant technology is extracted from a species of soap-bark tree (Quillaja saponaria) thatgrows mainly in Chile, and while we have been able to acquire quillaja extract as needed from our current suppliers, we remain focused onestablishing appropriate back-up supply arrangements for high-quality quillaja extract.Business DevelopmentWe believe our proprietary vaccine technology affords us a range of traditional and non-traditional commercialization options that arebroader than those of existing vaccine companies. We strive to create sustainable value by working to obtain non-dilutive funding, similar toour agreements with HHS BARDA or PATH, to fund future trials for our RSV, seasonal influenza and pandemic influenza vaccinecandidates, to continue development of our vaccine candidates until such vaccines can be licensed on a regional basis, to retain commercialrights in major markets and generate product sales revenue and, in certain markets, to commercialize our products through partners andother strategic relationships.12  TABLE OF CONTENTSIn addition to our aforementioned contract with HHS BARDA, some examples of our strategic relationships are the joint venture weestablished with Cadila Pharmaceuticals, Ltd. (Cadila), our licensing agreement with LG Life Sciences, Ltd. (LGLS) and, most recently,our clinical development collaboration with PATH.CPLB is owned 20% by us and 80% by Cadila. It was established in March 2009 to develop and manufacture certain vaccinecandidates, biogeneric products and diagnostic products for the territory of India. CPLB operates a state-of-the-art manufacturing facility forthe production of influenza vaccine and other vaccine candidates. CPLB is actively developing a number of vaccine candidates that weregenetically engineered by Novavax. CPLB’s seasonal and pandemic influenza vaccine candidates began Phase 1/2 clinical trials in 2012.Also in 2012, CPLB formed a new collaboration to develop a novel malaria vaccine in India with the International Centre for GeneticEngineering and Biotechnology. CPLB’s rabies vaccine candidate began Phase 1/2 clinical trials in India in early 2014.In February 2011, we entered into a license agreement with LGLS that allows LGLS to use our technology to develop and commerciallysell our influenza vaccines in South Korea and certain other emerging-market countries. LGLS received an exclusive license to our influenzaVLP technology in South Korea and a non-exclusive license in the other specified countries. At its own cost, LGLS is responsible forfunding both its clinical development of the influenza VLP vaccines and a manufacturing facility to produce such vaccine in South Korea.We received an upfront payment and may receive reimbursements of certain development and product costs, payments related to theachievement of certain milestones and royalty payments in the high single digits from LGLS’s future commercial sales of influenza VLPvaccines.In July 2012, we entered into a clinical development agreement with PATH to develop our vaccine candidate to protect against RSVthrough maternal immunization in low-resource countries (the RSV Collaboration Program). We were awarded approximately $2.0 millionby PATH for initial funding under the agreement to partially support our Phase 2 dose-ranging clinical trial in women of childbearing age asdescribed above. In October 2013, the funding under this agreement was increased by $0.4 million to support our reproductive toxicologystudies, which are necessary before we conduct clinical trials in pregnant women. In December 2013, we entered into an amendment withPATH providing an additional $3.5 million in funding to support the Phase 2 dose-confirmation clinical trial in 720 women of childbearingage. We retain global rights to commercialize the product and have made a commitment to make the vaccine affordable and available in low-resource countries. To the extent PATH has continued to fund 50% of our external clinical development costs for the RSV CollaborationProgram, but we do not continue development, we would then grant PATH a fully-paid license to our RSV vaccine technology for use inpregnant women in such low-resource countries.EmployeesAs of March 6, 2014, we had 213 full-time employees, of whom 44 hold M.D. or Ph.D. degrees and 52 of whom hold other advanceddegrees. Of our total workforce, 175 are engaged primarily in research, development and manufacturing activities and 38 are engagedprimarily in executive, business development, finance and accounting, legal and administrative functions. None of our U.S. basedemployees are represented by a labor union or covered by a collective bargaining agreement, while the majority of our employees located inour facility in Uppsala, Sweden are covered by industry-typical collective bargaining agreements, and in both cases we consider ouremployee relations to be good.Executive OfficersOur executive officers hold office until the first meeting of the Board of Directors (the Board) following the Annual Meeting ofStockholders and until their successors are duly chosen and qualified, or until they resign or are removed from office in accordance withour By-laws.13  TABLE OF CONTENTSThe following table provides certain information with respect to our executive officers. Name Age Principal Occupation and Other Business Experience During the Past Five YearsStanley C. Erck 65 President and Chief Executive Officer and Director of Novavax since April2011, formerly Executive Chairman since February 2010, and a Director sinceJune 2009. From 2000 to 2008, Mr. Erck served as President and Chief ExecutiveOfficer of Iomai Corporation, a developer of vaccines and immune systemtherapies, which was acquired in 2008 by Intercell AG. He also previously heldleadership positions at Procept, a publicly traded immunology company, IntegratedGenetics, now part of Sanofi, and Baxter International. Mr. Erck also serves on theBoard of Directors of BioCryst Pharmaceuticals, MaxCyte, Inc. and MdBioFoundation.Barclay A. Phillips 51 Senior Vice President, Chief Financial Officer and Treasurer of Novavaxsince June 2013. Prior to joining the Company, Mr. Phillips served as Senior VicePresident and Chief Financial Officer of Micromet, Inc., which was acquired byAmgen in 2012. Previously, he was Managing Director of Vector FundManagement and a Biotechnology Analyst and Director of Venture Investments atInvesco Funds Group, Inc.Gregory Glenn, M.D. 60 Senior Vice President, Research and Development of Novavax since January2011. Senior Vice President and Chief Scientific Officer from July 2010 to January2011. Prior to joining the Company, Dr. Glenn was the Chief Scientific Officer andfounder of Iomai Corporation, which was acquired in 2008 by Intercell AG, anassociate in international health at Johns Hopkins University’s School of PublicHealth and a clinical and basic research scientist at Walter Reed Army Institute ofResearch.Timothy J. Hahn, Ph.D. 50 Senior Vice President, Manufacturing and Process Development of Novavaxsince June 2011. Prior to joining the Company, Dr. Hahn was Vice President ofAntibody Manufacturing and later Vice President of Vaccine Manufacturing atMedImmune, LLC, with responsibilities for both U.S. and non-U.S.manufacturing sites. Dr. Hahn spent more than 15 years in vaccine manufacturingwith Merck & Co.Russell P. Wilson 54 Senior Vice President, Business Development of Novavax since November2011. Mr. Wilson was most recently the Chief Financial Officer at SupernusPharmaceuticals beginning in 2009. He was previously Senior Vice President,Chief Financial Officer and General Counsel of Iomai Corporation, which wasacquired in 2008 by Intercell AG. He was the Acting General Counsel of NorthAmerican Vaccine, Inc. until its acquisition by Baxter International in 2000.Availability of InformationNovavax was incorporated in 1987 under the laws of the State of Delaware. Our principal executive offices are located at 20 FirstfieldRoad, Gaithersburg, Maryland, 20878. Our telephone number is (240) 268-2000 and our website address is novavax.com. The contents ofour website are not part of this Annual Report on Form 10-K.We make available, free of charge and through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,Current Reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of theSecurities Exchange Act of 1934, as amended, as soon as reasonably practicable after filed with or furnished to the SEC.14  TABLE OF CONTENTSItem 1A.RISK FACTORSYou should carefully consider the following risk factors in evaluating our business. There are a number of risk factors that could causeour actual results to differ materially from those that are indicated by forward-looking statements. Some of the risks described relateprincipally to our business and the industry in which we operate. Others relate principally to the securities market and ownership of ourcommon stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we areunaware of, or that we currently deem immaterial, also may become important factors that affect us. If any of the following risks occur, ourbusiness, financial condition or results of operations could be materially and adversely affected. You should also consider the otherinformation included in this Annual Report on Form 10-K.RISKS RELATED TO OUR BUSINESSWe have a history of losses and our future profitability is uncertain.Our expenses have exceeded our revenue since our formation in 1987, and our accumulated deficit at December 31, 2013 was $410.1million. Our revenue for the last three fiscal years was $20.9 million in 2013, $22.1 million in 2012, and $14.7 million in 2011. Prior to2011, we recorded limited revenue from research contracts, licenses and agreements to provide vaccine candidates, services andtechnologies. We cannot be certain that we will be successful in entering into strategic alliances or collaborative arrangements with othercompanies and government agencies that will result in significant revenue to offset our expenses. Our net losses for the last three fiscal yearswere $52.0 million in 2013, $28.5 million in 2012, and $19.4 million in 2011.Our recent historical losses have predominantly resulted from research and development expenses for our vaccine candidates,manufacturing-related expenses, costs related to protection of our intellectual property and for other general operating expenses. Our expenseshave exceeded our revenue since inception. We believe our expenses will continue to increase, as a result of higher research and developmentefforts to support the development of our vaccine candidates.Although certain specified costs associated with the development of our influenza vaccines may be reimbursed under the contract withHHS BARDA, and to a more limited extent, certain outside costs associated with the development of our RSV maternal vaccine may bereimbursed under our contract with PATH, nevertheless we expect to continue to incur significant operating expenses and anticipate that ourlosses will increase in the foreseeable future as we seek to:•conduct clinical trials for RSV and an RSV-influenza combination vaccine candidate;•conduct pre-clinical studies for other early-stage vaccine candidates;•comply with the FDA’s manufacturing facility requirements;•invest in our manufacturing process for commercial-scale and cost-efficiency (not including technology transfer to our newmanufacturing facility in Gaithersburg, Maryland that may be partially reimbursed by HHS BARDA); and•maintain, expand and protect our intellectual property portfolio.As a result, we expect our cumulative operating losses to increase until such time, if ever, that product sales, licensing fees, royalties,milestones, contract research and other sources generate sufficient revenue to fund our operations. We cannot predict when, if ever, we mightachieve profitability and cannot be certain that we will be able to sustain profitability, if achieved.We have limited financial resources and we are not certain that we will be able to maintain our current level of operations orbe able to fund the further development of our vaccine candidates.We do not expect to generate revenue from product sales, licensing fees, royalties, milestones, contract research or other sources in anamount sufficient to fully fund our operations for the foreseeable future, and we will therefore use our cash resources and expect to requireadditional funds to maintain our operations, continue our research and development programs, commence future pre-clinical studies andclinical trials, seek15  TABLE OF CONTENTSregulatory approvals and manufacture and market our products. We will seek such additional funds through public or private equity ordebt financings, collaborative licensing and development arrangements, non-dilutive government contracts and grants and other sources.While we continue to apply for contracts or grants from academic institutions, non-profits and governmental entities, there are noassurances that we would be successful. We cannot be certain that adequate additional funding will be available to us on acceptable terms, ifat all. If we cannot raise the additional funds required for our anticipated operations, we may be required to delay significantly, reduce thescope of or eliminate one or more of our research or development programs, downsize our general and administrative infrastructure, or seekalternative measures to avoid insolvency, including arrangements with collaborative partners or others that may require us to relinquishrights to certain of our technologies or vaccine candidates. If we raise additional funds through future offerings of shares of our commonstock or other securities, such offerings would cause dilution of current stockholders’ percentage ownership in the Company, which couldbe substantial. Future offerings also could have a material and adverse effect on the price of our common stock.Capital and credit market conditions may adversely affect our access to capital, cost of capital and ability to execute ourbusiness plan as scheduled.Access to capital markets is critical to our ability to operate. Traditionally, biopharmaceutical companies have funded their research anddevelopment expenditures through raising capital in the equity markets. Declines and uncertainties in these markets in the past have severelyrestricted raising new capital and have affected companies’ ability to continue to expand or fund existing research and development efforts.We require significant capital for research and development for our vaccine candidates and clinical trials. The general economic and capitalmarket conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access to capitaland increased the cost of capital. There is no certainty that the capital and credit markets will be available to raise additional capital onfavorable terms. If economic conditions become worse, our future cost of equity or debt capital and access to the capital markets could beadversely affected. In addition, our inability to access the capital markets on favorable terms due to our low stock price, could affect ourability to execute our business plan as scheduled. Moreover, we rely and intend to rely on third-parties, including our clinical researchorganizations and certain other important vendors and consultants. As a result of the global economic situation, there may be a disruption ordelay in the performance of our third-party contractors and suppliers. If such third-parties are unable to adequately satisfy their contractualcommitments to us in a timely manner, our business could be adversely affected.Even with the HHS BARDA contract award, we may not be able to fully fund our influenza programs.The HHS BARDA contract is a cost-plus-fixed-fee contract that only reimburses certain specified activities that have been previouslyauthorized by HHS BARDA. There is no guarantee that additional activities will not be needed and, if so, that HHS BARDA will reimburseus for these activities. Additionally, we have limited experience meeting the significant requirements of a federal government contractor,which includes having appropriate accounting, project tracking and earned-value management systems implemented and operational, andour existing operations may not meet these requirements in a timely way or at all. Performance under the HHS BARDA contract requires thatwe comply with appropriate regulations and operational mandates, with which we have minimal operational experience. Our ability to beregularly and fully reimbursed for our activities will depend on our ability to comply and demonstrate compliance with such requirements.The HHS BARDA contract award does not guarantee that we will be successful in future clinical trials, that the vaccinecandidates will be licensed by the FDA, or that the contract award will continue to be available throughout the contract period.The HHS BARDA contract provides a cost-plus-fixed-fee reimbursement opportunity for certain specified clinical and developmentactivities, but we remain fully responsible for conducting these activities. The award of the HHS BARDA contract does not guarantee thatany of these activities will be successful. Our inability to be successful with certain key clinical or development activities could jeopardizeour ability to get FDA licensure to sell our vaccines.16  TABLE OF CONTENTSHHS BARDA could decide to potentially delay certain of our activities, and we may elect to move forward with certain activitiesat our own risk and without HHS BARDA reimbursement.Under the HHS BARDA contract, HHS BARDA regularly reviews our development efforts and clinical activities. Under certaincircumstances, HHS BARDA may advise us to delay certain activities and invest additional time and resources before proceeding. If wefollow such HHS BARDA advice, overall program delays and costs associated with additional resources for which we had not plannedmay result. Also, the costs associated with following such advice may or may not be reimbursed by HHS BARDA under our contract.Finally, we may decide not to follow the advice provided by HHS BARDA and instead pursue activities that we believe are in the bestinterest of the program and of the Company, even if HHS BARDA would not reimburse us under our contract.We may not meet the milestones of our contract with HHS BARDA during the contract period and HHS BARDA may electnot to extend the contract period for us to meet these milestones.The HHS BARDA contract anticipates that we file Biologics License Applications (BLA, the biologic equivalent to a New DrugApplication or NDA) for licensure of both a seasonal influenza vaccine and a pandemic influenza vaccine; however, the recently-modifiedcontract is for a base-period of three years and seven months plus an option-period of two additional years, and there is no guarantee that wewill successfully complete all of the tasks required to file these BLAs during the anticipated contract period. For example, while we havemade significant progress during the last year in addressing our goal of consistent and enhanced immune responses in all strains of ourinfluenza vaccine candidates, there is no guarantee that we will ever be successful in having all the strains meet the immunogenicity criteriafor accelerated approval by the FDA. The inability to meet such goals could cause delays in our influenza vaccine candidate programs.HHS BARDA may decide not to extend our contract beyond the recently extended base-period for a two-year option period.The HHS BARDA contract anticipates a three-year base-period, which has recently been extended by an additional seven months,followed by an optional two-year period. Depending on how we perform during the base-period, HHS BARDA will decide whether or not toextend the contract to include the option period. Although we believe that, based on our progress to date and the activities that we haveplanned in the future, HHS BARDA will want to extend the contract, there can be no guarantee that HHS BARDA will decide to extend ourcontract to an option period.HHS BARDA directed activities under the contract may require us to change our plans such that other activities anticipatedunder the contract may not occur during the contract period, which may necessitate that we fund such activities ourselves or notconduct them at all.HHS BARDA has directed us to focus on developing our pandemic influenza vaccine against the A(H7N9) strain; while we expect to beable to initiate a Phase 2 clinical trial for our pandemic (H7N9) influenza vaccine candidate, certain work that had been conducted on ourpandemic (H5N1) influenza vaccine candidate may need to be duplicated or re-conducted on our pandemic (H7N9) influenza vaccinecandidate. To the extent that such work is reimbursed by HHS BARDA under our contract, such funds may not be available for otherdevelopment activities that we had anticipated would be performed under the contract. In such cases, we will need to decide whether toconduct the activities at our own expense or to determine that such activities are unnecessary.Our expectation that our pandemic influenza vaccine candidate will be granted accelerated approval by the FDA is notguaranteed and if we don't get accelerated approval, development of this vaccine will take longer and cost significantly more priorto BLA approval.As is the case with seasonal influenza, FDA has articulated the immunogenicity criteria for accelerated approval of vaccines thataddress potential pandemic influenza strains. Because a controlled efficacy clinical trial of a pandemic vaccine candidate is not logisticallyor ethically possible, accelerated approval will require evidence that a seasonal vaccine made by the same manufacturing process as thepandemic vaccine is efficacious. There is no guarantee the FDA will grant accelerated approval of our pandemic vaccine before we provideseasonal influenza efficacy data. If our seasonal influenza vaccine does not get accelerated approval17  TABLE OF CONTENTSfrom the FDA, it is likely that we will need to conduct larger and more expensive efficacy clinical trials and that licensure of our seasonalvaccine will be materially delayed for a year or more, assuming such licensure occurs at all, which may, in turn, delay the FDA approval ofour pandemic vaccine.Because of changes to the influenza vaccine industry and regulatory environment, accelerated approval by the FDA of ourseasonal influenza vaccine candidate may not be available in which case development of this vaccine will take longer and costsignificantly more prior to BLA approval.While FDA regulations allow for the accelerated approval of a seasonal influenza vaccine based on surrogate endpoint criteria forproducts that treat serious diseases and fill an unmet medical need, which can allow developers to obtain licensure well ahead of the timelinefor demonstrating clinical results in a traditional efficacy trial, the seasonal influenza vaccine industry has made significant steps to providesufficient supply to the recommended population in the U.S. Thus, the FDA may no longer view the development of our seasonal influenzavaccine as meeting an unmet medical need. If our seasonal influenza vaccine does not receive accelerated approval from the FDA, we willneed to conduct larger and more expensive efficacy clinical trials and that licensure of our seasonal vaccine will be materially delayed for ayear or more, assuming such licensure occurs at all.Our recent acquisition of Novavax AB, collaborations with regional partners, such as Cadila, LGLS, and PATH, as well ascontracts with international providers, expose us to additional risks associated with doing business outside the U.S., and anyadverse event could have a material negative impact on our operations.We acquired Swedish-based Novavax AB on July 31, 2013. We have also formed a joint venture with Cadila in India, entered into alicense agreement with LGLS in South Korea, a clinical development agreement with PATH and have entered into other agreements andarrangements with companies in other countries. We plan to continue to enter into collaborations or partnerships with companies, non-profitorganizations and local governments in other parts of the world. Risks of conducting business outside the U.S. include:•multiple regulatory requirements could affect our ability to develop, manufacture and sell products in such local markets;•compliance with anti-bribery laws such as the United States Foreign Corrupt Practices Act and similar anti-bribery laws in otherjurisdictions;•trade protections measures and import and export licensing requirements;•different labor regulations;•changes in environmental, health and safety laws;•exchange rates;•potentially negative consequences from changes in or interpretations of tax laws;•political instability and actual or anticipated military or potential conflicts;•economic instability, inflation, recession and interest rate fluctuations;•minimal or diminished protection of intellectual property in some countries; and•possible nationalization and expropriation.These risks, individually or in the aggregate, could have a material adverse effect on our business, financial conditions, results ofoperations and cash flows.Current or future regional relationships may hinder our ability to engage in larger transactions.We have entered into regional collaborations to develop our vaccine candidates in certain parts of the world, and we may enter intoadditional regional collaborations. Our relationships with Cadila, LGLS, and PATH are examples of these regional relationships. Theserelationships are likely to involve the licensing of our technology to our partner or entering into a distribution agreement, frequently on anexclusive basis.18  TABLE OF CONTENTSGenerally, these exclusive agreements are restricted to certain territories. Because we have entered into exclusive license and distributionagreements, larger companies may not be interested, or able, to enter into collaborations with us on a worldwide-scale. Also, these regionalrelationships may make us an unattractive target for an acquisition.We are a biopharmaceutical company and face significant risk in developing, manufacturing and commercializing ourproducts.We focus our research and development activities on vaccines, an area in which we have particular strengths and a technology thatappears promising. The outcome of any research and development program is highly uncertain. Only a small fraction of biopharmaceuticaldevelopment programs ultimately result in commercial products or even product candidates and a number of events could delay ourdevelopment efforts and negatively impact our ability to obtain regulatory approval for, and to manufacture, market and sell, a vaccine.Vaccine candidates that initially appear promising often fail to yield successful products. In many cases, pre-clinical studies or clinicaltrials will show that a product candidate is not efficacious or that it raises safety concerns or has other side effects that outweigh its intendedbenefit. Success in pre-clinical or early clinical trials may not translate into success in large-scale clinical trials. Further, success in clinicaltrials will likely lead to increased investment, accelerating cumulative losses to bring such products to market. Even if clinical trial resultsappear positive, regulatory approval may not be obtained if the FDA does not agree with our interpretation of the results and we may facechallenges when scaling-up the production process to commercial levels. Even after a product is approved and launched, general usage orpost-marketing clinical trials may identify safety or other previously unknown problems with the product, which may result in regulatoryapprovals being suspended, limited to narrow indications or revoked, which may otherwise prevent successful commercialization. Intensecompetition in the vaccine industry could also limit the successful commercialization of our products.Many of our competitors have significantly greater resources and experience, which may negatively impact our commercialopportunities and those of our current and future licensees.The biotechnology and pharmaceutical industries are subject to intense competition and rapid and significant technological change. Wehave many potential competitors, including major pharmaceutical companies, specialized biotechnology firms, academic institutions,government agencies and private and public research institutions. Many of our competitors have significantly greater financial and technicalresources, experience and expertise in:•research and development;•pre-clinical testing;•designing and implementing clinical trials;•regulatory processes and approvals;•production and manufacturing; and•sales and marketing of approved products.Principal competitive factors in our industry include:•the quality and breadth of an organization’s technology;•management of the organization and the execution of the organization’s strategy;•the skill and experience of an organization’s employees and its ability to recruit and retain skilled and experienced employees;•an organization’s intellectual property portfolio;19  TABLE OF CONTENTS•the range of capabilities, from target identification and validation to drug discovery and development to manufacturing andmarketing; and•the availability of substantial capital resources to fund discovery, development and commercialization activities.Large and established companies such as Merck & Co., Inc., GlaxoSmithKline plc, Novartis, Inc., Sanofi Pasteur, SA, Pfizer Inc.and MedImmune, LLC (a subsidiary of AstraZeneca PLC), among others, compete in the vaccine market. In particular, these companieshave greater experience and expertise in securing government contracts and grants to support their research and development efforts,conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scaleand marketing approved products.There are many seasonal influenza vaccines currently approved and marketed. Competition in the sale of these seasonal influenzavaccines is intense. Therefore, newly developed and approved products must be differentiated from existing vaccines in order to havecommercial success. In order to show differentiation in the seasonal influenza market, a product must be more efficacious, particularly inolder adults, and/or be less expensive and quicker to manufacture. Many of our competitors are working on new products and newgenerations of current products, each of which is intended to be more efficacious than products currently being marketed. Our seasonalinfluenza vaccine candidate may not prove to be more efficacious than current products or products under development by our competitors.Further, our manufacturing system may not provide enough savings of time or money to provide the required differentiation for commercialsuccess.We are also aware that there are multiple companies with active RSV vaccine programs at various stages of development. Thus, whilethere is no RSV vaccine currently on the market, there is likely to be significant and consistent competition as these active programs mature.Different RSV vaccines may work better for different segments of the population, so it may be difficult for a single RSV vaccinemanufacturer to provide a vaccine that is marketable to multiple segments of the population. Geographic markets are also likely to varysignificantly which may make it difficult to market a single RSV vaccine worldwide. Even if a manufacturer brings an RSV vaccine tolicense, it is likely that competitors will continue to work on new products that could be more efficacious and/or less-expensive. Our RSVvaccine candidate may not be as far along in development as other active RSV vaccine programs, nor as efficacious as products underdevelopment by competing companies.Smaller or early-stage companies and research institutions may also prove to be significant competitors, particularly throughcollaborative arrangements with large and established pharmaceutical companies. As these companies develop their technologies, they maydevelop proprietary positions, which may prevent or limit our product development and commercialization efforts. We will also facecompetition from these parties in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites andsubject registration for clinical trials and in acquiring and in-licensing technologies and products complementary to our programs orpotentially advantageous to our business. If any of our competitors succeed in obtaining approval from the FDA or other regulatoryauthorities for their products sooner than we do or for products that are more effective or less costly than ours, our commercial opportunitycould be significantly reduced.In order to effectively compete, we will have to make substantial investments in development, testing, manufacturing and sales andmarketing or partner with one or more established companies. There is no assurance that we will be successful in gaining significant marketshare for any vaccine. Our technologies and vaccines also may be rendered obsolete or non-competitive as a result of products introduced byour competitors to the marketplace more rapidly and at a lower cost.If we are unable to attract or retain key management or other personnel, we may experience delays in product development.We depend on our senior executive officers, as well as key scientific and other personnel. The loss of these individuals could harm ourbusiness and significantly delay or prevent the achievement of research, development or business objectives. We have had several turnoversituations in key executive positions and the lack of management continuity and resulting lack of long-term history with our Companyalong with the20  TABLE OF CONTENTSlearning curve that executives experience when they join our management team could result in operational and administrative inefficienciesand added costs. If we were to experience additional turnover at the executive level, these risks would be exacerbated.We may not be able to attract qualified individuals for other key management or other personnel positions on terms acceptable to us.Competition for qualified employees is intense among pharmaceutical and biotechnology companies, and the loss of qualified employees, oran inability to attract, retain and motivate additional highly skilled employees required for the expansion of our activities, could hinder ourability to complete clinical trials successfully and develop marketable products.We also rely from time to time on outside advisors who assist us in formulating our research and development and clinical strategy. Wemay not be able to attract and retain these individuals on acceptable terms, which could have a material adverse effect on our business,financial condition and results of operations.We may have product liability exposure.The administration of drugs or vaccines to humans, whether in clinical trials or after marketing clearances are obtained, can result inproduct liability claims. We maintain product liability insurance coverage in the total amount of $20 million aggregate for all claims arisingfrom the use of products in clinical trials prior to FDA approval. Coverage is relatively expensive, and the market pricing can significantlyfluctuate. Therefore, we may not be able to maintain insurance at a reasonable cost. There can be no assurance that we will be able tomaintain our existing insurance coverage or obtain coverage for the use of our other products in the future. This insurance coverage and ourresources may not be sufficient to satisfy all liabilities resulting from product liability claims. A successful claim may prevent us fromobtaining adequate product liability insurance in the future on commercially desirable items, if at all. Even if a claim is not successful,defending such a claim would be time-consuming and expensive, may damage our reputation in the marketplace and would likely divertmanagement’s attention.Regardless of merit or eventual outcome, liability claims may result in:•decreased demand for our products;•impairment of our business reputation;•withdrawal of clinical trial participants;•costs of related litigation;•substantial monetary awards to subjects or other claimants;•loss of revenue; and•inability to commercialize our vaccine candidates.We may not be able to win government, academic institution or non-profit contracts or grants.From time to time, we may apply for contracts or grants from academic institutions, government agencies and non-profit entities. Suchcontracts or grants can be highly attractive because they provide capital to fund the ongoing development of our technologies and vaccinecandidates without diluting our stockholders. However, there is often significant competition for these contracts or grants. Entities offeringcontracts or grants may have requirements to apply for or to otherwise be eligible to receive certain contracts or grants that our competitorsmay be able to satisfy that we cannot. In addition, such entities may make arbitrary decisions as to whether to offer contracts or makegrants, to whom the contracts or grants will be awarded and the size of the contracts or grants to each awardee. Even if we are able to satisfythe award requirements, there is no guarantee that we will be a successful awardee. Therefore, we may not be able to win any contracts orgrants in a timely manner, if at all.21  TABLE OF CONTENTSRaising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution toexisting stockholders or require us to relinquish rights to our technologies or vaccine candidates.If we are unable to partner with a third-party to advance the development of one or more of our vaccine candidates, we will need to raisemoney through additional debt or equity financings. To the extent that we raise additional capital by issuing equity securities, ourstockholders will experience immediate dilution, which may be significant. There is also a risk that such equity issuances may cause anownership change under the Internal Revenue Code of 1986, as amended, and similar state provisions, thus limiting our ability to use ournet operating loss carryforwards and credits. To the extent that we raise additional capital through licensing arrangements or arrangementswith collaborative partners, we may be required to relinquish, on terms that may not be favorable to us, rights to some of our technologies orvaccine candidates that we would otherwise seek to develop or commercialize ourselves. In addition, current economic conditions may alsonegatively affect the desire or ability of potential collaborators to enter into transactions with us. They may also have to delay or cancelresearch and development projects or reduce their overall budgets.Our business may be adversely affected if we do not successfully execute our business development initiatives.We anticipate growing through both internal development projects, as well as external opportunities, which include the acquisition,partnering and in-licensing of products, technologies and companies or the entry into strategic alliances and collaborations. The availabilityof high quality opportunities is limited, and we may fail to identify candidates that we and our stockholders consider suitable or completetransactions on terms that prove advantageous. In order to pursue such opportunities, we may require significant additional financing,which may not be available to us on favorable terms, if at all. Even if we are able to successfully identify and complete acquisitions, likeour business combination with Novavax AB, we may not be able to integrate the assets or take full advantage of the opportunities and,consequently, may not realize the benefits that we expect.To effectively manage our current and future potential growth, we will need to continue to enhance our operational, financial andmanagement processes and to effectively expand, train and manage our employee base. Supporting our growth initiatives will requiresignificant expenditures and management resources, including investments in research and development, manufacturing and other areas ofour business. If we do not successfully manage our growth and do not successfully execute our growth initiatives, then our business andfinancial results may be adversely impacted, and we may incur asset impairment or restructuring charges.RISKS RELATED TO OUR ACQUISITION OF NOVAVAX ABWe may not be able to successfully integrate our business with the business of Novavax AB.The acquisition of Novavax AB involves the integration of two companies based in different countries that had been operatingindependently. This integration will be a complex, costly and time-consuming process. We may encounter difficulties in integrating ouroperations, technology and personnel with those of Novavax AB and this may continue for some time. Our management has limitedexperience integrating operations as substantial and geographically diverse as those of Novavax AB. We may not successfully integrate ouroperations and Novavax AB's operations in a timely manner, or at all. The failure to successfully integrate the businesses' operations couldadversely affect our business, financial condition and results of operations. The anticipated benefits relate to utilizing Novavax AB'sproprietary adjuvants, including Matrix-M, with one or more of Novavax' product candidates and retaining the full economics anddevelopmental control of these adjuvanted vaccines, as well as other opportunities resulting from Novavax' and Novavax AB'scomplementary product candidates, industry specialties and technology platforms. However, these anticipated benefits are based onprojections and assumptions, not actual experience, and assume a successful integration.22  TABLE OF CONTENTSAs a result of the combination with Novavax AB, we may face risks upon entering into certain specific areas of vaccinedevelopment for which we have limited or no experience.Novavax AB develops adjuvants in veterinary vaccines. The development and improvement of vaccines for the global veterinary marketis an area of vaccine development for which we have limited or no experience. Although comprising a small part of our business, this lackof experience may have a negative impact to operations.Novavax AB adjuvants, including Matrix-M, may prove to have limited or no benefit to our vaccine development programs.We cannot guarantee that Matrix-M, or any other of Novavax AB's saponin-based adjuvants, will offer immunogenic benefits to any ofour vaccine programs until such adjuvants are tested in clinical trials.We may not be able to achieve the anticipated strategic benefits of our recent combination with Novavax AB.We are not able to guarantee that anticipated strategic benefits from the completed acquisition of Novavax AB, including cost savingsfrom operational activities, will be realized within the time periods contemplated or that they will be realized at all. We are not able toguarantee that the combination of Novavax and Novavax AB will result in the realization of the full benefits.Adjuvants, including saponin-based adjuvants such as Matrix-M, are likely to face increased regulatory scrutiny and mayprove to be unpopular with vaccine-using consumers and advocacy groups.Regulatory agencies, including the FDA, have been cautious in approving adjuvants for use in commercial vaccines. Recent reports onadjuvants that contain squalene, a commercially extracted adjuvant derived from shark liver oil, as an active ingredient, and links toneurological disorders like narcolepsy may cause regulatory agencies to increase their scrutiny of all adjuvants, whether they containsqualene or not. Although none of the adjuvants made by Novavax AB contain squalene, the impact of such regulatory scrutiny may bedetrimental to vaccine products containing non-squalene adjuvants. In addition, adjuvant usage has been unpopular with a small group ofvaccine advocacy and consumer groups who oppose the addition of further active ingredients in vaccines; their opposition may gain supportand have a detrimental impact on commercialization efforts and opportunities.As a result of the acquisition of Novavax AB, we will have revenue and expenses outside of the U.S., so we will be subject tofluctuations in foreign currency rates, and if our management is unable to manage our exposure to foreign currenciessuccessfully, our operating results will suffer.With the acquisition of Novavax AB, we will be exposed to risks associated with the translation of Novavax AB's Swedish Krona(SEK)-denominated financial results and balance sheet into U.S. dollars. Our reporting currency will remain as the U.S. dollar. Anyinability to successfully manage fluctuations in foreign currency rates could have a material adverse effect on our results of operations and,as a result, on the market price of our common stock.The uncertainties associated with our combination with Novavax AB may cause key personnel to leave.Our employees, including the employees of Novavax AB, may perceive uncertainty about their future role with the combined businessuntil strategies with regard to the combined business are fully executed. Any uncertainty may affect either our ability to retain keymanagement, sales, marketing, technical and financial personnel. Novavax AB's technology is based, in part, on trade secret and know-how, so if we are not able to retain key technical employees, we might have difficulties in continuing to develop and maintain Novavax AB'sproprietary adjuvants, which may impede the achievement of our objectives with this acquisition.23  TABLE OF CONTENTSPRODUCT DEVELOPMENT RISKSBecause our vaccine product development efforts depend on new and rapidly evolving technologies, we cannot be certain thatour efforts will be successful.Our vaccine development efforts depend on new, rapidly evolving technologies and on the marketability and profitability of ourproducts. Our development efforts and, if those are successful, commercialization of our vaccines could fail for a variety of reasons, andinclude the possibility that:•our recombinant nanoparticle vaccine technologies, any or all of the products based on such technologies or our proprietarymanufacturing process will be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances or commercialviability;•we are unable to scale-up our manufacturing capabilities in a cost-effective manner;•the products, if safe and effective, will be difficult to manufacture on a large-scale or uneconomical to market;•our manufacturing facility will fail to continue to pass regulatory inspections;•proprietary rights of third-parties will prevent us or our collaborators from exploiting technologies, and manufacturing or marketingproducts; and•third-party competitors will gain greater market share due to superior products or marketing capabilities.We have not completed the development of vaccine products and we may not succeed in obtaining the FDA approval necessaryto sell such vaccine products.The development, manufacture and marketing of our pharmaceutical and biological products are subject to government regulation in theU.S. and other countries, including the European Medicines Agency and the Swedish Medical Products Agency with respect to our adjuvantproduct being developed in Sweden. In the U.S. and most foreign countries, we must complete rigorous pre-clinical testing and extensiveclinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product. None ofour vaccine candidates have yet gained regulatory approval in the U.S. or elsewhere. We also have vaccine candidates in clinical trials andpre-clinical laboratory or animal studies.The steps required by the FDA before our proposed investigational products may be marketed in the U.S. include:•performance of pre-clinical (animal and laboratory) tests;•submissions to the FDA of an IND, which must become effective before clinical trials may commence;•performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the investigational product in theintended target population;•performance of a consistent and reproducible manufacturing process intended for commercial use, including appropriatemanufacturing data and regulatory inspections;•submission to the FDA of a BLA or a NDA; and•FDA approval of the BLA or NDA before any commercial sale or shipment of the product.The processes are expensive and can take many years to complete, and we may not be able to demonstrate the safety and efficacy of ourvaccine candidates to the satisfaction of regulatory authorities. The start of clinical trials can be delayed or take longer than anticipated formany and varied reasons, many of which are out of our control. Safety concerns may emerge that could lengthen the ongoing clinical trialsor require additional clinical trials to be conducted. Promising results in early clinical trials may not be replicated in subsequent clinicaltrials. Regulatory authorities may also require additional testing, and we may be required to demonstrate that our proposed productsrepresent an improved form of treatment over existing therapies, which we may be unable to do without conducting further clinical trials.Moreover, if the FDA or a24  TABLE OF CONTENTSforeign regulatory body grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect toits distribution. Expanded or additional indications for approved products may not be approved, which could limit our revenue. Foreignregulatory authorities may apply similar limitations or may refuse to grant any approval. Consequently, even if we believe that pre-clinicaland clinical data are sufficient to support regulatory approval for our vaccine candidates, the FDA and foreign regulatory authorities maynot ultimately grant approval for commercial sale in any jurisdiction. If our vaccine candidates are not approved, our ability to generaterevenue will be limited and our business will be adversely affected.If we are unable to manufacture our vaccines in sufficient quantities, at sufficient yields or are unable to obtain regulatoryapprovals for a manufacturing facility for our vaccines, we may experience delays in product development, clinical trials,regulatory approval and commercial distribution.Completion of our clinical trials and commercialization of our vaccine candidates require access to, or development of, facilities tomanufacture our vaccine candidates at sufficient yields and at commercial-scale. We have limited experience manufacturing any of ourvaccine candidates in the volumes that will be necessary to support large-scale clinical trials or commercial sales. Efforts to establish thesecapabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency or quality.Manufacturing our vaccines candidates involves a complicated process with which we have limited experience. If we are unable tomanufacture our vaccine candidates in clinical quantities or, when necessary, in commercial quantities and at sufficient yields, then wemust rely on third-parties. Other third-party manufacturers must also receive FDA approval before they can produce clinical material orcommercial products. Our vaccines may be in competition with other products for access to these facilities and may be subject to delays inmanufacture if third-parties give other products greater priority. We may not be able to enter into any necessary third-party manufacturingarrangements on acceptable terms, or on a timely basis. In addition, we have to enter into technical transfer agreements and share our know-how with the third-party manufacturers, which can be time-consuming and may result in delays.Influenza vaccines are seasonal in nature. If a vaccine is not available early enough in the influenza season, we would likely havedifficulty selling the vaccine. Further, pandemic outbreaks present only short-term opportunities for us. There is no way to predict whenthere will be a pandemic outbreak, the strain of the influenza or how long the pandemic will last. For these reasons, any delay in the deliveryof an influenza vaccine could result in lower sales volumes, lower sale prices, or no sales. Because the strain of the seasonal influenzachanges annually, inventory of seasonal vaccine cannot be sold during a subsequent influenza season. Any delay in the manufacture of ourinfluenza vaccines could adversely affect our ability to sell the vaccines.Our reliance on contract manufacturers may adversely affect our operations or result in unforeseen delays or other problems beyond ourcontrol. Because of contractual restraints and the limited number of third-party manufacturers with the expertise, required regulatoryapprovals and facilities to manufacture our bulk vaccines on a commercial-scale, replacement of a manufacturer may be expensive andtime-consuming and may cause interruptions in the production of our vaccine. A third-party manufacturer may also encounter difficulties inproduction. These problems may include:•difficulties with production costs, scale-up and yields;•availability of raw materials and supplies;•quality control and assurance;•shortages of qualified personnel;•compliance with strictly enforced federal, state and foreign regulations that vary in each country where product might be sold; and•lack of capital funding.As a result, any delay or interruption could have a material adverse effect on our business, financial condition, results of operations andcash flows.25  TABLE OF CONTENTSExpanded capacity in our new manufacturing facility, if required, may not be fully available during 2014, which may impedeor delay our ability to manufacture one or more vaccine candidates for subsequent clinical trials.Although our new manufacturing facility in Gaithersburg, Maryland, designed to manufacture later stage vaccine candidates, hascompleted refurbishment and is currently qualified, the new facility may require new equipment in order to expand its manufacturingcapacity. There are risks associated with expanding the capacity of such a facility that include but are not limited to contractor issues anddelays, licensing and permitting delays or rejections, limitations and delays on the installation of new or custom-ordered equipment, issuesassociated with validating such equipment, and processes or other aspects of insuring cGMP manufacturing. There are many aspects of theproject that rely on third party contractors and subcontractors, and we and they encounter delays.We expect to continue to use all of our Rockville manufacturing facility; however, if we choose not to do so, we may not beable to defray the lease payments and operating expenses of that facility.With our new late-stage and commercial launch manufacturing facility in Gaithersburg, Maryland, we have the opportunity to continueto fully utilize our facility in Rockville, Maryland to develop early-stage clinical material and perform other pilot manufacturing activities.Although we expect to utilize the entire Rockville facility, depending on our needs, we may decide to sublease a portion or all of the Rockvillefacility prior to the end of our lease on January 31, 2017. The expenses of leasing two manufacturing facilities are significant, however, ifwe decide to sublease a portion or all of the Rockville facility, such a sublease may prove difficult to obtain and even if we are able to do so,the sublease payments may not cover our lease payments and operating expenses for the space that we would sublet.We must identify vaccines for development with our technologies and establish successful third-party relationships.The near and long-term viability of our vaccine candidates will depend in part on our ability to successfully establish new strategiccollaborations with pharmaceutical and biotechnology companies, non-profit organizations and government agencies. Establishing strategiccollaborations and obtaining government funding is difficult and time-consuming. Potential collaborators may reject collaborations basedupon their assessment of our financial, regulatory or intellectual property position or based on their internal pipeline; government agenciesmay reject contract or grant applications based on their assessment of public need, the public interest, our products’ ability to address theseareas, or other reasons beyond our expectations or control. If we fail to establish a sufficient number of collaborations or governmentrelationships on acceptable terms, we may not be able to commercialize our vaccine candidates or generate sufficient revenue to fund furtherresearch and development efforts.Even if we establish new collaborations or obtain government funding, these relationships may never result in the successfuldevelopment or commercialization of any vaccine candidates for several reasons, including the fact that:•we may not have the ability to control the activities of our partner and cannot provide assurance that they will fulfill their obligationsto us, including with respect to the license, development and commercialization of vaccine candidates, in a timely manner or at all;•such partners may not devote sufficient resources to our vaccine candidates or properly maintain or defend our intellectual propertyrights;•any failure on the part of our partners to perform or satisfy their obligations to us could lead to delays in the development orcommercialization of our vaccine candidates and affect our ability to realize product revenue; and26  TABLE OF CONTENTS•disagreements, including disputes over the ownership of technology developed with such collaborators, could result in litigation,which would be time-consuming and expensive, and may delay or terminate research and development efforts, regulatory approvalsand commercialization activities.Our collaborators will be subject to the same regulatory approval of their manufacturing facility and process as Novavax. Before wecould begin commercial manufacturing of any of our vaccine candidates, we and our collaborators must pass a pre-approval inspectionbefore FDA approval and comply with the FDA’s cGMP. If our collaborators fail to comply with these requirements, our vaccine candidateswould not be approved. If our collaborators fail to comply with these requirements after approval, we would be subject to possible regulatoryaction and may be limited in the jurisdictions in which we are permitted to sell our products.If we or our collaborators fail to maintain our existing agreements or in the event we fail to establish agreements as necessary, we could berequired to undertake research, development, manufacturing and commercialization activities solely at our own expense. These activitieswould significantly increase our capital requirements and, given our lack of sales, marketing and distribution capabilities, significantlydelay the commercialization of our vaccine candidates.Because we depend on third-parties to conduct some of our laboratory testing, clinical trials, and manufacturing, we mayencounter delays in or lose some control over our efforts to develop products.We are dependent on third-party research organizations to conduct some of our laboratory testing, clinical trials and manufacturingactivities. If we are unable to obtain any necessary services on acceptable terms, we may not complete our product development efforts in atimely manner. We may lose some control over these activities and become too dependent upon these parties. These third-parties may notcomplete testing or manufacturing activities on schedule, within budget, or when we request. We may not be able to secure and maintainsuitable research organizations to conduct our laboratory testing, clinical trials and manufacturing activities. We have not manufactured anyof our vaccine candidates at a commercial level and may need to identify additional third-party manufacturers to scale-up and manufactureour products.We are responsible for confirming that each of our clinical trials is conducted in accordance with its general investigational plan andprotocol. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards, commonly referred to asgood clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results arecredible and accurate and that the clinical trial participants are adequately protected. The FDA and foreign regulatory agencies also requireus to comply with good manufacturing practices. Our reliance on third-parties does not relieve us of these responsibilities and requirements.These third-parties may not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines. In addition,these third-parties may need to be replaced or the quality or accuracy of the data they obtain may be compromised or the product theymanufacture may be contaminated due to the failure to adhere to our clinical and manufacturing protocols, regulatory requirements or forother reasons. In any such event, our pre-clinical development activities or clinical trials may be extended, delayed, suspended orterminated, and we may not be able to obtain regulatory approval of, or commercially manufacture, our vaccine candidates.Our collaborations may not be profitable.We entered a co-marketing agreement with GEHC in December 2007 for a pandemic influenza vaccine solution for select internationalcountries, and our collaboration continues to incorporate GEHC’s bioprocessing/manufacturing solutions and design expertise with our VLPmanufacturing platform.We have formed CPLB with Cadila in India and, in connection with it, entered into a master services agreement pursuant to which wemay request certain services from Cadila in the areas of biologics research, pre-clinical development, clinical development, processdevelopment, manufacturing scale-up and general manufacturing related services in India. We and Cadila amended the master servicesagreement first in July 2011, and subsequently in March 2013 and March 2014, in each case to extend the term by one year for whichservices can be provided by Cadila under this agreement. Under the revised terms, if, by March 2015, the amount of services provided byCadila under the master services agreement is less than $7.5 million, we27  TABLE OF CONTENTSwill pay Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion of the shortfall amountthat exceeds $2.0 million. We and Cadila also agreed to an amendment that allows CPLB, as of the beginning of 2013, to provide serviceson behalf of Cadila. Through December 31, 2013, we have purchased $3.0 million in services from Cadila pursuant to this agreement,including amounts in which CPLB provided the services on behalf of Cadila.We have entered into a license agreement with LGLS that allows them to use our manufacturing and production technology to developand sell our influenza vaccines. We have also entered into a clinical development agreement with PATH related to our RSV vaccine formaternal immunization in low-resource countries. To the extent PATH continues to fund 50% of the Company’s external clinicaldevelopment costs, but the Company does not continue development, the Company would grant PATH a fully-paid license to its RSVvaccine technology for use in pregnant women in such low-resource countries at terms that may not be favorable to the Company.We cannot predict when, if at all, these relationships will lead to approved products, sales, or otherwise provide revenue to the Companyor become profitable.We have limited marketing capabilities, and if we are unable to enter into collaborations with marketing partners or developour own sales and marketing capability, we may not be successful in commercializing any approved products.We currently have no sales, marketing or distribution capabilities. As a result, we will depend on collaborations with third-parties thathave established distribution systems and sales forces. To the extent that we enter into co-promotion or other licensing arrangements, ourrevenue will depend upon the efforts of third-parties, over which we may have little or no control. If we are unable to reach and maintainagreements with one or more pharmaceutical companies or collaborators, we may be required to market our products directly. Developing amarketing and sales force is expensive and time-consuming and could delay a product launch. We cannot be certain that we will be able toattract and retain qualified sales personnel or otherwise develop this capability.Our vaccine candidates may never achieve market acceptance even if we obtain regulatory approvals.Even if we receive regulatory approvals for the commercial sale of our vaccine candidates, the commercial success of these vaccinecandidates will depend on, among other things, their acceptance by physicians, patients, third-party payers such as health insurancecompanies and other members of the medical community as a vaccine and cost-effective alternative to competing products. If our vaccinecandidates fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business. Market acceptance of, anddemand for, any product that we may develop and commercialize will depend on many factors, including:•our ability to provide acceptable evidence of safety and efficacy;•the prevalence and severity of adverse side effects;•whether our vaccines are differentiated from other vaccines based on immunogenicity;•availability, relative cost and relative efficacy of alternative and competing treatments;•the effectiveness of our marketing and distribution strategy;•publicity concerning our products or competing products and treatments; and•our ability to obtain sufficient third-party insurance coverage or reimbursement.In particular, there are significant challenges to market acceptance for seasonal influenza vaccines. For our seasonal vaccine to beaccepted in the market, we must demonstrate differentiation from other seasonal vaccines that are currently approved and marketed. Thiscan mean that the vaccine is more effective in certain populations, such as in older adults, or cheaper and quicker to produce. There are noassurances that our vaccine will be more efficacious than other vaccines.28  TABLE OF CONTENTSIf our vaccine candidates do not become widely accepted by physicians, patients, third-party payers and other members of the medicalcommunity, our business, financial condition and results of operations would be materially and adversely affected.We may not be able to secure sufficient supplies of a key component of our adjuvant technology.Because an important component of our recently-acquired adjuvant technology is extracted from a species of soap-bark tree (Quillajasaponaria) grown in Chile, we need long term access to quillaja extract with a consistent and sufficiently high quality. We need a securesupply of raw material, as well as back-up suppliers, or the introduction of products may be delayed.If reforms in the health care industry make reimbursement for our potential products less likely, the market for our potentialproducts will be reduced, and we could lose potential sources of revenue.Our success may depend, in part, on the extent to which reimbursement for the costs of vaccines will be available from third-partypayers such as government health administration authorities, private health insurers, managed care programs and other organizations. Overthe past decade, the cost of health care has risen significantly, and there have been numerous proposals by legislators, regulators and third-party health care payers to curb these costs. Some of these proposals have involved limitations on the amount of reimbursement for certainproducts. Similar federal or state health care legislation may be adopted in the future and any products that we or our collaborators seek tocommercialize may not be considered cost-effective. Adequate third-party insurance coverage may not be available for us to establish andmaintain price levels that are sufficient for realization of an appropriate return on our investment in product development. Moreover, theexistence or threat of cost control measures could cause our corporate collaborators to be less willing or able to pursue research anddevelopment programs related to our vaccine candidates.REGULATORY RISKSWe may fail to obtain regulatory approval for our products on a timely basis or comply with our continuing regulatoryobligations after approval is obtained.Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities, losing any potential marketingadvantage of being early to market and increased clinical trial costs. The speed with which we begin and complete our pre-clinical studiesnecessary to begin clinical trials, clinical trials and our applications for marketing approval will depend on several factors, including thefollowing:•our ability to manufacture or obtain sufficient quantities of materials for use in necessary pre-clinical studies and clinical trials;•prior regulatory agency review and approval;•approval of the protocol and the informed consent form by the review board of the institution conducting the clinical trial;•the rate of subject or patient enrollment and retention, which is a function of many factors, including the size of the subject orpatient population, the proximity of subjects and patients to clinical sites, the eligibility criteria for the clinical trial and the nature ofthe protocol;•negative test results or side effects experienced by clinical trial participants;•analysis of data obtained from pre-clinical and clinical activities, which are susceptible to varying interpretations and whichinterpretations could delay, limit or prevent further studies or regulatory approval;•the availability of skilled and experienced staff to conduct and monitor clinical trials and to prepare the appropriate regulatoryapplications; and•changes in the policies of regulatory authorities for drug or vaccine approval during the period of product development.We have limited experience in conducting and managing the pre-clinical studies and clinical trials necessary to obtain regulatorymarketing approvals. We may not be permitted to continue or commence29  TABLE OF CONTENTSadditional clinical trials. We also face the risk that the results of our clinical trials may be inconsistent with the results obtained in pre-clinical studies or clinical trials of similar products or that the results obtained in later phases of clinical trials may be inconsistent withthose obtained in earlier phases. A number of companies in the biopharmaceutical and product development industry have sufferedsignificant setbacks in advanced clinical trials, even after experiencing promising results in early animal and human testing.Regulatory agencies may require us or our collaborators to delay, restrict or discontinue clinical trials on various grounds, including afinding that the subjects or patients are being exposed to an unacceptable health risk. In addition, we or our collaborators may be unable tosubmit applications to regulatory agencies within the time frame we currently expect. Once submitted, applications must be approved byvarious regulatory agencies before we or our collaborators can commercialize the product described in the application. All statutes andregulations governing the conduct of clinical trials are subject to change in the future, which could affect the cost of such clinical trials. Anyunanticipated costs or delays in our clinical trials could delay our ability to generate revenue and harm our financial condition and results ofoperations.Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our products internationally.We intend to have our vaccine candidates marketed outside the U.S. In furtherance of this objective, we have entered into relationshipswith Cadila in India, LGLS in South Korea and PATH. In order to market our products in the European Union, India, Asia and manyother non-U.S. jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatoryrequirements. The approval procedure varies among countries and can involve additional testing and data review. The time required toobtain foreign regulatory approval may differ from that required to obtain FDA approval. The foreign regulatory approval process mayinclude all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all.Approval by a regulatory agency, such as the FDA, does not ensure approval by any other regulatory agencies, for example in other foreigncountries. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatoryapproval process in other jurisdictions, including approval by the FDA. The failure to obtain regulatory approval in foreign jurisdictionscould harm our business.Even if regulatory approval is received for our vaccine candidates, the later discovery of previously unknown problems with aproduct, manufacturer or facility may result in restrictions, including withdrawal of the product from the market.Even if a product gains regulatory approval, such approval is likely to limit the indicated uses for which it may be marketed, and theproduct and the manufacturer of the product will be subject to continuing regulatory review, including adverse event reporting requirementsand the FDA’s general prohibition against promoting products for unapproved uses. Failure to comply with any post-approval requirementscan, among other things, result in warning letters, product seizures, recalls, substantial fines, injunctions, suspensions or revocations ofmarketing licenses, operating restrictions and criminal prosecutions. Any of these enforcement actions, any unanticipated changes inexisting regulatory requirements or the adoption of new requirements, or any safety issues that arise with any approved products, couldadversely affect our ability to market products and generate revenue and thus adversely affect our ability to continue our business.We also may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, ifpreviously unknown problems with the product or its manufacture are subsequently discovered and we cannot provide assurance thatnewly discovered or developed safety issues will not arise following any regulatory approval. With the use of any vaccine by a wide patientpopulation, serious adverse events may occur from time to time that initially do not appear to relate to the vaccine itself, and only if thespecific event occurs with some regularity over a period of time does the vaccine become suspect as having a causal relationship to theadverse event. Any safety issues could cause us to suspend or cease marketing of our approved products, possibly subject us to substantialliabilities, and adversely affect our ability to generate revenue and our financial condition.30  TABLE OF CONTENTSBecause we are subject to environmental, health and safety laws, we may be unable to conduct our business in the mostadvantageous manner.We are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, theexperimental use of animals, emissions and wastewater discharges, and the use and disposal of hazardous or potentially hazardoussubstances used in connection with our research, including infectious disease agents. We also cannot accurately predict the extent ofregulations that might result from any future legislative or administrative action. Any of these laws or regulations could cause us to incuradditional expense or restrict our operations.Our facilities in Maryland and in Sweden are subject to various local, state and federal laws and regulations relating to safe workingconditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentiallyhazardous substances, including chemicals, microorganisms and various hazardous compounds used in connection with our research anddevelopment activities. In the U.S., these laws include the Occupational Safety and Health Act, the Toxic Test Substances Control Act andthe Resource Conservation and Recovery Act. We cannot eliminate the risk of accidental contamination or discharge or injury from thesematerials. Federal, state, and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. Wecould be subject to civil damages in the event of an improper or unauthorized release of, or exposure of individuals to, these hazardousmaterials. In addition, claimants may sue us for injury or contamination that results from our use or the use by third-parties of thesematerials, and our liability may exceed our total assets. Compliance with environmental laws and regulations may be expensive, and currentor future environmental regulations may impair our research, development or production efforts.Although we have general liability insurance, these policies contain exclusions from insurance against claims arising from pollutionfrom chemicals or pollution from conditions arising from our operations. Our collaborators are working with these types of hazardousmaterials in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury we orour collaborators cause to persons or property by exposure to, or release of, any hazardous materials. However, we believe that we arecurrently in compliance with all applicable environmental and occupational health and safety regulations.Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face uncertaintywith respect to pricing, third-party reimbursement and healthcare reform, all of which could adversely affect any commercialsuccess of our vaccine candidates.Our ability to collect revenue from the commercial sale of our vaccines may depend on our ability, and that of any current or potentialfuture collaboration partners or customers, to obtain adequate levels of coverage and reimbursement for such products from third-partypayers such as:•government health administration authorities;•private health insurers;•health maintenance organizations;•pharmacy benefit management companies; and•other healthcare-related organizations.Third-party payers are increasingly challenging the prices charged for medical products and may deny coverage or offer inadequatelevels of reimbursement if they determine that a prescribed product has not received appropriate clearances from the FDA, or foreignequivalent, or other government regulators, is not used in accordance with cost-effective treatment methods as determined by the third-partypayer, or is experimental, unnecessary or inappropriate. Prices could also be driven down by health maintenance organizations that controlor significantly influence purchases of healthcare products.In both the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives tochange the health care system in ways that could affect our ability to sell vaccines. Some of these proposed and implemented reforms couldresult in reduced reimbursement rates for medical products, and while we have no current vaccines available for commercial sale, theimpact of such reform31  TABLE OF CONTENTScould nevertheless adversely affect our business strategy, operations and financial results. In March 2010, President Obama signed into lawa legislative overhaul of the U.S. healthcare system, known as the Patient Protection and Affordable Care Act of 2010, as amended by theHealthcare and Education Affordability Reconciliation Act of 2010 (PPACA). As a result of this new legislation, substantial changes couldbe made to the current system for paying for healthcare in the United States, including changes made in order to extend medical benefits tothose who currently lack insurance coverage. The long-term ramifications of PPACA remain unclear and many details regardingimplementation of PPACA are yet to be determined, however the cost-containment measures that healthcare providers are instituting and theresults of healthcare reforms may negatively impact the commercial prospects of one or more of our vaccine candidates currently indevelopment.INTELLECTUAL PROPERTY RISKSOur success depends on our ability to maintain the proprietary nature of our technology.Our success in large part depends on our ability to maintain the proprietary nature of our technology and other trade secrets. To do so,we must prosecute and maintain existing patents, obtain new patents and pursue trade secret and other intellectual property protection. Wealso must operate without infringing the proprietary rights of third-parties or allowing third-parties to infringe our rights. We currently haveor have rights to over 100 U.S. patents and corresponding foreign patents and patent applications covering our technologies. However, patentissues relating to pharmaceuticals and biologics involve complex legal, scientific and factual questions. To date, no consistent policy hasemerged regarding the breadth of biotechnology patent claims that are granted by the U.S. Patent and Trademark Office or enforced by thefederal courts. Therefore, we do not know whether our patent applications will result in the issuance of patents, or that any patents issued tous will provide us with any competitive advantage. We also cannot be sure that we will develop additional proprietary products that arepatentable. Furthermore, there is a risk that others will independently develop or duplicate similar technology or products or circumvent thepatents issued to us.There is a risk that third-parties may challenge our existing patents or claim that we are infringing their patents or proprietary rights. Wecould incur substantial costs in defending patent infringement suits or in filing suits against others to have their patents declared invalid orclaim infringement. It is also possible that we may be required to obtain licenses from third-parties to avoid infringing third-party patents orother proprietary rights. We cannot be sure that such third-party licenses would be available to us on acceptable terms, if at all. If we areunable to obtain required third-party licenses, we may be delayed in or prohibited from developing, manufacturing or selling productsrequiring such licenses.Although our patent filings include claims covering various features of our vaccine candidates, including composition, methods ofmanufacture and use, our patents do not provide us with complete protection against the development of competing products. Some of ourknow-how and technology is not patentable. To protect our proprietary rights in unpatentable intellectual property and trade secrets, werequire employees, consultants, advisors and collaborators to enter into confidentiality agreements. These agreements may not providemeaningful protection for our trade secrets, know-how or other proprietary information.If we infringe or are alleged to infringe the intellectual property rights of third-parties, it will adversely affect our business,financial condition and results of operations.Our research, development and commercialization activities, including any vaccine candidates resulting from these activities, mayinfringe or be claimed to infringe patents owned by third-parties and to which we do not hold licenses or other rights. There may be rights weare not aware of, including applications that have been filed but not published that, when issued, could be asserted against us. These third-parties could bring claims against us, and that would cause us to incur substantial expenses and, if successful against us, could cause usto pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research,development, manufacturing or sales of the product or biologic drug candidate that is the subject of the suit.As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from thethird-party. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likelyobligate us to pay license fees or royalties32  TABLE OF CONTENTSor both, and the rights granted to us might be non-exclusive, which could result in our competitors gaining access to the same intellectualproperty. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations,if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. All of the issuesdescribed above could also impact our collaborators, which would also impact the success of the collaboration and therefore us.There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceuticaland biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and otherproceedings, including interference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in theEuropean Patent Office, regarding intellectual property rights with respect to our products and technology.We may become involved in lawsuits to protect or enforce our patents or the patents of our collaborators or licensors, whichcould be expensive and time-consuming.Competitors may infringe our patents or the patents of our collaborators or licensors. As a result, we may be required to file infringementclaims to counter infringement for unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. Inaddition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop theother party from using the technology at issue on the grounds that our patents do not cover its technology. An adverse determination of anylitigation or defense proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put ourpatent applications at the risk of not issuing.Interference proceedings brought by the U.S. Patent and Trademark Office, or similar proceedings in foreign jurisdictions, may benecessary to determine the priority of inventions with respect to our patent applications or those of our collaborators or licensors. Litigationor interference proceedings may fail and, even if successful, may result in substantial costs and distraction to our management. We may notbe able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly in countries wherethe laws may not protect such rights as fully as in the U.S.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a riskthat some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the courseof this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings ordevelopments. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.We may need to license intellectual property from third-parties and, if our right to use the intellectual property we license isaffected, our ability to develop and commercialize our vaccine candidates may be harmed.We expect that we will need to license intellectual property from third-parties in the future and that these licenses will be material to ourbusiness. We will not own the patents or patent applications that underlie these licenses, and we will not control the enforcement of thepatents. We will rely upon our licensors to properly prosecute and file those patent applications and prevent infringement of those patents.Our license agreement with Wyeth, which gives us rights to a family of patents and patent applications that are expected to expire inearly 2022, covering VLP technology for use in human vaccines in certain fields of use, is non-exclusive. These applications are verysignificant to our business. If each milestone is achieved for any particular vaccine candidate, we would likely be obligated to pay anaggregate of $14 million to Wyeth for each vaccine candidate developed and commercialized under the agreement. Achievement of eachmilestone is subject to many risks, including those described in these Risk Factors. Annual license fees under the Wyeth agreement aggregateto $0.2 million per year.While many of the licenses under which we have rights provide us with rights in specified fields, the scope of our rights under theseand other licenses may be subject to dispute by our licensors or third-parties. In addition, our rights to use these technologies and practicethe inventions claimed in the licensed patents and33  TABLE OF CONTENTSpatent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Any of our licenses may beterminated by the licensor if we are in breach of a term or condition of the license agreement, or in certain other circumstances.Our vaccine candidates and potential vaccine candidates will require several components that may each be the subject of a licenseagreement. The cumulative license fees and royalties for these components may make the commercialization of these vaccine candidatesuneconomical.If patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize ourdiscoveries.Important legal issues remain to be resolved as to the extent and scope of available patent protection for biopharmaceutical products andprocesses in the U.S. and other important markets outside the U.S., such as Europe and Japan. Foreign markets may not provide the samelevel of patent protection as provided under the U.S. patent system. Litigation or administrative proceedings may be necessary to determinethe validity and scope of certain of our and others’ proprietary rights. Any such litigation or proceeding may result in a significantcommitment of resources in the future and could force us to do one or more of the following: cease selling or using any of our products thatincorporate the challenged intellectual property, which would adversely affect our revenue; obtain a license from the holder of the intellectualproperty right alleged to have been infringed, which license may not be available on reasonable terms, if at all; and redesign our products toavoid infringing the intellectual property rights of third-parties, which may be time-consuming or impossible to do. In addition, changes in,or different interpretations of, patent laws in the U.S. and other countries may result in patent laws that allow others to use our discoveriesor develop and commercialize our products. We cannot provide assurance that the patents we obtain or the unpatented technology we holdwill afford us significant commercial protection.RISKS RELATED TO OUR COMMON STOCK AND ORGANIZATIONAL STRUCTUREBecause our stock price has been and will likely continue to be highly volatile, the market price of our common stock may belower or more volatile than expected.Our stock price has been highly volatile. The stock market in general and the market for biopharmaceutical companies in particularhave experienced extreme volatility that has often been unrelated to the operating performance of particular companies. From January 1, 2013through December 31, 2013, the closing sale price of our common stock has been as low as $1.75 per share and as high as $5.16 pershare. The market price of our common stock may be influenced by many factors, including:•future announcements about our Company or our collaborators or competitors, including the results of testing, technologicalinnovations or new commercial products;•clinical trial results;•depletion of our cash reserves;•sale of equity securities or issuance of additional debt;•announcement by us of significant strategic partnerships, collaborations, joint ventures, capital commitments or acquisitions;•changes in government regulations;•impact of competitor successes and in particular development success of vaccine candidates that compete with our own vaccinecandidates;•developments in our relationships with our collaboration partners;•announcements relating to health care reform and reimbursement levels for new vaccines;•sales of substantial amounts of our stock by existing stockholders (including stock by insiders or 5% stockholders);•development, spread or new announcements related to pandemic influenza;34  TABLE OF CONTENTS•litigation;•public concern as to the safety of our products;•significant set-backs or concerns with the industry or the market as a whole;•regulatory inquiries, reviews and potential action, including from the FDA or the SEC; and•the other factors described in this Risk Factors section.The stock market has experienced extreme price and volume fluctuations that have particularly affected the market price for manyemerging and biopharmaceutical companies. These fluctuations have often been unrelated to the operating performance of these companies.These broad market fluctuations may cause the market price of our common stock to be lower or more volatile than expected.Provisions of our Certificate of Incorporation and By-laws and Delaware law could delay or prevent the acquisition of theCompany, even if such acquisition would be beneficial to stockholders, and could impede changes in our Board.Our organizational documents could hamper a third-party’s attempt to acquire, or discourage a third-party from attempting to acquirecontrol of, the Company. Stockholders who wish to participate in these transactions may not have the opportunity to do so. Ourorganizational documents also could limit the price investors are willing to pay in the future for our securities and make it more difficult tochange the composition of our Board in any one year. Certain provisions include the right of the existence of a staggered Board with threeclasses of directors serving staggered three-year terms and advance notice requirements for stockholders to nominate directors and makeproposals.The Company also is afforded the protections of Section 203 of the Delaware General Corporation Law, which will prevent us fromengaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the datesuch person acquired such common stock, unless advance board or stockholder approval was obtained.Any delay or prevention of a change of control transaction or changes in our Board or management could deter potential acquirers orprevent the completion of a transaction in which our stockholders could receive a substantial premium over the then current market price fortheir shares.We have never paid dividends on our capital stock, and we do not anticipate paying any such dividends in the foreseeablefuture.We have never paid cash dividends on our common stock. We currently anticipate that we will retain all of our earnings for use in thedevelopment of our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, ifany, of our common stock would be the only source of gain for stockholders until dividends are paid, if at all.35  TABLE OF CONTENTSItem 2.PROPERTIESWe lease two facilities in Gaithersburg, Maryland and one in Rockville, Maryland. In conjunction with our acquisition of Isconova ABin 2013, we acquired a facility lease in Uppsala, Sweden. We continue to lease space at our former corporate headquarters in Malvern,Pennsylvania, all of which is currently subleased. A summary of our current facilities is set forth below. PropertyLocation ApproximateSquare FootageRockville, MD 51,200 Vaccine research and development and manufacturing facility 20FF Gaithersburg, MD 53,000 Corporate headquarters, vaccine research and development andmanufacturing facility 22FF Gaithersburg, MD 21,000 Administrative, clinical and regulatory offices Uppsala, Sweden 15,400 Adjuvant manufacturing facility and research and development andadministrative offices Malvern, PA 32,900 Former corporate headquarters and research and development Total square footage 173,500 Malvern, PA sublease (32,900) Net square footage 140,600 Item 3.LEGAL PROCEEDINGSWe currently have no material legal proceedings underway.Item 4.MINE SAFETY DISCLOSURESNot applicable.36  TABLE OF CONTENTSPART IIItem 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERSOur common stock trades on The NASDAQ Global Select Market under the symbol “NVAX.” The following table sets forth the rangeof high and low closing sale prices for our common stock as reported on The NASDAQ Global Select Market for each quarter in the twomost recent years: Quarter Ended High LowDecember 31, 2013 $5.16 $2.76 September 30, 2013 $3.38 $2.11 June 30, 2013 $2.69 $1.79 March 31, 2013 $2.28 $1.75 December 31, 2012 $2.39 $1.57 September 30, 2012 $2.23 $1.71 June 30, 2012 $1.56 $1.16 March 31, 2012 $1.52 $1.23 On March 6, 2014, the last sale price reported on The NASDAQ Global Select Market for our common stock was $6.05. Ourcommon stock was held by approximately 452 stockholders of record as of March 6, 2014, one of which is Cede & Co., a nominee forDepository Trust Company (or DTC). All of the shares of common stock held by brokerage firms, banks and other financial institutionsas nominees for beneficial owners are deposited into participant accounts at DTC, and are therefore considered to be held of record by Cede& Co. as one stockholder. We have not paid any cash dividends on our common stock since our inception. We do not anticipate declaring orpaying any cash dividends in the foreseeable future.Securities Authorized for Issuance under our Equity Compensation PlansInformation regarding our equity compensation plans, including both stockholder approved plans and non-stockholder approved plans,is included in Item 12 of this Annual Report on Form 10-K (Annual Report).37  TABLE OF CONTENTSPerformance GraphThe graph below compares the cumulative total stockholders return on our common stock for the last five fiscal years with thecumulative total return on the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index (which includes Novavax) overthe same period, assuming the investment of $100 in our common stock, the NASDAQ Composite Index and the Russell 2000 GrowthBiotechnology Index on December 31, 2008, and reinvestments of all dividends.Value of $100 invested on December 31, 2008 in stock or index, including reinvestment of dividends, for fiscal years ended December31: 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13Novavax, Inc. $100.00 $140.74 $128.57 $66.67 $100.00 $270.90 NASDAQ Composite Index $100.00 $144.88 $170.58 $171.30 $199.99 $283.39 RUSSELL 2000 Growth Biotechnology Index $100.00 $131.12 $146.22 $141.62 $162.66 $254.04 This graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of theCompany under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespectiveof any general incorporation language in any such filing.38  TABLE OF CONTENTSItem 6.SELECTED FINANCIAL DATAThe following table sets forth selected financial data for each of the years in the five-year period ended December 31, 2013, which hasbeen derived from our audited financial statements. The information below should be read in conjunction with our financial statements andnotes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in thisAnnual Report. These historical results are not necessarily indicative of results that may be expected for future periods. For The Years Ended December 31, 2013 2012 2011 2010 2009 (in thousands, except per share amounts)Statements of Operations Data: Revenue $20,915 $22,076 $14,688 $343 $325 Net loss (51,983) (28,507) (19,364) (35,708) (40,346) Basic and diluted net loss per share (0.31) (0.22) (0.17) (0.34) (0.47) Weighted average shares used in computing basicand diluted net loss per share 169,658 131,726 113,610 104,768 85,555 As of December 31, 2013 2012 2011 2010 2009 (in thousands)Balance Sheet Data: Cash and investments(1) $133,068 $50,344 $18,309 $31,676 $42,950 Total current assets 145,001 50,408 26,109 33,337 44,503 Working capital(2) 126,067 38,733 18,530 23,071 36,476 Total assets(3) 235,937 102,345 66,576 74,844 85,605 Long-term debt, less current portion 1,199 990 300 320 406 Accumulated deficit (410,146) (358,163) (329,656) (310,292) (274,584) Total stockholders’ equity(3) 203,234 80,240 53,849 59,050 69,952 (1)Includes non-current investments of $6,233 at December 31, 2012.(2)Working capital is computed as the excess of current assets over current liabilities.(3)At December 31, 2013, total assets and total stockholders’ equity include approximately $45 million and $42 million, respectively,relating to the acquisition of Isconova AB (see Note 4 to the consolidated financial statements included herewith).39  TABLE OF CONTENTSItem 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSAny statements in the discussion below and elsewhere in this report, about the expectations, beliefs, plans, objectives, assumptions orfuture events or performance of Novavax, Inc. (Novavax, and together with its subsidiary, Novavax AB, the Company, we or us) are nothistorical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements regarding ourexpectations regarding future revenue and expense levels, the efficacy, safety and intended utilization of our product candidates, thedevelopment of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies, the future development of ourproduct candidates by us, the conduct, timing and results of future clinical trials, plans regarding regulatory filings, our available cashresources and the availability of financing generally, our plans regarding partnering activities and business development initiatives, andother factors referenced herein. You can identify these forward-looking statements by the use of words or phrases such as “believe,” “may,”“could,” “will,” “possible,” “can,” “estimate,” “continue,” “ongoing,” “consider,” “anticipate,” “intend,” “seek,” “plan,” “project,”“expect,” “should,” “would,” or “assume” or the negative of these terms, or other comparable terminology, although not all forward-lookingstatements contain these words.Any or all of our forward-looking statements in the Annual Report may turn out to be inaccurate or materially different than actualresults. Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements arerisks and uncertainties inherent in our business including, without limitation, the progress, timing or success of our clinical trials;difficulties or delays in development, testing, GMP manufacturing and scale-up, obtaining regulatory approval for producing andmarketing our product candidates; regulatory developments in the United States or in foreign countries; the risks associated with ourreliance on collaborations for the development and commercialization of our product candidates; unexpected adverse side effects orinadequate efficacy of our product candidates that could delay or prevent product development or commercialization, or that could result inrecalls or product liability claims; our ability to attract and retain key scientific, management or operational personnel; the size and growthpotential of the markets for our product candidates and our ability to serve those markets; the scope and validity of patent protection for ourproduct candidates; competition from other pharmaceutical or biotechnology companies; our ability to establish and maintain strategiccollaborations or to otherwise obtain additional financing to support our operations on commercially reasonable terms; successfuladministration of our business and financial reporting capabilities; and other risks detailed in this report, including those identified in PartI, Item 1A, “Risk Factors” of this Annual Report. In light of these risks and uncertainties, the forward-looking events and circumstancesdiscussed in this Annual Report may not occur as we contemplate, and actual results could differ materially from those anticipated orimplied by the forward-looking statements and we therefore caution readers not to place undue reliance on such forward-looking statementscontained in this Annual Report.Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results,events, levels of activity, performance or achievement. We undertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise, unless required by law.OverviewNovavax, Inc. (Novavax, and together with its subsidiary, Novavax AB, the “Company,” “we” or “us”) is a clinical-stagebiopharmaceutical company focused on the discovery, development and commercialization of recombinant protein nanoparticle vaccinesand adjuvants. Our vaccine technology platform is based on proprietary recombinant nanoparticle vaccine technology that includes virus-like particles (“VLPs”) vaccines and protein nanoparticle vaccines. These vaccine candidates are genetically engineered three-dimensionalnanostructures that incorporate immunologically important proteins. Our vaccine product pipeline targets a variety of infectious diseaseswith candidates currently in clinical development for seasonal influenza, pandemic influenza and respiratory syncytial virus (“RSV”). Weoperate in one business segment: developing recombinant vaccines. Therefore, our results of operations are discussed on a consolidatedbasis.Through our Swedish subsidiary, Novavax AB (formerly Isconova AB), we are also developing proprietary technology for theproduction of immune stimulating saponin-based adjuvants, which we expect to40  TABLE OF CONTENTSutilize in conjunction with our pandemic influenza vaccine candidates and potentially with other vaccine candidates that may benefit fromsuch an adjuvant. The MatrixTM technology utilizes selected quillaja fractions, which form separate matrix structures, to develop modern,multi-purpose immune-modulating adjuvant products for a broad range of potential vaccine applications. We acquired the Matrix technologythrough our acquisition of Isconova AB in the third quarter of 2013 because we believe this saponin-based adjuvant technology is a powerfulcomplement to our recombinant vaccine programs. Our lead adjuvant for human applications, Matrix-MTM, is in clinical trials with ourpartner Genocea Biosciences, and we plan to initiate a clinical trial using Matrix-M in combination with our H7N9 vaccine candidate in thefirst half of 2014. This trial will be conducted under our contract with the Department of Health and Human Services, BiomedicalAdvanced Research and Development Authority (HHS BARDA).In 2009, we formed a joint venture with Cadila Pharmaceuticals Limited (“Cadila”) named CPL Biologicals Private Limited (“CPLB”)to develop and manufacture vaccines, biological therapeutics and diagnostics in India. CPLB is owned 20% by us and 80% by Cadila.CPLB operates a state-of-the-art manufacturing facility for the production of influenza vaccines and other vaccine candidates and is activelydeveloping a number of vaccine candidates that were genetically engineered by us.Clinical Product PipelineA current summary of our significant research and development programs and status of related products in development follows: Program Development Phase CollaboratorRespiratory Syncytial Virus (RSV) • Maternal Immunization Phase 2 PATH• Elderly Phase 1 • Pediatric Pre-clinical Influenza • Seasonal Quadrivalent Phase 2 HHS BARDA/LGLS• Pandemic (H5N1)6 Phase 1/2 HHS BARDA/LGLS• Pandemic (H7N9)6 Phase 1 HHS BARDA/LGLSCombination (Influenza/RSV) Pre-clinical CPLB Programs (India) • Seasonal Trivalent Influenza Phase 1/2 • Pandemic (H1N1) Influenza Phase 1/2 • Rabies Phase 1/2 Respiratory Syncytial Virus (RSV)RSV is a widespread disease that causes infections of the lower respiratory tract. While RSV affects persons of all ages, it acutelyimpacts infants, the elderly, young children and others with compromised immune systems. Current estimates indicate that RSV isresponsible for over 30 million new acute lower respiratory infection episodes and between 150,000 and 200,000 deaths in children underfive years old.7 In the U.S., nearly all children become infected with RSV before they are two years old; it has been associated with 20% ofhospitalizations and 15% of office visits for acute respiratory infection in young children.8 The6Although we initiated development of our pandemic influenza vaccine program under our contract with HHS BARDA against theA(H5N1) strain, because of concern over the potential mutation and spread of the A(H7N9) influenza strain in China, we independentlyinitiated a second pandemic vaccine program in the first half of 2013 against A(H7N9). In February 2014, we amended our contractwith HHS BARDA to re-focus our development of a pandemic influenza vaccine against the A(H7N9) strain with a Phase 1/2 clinicaltrial with our H7N9 candidate and Matrix-MTM adjuvant, which began in the first quarter of 2014; however, HHS BARDA has alsoindicated that the H5N1 vaccine program remains a viable potential development opportunity under the contract.7Nair, H., et al., (2010) Lancet. 375:1545 – 15558Hall, CB, et al., (2009) N Engl J Med. 360(6):588-98.41  TABLE OF CONTENTSWorld Health Organization (WHO) estimates that the global disease burden for RSV is 64 million cases. Because there is no approvedprophylactic vaccine, the unmet medical need of an RSV vaccine has the potential to protect millions of patients from this far-reachingdisease.We are developing a vaccine candidate to prevent RSV disease, and are looking at three susceptible target populations: infants who mayreceive protection through antibodies transferred from their mothers who would be immunized during the last trimester of pregnancy, theelderly and young children.Maternal Immunization Development Program — Clinical ExperienceIn April 2013, we announced top-line data from a Phase 2 dose-ranging clinical trial in women of childbearing age that were similar to,or exceeded, immune responses seen in our first Phase 1 clinical trial. This randomized, blinded, placebo-controlled Phase 2 clinical trialevaluated the safety and immunogenicity of two dose levels of our RSV vaccine candidate, with and without an aluminum phosphateadjuvant, in 330 women of childbearing age. We further reported that the vaccine candidate was well-tolerated, the two-dose alum-adjuvantedgroups showed a 13 to 16-fold rise in anti-F IgG antibodies to the F protein compared to a six to ten-fold rise in the non-alum groups, andPalivizumab-like antibody titers rose eight to nine-fold with four-fold rises in 92% of subjects in the two-dose alum-adjuvanted groups.In October 2013, we initiated and completed enrollment in a Phase 2 dose-confirmation clinical trial in 720 women of childbearing age.The data from this trial, expected in the second quarter of 2014, will supplement the data from our other clinical trials, and is expected tosupport the advancement of our maternal immunization program in pregnant women; we plan to initiate a Phase 2 clinical trial of our RSVvaccine candidate in pregnant women in the fourth quarter of 2014.Elderly Development Program — Clinical ExperienceIn July 2013, we announced top-line data from the Phase 1 clinical trial in the elderly that was initiated in October 2012. This clinicaltrial was a randomized, blinded, placebo-controlled Phase 1 clinical trial that evaluated the safety and immunogenicity in 220 enrolledelderly adults, 60 years of age and older, who received a single intramuscular injection of our RSV vaccine candidate (with and withoutalum) or placebo plus a single dose of licensed influenza vaccine or placebo at days 0 and 28. The top-line data further corroborated ourprevious clinical experiences with our RSV vaccine candidate: we reported that the vaccine candidate was well-tolerated, that the higher dosegroups had better overall immune responses than the lower dose groups and that essentially undetectable Day 0 levels of antibodies thatcompete with palivizumab increased to between 80% and 97% of active vaccine recipients by Day 28. Our expected path forward in theelderly would include a dose-confirmation clinical trial in late 2014 or early 2015.Pediatric Development Program — Pre-clinical ExperienceWhile the burden of RSV disease falls heavily on newborn infants, RSV is also a prevalent and currently unaddressed problem inpediatric patients. This third market segment for our RSV vaccine candidate remains an important opportunity. We expect to initiate clinicaltrials in pediatric subjects as “step-downs” from our past clinical trials in healthy adults. We also expect that our clinical experience inpregnant women will be equally important to understanding a vaccine for this patient population. Our preclinical development effortssupport such a clinical development plan that is expected to be launched in late 2014.PATH Vaccine Solutions (PATH) Clinical Development AgreementIn July 2012, we entered into a clinical development agreement with PATH to develop our vaccine candidate to protect against RSVthrough maternal immunization in low-resource countries (RSV Collaboration Program). We were awarded approximately $2.0 million byPATH for initial funding under the agreement to partially support our Phase 2 dose-ranging clinical trial in women of childbearing age asdescribed above. The funding under the agreement was increased by $0.4 million to support our reproductive toxicology studies, which arenecessary before we conduct clinical trials in pregnant women. In December 2013, we entered into an amendment with PATH providing anadditional $3.5 million in funding to support the Phase 2 dose-confirmation clinical trial in 720 women of childbearing age as describedabove. We retain global rights to commercialize the product and will support PATH in its goal to make an RSV maternal vaccine productaffordable and available in low-resource countries.42  TABLE OF CONTENTSTo the extent PATH elects to continue to fund 50% of our external clinical development costs for the RSV Collaboration Program, but wedo not continue development, we would then grant PATH a fully-paid license to our RSV vaccine technology for use in pregnant women insuch low-resource countries.InfluenzaSeasonal Influenza VaccineDeveloping and commercializing a Novavax seasonal influenza vaccine remains an important strategic goal and viable opportunity forus. The Advisory Committee for Immunization Practices of the Center for Disease Control and Prevention (CDC) recommends that allpersons aged six months and older should be vaccinated annually against seasonal influenza. In conjunction with these universalrecommendations, attention from the 2009 influenza H1N1 pandemic, along with reports of other cases of avian-based influenza strains,has increased public health awareness of the importance of seasonal influenza vaccination, the market for which is expected to continue togrow worldwide in both developed and developing global markets.There are currently four quadrivalent influenza vaccines licensed in the U.S., but in the coming years, additional seasonal influenzavaccines are expected to be produced and licensed within and outside of the U.S. in a quadrivalent formulation (four influenza strains: twoinfluenza A strains and two influenza B strains), as opposed to trivalent formulations (three influenza strains: two influenza A strains andone influenza B strain). With two distinct lineages of influenza B viruses circulating, governmental health authorities have advocated for theaddition of a second influenza B strain to provide additional protection. Current estimates for seasonal influenza vaccines growth in the topseven markets (U.S., Japan, France, Germany, Italy, Spain and UK), show potential growth from the current market of approximately$3.2 billion (2012/13 season) to $5.3 billion by the 2021/2022 season.9 Recombinant seasonal influenza vaccines, like the candidate we aredeveloping, have an important advantage: once licensed for commercial sale, large quantities of vaccines can be quickly and cost-effectivelymanufactured without the use of either the live influenza virus or eggs.Top-line data from our most recent Phase 2 clinical trial for our quadrivalent influenza vaccine candidate were announced in July 2012.In that clinical trial, our quadrivalent VLP vaccine candidate demonstrated immunogenicity against all four viral strains based on HAIresponses at day 21, and was also well-tolerated, as evidenced by the absence of any observed vaccine-related serious adverse events (SAEs)and an acceptable reactogenicity profile. Our vaccine candidate met the FDA accelerated approval seroprotection rates criterion for all fourviral strains. The potential to fulfill the seroconversion rates criterion was demonstrated for three of the four viral strains. The fourth strain,B/Brisbane/60/08, despite fulfilling the seroprotection criterion, failed to demonstrate a satisfactory seroconversion rate. Following our lastPhase 2 clinical trial, we focused our seasonal influenza vaccine candidate activities on locking the manufacturing process that will ensureconsistent and enhanced immune responses in all strains. We completed these activities in September 2013. We have begun manufacturing Aand B strain influenza VLPs for the next Phase 2 clinical trial with our quadrivalent vaccine candidate, which we expect to initiate in thefourth quarter of 2014.Pandemic Influenza VaccineIn the aftermath of the 2009 H1N1 influenza pandemic, recognition of the potential devastation of a human influenza pandemic remainsa key priority with both governmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1 pandemicled to the production of approximately 126 million doses of monovalent (single strain) vaccine. Public health awareness and governmentpreparedness for the next potential influenza pandemic are driving development of vaccines that can be manufactured quickly against apotentially threatening influenza strain. Until the spring of 2013, industry and health experts focused attention on developing a monovalentH5N1 influenza vaccine as a potential key defense against a future pandemic threat; however, recent attention from a significant number ofreported cases in China of an avian-based influenza strain of H7N9 has shifted to the potential development of an H7N9 influenza vaccine.In October 2012, under our collaboration with HHS BARDA, we reported positive results from two Phase 1 clinical trials of ourpandemic (H5N1) vaccine candidate in combination with two different adjuvants,9Influenza Vaccines Forecass. Datamonitor (2013)43  TABLE OF CONTENTSboth of which are designed to improve the immunogenicity of vaccines at lower doses and thus provide antigen dose-sparing. The top-line data demonstrated safety and immunogenicity of varying dose-levels of the vaccine, with and without adjuvant, and furtherdemonstrated statistically significant robust adjuvant effects on immune response.In April 2013, we initiated manufacturing of a new monovalent influenza vaccine candidate against prototype A(H7N9). This strainwas first recognized by Chinese health authorities as a potential pandemic influenza threat in late March 2013. In a three month period, wedeveloped a recombinant baculovirus expressing the published A(H7N9) viral HA and NA gene sequences, developed and purified a VLPvaccine antigen, conducted multiple animal studies and initiated a Phase 1 clinical trial in Australia independent of our HHS BARDAcontract. In November 2013, we announced the publication of the clinical results from the Phase 1 clinical trial in The New EnglandJournal of Medicine. The publication highlighted the fact that 81% of subjects treated with 5ug of adjuvanted vaccine dose achievedprotective HAI levels, and 97% of subjects showed an anti-neuraminidase antibody response. We achieved protective levels fromvaccinations within 116 days of the announcement of the H7N9 outbreak from the industry’s first clinical trial of a vaccine against anA(H7N9) influenza strain.In February 2014, we modified our contract with HHS BARDA to focus our development of a monovalent pandemic influenza vaccineagainst the A(H7N9) strain with a Phase 1/2 clinical trial with our H7N9 candidate and Matrix-M adjuvant, which began in the firstquarter of 2014 and for which top-line data is scheduled to be released in the second half of 2014; however, HHS BARDA has alsoindicated that our H5N1 vaccine program remains a viable development opportunity under our contract.Potential Accelerated Approval Pathway for InfluenzaIn the past, we have referenced attainment of accelerated approval immunogenicity endpoints for seroprotection and seroconversion as apotential pathway for licensure of our influenza vaccines. The criteria for granting such accelerated approval of a Biologics LicenseApplication (BLA, the biologic equivalent to a New Drug Application or NDA) for new seasonal and pandemic influenza vaccines waspublished by the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (FDA). Under FDA guidance,developers that can demonstrate results that meet or exceed certain specified immunogenicity endpoint criteria in their clinical trials may, atthe FDA’s discretion, be granted a license to market a product prior to submission of traditional clinical endpoint efficacy trial data. Itshould be noted that FDA licensure based on accelerated approval nevertheless requires sponsors to conduct a post-licensure efficacy studyto demonstrate the clinical benefit of the vaccine, which would thereby support traditional approval of the vaccine. Because it is not possibleto conduct a clinical endpoint efficacy study for a pandemic vaccine in advance of a declared pandemic, FDA’s pandemic guidance allowsfor submission of seasonal influenza clinical efficacy data for the purpose of confirming clinical benefit of a pandemic vaccinemanufactured by the same process. Thus, the demonstration of efficacy with a seasonal vaccine provides a key link between the seasonaland pandemic programs. Accelerated approval further necessitates a shortage of influenza vaccine relative to the total populationrecommended to receive such vaccine, a situation that persists with seasonal influenza vaccines.Although we have not ruled out this accelerated approval approach, particularly for our pandemic program or certain subjectpopulations within the seasonal influenza program, we do not expect to pursue accelerated approval of our quadrivalent seasonal influenzavaccine, largely because of the uncertainty as to whether the accelerated approval pathway will be available to us at the time of our BLAsubmissions and the unknown ability of current and new influenza strains to meet such accelerated approval criteria. We are planning,therefore, to pursue traditional licensure of our quadrivalent seasonal influenza vaccine by conducting a clinical endpoint efficacy study forthe purpose of submitting the data within the original BLA. These efficacy data will also support the requirement for clinical efficacy datafor our pandemic vaccine program. We plan to discuss with the FDA our licensure pathways (both the traditional pathway for seasonal andpossible accelerated pathways for pandemic and certain subject populations within the seasonal program) during future formal meetings.The likely impact of such an efficacy trial would be an additional year or more before the FDA grants licensure to our seasonal influenzavaccine.44  TABLE OF CONTENTSHHS BARDA Contract for Recombinant Influenza VaccinesHHS BARDA awarded us a contract in February 2011, which funds the development of both our seasonal and pandemic influenzavaccine candidates. The contract, valued at $97 million for the first three-year base-period, was extended in February 2014 by sevenmonths to September 2014; this extension is intended to allow us to continue to access the remainder of the base-period funding. In addition,the contract provides $79 million for an HHS BARDA optional two-year period. Our contract with HHS BARDA is a cost-plus-fixed-feecontract in which they reimburse us for allowable direct contract costs incurred plus allowable indirect costs and a fixed-fee earned in theongoing clinical development and product scale-up of our multivalent seasonal and monovalent pandemic influenza vaccines. HHS BARDAoriginally directed us to develop our monovalent pandemic influenza vaccine against the A(H5N1) strain. With the recent amendment, weare developing our monovalent pandemic influenza vaccine against the A(H7N9) strain; nevertheless, our H5N1 vaccine program remains aviable development opportunity under the contract. We recognized revenue of approximately $17.4 million during 2013, and have recognizedapproximately $52 million in revenue since the inception of the contract. Under certain circumstances, HHS BARDA reimbursements maybe delayed or even potentially withheld. In March 2012, we decided to conduct a Phase 2 clinical trial of our quadrivalent seasonal influenzavaccine candidate (the 205 Trial) under our existing U.S. investigational new drug application (IND) for our trivalent seasonal influenzavaccine candidate as opposed to waiting to conduct this clinical trial under a new IND for our quadrivalent vaccine candidate (QuadrivalentIND). Based on our discussions with HHS BARDA in 2012, the outside clinical trial costs for the 205 Trial may only be submitted forreimbursement to HHS BARDA and recorded as revenue by us after we submit the clinical trial data in a future Quadrivalent IND. Thesubmission of the Quadrivalent IND is expected shortly before we initiate the next Phase 2 dose-confirmatory clinical trial, which iscurrently expected in the fourth quarter of 2014. The outside clinical trial costs of the 205 Trial conducted in 2012 total $2.9 million. Thesecosts have been recorded as an expense and are included in cost of government contracts revenue.LG Life Sciences, Ltd. (LGLS) License AgreementIn February 2011, we entered into a license agreement with LGLS that allows LGLS to use our technology to develop and commerciallysell our influenza vaccines in South Korea and certain other emerging-market countries. LGLS received an exclusive license to our influenzaVLP technology in South Korea and a non-exclusive license in the other specified countries. At its own cost, LGLS is responsible forfunding both its clinical development of the influenza VLP vaccines and a manufacturing facility to produce such vaccines in South Korea.We received an upfront payment and may receive reimbursements of certain development and product costs, payments related to theachievement of certain milestones and royalty payments in the high single digits from LGLS’s future commercial sales of influenza VLPvaccines.Combination Respiratory (Influenza and RSV)Given the ongoing development of our seasonal influenza vaccine candidate and our RSV vaccine candidate, we see an importantopportunity to develop a combination respiratory vaccine. This opportunity presents itself most evidently in the elderly population, althoughwe have not ruled out developing a combination respiratory vaccine for younger persons, including children. Early pre-clinical developmentefforts have given us confidence that such a combination vaccine is viable and in animal models, provides acceptable immunogenicity. Weintend to explore this development opportunity by conducting a Phase 1 clinical trial in such a combination vaccine in late 2014 or early2015.CPLB Programs (India)InfluenzaCPLB initiated Phase 1/2 clinical trials on its seasonal trivalent VLP vaccine candidate and pandemic H5N1 influenza vaccinecandidate in 2012. The results of these trials showed safety and immunogenicity data similar to our experiences, particularly when takinginto account differences between the Indian subjects baseline titers and the baseline titers of the subjects in our trials. In August 2013, CPLBsubmitted a Phase 3 clinical trial application to the office of the drug controller general of India (DCGI) and in October 2013, initiated themanufacture of Phase 3 material in anticipation of starting this trial in 2014.45  TABLE OF CONTENTSRabiesCPLB is developing a rabies G protein vaccine candidate that we genetically engineered and has initiated a Phase 1/2 clinical trial inIndia in January 2014. Our common objective with CPLB is to develop a recombinant vaccine that can be administered both as a pre-exposure prophylaxis for residents of certain higher-risk geographies, as well as travelers to such locations, and also has potential to providepost-exposure prophylaxis with fewer doses. Pre-clinical results have demonstrated that this vaccine candidate has the potential to evokeantibody responses that are active in the neutralization of the rabies virus and could prevent the virus from entering the central nervoussystem, thus preventing death. The CPLB candidate protects mice from rabies in an assay known as the NIH potency test, which is usedas one predictor of the clinical effect of rabies vaccines.Discovery ProgramsOur vaccine platform technology provides an efficient system to rapidly develop antigens to selected targets, refine manufacturingprocesses and optimize development across multiple vaccine candidates. In addition we pay close attention to global reports of emergingdiseases for which there do not appear to be immediate cures and where a vaccine protocol could offer potential protection. In addition to ourresponse to the A(H7N9) influenza strain (see discussion above), we have been monitoring reports concerning the Middle East RespiratorySyndrome Coronavirus (MERS), a novel coronavirus first identified in September 2012 by an Egyptian virologist. MERS has become anemerging threat in 2013, with more than 50 confirmed cases of infection and 30 deaths. The MERS virus is a part of the coronavirus familythat includes the severe acute respiratory syndrome coronavirus (SARS). Because of the public health priority given to MERS, withinweeks of getting the virus’ sequence, we successfully produced a vaccine candidate designed to provide protection against MERS. Thisvaccine candidate, which was made using our recombinant nanoparticle vaccine technology, is based on the major surface spike protein,which we had earlier identified as the antigen of choice in our work with a SARS vaccine candidate. Although the development of thisvaccine candidate currently remains a pre-clinical program, we believe that our MERS vaccine candidate offers a viable option to interestedglobal public health authorities.Sales of Common StockIn October 2012, we entered into an At Market Issuance Sales Agreement (2012 Sales Agreement), under which our Board of Directors(the Board) approved the sale of up to an aggregate of $50 million in gross proceeds of our common stock. The shares of common stock arebeing offered pursuant to a shelf registration statement filed with the SEC in March 2013, which replaced the previous shelf registrationstatement filed in 2010. The Board’s standing Finance Committee (the Committee) assists with its responsibilities to monitor, provide adviceto our senior management and approve all capital raising activities. The Committee has been authorized by the Board, absent any action bythe Board to the contrary, to take any additional actions necessary to carry out the Board’s authorization of the issuance and sale of thecommon stock sold pursuant to the 2012 Sales Agreement. In doing so, the Committee is authorized to set the amount of shares to be sold,the period of time during which such sales may occur and the minimum sales price per share. During 2013, we sold 12.6 million shares atsales prices ranging from $2.06 to $3.38 per share, resulting in approximately $34.0 million in net proceeds. As of December 31, 2013, wehave approximately $15.0 million available under the 2012 Sales Agreement. The most recent sales to occur under the 2012 Sales Agreementwere on September 10, 2013.In September 2013, we completed a public offering of 31,846,950 shares of our common stock, including 4,153,950 shares ofcommon stock that were issued upon the exercise in full of the over-allotment granted to the underwriters, at a price of $3.14 per shareresulting in net proceeds of approximately $95 million.Critical Accounting Policies and Use of EstimatesThe discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generally accepted in the United States.The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect thereported amounts of assets, liabilities and equity and disclosure of contingent assets46  TABLE OF CONTENTSand liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Theseestimates, particularly estimates relating to accounting for revenue, the valuation of our investments, stock-based compensation, long-livedassets, goodwill and estimated recovery of our net deferred tax assets have a material impact on our consolidated financial statements and arediscussed in detail throughout our analysis of the results of operations discussed below.We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances, theresults of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparentfrom other sources. Actual results and outcomes could differ from these estimates and assumptions.RevenueWe perform research and development for U.S. Government agencies and other collaborators under cost reimbursable and fixed pricecontracts, including license and clinical development agreements. We recognize revenue under research contracts when a contract has beenexecuted, the contract price is fixed and determinable, delivery of services or products has occurred and collection of the contract price isreasonably assured. Payments received in advance of work performed are recorded as deferred revenue and losses on contracts, if any, arerecognized in the period in which they become known.Under cost reimbursable contracts, we are reimbursed and recognize revenue as allowable costs are incurred plus a portion of the fixed-fee earned. We consider fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred in performanceof the work as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement of theproportional performance of the work completed. Under our HHS BARDA contract, certain activities must be pre-approved by HHSBARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursable contracts are recorded ascost of government contracts revenue. Our government contracts, including the HHS BARDA contract, provide the U.S. government (oragency) the ability to terminate the contract for convenience or to terminate for default if the Company fails to meet its obligations as set forthin the statement of work. We believe that if the government were to terminate one of its contracts for convenience, including the HHSBARDA contract, the costs incurred through the effective date of such termination and any settlement costs resulting from such terminationwould be allowable costs. Payments to us under cost reimbursable contracts with agencies of the U.S. Government, including the contractwith HHS BARDA, are provisional payments subject to adjustment upon annual audit by the government. An audit by the U.S governmentof fiscal years 2011 and 2012 has been completed as of the date of this filing. Management believes that revenue for periods not yet auditedhas been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of the allowablecosts for any year has been made, revenue and billings may be adjusted accordingly.Our collaborative research and development agreements may include an upfront payment, payments for research and developmentservices, milestone payments and royalties. Agreements with multiple deliverables are evaluated to determine if the deliverables can bedivided into more than one unit of accounting. A deliverable can generally be considered a separate unit of accounting if both of the followingcriteria are met: (1) the delivered item(s) has value to the customer on a stand-alone basis; and (2) if the arrangement includes a general rightof return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in ourcontrol. Deliverables that cannot be divided into separate units are combined and treated as one unit of accounting. Consideration received isallocated among the separate units of accounting based on the relative selling price method. Deliverables under these arrangements typicallyinclude rights to intellectual property, research and development services and involvement by the parties in steering committees. Historically,deliverables under our collaborative research and development agreements have been deemed to have no stand-alone value and as a resulthave been treated as a single unit of accounting. In addition, we analyze our contracts and collaborative agreements to determine whether thepayments received should be recorded as revenue or as a reduction to research and development expenses. In reaching this determination,management considers a number of factors, including whether we are the principal under the arrangement, and whether the arrangement issignificant to, and part of, our core47  TABLE OF CONTENTSoperations. Historically, payments received under its contracts and collaborative agreements have been recognized as revenue since we act asa principal in the arrangement and the activities are core to our operations.When the performance under a fixed price contract can be reasonably estimated, revenue for fixed price contracts is recognized under theproportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared to totalestimated contract costs. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of thework. Direct costs incurred under collaborative research and development agreements are recorded as research and development expenses. Ifthe performance under a fixed price contract cannot be reasonably estimated, we recognize the revenue on a straight-line basis over thecontract term.Revenue associated with upfront payments under arrangements is recognized over the contract term or when all obligations associatedwith the upfront payment have been satisfied.Revenue from the achievement of research and development milestones, if deemed substantive, is recognized as revenue when themilestones are achieved and the milestone payments are due and collectible. If not deemed substantive, we would recognize such milestone asrevenue upon its achievement on a straight-line basis over the remaining expected term of the research and development period. Milestones areconsidered substantive if all of the following conditions are met: (1) the milestone is non-refundable; (2) there is substantive uncertainty ofachievement of the milestone at the inception of the arrangement; (3) substantive effort is involved to achieve the milestone and suchachievement relates to past performance; and (4) the amount of the milestone appears reasonable in relation to the effort expended and all ofthe deliverables and payment terms in the arrangement.InvestmentsOur investments are classified as available-for-sale securities and are carried at fair value. Unrealized gains and losses on thesesecurities, if determined to be “other-than-temporary,” are included in accumulated other comprehensive income (loss) in stockholders’equity. Investments are evaluated periodically to determine whether a decline in value is other-than-temporary. Management reviews criteria,such as the magnitude and duration of the decline, as well as the Company’s ability to hold the securities until market recovery, to predictwhether the loss in value is other-than-temporary. If a decline in value is determined to be other-than-temporary, the value of the security isreduced and the impairment is recorded in the statements of operations. For investments carried at fair value, we disclose the level within thefair value hierarchy as prescribed by Accounting Standard Codification (ASC) 820, Fair Value Measurements and Disclosures. Weevaluate the types of securities in our investment portfolio to determine the proper classification in the fair value hierarchy based on tradingactivity and market inputs. We generally obtain information from an independent third-party to help us determine the fair value of securitiesin Level 2 of the fair value hierarchy. Investment income is recorded when earned and included in interest income.Stock-Based CompensationWe account for our stock-based compensation under our equity compensation plans in accordance with ASC 718,Compensation — Stock Compensation. This standard requires us to measure the cost of employee services received in exchange for equityawards based on the grant-date fair value of the award. Employee stock-based compensation is estimated at the date of grant based on theaward’s fair value using the Black-Scholes option-pricing model and is recognized as an expense on a straight-line basis over the requisiteservice period for those awards expected to vest. The Black-Scholes option-pricing model requires the use of certain assumptions, the mostsignificant of which are our estimates of the expected volatility of the market price of our common stock and the expected term of the award.Our estimate of the expected volatility is based on historical volatility over the look-back period corresponding to the expected term. Theexpected term represents the period during which our stock-based awards are expected to be outstanding. We estimate this amount based onhistorical experience of similar awards, giving consideration to the contractual terms of the awards, vesting requirements and expectation offuture employee behavior, including post-vesting exercise and forfeiture history. We review our valuation assumptions at each grant dateand, as a result, our assumptions in future periods may change. Also, the accounting estimate of stock-based compensation expense isreasonably likely to change from period to period as further equity awards are made and adjusted for cancellations.48  TABLE OF CONTENTSImpairments of Long-Lived AssetsWe account for the impairment of long-lived assets by performing a periodic evaluation of the recoverability of the carrying value oflong-lived assets and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.Examples of events or changes in circumstances that indicate that the recoverability of the carrying value of an asset should be assessedinclude, but are not limited to, the following: a significant decrease in the market value of an asset, a significant change in the extent ormanner in which an asset is used, a significant physical change in an asset, a significant adverse change in legal factors or in the businessclimate that could affect the value of an asset, an adverse action or assessment by a regulator, an accumulation of costs significantly inexcess of the amount originally expected to acquire or construct an asset, a current period operating or cash flow loss combined with ahistory of operating or cash flow losses and/or a projection or forecast that demonstrates continuing losses associated with an asset used forthe purpose of producing revenue. We consider historical performance and anticipated future results in our evaluation of potentialimpairment. Accordingly, when indicators of impairment are present, we evaluate the carrying value of these assets in relation to theoperating performance of the business and future undiscounted cash flows expected to result from the use of these assets. Impairment lossesare recognized when the sum of expected future cash flows is less than the assets’ carrying value.Goodwill and Intangible AssetsGoodwill and finite-lived intangible assets were generated from two business acquisitions. Our goodwill is not amortized, but is subjectto impairment tests annually, or more frequently should indicators of impairment arise. Because the Company’s only business is thedevelopment of recombinant vaccines, the Company operates as a single operating segment and reporting unit. We utilize the marketapproach and, if considered necessary, the income approach to determine if we have an impairment of our goodwill. The market approachserves as the primary approach and is based on market value of invested capital. To ensure that our capital stock is the appropriatemeasurement of fair value, we have considered factors such as our trading volume, diversity of investors and analyst coverage. Theconcluded fair value of our reporting unit significantly exceeded the carrying value at December 31, 2013 and 2012. The income approach isused as a confirming look to the market approach. Goodwill impairment is deemed to exist if the carrying value of a reporting unit exceedsits estimated fair value, which we test annually at December 31.The fair value of our acquired finite-lived intangible assets, proprietary technology and agreements, were determined based on estimatesof expected future net cash flows. The present value of future net cash flows was then determined utilizing an estimate of the appropriatediscount rate, which is consistent with the uncertainties of the cash flows utilized. The fair value measurements are based on significantunobservable inputs that were developed by us using publicly available information, market participant assumptions, cost anddevelopment assumptions, expected synergies and other cost savings that a market participant would be expected to realize as a result of thecombination and certain other high-level assumptions. The proprietary technology is amortized over its estimated remaining useful life basedon our expected future net cash flows. The agreements are amortized over the estimated periods of expected future net cash flows. We believethe fair values assigned to these finite–lived intangible assets acquired are based upon reasonable estimates and assumptions given availablefacts and circumstances as of the acquisition date. Impairment losses are measured and recognized to the extent the carrying value of suchintangible assets exceeds their fair values.Given the current economic conditions and the uncertainties regarding their impact on us, there can be no assurance that the estimatesand assumptions made for purposes of our goodwill and intangible assets impairment testing will prove to be accurate predictions of thefuture, or that any change in the assumptions or the current economic conditions will not trigger more frequently than on an annual basis. Ifour assumptions are not achieved or economic conditions deteriorate further, we may be required to record goodwill and/or intangible assetimpairment charges in future periods.Income TaxesWe recognize deferred tax assets and liabilities for expected future tax consequences of temporary differences between the carryingamounts and tax basis of assets and liabilities. Income tax receivables and liabilities, and deferred tax assets and liabilities, are recognizedbased on the amounts that more likely than not would be sustained upon ultimate settlement with taxing authorities.49  TABLE OF CONTENTSDeveloping our provision for income taxes and analyzing our tax position requires significant judgment and knowledge of federal andstate income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and any valuationallowances that may be required for deferred tax assets.We assess the likelihood of realizing our deferred tax assets to determine whether an income tax valuation allowance is required. Basedon such evidence that can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred taxassets will be realized. The main factors that we consider include: cumulative losses in recent years; income/losses expected in future years;the applicable statute of limitations; and potential limitations on available net operating loss and tax credit carryforwards.Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1)the more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) thestatute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain taxposition are reversed in the period in which the more likely than not recognition threshold is no longer satisfied.A valuation allowance is established when necessary to reduce net deferred tax assets to the amount expected to be realized. We concludedthat the realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.Accordingly, our net deferred tax assets have been fully offset by a valuation allowance.Recent Accounting Guidance Not Yet AdoptedWe have considered the applicability and impact of all Financial Accounting Standards Board’s Accounting Standards Updates(ASUs). Recently issued ASUs were evaluated and determined to be not applicable in this Annual Report.Results of Operations for Fiscal Years 2013, 2012 and 2011 (amounts in tables are presented in thousands, except per shareinformation)The following is a discussion of the historical financial condition and results of operations of Novavax, Inc., which includes NovavaxAB’s operations since the acquisition date of July 31, 2013, and should be read in conjunction with the consolidated financial statementsand notes thereto set forth in this Annual Report. Additional information concerning factors that could cause actual results to differmaterially from those in our forward-looking statements is described under Part I, Item 1A, “Risk Factors” of this Annual Report.Revenue: 2013 2012 2011 Change 2012 to2013 Change 2011to 2012Revenue: Total revenue $20,915 $22,076 $14,688 $(1,161) $7,388 Revenue for 2013 was $20.9 million as compared to $22.1 million for 2012, a decrease of $1.2 million, or 5%. Revenue for 2013 and2012 is primarily comprised of services performed under the HHS BARDA contract and, to a much lesser extent, the PATH clinicaldevelopment agreement and in 2013, revenue of $0.7 million from recently acquired Novavax AB. The decrease in revenue is primarily dueto the higher level of activity in 2012 associated with our influenza clinical trials under the HHS BARDA contract as compared to 2013when no similar clinical trials were initiated. In connection with the recent amendment of the HHS BARDA contract, we recorded revenue of$2.7 million in the fourth quarter of 2013 relating to manufacturing and other activities that support the Phase 1/2 clinical trial of our H7N9candidate and Matrix-M adjuvant, which began in the first quarter of 2014.Revenue for 2012 was $22.1 million as compared to $14.7 million for 2011, an increase of $7.4 million, or 50%. Revenue for 2012and 2011 is primarily comprised of services performed under the HHS BARDA contract and, to a much lesser extent in 2012, the PATHclinical development agreement. The increase in revenue is primarily due to the pandemic (H5N1) influenza clinical trials and productdevelopment activities that occurred during 2012 under the HHS BARDA contract (see below regarding the 205 Trial).Revenue for 2012 was negatively impacted by the Company’s election to conduct the 205 Trial without immediate HHS BARDAreimbursement of its outside clinical trial cost of $2.9 million (see discussion of the50  TABLE OF CONTENTSHHS BARDA Contract for Recombinant Influenza Vaccines in Management’s Discussion and Analysis of Financial Condition and Resultsof Operations — Overview beginning on page 45). For 2014, we expect a significant increase in revenue associated with our increasedclinical trial and product development activities under the HHS BARDA contract to support the initiation of later-stage clinical trials of ourseasonal influenza and pandemic (H7N9) influenza vaccine candidates.Costs and Expenses: 2013 2012 2011 Change 2012 to2013 Change 2011to 2012Costs and Expenses: Cost of government contracts revenue $8,222 $14,692 $7,003 $(6,470) $7,689 Research and development 50,308 26,907 18,364 23,401 8,543 General and administrative 14,819 10,142 10,900 4,677 (758) Total costs and expenses $73,349 $51,741 $36,267 $21,608 $15,474 Cost of Government Contracts RevenueCost of government contracts revenue includes direct costs of salaries, laboratory supplies, consultants and subcontractors and otherdirect costs associated with our process development, manufacturing, clinical, regulatory and quality assurance activities under researchcontracts. Cost of government contracts revenue decreased to $8.2 million for 2013 from $14.7 million for 2012, a decrease of $6.5million, or 44%. The decrease in cost of government contracts revenue is primarily related to the levels of activity associated with ourinfluenza clinical trials previously mentioned, including the 205 Trial (see discussion of the 205 Trial in HHS BARDA Contract forRecombinant Influenza Vaccines above). For 2014, we expect a significant increase in cost of government contracts revenue associated withour increased clinical trial and product development activities under the HHS BARDA contract to support the initiation of later-stage clinicaltrials of our seasonal influenza and pandemic (H7N9) influenza vaccine candidates.Cost of government contracts revenue increased to $14.7 million for 2012 from $7.0 million for 2011, an increase of $7.7 million, or110%. The increase in cost of government contracts revenue is primarily due to the seasonal influenza and pandemic (H5N1) influenzaclinical trials and product development activities that occurred during 2012 under the HHS BARDA contract. Cost of government contractsrevenue for 2012 includes $2.8 million of direct clinical trial costs of our 205 Trial.Research and Development ExpensesResearch and development expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associatedwith our process development, manufacturing, clinical, regulatory and quality assurance activities for internally funded programs. Inaddition, indirect costs such as, fringe benefits and overhead expenses, are also included in research and development expenses. Researchand development expenses increased to $50.3 million for 2013 from $26.9 million for 2012, an increase of $23.4 million, or 87%.Excluding the increase in research and development expenses of approximately $3.0 million from recently acquired Novavax AB, theincrease in research and development expenses was primarily due to increased costs relating to our RSV and pandemic (H7N9) influenzaclinical trials (internally funded programs at the time) and higher employee-related costs. For 2014, we expect a significant increase inresearch and development expenses primarily due to additional RSV clinical trials and employee-related costs to support productdevelopment of RSV and other potential vaccine candidates.Research and development expenses increased to $26.9 million for 2012 from $18.4 million for 2011, an increase of $8.5 million, or47%. The increase in research and development expenses was primarily due to increased costs relating to our RSV clinical trial, higheremployee-related costs and expenses associated with our new manufacturing facility.Costs and Expenses by Functional AreaWe track our cost of government contracts revenue and research and development expenses by the type of costs incurred in identifying,developing, manufacturing and testing vaccine candidates. We evaluate and prioritize our activities according to functional area and thereforebelieve that project-by-project information51  TABLE OF CONTENTSwould not form a reasonable basis for disclosure to our investors. At December 31, 2013, we had 175 employees dedicated to our researchand development programs versus 109 employees as of December 31, 2012. Historically, we did not account for internal research anddevelopment expenses by project, since our employees work time is spread across multiple programs and our internal manufacturing clean-room facility produces multiple vaccine candidates.The following summarizes our cost of government contracts revenue and research and development expenses by functional area for theyear ended December 31 (in millions). 2013 2012Manufacturing $31.0 $19.4 Vaccine Discovery 5.6 3.5 Clinical and Regulatory 21.9 18.7 Total cost of government contracts revenue and research and development expenses $58.5 $41.6 We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertaintiesassociated with vaccine development. As we obtain data from pre-clinical studies and clinical trials, we may elect to discontinue or delayclinical trials in order to focus our resources on more promising vaccine candidates. Completion of clinical trials may take several years ormore, but the length of time can vary substantially depending upon the phase, size of clinical trial, primary and secondary endpoints andthe intended use of the vaccine candidate. The cost of clinical trials may vary significantly over the life of a project as a result of a variety offactors, including:•the number of patients who participate in the clinical trials;•the number of sites included in the clinical trials;•if clinical trial locations are domestic, international or both;•the time to enroll patients;•the duration of treatment and follow-up;•the safety and efficacy profile of the vaccine candidate; and•the cost and timing of, and the ability to secure, regulatory approvals.As a result of these uncertainties, we are unable to determine with any significant degree of certainty the duration and completion costs ofour research and development projects or when, and to what extent, we will generate future cash flows from our research projects.General and Administrative ExpensesGeneral and administrative expenses increased to $14.8 million in 2013 from $10.1 million for 2012, an increase of $4.7 million, or46%. Excluding the increase in general and administrative expenses of approximately $1.0 million from recently acquired Novavax AB, theincrease was primarily due to higher professional fees, including those associated with our acquisition of Novavax AB. For 2014, we expectgeneral and administrative expenses to increase primarily due to a full year of expenses relating to Novavax AB and pre-commercializationactivities.General and administrative expenses decreased to $10.1 million in 2012 from $10.9 million for 2011, a decrease of $0.8 million, or7%. The decrease in expenses was primarily due to lower employee-related costs, including severance expenses, and lower professional fees,partially offset by higher expenses associated with our new office facility.52  TABLE OF CONTENTSOther Income (Expense): 2013 2012 2011 Change 2012 to2013 Change 2011 to2012Other Income (Expense): Interest income $187 $165 $136 $22 $29 Interest expense (160) (32) (9) (128) (23) Other income 182 45 26 137 19 Realized gains on short-term investments — 879 — (879) 879 Change in fair value of warrant liability 267 101 2,474 166 (2,373) Total other income (expense) $476 $1,158 $2,627 $(682) $(1,469) We had total other income of $0.5 million for 2013 compared to total other income of $1.2 million for 2012, a decrease of $0.7 million.In 2012, two of our auction rate securities were redeemed at approximately par value and resulted in $0.9 million in realized gains as we hadrecorded other than temporary impairments on these securities in previous periods.We had total other income of $1.2 million for 2012 compared to total other income of $2.6 million for 2011, a decrease of $1.5 million.In 2012, two of our auction rate securities were redeemed at approximately par value and resulted in $0.9 million in realized gains as we hadrecorded other than temporary impairments on these securities in previous periods. Additionally, we were required to calculate the fair valueof our warrant liability at each reporting period. For 2012, the change in fair value of the warrant liability resulted in a $2.4 million decreasein total other income as compared to 2011. The warrants expired unexercised on July 31, 2013.Net Loss: 2013 2012 2011 Change 2012 to2013 Change 2011 to2012Net Loss: Net loss $(51,983) $(28,507) $(19,364) $(23,476) $(9,143) Net loss per share $(0.31) $(0.22) $(0.17) $(0.09) $(0.05) Weighted average shares outstanding 169,658 131,726 113,610 37,932 18,116 Net loss for 2013 was $52.0 million, or $0.31 per share, as compared to $28.5 million, or $0.22 per share, for 2012, an increased netloss of $23.5 million. The increased net loss was primarily due to higher research and development spending, including increased costsrelating to our RSV and pandemic (H7N9) influenza clinical trials and higher employee-related costs.Net loss for 2012 was $28.5 million, or $0.22 per share, as compared to $19.4 million, or $0.17 per share, for 2011, an increased netloss of $9.1 million. The increased net loss was primarily due to higher research and development spending, including increased costsrelating to our RSV clinical trials, higher employee-related costs and expenses associated with our new manufacturing facility.The increase in weighted average shares outstanding for 2013 and 2012 is primarily a result of sales of our common stock in 2013 and2012.Liquidity Matters and Capital ResourcesOur future capital requirements depend on numerous factors including, but not limited to, the commitments and progress of ourresearch and development programs, the progress of pre-clinical and clinical testing, the time and costs involved in obtaining regulatoryapprovals, the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights and manufacturingcosts. We plan to continue to have multiple vaccines and products in various stages of development, and we believe our operating expensesand capital requirements will fluctuate depending upon the timing of certain events, such as the scope, initiation, rate and progress of ourpre-clinical studies and clinical trials and other research and development activities.As of December 31, 2013, we had $133.1 million in cash and cash equivalents and investments as compared to $50.3 million as ofDecember 31, 2012. These amounts consisted of $119.5 million in cash and cash equivalents and $13.6 million in investments as ofDecember 31, 2013 as compared to $17.4 million in53  TABLE OF CONTENTScash and cash equivalents and $32.9 million in investments at December 31, 2012.54  TABLE OF CONTENTSThe following table summarizes cash flows for 2013 and 2012 (in thousands): 2013 2012 Change 2012 to2013Summary of Cash Flows: Net cash (used in) provided by: Operating activities $(45,359) $(18,229) $(27,130) Investing activities 16,392 (32,262) 48,654 Financing activities 131,035 53,786 77,249 Effect on exchange rate on cash and cash equivalents 4 — 4 Net increase in cash and cash equivalents 102,072 3,295 98,777 Cash and cash equivalents at beginning of year 17,399 14,104 3,295 Cash and cash equivalents at end of year $119,471 $17,399 $102,072 Net cash used in operating activities increased to $45.4 million for 2013 as compared to $18.2 million for 2012. The increase in cashusage was primarily due to increased costs relating to our RSV and pandemic (H7N9) influenza clinical trials and higher employee-relatedcosts.During 2013 and 2012, our investing activities consisted of purchases and maturities of investments and capital expenditures. In 2013,we primarily utilized our investments to fund operations and increase our cash balances. In the same period in 2012, we primarilypurchased investments to increase our rate of return on our investments relative to returns available to money market funds. Capitalexpenditures for 2013 and 2012 were $5.8 million and $4.3 million, respectively. The increase in capital expenditures was primarily due topurchase of laboratory equipment and tenant improvements relating to our new manufacturing facility. In 2014, we expect our level of capitalexpenditures to be consistent with our 2013 spending.Our financing activities consist primarily of sales of our common stock. In 2013, we received net proceeds of approximately $95million through our public offering at a sales price of $3.14 per share and approximately $34 million through our At Market Issuance SalesAgreements at an average sales price of $2.76 per share. In 2012, we received net proceeds of approximately $39 million from direct sales ofour common stock at an average sales price of $1.74 and approximately $15 million through our At Market Issuance Sales Agreements atan average sales price of $1.70 per share.In November 2011, we entered into lease agreements under which we lease our new manufacturing, laboratory and office space inGaithersburg, Maryland with rent payments for such space to the landlord commencing April 1, 2014. Under the terms of the arrangement,the landlord provided us with a tenant improvement allowance of $2.5 million and an additional tenant improvement allowance of $3million (collectively, the Improvement Allowance). The additional tenant improvement allowance is to be paid back to the landlord over theremaining term of the lease agreement through additional rent payments. We were funded $0.7 million in 2013, and have been funded $5.0million in total under the Improvement Allowance.In September 2012, we entered into a master security agreement, whereby we could borrow up to $2.0 million to finance the purchasesof equipment through June 2013 (Equipment Loan). We financed $1.5 million in 2013, and have financed $2.0 million in total under theEquipment Loan.We have entered into agreements with outside providers to support our clinical development. As of December 31, 2013, $6.1 millionremains unpaid on certain of these agreements in the event our outside providers complete their services in 2014. However, under the termsof the agreements, we have the option to terminate for convenience pursuant to notification, but we would be obligated to pay the provider forall costs incurred through the effective date of termination.We have licensed certain rights from Wyeth. The Wyeth license, which provides for an upfront payment (previously made), ongoingannual license fees, milestone payments and royalties on any product sales, is a non-exclusive, worldwide license to a family of patentapplications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. The licensemay be terminated by Wyeth only for cause and may be terminated by us only after we have provided ninety (90) days’ notice that we haveabsolutely and finally ceased activity, including through any affiliate or sublicense, related to the55  TABLE OF CONTENTSmanufacturing, development, marketing or sale of products covered by the license. Payments under the agreement to Wyeth from 2007through 2013 totaled $5.9 million, of which $0.2 million was paid in 2013. We do not expect to make a milestone payment to Wyeth in thenext 12 months.In connection with CPLB, we entered into a master services agreement with Cadila, which we and Cadila amended in July 2011, andsubsequently in March 2013 and March 2014, in each case to extend the term by one year for which services can be provided by Cadilaunder this agreement. Under the revised terms, if, by March 2015, the amount of services provided by Cadila under the master servicesagreement is less than $7.5 million, we will pay Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and50% of the portion of the shortfall amount that exceeds $2.0 million. The Company and Cadila also agreed to an amendment that allowsCPLB, as of the beginning of 2013, to provide services on behalf of Cadila. Through December 31, 2013, we have purchased $3.0 millionin services from Cadila pursuant to this agreement, including amounts in which CPLB provided the services on behalf of Cadila.Based on our December 31, 2013 cash and cash equivalents, investment balances, the anticipated revenue under the contract with HHSBARDA and other resources, we believe we have adequate capital to fund our operating plans into 2016. Additional capital may be requiredin the future to develop our vaccine candidates through clinical development, manufacturing and commercialization. Our ability to obtainsuch additional capital will likely be subject to various factors, including our ability to perform and thus generate revenue under the HHSBARDA contract, our overall business performance and market conditions.Any capital raised by an equity offering will likely be substantially dilutive to the existing stockholders and any licensing ordevelopment arrangement may require us to give up rights to a product or technology at less than its full potential value. We cannot provideany assurance that new financing will be available on commercially acceptable terms, if at all. If we are unable to perform under the HHSBARDA contract or obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, oreliminate one or more of our product research and development programs, and/or downsize our organization, including our general andadministrative infrastructure.Contractual ObligationsThe following table summarizes our contractual obligations as of December 31, 2013 (in thousands): Total Less than OneYear 1 – 3Years 3 – 5 Years More than 5YearsContractual Obligations: Operating leases $32,373 $4,528 $9,856 $5,330 $12,659 Capital leases 338 116 169 53 — Notes payable 1,881 877 1,004 — — Purchase obligations 4,500 2,600 1,900 — — Total contractual obligations $39,092 $8,121 $12,929 $5,383 $12,659 Our purchase obligations include our anticipated timing of future purchases for services pursuant to the master services agreement withCadila. We are required to purchase from Cadila, through March 2015, services for biologic research, pre-clinical development, clinicaldevelopment, process development, manufacturing scale-up and general manufacturing related services. As of December 31, 2013, ourremaining obligation to Cadila under the master services agreement was $4.5 million.Off-Balance Sheet ArrangementsWe are not involved in any off-balance sheet agreements that have or are reasonably likely to have a material future effect on ourfinancial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capitalresources.56  TABLE OF CONTENTSItem 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe primary objective of our investment activities is preservation of capital, with the secondary objective of maximizing income. As ofDecember 31, 2013, we had cash and cash equivalents of $119.5 million, investments of $13.6 million, all of which are short-term, andworking capital of $126.1 million.Our exposure to market risk is primarily confined to our investment portfolio. As of December 31, 2013, our investments wereclassified as available-for-sale. We do not believe that a change in the market rates of interest would have any significant impact on therealizable value of our investment portfolio. Changes in interest rates may affect the investment income we earn on our investments whenthey mature and the proceeds are reinvested into new investments and, therefore, could impact our cash flows and results of operations.Interest and dividend income is recorded when earned and included in interest income. Premiums and discounts, if any, on investmentsare amortized or accreted to maturity and included in interest income. The specific identification method is used in computing realized gainsand losses on the sale of our securities.We are headquartered in the U.S. where we conduct the vast majority of our business activities. Accordingly, even with the acquisitionof Novavax AB, we have not had any material exposure to foreign currency rate fluctuations.We do not have material debt and, as such, do not believe that we are exposed to any material interest rate risk as a result of ourborrowing activities.Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe information required by this item is set forth on pages F-1 to F-30.Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURENone.Item 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresThe term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a companythat are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities ExchangeAct of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within time periods specified in the rules and forms of theSecurities and Exchange Commission. “Disclosure controls and procedures” include, without limitation, controls and procedures designedto ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act isaccumulated and communicated to the company’s management, including its principal executive and principal financial officers, or personsperforming similar functions, as appropriate to allow timely decisions regarding required disclosure.The Company’s management, with the participation of the chief executive officer and the chief financial officer, has evaluated theeffectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this annual report (the EvaluationDate). Based on that evaluation, the Company’s chief executive officer and chief financial officer have concluded that, as of the EvaluationDate, such controls and procedures were effective.57  TABLE OF CONTENTSManagement’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control overfinancial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under thesupervision of, the Company’s principal executive officer and principal financial officer and effected by the Company’s board of directors,management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with accounting principles generally accepted in the United States (GAAP). Suchinternal control includes those policies and procedures that:•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the Company;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; and•provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of theCompany’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making thisassessment, our management used the criteria set forth in the 1992 Internal Control — Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, our management had determined that, as ofDecember 31, 2013, our internal controls over financial reporting are effective based on those criteria. This assessment excluded the internalcontrol over financial reporting of Novavax AB, which was acquired on July 31, 2013.Grant Thornton LLP has issued an attestation report on our internal control over financial reporting. This report is included in theReports of Independent Registered Public Accounting Firm in Item 15.Changes in Internal Control over Financial ReportingOur management, including our chief executive officer and chief financial officer, has evaluated any changes in our internal control overfinancial reporting that occurred during the quarterly period ended December 31, 2013, and has concluded that there was no change thatoccurred during the quarterly period ended December 31, 2013 that materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.During the third quarter of 2013, the Company acquired Novavax AB. The Company is currently in the process of integrating NovavaxAB pursuant to the Sarbanes-Oxley Act of 2002. The Company is evaluating changes to processes, information technology systems andother components of internal controls over financial reporting as part of its ongoing integration activities, and as a result, controls will bechanged as needed.Item 9B.OTHER INFORMATIONNone.58  TABLE OF CONTENTSPART IIIItem 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCECertain information regarding our executive officers is set forth at the end of Part I, Item 1 of this Form 10-K under the heading,“Executive Officers.” The other information required by this item is incorporated by reference from our definitive Proxy Statement for our2014 Annual Meeting of Stockholders scheduled to be held on June 12, 2014 (the 2014 Proxy Statement). We expect to file the 2014 ProxyStatement within 120 days after the close of the fiscal year ended December 31, 2013.Item 11.EXECUTIVE COMPENSATIONWe incorporate herein by reference the information concerning executive compensation to be contained in the 2014 Proxy Statement.Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERSWe incorporate herein by reference the information concerning security ownership of certain beneficial owners and management andrelated stockholder matters to be contained in the 2014 Proxy Statement.The following table provides our equity compensation plan information as of December 31, 2013. Under these plans, our commonstock may be issued upon the exercise of options and purchases under our Employee Stock Purchase Plan (ESPP). See also the informationregarding our stock options and ESPP in Note 14 to the financial statements included herewith.Equity Compensation Plan Information Plan Category Number of Securities to beIssued Upon Exercise ofOutstanding Options,Warrants and Rights(a) Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights(b) Number of SecuritiesRemaining Available for FutureIssuance Under EquityCompensation Plans (ExcludingSecurities Reflected in Column(a))(c)Equity compensation plans approvedby security holders(1) 11,976,250 $1.93 8,463,969 Equity compensation plans notapproved by security holders N/A N/A N/A (1)Includes our 2005 Stock Incentive Plan, 1995 Stock Option Plan and ESPP.Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCEWe incorporate herein by reference the information concerning certain related party transactions set forth in Note 18 to our financialstatements included herewith. We incorporate herein by reference the information concerning certain other relationships and relatedtransactions and director independence to be contained in the 2014 Proxy Statement.Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICESWe incorporate herein by reference the information concerning principal accountant fees and services to be contained in the 2014 ProxyStatement.59  TABLE OF CONTENTSPART IVItem 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)The following documents are filed as part of the Annual Report:(1)Index to Financial Statements Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2013 and 2012 F-4 Consolidated Statements of Operations and Statements of Comprehensive Loss for the yearsended December 31, 2013, 2012 and 2011 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013,2012 and 2011 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and2011 F-7 Notes to Consolidated Financial Statements F-8 (2)Financial Statement SchedulesSchedule II — Valuation and Qualifying AccountsAll other financial statement schedules are omitted because they are not applicable, not required under the instructions or all theinformation required is set forth in the financial statements or notes thereto.(3)ExhibitsExhibits marked with a single asterisk (*) are filed herewith.Exhibits marked with a double plus sign (††) refer to management contracts, compensatory plans or arrangements.Confidential treatment has been granted for portions of exhibits marked with a double asterisk (**).All other exhibits listed have previously been filed with the Commission and are incorporated herein by reference. 3.1 Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, filed March 21,1997), as amended by the Certificate of Amendment dated December 18, 2000 (Incorporated by reference toExhibit 3.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filedMarch 29, 2001), as further amended by the Certificate of Amendment dated July 8, 2004 (Incorporated byreference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,2004, filed August 9, 2004), as further amended by the Certificate of Amendment dated May 13, 2009(Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterended June 30, 2009, filed August 10, 2009), as further amended by the Certificate of Amendment datedJune 13, 2013 (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2013, filed August 8, 2013) 3.2 Amended and Restated By-Laws of the Company (Incorporated by reference to Exhibit 3.2 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2012) 4.1 Specimen stock certificate for shares of common stock, par value $.01 per share (Incorporated by referenceto Exhibit 4.1 to the Company’s Registration Statement on Form 10, File No. 0-26770, filed September 14,1995) 4.2 Registration Rights Agreement between Novavax, Inc. and Satellite Overseas (Holdings) Limited, datedMarch 31, 2009 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009)10.1†† Novavax, Inc. 1995 Stock Option Plan, as amended (Incorporated by reference to Appendix A of theCompany’s Definitive Proxy Statement filed March 31, 2003 in connection with the Annual Meeting held onMay 7, 2003) (File No. 000-26770)60  TABLE OF CONTENTS 10.2†† Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2to the Company’s Annual Report for the year ended December 31, 2012, filed March 12, 2013)10.3†† 2013 Employee Stock Purchase Plan (Incorporated by reference to Appendix C to the Company’s DefinitiveProxy Statement filed April 30, 2013 in connection with the Annual Meeting held on June 13, 2013)10.4†† Employment Agreement of Stanley C. Erck, dated as of February 15, 2010 (Incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 1, 2010)10.5†† Employment Agreement of Stanley C. Erck, dated as of June 22, 2011 (Incorporated by reference to Exhibit10.2 to the Company’s Quarterly Report for the quarter ended June 30, 2011, filed August 9, 2011)10.6†† Employment Agreement between Novavax, Inc. and Frederick Driscoll dated August 6, 2009 (Incorporatedby reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed August 7, 2009)10.7†† Employment Agreement of Gregory Glenn dated July 1, 2010 (Incorporated by reference to Exhibit 10.1 tothe Company’s Current Report on Form 8-K, filed July 6, 2010)10.8†† Employment Agreement of Russell Wilson dated November 7, 2011 (Incorporated by reference to Exhibit10.1 to the Company’s Current Report on Form 8-K, filed November 14, 2011)10.9†† Employment Agreement of Timothy Hahn dated June 22, 2011 (Incorporated by reference to Exhibit 10.12to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed March 14,2012)10.10†† Employment agreement between Novavax, Inc. and Barclay A. Phillips dated June 24, 2013 (Incorporatedby reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed June 28, 2013)10.11†† Novavax, Inc. Amended and Restated Change in Control Severance Benefit Plan, (Incorporated by referenceto Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 5, 2009)10.12†† Form of Indemnity Agreement, as of January 1, 2010 (Incorporated by reference to Exhibit 10.19 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2009, filed March 16, 2010)10.13 Lease Agreement, dated as of July 15, 2004, between Liberty Property Limited Partnership and theCompany (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report in Form 10-Q forthe quarter ended June 30, 2004, filed August 9, 2004)10.14 Sublease Agreement, dated April 28, 2006, by and between the Company and Sterilox Technologies, Inc.(now PuriCore, Inc.) (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2006, filed August 14, 2006)10.15 Amendment dated as of October 25, 2006 to the Sublease Agreement, dated April 28, 2006, by andbetween the Company and Sterilox Technologies, Inc. (now PuriCore, Inc.) (Incorporated by reference toExhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006,filed November 14, 2006)10.16 Second Amendment to Sublease Agreement between Novavax, Inc. and PuriCore, Inc., dated April 22,2009 (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report for the quarter endedJune 30, 2009, filed August 10, 2009)10.17 Third Amendment to Sublease Agreement between Novavax, Inc. and PuriCore, Inc., dated December 29,2010 (Incorporated by reference to Exhibit 10.24 to the Company’s Annual Report for the year endedDecember 31, 2010, filed March 28, 2011)10.18 Lease Agreement between GP Rock One, LLC and Novavax, Inc., dated as of May 7, 2007 (Incorporatedby reference to Exhibit 10.4 to the Company’s Quarterly Report for the quarter ended June 30, 2008, filedAugust 11, 2008)10.19 First Amendment to Lease Agreement between GP Rock One, LLC and Novavax, Inc., dated as of May 30,2008 (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report for the quarter endedJune 30, 2008, filed August 11, 2008)61  TABLE OF CONTENTS 10.20 Second Amendment to Lease Agreement between BMR-9920 Belward Campus Q, LLC (formerly GP RockOne, LLC) and Novavax, Inc., dated as of June 26, 2008 (Incorporated by reference to Exhibit 10.6 to theCompany’s Quarterly Report for the quarter ended June 30, 2008, filed August 11, 2008)10.21 Lease Agreement for space at 20 Firstfield between ARE-20/22/1300 Firstfield Quince Orchard, LLC andNovavax, Inc., dated as of November 18, 2011 (Incorporated by reference to Exhibit 10.23 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2011, filed March 14, 2012)10.22 Sublease Agreement for space at 20 Firstfield between Intercell USA, Inc. and Novavax, Inc., dated as ofOctober 21, 2011 and effective as of November 18, 2011 (Incorporated by reference to Exhibit 10.24 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2011, filed March 14, 2012)10.23 Lease Agreement for space at 22 Firstfield between ARE-20/22/1300 Firstfield Quince Orchard, LLC andNovavax, Inc., dated as of November 18, 2011 (Incorporated by reference to Exhibit 10.25 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2011, filed March 14, 2012)10.24** Contract, effective as of February 24, 2011, between the Company and HHS/OS/ASPR/BARDA(Incorporated by reference to Exhibit 10.1 to the Company’s Amendment No. 1 to its Quarterly Report onForm 10-Q/A for the quarter ended March 31, 2011, filed November 4, 2011)10.25*** Contract Amendment/Modification No. 5 between the Company and HHS/OS/ASPR/BARDA, datedFebruary 21, 201410.26** License Agreement, entered in February 25, 2011, effective as of December 9, 2010, between the Companyand LG Life Sciences, Ltd. (Incorporated by reference to Exhibit 10.2 to the Company’s Amendment No. 1to its Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2011, filed November 4, 2011)10.27** License Agreement, dated July 5, 2007, between the Company and Wyeth Holdings Corporation(Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterended June 30, 2007, filed August 9, 2007)10.28** Amendment No. 1 to License Agreement, effective as of March 17, 2010, between the Company and WyethHoldings Corporation (Incorporated by reference to Exhibit 10.49 to the Company’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2010, filed August 6, 2010)10.29 At Market Issuance Sales Agreement, dated March 15, 2010, by and between Novavax, Inc. andMcNicoll, Lewis and Vlak, LLC (Incorporated by reference to Exhibit 10.37 to the Company’s AnnualReport on Form 10-K for the year ended December 31, 2009, filed March 16, 2010)10.30 At Market Issuance Sales Agreement, dated October 1, 2012, by and between Novavax, Inc. and MLV &Co. LLC (Incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filedOctober 2, 2012)10.31 Stock Purchase Agreement between Novavax, Inc. and Satellite Overseas (Holdings) Limited, dated March31, 2009 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2009)10.32** Amended and Restated Joint Venture Agreement between Novavax Inc. and Cadila Pharmaceuticals Limited,dated as of June 29, 2009 (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2009, filed on August 10, 2009)10.33** Amended and Restated Master Services Agreement between Novavax, Inc. and Cadila PharmaceuticalsLimited, dated as of June 29, 2009 (Incorporated by reference to Exhibit 10.5 to the Company’s QuarterlyReport on Form 10-Q for the quarter ended June 30, 2009, filed on August 10, 2009)10.34 Amendment No. 1 to Master Services Agreement between Novavax, Inc. and Cadila PharmaceuticalsLimited dated July 27, 2011 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Reporton Form 10-Q for the quarter ended September 30, 2011, filed on November 8, 2011)62  TABLE OF CONTENTS 10.35 Amendment No. 2 to Master Services Agreement between Novavax, Inc. and Cadila PharmaceuticalsLimited dated March 7, 2013 (Incorporated by reference to Exhibit 10.32 to the Company’s Annual Reporton Form 10-K for the year ended December 31, 2012)10.36 Amendment No. 3 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Ltd.dated October 29, 2013 (Incorporated by reference to Exhibit 1.1 to the Company’s Report on Form 8-Kdated October 30, 2013)10.37* Amendment No. 4 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Ltd.dated March 5, 201410.38** Amended and Restated Supply Agreement between Novavax, Inc. and CPL Biologicals Limited, dated as ofJune 29, 2009 (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2009, filed on August 10, 2009)10.39** Amended and Restated Technical Services Agreement between Novavax, Inc. and CPL Biologicals Limited,dated as of June 29, 2009 (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2009, filed on August 10, 2009)10.40** Amended and Restated Seasonal/Other License Agreement between Novavax, Inc. and CPL BiologicalsLimited, dated as of June 29, 2009 (Incorporated by reference to Exhibit 10.8 to the Company’s QuarterlyReport on Form 10-Q for the quarter ended June 30, 2009, filed on August 10, 2009)10.41** Amended and Restated Option to Obtain License between Novavax, Inc. and CPL Biologicals Limited,dated as of June 29, 2009 (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2009, filed on August 10, 2009)10.42** H1N1 License to Agreement between Novavax, Inc. and CPL Biologicals Private Limited, dated October 6,2009 (Incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for theyear ended December 31, 2010)14 Code of Business Conduct and Ethics (Incorporated by reference to Exhibit 14 to the Company’s QuarterlyReport on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011)21* List of Subsidiaries of Novavax, Inc.23.1* Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm31.1* Certification of chief executive officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities ExchangeAct31.2* Certification of chief financial officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities ExchangeAct32.1* Certification of chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 200232.2* Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 200263  TABLE OF CONTENTSSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.NOVAVAX, INC.By:/s/ Stanley C. ErckPresident and Chief Executive Officerand DirectorDate: March 12, 2014Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons onbehalf of the Registrant and in the capacities and on the dates indicated: Name Title Date/s/ Stanley C. ErckStanleyC. Erck President and Chief Executive Officer and Director(Principal Executive Officer) March 12, 2014/s/ Barclay A. PhillipsBarclayA. Phillips Senior Vice President, Chief Financial Officer andTreasurer (Principal Financial and Principal AccountingOfficer) March 12, 2014/s/ James F. YoungJamesF. Young Chairman of the Board of Directors March 12, 2014/s/ Richard H. DouglasRichardH. Douglas Director March 12, 2014/s/ Gary C. EvansGaryC. Evans Director March 12, 2014/s/ John O. Marsh, Jr.JohnO. Marsh, Jr. Director March 12, 2014/s/ Michael A. McManusMichaelA. McManus Director March 12, 2014/s/ Rajiv ModiRajivModi Director March 12, 201464  TABLE OF CONTENTSINDEX TO FINANCIAL STATEMENTSYears ended December 31, 2013, 2012 and 2011 Contents Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2013 and 2012 F-4 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December31, 2013, 2012 and 2011 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012and 2011 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 F-7 Notes to Consolidated Financial Statements F-8 Schedule II — Valuation and Qualifying Accounts F-1  TABLE OF CONTENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and Stockholders ofNovavax, Inc. and SubsidiaryWe have audited the accompanying consolidated balance sheets of Novavax, Inc. (a Delaware corporation) and subsidiary (the“Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive loss, changes instockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits of the basic consolidatedfinancial statements included the financial statement schedule listed in the index appearing under Item 15(a)(2). These financial statementsand financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on thesefinancial statements and financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position ofNovavax, Inc. and subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of thethree years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States ofAmerica. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financialstatements taken as a whole, presents fairly, in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), theCompany’s internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 InternalControl — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and ourreport dated March 12, 2014 expressed an unqualified opinion./s/ Grant Thornton LLPMcLean, VirginiaMarch 12, 2014F-2  TABLE OF CONTENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and Stockholders ofNovavax, Inc. and SubsidiaryWe have audited the internal control over financial reporting of Novavax, Inc. (a Delaware Corporation) and subsidiary (the“Company”) as of December 31, 2013, based on criteria established in the 1992 Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible formaintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to expressan opinion on the Company’s internal control over financial reporting based on our audit. Our audit of, and opinion on, the Company’sinternal control over financial reporting does not include the internal control over financial reporting of Novavax AB, a subsidiary, whosefinancial statements reflect total assets and revenue constituting 2 and 3 percent, respectively, of the related consolidated financial statementamounts as of and for the year ended December 31, 2013. As indicated in Management’s Report, Novavax AB was acquired on July 31,2013. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control overfinancial reporting of Novavax AB.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financialreporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based onthe assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,2013, based on criteria established in the 1992 Internal Control — Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), theconsolidated financial statements of the Company as of and for the year ended December 31, 2013, and our report dated March 12, 2014expressed an unqualified opinion on those financial statements./s/ Grant Thornton LLPMcLean, VAMarch 12, 2014F-3  TABLE OF CONTENTSNOVAVAX, INC. CONSOLIDATED BALANCE SHEETS December 31, 2013 2012 (in thousands, except share andper share information)ASSETS Current assets: Cash and cash equivalents $119,471 $17,399 Short-term investments available-for-sale 13,597 26,712 Restricted cash 1,417 986 Accounts receivables 1,911 1,011 Unbilled receivables 4,988 1,570 Prepaid expenses 3,044 2,559 Other current assets 573 171 Total current assets 145,001 50,408 Investments available-for-sale — 6,233 Property and equipment, net 14,251 11,456 Intangible assets, net 16,250 — Goodwill 59,519 33,141 Restricted cash 757 756 Other non-current assets 159 351 Total assets $235,937 $102,345 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $5,985 $3,228 Accrued expenses and other current liabilities 11,223 7,275 Deferred revenue 271 258 Current portion of capital leases 108 58 Current portion of notes payable 877 157 Warrant liability — 267 Deferred rent 470 432 Total current liabilities 18,934 11,675 Deferred revenue 2,500 2,500 Non-current portion of capital leases 195 237 Non-current portion of notes payable 1,004 753 Deferred rent 8,502 6,940 Other non-current liabilities 1,568 — Total liabilities 32,703 22,105 Commitments and contingences — — Stockholders’ equity: Preferred stock, $0.01 par value, 2,000,000 shares authorized; no shares issued andoutstanding — — Common stock, $0.01 par value, 300,000,000 and 200,000,000 shares authorized atDecember 31, 2013 and 2012, respectively; and 209,110,744 shares issued and208,655,314 shares outstanding at December 31, 2013 and 148,398,747 sharesissued and 147,943,317 shares outstanding at December 31, 2012 2,091 1,484 Additional paid-in capital 612,900 438,939 Accumulated deficit (410,146) (358,163) Treasury stock, 455,430 shares, cost basis (2,450) (2,450) Accumulated other comprehensive income 839 430 Total stockholders’ equity 203,234 80,240 Total liabilities and stockholders’ equity $235,937 $102,345 The accompanying notes are an integral part of these financial statements.F-4  TABLE OF CONTENTSNOVAVAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years ended December 31, 2013 2012 2011 (in thousands, except per share information)Revenue: Government contracts $17,708 $20,671 $14,688 Research and development collaborations 3,207 1,405 — Total revenue 20,915 22,076 14,688 Costs and expenses: Cost of government contracts revenue 8,222 14,692 7,003 Research and development 50,308 26,907 18,364 General and administrative 14,819 10,142 10,900 Total costs and expenses 73,349 51,741 36,267 Loss from operations before other income (expense) (52,434) (29,665) (21,579) Other income (expense): Interest income 187 165 136 Interest expense (160) (32) (9) Other income 182 45 26 Realized gains on investments — 879 — Change in fair value of warrant liability 267 101 2,474 Loss from operations before income tax expense (51,958) (28,507) (18,952) Income tax expense 25 — 412 Net loss $(51,983) $(28,507) $(19,364) Basic and diluted net loss per share: $(0.31) $(0.22) $(0.17) Basic and diluted weighted average number of common shares outstanding 169,658 131,726 113,610 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS For the Years ended December 31, 2013 2012 2011 (in thousands)Net loss $(51,983) $(28,507) $(19,364) Other comprehensive income (loss): Net unrealized gains (losses) on investmentsavailable-for-sale 186 (402) 60 Foreign currency translation adjustment 223 — — Other comprehensive income (loss) 409 (402) 60 Comprehensive loss $(51,574) $(28,909) $(19,304) The accompanying notes are an integral part of these financial statements.F-5  TABLE OF CONTENTSNOVAVAX, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the Years ended December 31, 2013, 2012 and 2011 Common Stock AdditionalPaid-in Capital Notes ReceivableFrom FormerDirectors AccumulatedDeficit TreasuryStock AccumulatedOtherComprehensiveIncome TotalStockholders’Equity Shares Amount (in thousands, except share information)Balance at December 31, 2010 111,492,014 $1,115 $371,477 $(1,572) $(310,292) $(2,450) $772 $59,050 Non-cash compensation cost for stock options andrestricted stock — — 2,047 — — — — 2,047 Exercise of stock options 198,679 2 177 — — — — 179 Restricted stock issued as compensation 50,000 1 (1) — — — — — Cancellation of common stock issued to formerdirectors (261,667) (3) (1,519) 1,572 — — — 50 Issuance of common stock, net of issuance costsof $246 6,001,841 60 11,767 — — — — 11,827 Unrealized gain (loss) on investments — — — — — — 60 60 Net loss — — — — (19,364) — — (19,364) Balance at December 31, 2011 117,480,867 1,175 383,948 — (329,656) (2,450) 832 53,849 Non-cash compensation cost for stock options andrestricted stock — — 2,091 — — — — 2,091 Exercise of stock options 90,534 1 53 — — — — 54 Issuance of common stock, net of issuance costsof $365 30,827,346 308 52,847 — — — — 53,155 Unrealized gain (loss) on investments — — — — — — (402) (402) Net loss — — — — (28,507) — — (28,507) Balance at December 31, 2012 148,398,747 1,484 438,939 — (358,163) (2,450) 430 80,240 Non-cash compensation cost for stock options,ESPP and restricted stock — — 2,480 — — — — 2,480 Exercise of stock options 667,867 7 1,491 — — — — 1,498 Issuance of common stock, net of issuance costsof $6,067 60,044,130 600 169,990 — — — — 170,590 Unrealized gain (loss) on investments — — — — — — 186 186 Foreign currency translation adjustment — — — — — — 223 223 Net loss — — — — (51,983) — — (51,983) Balance at December 31, 2013 209,110,744 $2,091 $612,900 $— $(410,146) $(2,450) $839 $203,234 The accompanying notes are an integral part of these financial statements.F-6  TABLE OF CONTENTSNOVAVAX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years ended December 31, 2013 2012 2011 (in thousands)Operating Activities: Net loss $(51,983) $(28,507) $(19,364) Reconciliation of net loss to net cash used in operating activities: Change in fair value of warrant liability (267) (101) (2,474) Depreciation and amortization 2,591 1,666 1,613 Loss on disposal of property and equipment (32) (28) — Impairment of long-lived assets — — 360 Amortization of net premiums on investments 507 (18) 317 Deferred rent 897 660 (341) Non-cash stock-based compensation 2,480 2,091 2,047 Realized gains on investments — (879) — Other non-cash income (200) — — Changes in operating assets and liabilities: Restricted cash (431) (986) — Accounts receivables (451) 954 (1,911) Unbilled receivables (3,418) 266 (1,836) Prepaid expenses and other assets 402 40 (1,854) Accounts payable and accrued expenses 4,184 2,009 (2,686) Deferred revenue (341) 258 2,500 Lease incentives received 703 4,346 — Net cash used in operating activities (45,359) (18,229) (23,629) Investing Activities: Capital expenditures (5,785) (4,341) (610) Proceeds from disposal of property and equipment 116 324 — Net cash received from the Isconova AB acquisition 3,034 — — Purchases of investments (14,754) (48,652) (2,082) Proceeds from maturities and redemptions of investments 33,781 20,407 21,235 Net cash provided by (used in) investing activities 16,392 (32,262) 18,543 Financing Activities: Principal payments of capital leases (87) (104) — Principal payments of notes payable (473) (60) (80) Proceeds from notes payable 1,450 650 — Proceeds from settlement of notes receivable from former directors — — 50 Restricted cash (1) (756) — Net proceeds from sales of common stock, net of offering costs of$6.1 million, $0.4 million and $0.2 million, respectively 128,648 54,002 10,980 Proceeds from the exercise of stock options 1,498 54 179 Net cash provided by financing activities 131,035 53,786 11,129 Effect of exchange rate on cash and cash equivalents 4 — — Net increase in cash and cash equivalents 102,072 3,295 6,043 Cash and cash equivalents at beginning of year 17,399 14,104 8,061 Cash and cash equivalents at end of year $119,471 $17,399 $14,104 Supplemental disclosure of non-cash activities: Common stock issued in connection with the Isconova AB acquisition $41,942 $— $— Capital expenditures included in accounts payable and accrued expenses $379 $1,321 $14 Deposit applied towards the purchase of equipment $— $500 $— Equipment acquired under a capital lease $— $399 $— Settlement of notes receivable from former directors $— $— $1,522 Sale of common stock under the 2010 Sales Agreement not settled at year-end $— $— $847 Supplemental disclosure of cash flow information: Cash interest payments $177 $20 $— The accompanying notes are an integral part of these financial statements.F-7  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 1 — OrganizationNovavax, Inc. (“Novavax,” and together with its subsidiary, “Novavax AB,” the “Company”) is a clinical-stage biopharmaceuticalcompany focused on the discovery, development and commercialization of recombinant protein nanoparticle vaccines and adjuvants. TheCompany’s product pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical development for seasonalinfluenza, pandemic influenza and respiratory syncytial virus (“RSV”).Note 2 — OperationsThe Company’s vaccine candidates, some of which may include an adjuvant, currently under development will require significantadditional research and development efforts that include extensive pre-clinical and clinical testing, and regulatory approval prior tocommercial use.As a clinical-stage biopharmaceutical company, the Company has primarily funded its operations from proceeds through the sale of itscommon stock in equity offerings and revenue under its contract with the Department of Health and Human Services, Biomedical AdvancedResearch and Development Authority (“HHS BARDA”). Management regularly reviews the Company’s cash and cash equivalents andinvestments against its operating budget to ensure the Company will have sufficient working capital, and will continue to draw upon suchavailable sources of capital to meet its product development activities.Note 3 — Summary of Significant Accounting PoliciesBasis of PresentationAs discussed in more detail in Note 4, Novavax acquired Swedish-based Isconova AB (“Isconova”) on July 31, 2013. Isconova wassubsequently renamed Novavax AB. The accompanying consolidated financial statements include the accounts of Novavax and itssubsidiary, Novavax AB, since the acquisition date. All intercompany accounts and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the UnitedStates, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses duringthe reporting period. Actual results could differ materially from those estimates.Cash and Cash EquivalentsCash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase. Cashand cash equivalents consist of the following at December 31 (in thousands): 2013 2012Cash $4,251 $3,758 Money market funds 100,049 11,970 Corporate debt securities 15,171 — Municipal bonds — 1,671 Cash and cash equivalents $119,471 $17,399 Cash equivalents are recorded at cost plus accrued interest, which approximate fair value due to their short-term nature. At December 31,2013, the Company had $1.2 million of cash held in bank accounts in Sweden.F-8  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 3 — Summary of Significant Accounting Policies – (continued)InvestmentsInvestments consist of commercial paper, corporate notes and an investment in one auction rate security that was sold in January 2014.Classification of marketable securities between current and non-current is dependent upon the original maturity date at purchase. Thosesecurities purchased with original maturities greater than 90 days, but less than one year are classified as current and those with greater thanone year as non-current.Interest and dividend income is recorded when earned and included in interest income. Premiums and discounts, if any, on investmentsare amortized or accreted to maturity and included in interest income. The specific identification method is used in computing realized gainsand losses on the sale of the Company’s securities.The Company has classified its investments as available-for-sale since the Company may need to liquidate these securities within thenext year. The available-for-sale securities are carried at fair value and unrealized gains and losses on these securities, if determined to betemporary, are included in accumulated other comprehensive income (loss) in stockholders’ equity. Investments are evaluated periodically todetermine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanentdecline in value. Rather, it means that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack ofevidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria, such as themagnitude and duration of the decline, as well as the Company’s ability to hold the securities until market recovery, to predict whether theloss in value is other-than-temporary. If a decline in value is determined to be other-than-temporary, the value of the security is reduced andthe impairment is recorded in the statements of operations.Concentration of Credit RiskFinancial instruments, which possibly expose the Company to concentration of credit risk, consist primarily of cash and cashequivalents and investments. The Company’s investment policy limits investments to certain types of instruments, including auction ratesecurities, high-grade corporate debt securities and money market instruments, places restrictions on maturities and concentrations incertain industries and requires the Company to maintain a certain level of liquidity. At times, the Company maintains cash balances infinancial institutions, which may exceed federally insured limits. The Company has not experienced any losses relating to such accountsand believes it is not exposed to a significant credit risk on its cash and cash equivalents. As discussed below, the fair value of investmentsis based upon Level 1 and 2 data.Fair Value MeasurementsThe Company applies Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, forfinancial and non-financial assets and liabilities.ASC 820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present valueof future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statementutilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Thefollowing is a brief description of those three levels:•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These includequoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities inmarkets that are not active.•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.F-9  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 3 — Summary of Significant Accounting Policies – (continued)Restricted CashThe Company’s restricted cash includes payments received under the PATH agreement (See Note 8) until such time as the Companyhas paid for the outside services performed under the agreement. In addition, the Company’s non-current restricted cash with respect to itsmanufacturing, laboratory and office space in Gaithersburg, Maryland functions as collateral for letters of credit, which serve as securitydeposits for the duration of the leases.Accounts ReceivableAccounts receivable arise primarily from the Company’s contract with HHS BARDA and are reported at amounts expected to becollected in future periods. No allowance for doubtful accounts is deemed necessary.Unbilled ReceivablesUnbilled receivables relate to service contracts and agreements for which work has been performed, though invoicing has not yetoccurred. Substantially all of the unbilled receivables are expected to be billed and collected within the next 12 months.Property and EquipmentProperty and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets,generally three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of theestimated useful lives of the improvements or the remaining term of the lease. Repairs and maintenance costs are expensed as incurred.Goodwill and Intangible AssetsGoodwill and intangible assets are subject to impairment tests annually or more frequently should indicators of impairment arise.The Company has determined since its only business is the development of recombinant vaccines that it operates as a single operatingsegment and reporting unit. The Company utilizes primarily the market approach and, if considered necessary, the income approach todetermine if it has an impairment of its goodwill. The market approach is based on market value of invested capital. To ensure that theCompany’s capital stock is the appropriate measurement of fair value, the Company considers factors such as its trading volume, diversityof investors and analyst coverage. When utilized, the income approach is used as a confirming look to the market approach. Goodwillimpairment is deemed to exist if the carrying value of the reporting unit exceeds its estimated fair value.At December 31, 2013 and 2012, the Company used the market approach to determine if the Company had an impairment of itsgoodwill. Step one of the impairment test states that if the fair value of a reporting unit exceeds its carrying amount, goodwill is considerednot to be impaired. The fair value of the Company’s reporting unit was substantially higher than the carrying value, resulting in noimpairment to goodwill at December 31, 2013 and 2012.Purchased finite-lived intangibles were recorded at fair value and are amortized on a straight-line basis over their estimated useful livesranging from seven to 20 years, with the amortization recorded in research and development expenses. The Company reviews its finite-livedintangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset maynot be recoverable. Impairment losses are measured and recognized to the extent the carrying value of such intangible assets exceed their fairvalues.F-10  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 3 — Summary of Significant Accounting Policies – (continued)Equity Method InvestmentThe Company has an equity investment in CPL Biologicals Private Limited. The Company accounts for this investment using theequity method (see Note 8). Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequentadditional investments and the Company’s proportionate share of earnings or losses and distributions up to the amount initially invested oradvanced.Long-Lived AssetsThe Company accounts for the impairment of its long-lived assets in accordance with ASC 360, Property, Plant and Equipment. Thisfinancial standard requires a periodic evaluation of the recoverability of the carrying value of long-lived assets whenever events or changes incircumstances indicate that the carrying value of the asset may not be recoverable. The factors considered in performing this assessmentinclude current operating results, anticipated future results, the manner in which the property is used and the effects of obsolescence,demand, competition and other economic factors. Accordingly, when indicators of impairment are present, the Company evaluates thecarrying value of these assets in relation to the operating performance of the business and future undiscounted cash flows expected to resultfrom the use of these assets. Impairment losses are recognized when the sum of expected future cash flows is less than the assets’ carryingvalue, and losses are determined based upon the excess carrying value of the assets over its fair value. Based on this assessment, noimpairment to long-lived assets resulted for fiscal years ended December 31, 2013 and 2012.Revenue RecognitionThe Company performs research and development for U.S. Government agencies and other collaborators under cost reimbursable andfixed price contracts, including license and clinical development agreements. The Company recognizes revenue under research contractswhen a contract has been executed, the contract price is fixed and determinable, delivery of services or products has occurred and collectionof the contract price is reasonably assured. Payments received in advance of work performed are recorded as deferred revenue and losses oncontracts, if any, are recognized in the period in which they become known.Under cost reimbursable contracts, the Company is reimbursed and recognizes revenue as allowable costs are incurred plus a portion ofthe fixed-fee earned. The Company considers fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costsincurred in performance of the work as compared to total estimated contract costs, with such costs incurred representing a reasonablemeasurement of the proportional performance of the work completed. Under its HHS BARDA contract, certain activities must be pre-approved by HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursablecontracts are recorded as cost of government contracts revenue. The Company’s government contracts, including its HHS BARDA contract,provide the U.S. government (or agency) the ability to terminate the contract for convenience or to terminate for default if the Company failsto meet its obligations as set forth in the statement of work. The Company believes that if the government were to terminate one of itscontracts for convenience, including the HHS BARDA contract, the costs incurred through the effective date of such termination and anysettlement costs resulting from such termination would be allowable costs. Payments to the Company under cost reimbursable contractswith agencies of the U.S. Government, including its contract with HHS BARDA, are provisional payments subject to adjustment uponannual audit by the government. An audit by the U.S government of fiscal years 2011 and 2012 has been completed as of the date of thisfiling. Management believes that revenue for periods not yet audited has been recorded in amounts that are expected to be realized upon finalaudit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billings may be adjustedaccordingly.F-11  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 3 — Summary of Significant Accounting Policies – (continued)The Company’s collaborative research and development agreements may include an upfront payment, payments for research anddevelopment services, milestone payments and royalties. Agreements with multiple deliverables are evaluated to determine if the deliverablescan be divided into more than one unit of accounting. A deliverable can generally be considered a separate unit of accounting if both of thefollowing criteria are met: (1) the delivered item(s) has value to the customer on a stand-alone basis; and (2) if the arrangement includes ageneral right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable andsubstantially in control of the Company. Deliverables that cannot be divided into separate units are combined and treated as one unit ofaccounting. Consideration received is allocated among the separate units of accounting based on the relative selling price method.Deliverables under these arrangements typically include rights to intellectual property, research and development services and involvementby the parties in steering committees. Historically, deliverables under the Company’s collaborative research and development agreementshave been deemed to have no stand-alone value and as a result have been treated as a single unit of accounting. In addition, the Companyanalyzes its contracts and collaborative agreements to determine whether the payments received should be recorded as revenue or as areduction to research and development expenses. In reaching this determination, management considers a number of factors, includingwhether the Company is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s coreoperations. Historically, payments received under its contracts and collaborative agreements have been recognized as revenue since theCompany acts as a principal in the arrangement and the activities are core to its operations.When the performance under a fixed price contract can be reasonably estimated, revenue for fixed price contracts is recognized under theproportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared to totalestimated contract costs. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of thework. Direct costs incurred under collaborative research and development agreements are recorded as research and development expenses. Ifthe performance under a fixed price contract cannot be reasonably estimated, the Company recognizes the revenue on a straight-line basisover the contract term.Revenue associated with upfront payments under arrangements is recognized over the contract term or when all obligations associatedwith the upfront payment have been satisfied.Revenue from the achievement of research and development milestones, if deemed substantive, is recognized as revenue when themilestones are achieved and the milestone payments are due and collectible. If not deemed substantive, the Company would recognize suchmilestone as revenue upon its achievement on a straight-line basis over the remaining expected term of the research and development period.Milestones are considered substantive if all of the following conditions are met: (1) the milestone is non-refundable; (2) there is substantiveuncertainty of achievement of the milestone at the inception of the arrangement; (3) substantive effort is involved to achieve the milestone andsuch achievement relates to past performance; and (4) the amount of the milestone appears reasonable in relation to the effort expended andall of the deliverables and payment terms in the arrangement.Cost of Government Contracts RevenueCost of government contracts revenue includes direct costs of salaries, laboratory supplies, consultants and subcontractors and otherdirect costs associated with the Company’s process development, manufacturing, clinical, regulatory and quality assurance activities underresearch contracts. Cost of government contracts revenue does not include allocations of indirect costs.Stock-Based CompensationThe Company accounts for stock-based compensation related to grants of stock options, restricted stock awards and purchases underits Employee Stock Purchase Plan (the “ESPP”) at fair value. The Company recognizes compensation expense related to such awards on astraight-line basis over the requisite serviceF-12  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 3 — Summary of Significant Accounting Policies – (continued)period (generally the vesting period) of the equity awards that are expected to vest, which typically occurs ratably over periods ranging fromsix months to four years. See Note 14 for a further discussion on stock-based compensation.The expected term of stock options granted was based on the Company’s historical option exercise experience and post-vesting forfeitureexperience using the historical expected term from the vesting date, whereas the expected term for purchases under the ESPP was based onthe purchase periods included in the offering. The expected volatility was determined using historical volatilities based on stock prices over alook-back period corresponding to the expected term. The risk-free interest rate was determined using the yield available for zero-couponU.S. government issues with a remaining term equal to the expected term. The forfeiture rate was determined using historical pre-vestingforfeiture rates since the inception of the plans. The Company has never paid a dividend, and as such, the dividend yield is zero.Restricted stock awards have been recorded as compensation expense over the expected vesting period based on the fair value at theaward date and the number of shares ultimately expected to vest using the straight-line method of amortization.The Company accounts for share-based awards issued to non-employees by determining the fair value of equity awards given asconsideration for services rendered to be recognized as compensation expense over the shorter of the vesting or service periods. In cases wherean equity award is not fully vested, such equity award is revalued on each subsequent reporting date until vesting is complete with acumulative catch-up adjustment recognized for any changes in its estimated fair value.Research and Development ExpensesResearch and development expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associatedwith the Company’s process development, manufacturing, clinical, regulatory and quality assurance activities for internally fundedprograms. In addition, indirect costs such as, fringe benefits and overhead expenses, are also included in research and developmentexpenses. These expenses exclude costs associated with cost of government contracts revenue.Warrant AccountingThe Company accounted for its warrant to purchase 0.5 shares of Common Stock (the “Warrants”) at a price of $2.68 per unit inaccordance with applicable accounting guidance in ASC 815, Derivatives and Hedging, as derivative liabilities, and the Warrants hadbeen classified as such in the Company’s balance sheet. In compliance with applicable accounting standards, registered warrants thatrequire the issuance of registered shares upon exercise and do not sufficiently preclude an implied right to cash settlement are accounted foras derivative liabilities. The Company used the Monte Carlo Simulation model to determine the fair value of the Warrants, which requiredthe input of subjective assumptions, including the expected stock price volatility and probability of a fundamental transaction (a strategicmerger or sale). All Warrants subject to this accounting treatment expired unexercised on July 31, 2013.Income TaxesThe Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under the liability method, deferredincome taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered orsettled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes theenactment date. A valuation allowance is established when necessary to reduce net deferred tax assets to the amount expected to be realized.F-13  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 3 — Summary of Significant Accounting Policies – (continued)Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1)the more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) thestatute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain taxposition are reversed in the period in which the more likely than not recognition threshold is no longer satisfied.Interest and penalties related to income tax matters are recorded as income tax expense. At December 31, 2013 and 2012, the Companyhad no accruals for interest or penalties related to income tax matters.Net Loss per ShareNet loss per share is computed using the weighted average number of shares of common stock outstanding. All outstanding warrants,stock options and unvested restricted stock awards totaling 11,992,918, 12,732,383 and 11,284,054 shares at December 31, 2013, 2012and 2011, respectively, are excluded from the computation for 2013, 2012 and 2011, as their effect is anti-dilutive.Foreign CurrencyThe accompanying consolidated financial statements are presented in U.S. dollars. The translation of assets and liabilities of NovavaxAB to U.S. dollars is made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated athistorical rates. The translation of statement of operations data is made at the average exchange rate in effect for the period. The translation ofoperating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data istranslated at the exchange rate in effect at the date of the underlying transaction. Translation gains and losses are recognized as a componentof accumulated other comprehensive income in the accompanying consolidated balance sheets. The foreign currency translation adjustmentbalance included in accumulated other comprehensive income was $0.2 million at December 31, 2013.Segment InformationThe Company manages its business as one operating segment: developing recombinant vaccines. The Company does not operateseparate lines of business with respect to its vaccine candidates. Accordingly, the Company does not have separately reportable segments asdefined by ASC 280, Segment Reporting.ReclassificationsOverhead expenses relating to supply chain management of $0.8 million for 2012 and $0.5 million for 2011 have been reclassified fromgeneral and administrative expenses to research and development expenses. This reclassification has been made to conform to current yearpresentation.Note 4 — Acquisition of Isconova ABOn July 31, 2013 (the “acquisition date”), Novavax announced the acquisition of Isconova (the “Acquisition”) pursuant to its publictender offer to acquire all outstanding shares and warrants of the company directly from such holders and its private offer for all ofIsconova’s outstanding stock options. As a result of the public offer for shares and warrants and private offer for stock options, Novavaxissued approximately 15.6 million shares of its Common Stock valued at $41.9 million and paid cash of approximately $22,000 to acquire99.5% of the outstanding shares and all of the outstanding stock options and warrants of Isconova. On September 6, 2013, Isconova ABwas renamed “Novavax AB” and was delisted as a publicly traded company in Sweden. This transaction has been accounted for using thepurchase method of accounting, with Novavax as the acquirer. The results of Novavax AB’s operations have been included in theconsolidated financial statements since the acquisition date. From the acquisition date to December 31, 2013, the minority interest inNovavax AB’s net loss and stockholders’ equity is immaterial.Novavax AB has focused its recent efforts on the development of saponin-based, immune-modulating adjuvants that work withdifferent types of vaccine antigens to enhance the immunogenic effect of the antigen.F-14  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 4 — Acquisition of Isconova AB – (continued)Novavax AB has collaborated with several vaccine companies to allow its lead adjuvant, Matrix-MTM, to be tested with a number ofantigens in development; the Company has recently begun development work pairing the Novavax AB adjuvant with its own pandemicinfluenza VLP antigen. The Company believes that the Novavax AB adjuvants can be powerful complements to certain of its recombinantvaccine programs and will enable future discovery efforts and potentially reduce vaccine development timeframes and costs both byeliminating the need to in-license third-party adjuvants and related costs and by harmonizing operating and regulatory processes. The totalpurchase price is summarized as follows (in thousands): Value of shares of Novavax Common Stock issued $41,942 Cash paid to Isconova warrant holders 22 Total purchase price $41,964 The value of Novavax Common Stock issued was based on the closing price of Novavax’ Common Stock on the acquisition date.The table below summarizes the preliminary allocation of the purchase price based upon the fair values of assets acquired and liabilitiesassumed at the acquisition date. The preliminary allocation is based upon information that was available to management at the time theconsolidated financial statements were prepared and is subject to change within the purchase price allocation period (generally one year fromthe acquisition date). The primary area of the purchase price allocation that is not yet finalized relates to unsettled contingencies. (in thousands)Cash and cash equivalents $3,056 Accounts receivable 447 Prepaid expenses and other assets 1,092 Property and equipment 165 Intangible assets 16,620 Goodwill 26,236 Accounts payable and other current liabilities (3,806) Capital leases (94) Notes payable (193) Other non-current liabilities (1,559) Total purchase price $41,964 A substantial portion of the assets acquired consisted of intangible assets relating to its proprietary adjuvant technology andcollaboration agreements. The fair values of the proprietary technology and agreements were determined based on estimates of expected futurenet cash flows. The present value of future net cash flows was then determined utilizing an estimate of the appropriate discount rate, whichis consistent with the uncertainties of the cash flows utilized. The fair value measurements are based on significant unobservable inputs thatwere developed by the Company using publicly available information, market participant assumptions, cost and developmentassumptions, expected synergies and other cost savings that a market participant would be expected to realize as a result of the combinationand certain other high-level assumptions. The proprietary technology is amortized over its estimated remaining useful life based on theCompany’s expected future net cash flows. The agreements are amortized over the estimated periods of expected future net cash flows.Amortization expense for intangible assets will be recorded on a straight-line basis over the expected useful lives of the assets, ranging fromseven to 20 years. The weighted average useful lives for the proprietary adjuvant technology and collaboration agreements were 20 years and12 years, respectively. The weighted average useful life for all acquired intangible assets was 17 years. The carryingF-15  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 4 — Acquisition of Isconova AB – (continued)value and expected lives of the intangible assets may change based upon finalizing the purchase price allocation, and such intangibles willbe periodically reviewed to determine if the facts and circumstances suggest that a potential impairment may have occurred. Impairmentcharges, if any, will be recorded in the period in which the impairment occurs.The Company recorded $26.2 million in goodwill related to the Acquisition representing the purchase price paid in the Acquisition thatwas in excess of the fair value of the assets acquired and liabilities assumed, which is included in the Company’s vaccine operationsbecause of the anticipated complementary use of Novavax AB adjuvants with its vaccine candidates discussed above. The goodwillgenerated from the Acquisition is not expected to be deductible for U.S. federal income tax purposes.The Company incurred approximately $1.3 million in transaction costs related to the Acquisition, which is included in general andadministrative expenses in the Company’s consolidated statement of operations.From the acquisition date to December 31, 2013, the Company has recognized revenue of $0.7 million and recorded a net loss of $3.5million from the operations of Novavax AB.The following unaudited consolidated pro forma financial information is presented as if the Acquisition occurred on January 1, 2012.The unaudited pro forma financial information has been presented for comparative purposes only and is not necessarily indicative of resultsof operations that would have been achieved had the Company completed the Acquisition during the periods presented, or the futureconsolidated results of operations of the combined company. The unaudited pro forma financial information combines the historical resultsof operations of Novavax and Isconova for the periods presented below and reflects the application of the following adjustments:•Elimination of the historical intangible assets and amortization expense unrelated to the Acquisition;•Amortization expense related to the fair value of intangible assets acquired; and•The exclusion of acquisition-related costs incurred for the Acquisition. Year Ended December 31, 2013 2012 (in thousands)Revenue $22,785 $24,810 Net loss $(55,594) $(35,042) Basic and diluted net loss per share $(0.31) $(0.24) Novavax AB entered into a license and collaboration agreement and received $1.6 million in research funding that is required to berepaid by December 31, 2015 and is included in other non-current liabilities in the accompanying consolidated balance sheet.F-16  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 5 — Fair Value MeasurementsThe following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on arecurring basis: Fair Value at December 31, 2013 Fair Value at December 31, 2012 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3Assets Auction rate security $1,790 $— $— $— $1,584 $— Money market funds 100,049 — — 11,970 — — Municipal bonds — — — — 1,671 — Corporate debt securities — 26,978 — — 31,361 — Total cash equivalents and investments $101,839 $26,978 $— $11,970 $34,616 $— Liabilities Warrant liabilities $— $— $— $— $— $267 During the years ended December 31, 2013 and 2012, the Company did not have any transfers between levels other than the Company’sauction rate security that was assessed as level 1 at December 31, 2013 due to its sale in January 2014.The following table provides a reconciliation of the beginning and ending balance of Level 3 assets and liabilities measured on arecurring basis for the year ended December 31, 2013 (in thousands): Fair ValueMeasurements of WarrantsUsing SignificantUnobservable Inputs(Level 3)Balance at December 31, 2012 $267 Change in fair value of Warrant liability (267) Balance at December 31, 2013 $— The amounts in the Company’s consolidated balance sheet for accounts receivables, unbilled receivables and accounts payableapproximate fair value due to their short-term nature. Based on borrowing rates available to the Company, the fair value of capital leases andnotes payable approximates their carrying value.Note 6 — InvestmentsInvestments classified as available-for-sale as of December 31, 2013 and 2012 were comprised of (in thousands): December 31, 2013 December 31, 2012 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair ValueAuction rate security $1,175 $615 $— $1,790 $1,175 $409 $— $1,584 Corporate debt securities 11,806 1 — 11,807 31,340 21 — 31,361 Total $12,981 $616 $— $13,597 $32,515 $430 $— $32,945 In 2012, the Company received proceeds of $3.1 million from the redemption of two auction rate securities resulting in realized gains of$0.9 million. Approximately $0.3 million of these realized gains resulted from reclassification adjustments out of accumulated othercomprehensive income during the period. In January 2014, the Company sold its remaining auction rate security and received proceeds of$1.8 million resulting in a realized gain of $0.6 million, all of which resulted from reclassification adjustments out of accumulated othercomprehensive income in January 2014.F-17  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 7 — Goodwill and Intangible AssetsGoodwillThe changes in the carrying amounts of goodwill for the year ended December 31, 2013 and 2012 were as following (in thousands): Year Ended December 31, 2013 2012Beginning balance $33,141 $33,141 Goodwill resulting from acquisition of Isconova 26,236 — Currency translation 142 — Ending balance $59,519 $33,141 Intangible AssetsPurchased intangible assets consisted of the following as of December 31, 2013 (in thousands): Gross CarryingAmount AccumulatedAmortization IntangibleAssets, NetFinite-lived intangible assets: Proprietary adjuvant technology $11,514 $(240) $11,274 Collaboration agreements 5,199 (223) 4,976 Total identifiable intangible assets $16,713 $(463) $16,250 Amortization expense from the acquisition date to December 31, 2013 was $0.5 million. Estimated amortization expense for existingintangible assets for each of the five succeeding years ending December 31, will be as follows (in thousands): Year Amount2014 1,111 2015 1,111 2016 1,111 2017 1,111 2018 1,111 Note 8 — U.S. Government Agreement, Joint Venture and CollaborationsHHS BARDA Contract for Recombinant Influenza VaccinesIn February 2011, the Company was awarded a contract from HHS BARDA valued at $97 million for the first three-year base-period,which was extended in February 2014 by seven months to September 2014, with an HHS BARDA option for an additional two-year periodvalued at $79 million. This extension is intended to allow the Company to continue to access the remainder of the base-period funding. TheHHS BARDA contract award provides significant funding for the Company’s ongoing clinical development and product scale-up of bothits seasonal and pandemic influenza vaccine candidates. This is a cost-plus-fixed-fee contract in which HHS BARDA will reimburse theCompany for allowable direct contract costs incurred plus allowable indirect costs and a fixed-fee earned in the further development of itsmultivalent seasonal and monovalent pandemic influenza vaccines. HHS BARDA originally directed the Company to develop itsmonovalent pandemic influenza vaccines against the A(H5N1) strain. In February 2014, the Company amended its contract with HHSBARDA to focus its development of a monovalent pandemic influenza vaccine against the A(H7N9) strain with a Phase 1/2 clinical trialwith its H7N9 candidate and Matrix-M adjuvant, which began in the first quarter of 2014; however, HHS BARDA has also indicated thattheF-18  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 8 — U.S. Government Agreement, Joint Venture and Collaborations – (continued)Company’s H5N1 vaccine program remains a viable potential development opportunity under the contract. Billings under the contract arebased on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrativeexpenses not exceeding certain limits. These indirect rates are subject to audit by HHS BARDA on an annual basis. An audit by the U.Sgovernment of fiscal years 2011 and 2012 has been completed as of the date of this filing. Management believes that revenue for periods notyet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of theallowable costs for any year has been made, revenue and billings may be adjusted accordingly. The Company recognized revenue ofapproximately $17.4 million in 2013, and has recognized approximately $52 million in revenue since the inception of the contract. Inconnection with the recent amendment of the HHS BARDA contract, the Company recorded revenue of $2.7 million in the fourth quarter of2013 relating to manufacturing and other activities that support the Phase 1/2 clinical trial of its H7N9 candidate and Matrix-M adjuvant,which began in the first quarter of 2014.Under certain circumstances, HHS BARDA reimbursements may be delayed or even potentially withheld. In March 2012, theCompany decided to conduct a Phase 2 clinical trial of its quadrivalent seasonal influenza vaccine candidate (“205 Trial”) under its existingU.S. investigational new drug application (“IND”) for its trivalent seasonal influenza vaccine candidate as opposed to waiting to conductthis clinical trial under a new IND for its quadrivalent vaccine candidate (“Quadrivalent IND”). Based on the Company’s discussions withHHS BARDA in 2012, the outside clinical trial costs for the 205 Trial may only be submitted for reimbursement to HHS BARDA andrecorded as revenue by the Company after it submits the clinical trial data in a future Quadrivalent IND. The submission of theQuadrivalent IND is expected shortly before the Company initiates the next Phase 2 dose-confirmatory clinical trial, which is currentlyexpected in the fourth quarter of 2014. The outside clinical trial costs of the 205 Trial conducted in 2012 total $2.9 million. These costshave been recorded as an expense and are included in cost of government contracts revenue.Joint VentureIn March 2009, the Company entered into a Joint Venture Agreement with Cadila pursuant to which the Company and Cadila formedCPL Biologicals Private Limited (“CPLB”), of which 20% is owned by the Company and 80% is owned by Cadila. CPLB was establishedto develop and manufacture certain of the Company’s vaccine candidates and certain of Cadila’s biogeneric and diagnostic products for theterritory of India. CPLB has the right to negotiate definitive license arrangements in India to certain of the Company’s future vaccineproducts and certain of Cadila’s future biogeneric and diagnostic products, prior to the Company or Cadila licensing such rights to third-parties. The Company has the right to negotiate definitive license arrangements for vaccines developed by CPLB using Company technologyfor commercialization in every country except India and for vaccines developed by CPLB using Cadila technology for commercialization incertain other countries, including the U.S. Cadila has supported and continues to support the CPLB’s operations. CPLB is activelydeveloping a number of vaccine candidates that were genetically engineered by Novavax. CPLB’s seasonal and pandemic influenza vaccinecandidates began Phase 1/2 clinical trials in 2012. Also in 2012, the CPLB formed a new collaboration to develop a novel malaria vaccine inIndia with the International Centre for Genetic Engineering and Biotechnology. CPLB’s rabies G protein vaccine candidate entered a Phase1/2 clinical trial in India in January 2014. In connection with the Joint Venture Agreement, in March 2009, the Company also entered intoadditional agreements, including a master services agreement with Cadila. Because CPLB’s activities and operations are controlled andfunded by Cadila, the Company accounts for its investment using the equity method. Since the carrying value of the Company’s initialinvestment was nominal and there is no guarantee or commitment to provide future funding, the Company has not recorded nor expects torecord losses related to this investment in the future.F-19  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 8 — U.S. Government Agreement, Joint Venture and Collaborations – (continued)LG Life Sciences, Ltd. (“LGLS”) License AgreementIn February 2011, the Company entered into a license agreement with LGLS that allows LGLS to use the Company’s technology todevelop and commercially sell influenza vaccines exclusively in South Korea and non-exclusively in certain other specified countries. At itsown cost, LGLS is responsible for funding both its clinical development of the influenza VLP vaccines and a manufacturing facility toproduce such vaccine in South Korea. Under the license agreement, the Company is obligated to provide LGLS with information andmaterials related to the manufacture of the licensed products, provide on-going project management and regulatory support and conductclinical trials of its influenza vaccines in order to obtain FDA approval in the U.S. The term of the license agreement is expected to terminatein 2027. Payments to the Company under the license agreement include an upfront payment of $2.5 million, reimbursements of certaindevelopment and product costs, payments related to the achievement of certain milestones and royalty payments in the high single digitsfrom LGLS’s future commercial sales of influenza VLP vaccines. The upfront payment has been deferred and will be recognized when thepreviously mentioned obligations in the agreement are satisfied, which may not occur until the end of the term of the agreement. Paymentsfor milestones under the agreement will be recognized on a straight-line basis over the remaining term of the research and development periodupon achievement of such milestone. Any royalties under the agreement will be recognized as earned.PATH Vaccine Solutions (“PATH”) Clinical Development AgreementIn July 2012, the Company entered into a clinical development agreement with PATH to develop its vaccine candidate to protect againstRSV through maternal immunization in low-resource countries (the “RSV Collaboration Program”). The Company was awardedapproximately $2.0 million by PATH for initial funding under the agreement to partially support its initial Phase 2 dose-ranging clinical trialin women of childbearing age, which was launched in October 2012. The funding under the agreement was increased by $0.4 million tosupport the Company’s reproductive toxicology studies, which are necessary before it conducts clinical trials in pregnant women. InDecember 2013, the Company entered into an amendment with PATH providing an additional $3.5 million in funding to support the Phase2 dose-confirmation clinical trial in 720 women of childbearing age. The term of the agreement has been extended to October 2014. TheCompany retains global rights to commercialize the product and will support PATH in its goal to make the vaccine affordable and availablein low-resource countries. To the extent PATH elects to continue to fund 50% of the Company’s external clinical development costs for theRSV Collaboration Program, but the Company does not continue development, the Company would then grant PATH a fully-paid license toits RSV vaccine technology for use in pregnant women in such low-resource countries. The Company recognized revenue of approximately$2.5 million in 2013, and has recognized approximately $3.8 million in revenue since the inception of the agreement. Revenue under thisarrangement is being recognized under the proportional performance method and earned in proportion to the contract costs incurred inperformance of the work as compared to total estimated contract costs. Costs incurred under this agreement represent a reasonablemeasurement of proportional performance of the services being performed.Note 9 — Other Financial InformationPrepaid ExpensesPrepaid expenses consist of the following at December 31 (in thousands): 2013 2012Laboratory supplies $1,754 $1,592 Other prepaid expenses 1,290 967 Prepaid expenses $3,044 $2,559 F-20  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 9 — Other Financial Information – (continued)Property and Equipment, netProperty and equipment is comprised of the following at December 31 (in thousands): 2013 2012Machinery and equipment $11,951 $8,035 Leasehold improvements 8,192 4,629 Computer software and hardware 1,200 698 Construction in progress 2,328 5,248 23,671 18,610 Less – accumulated depreciation and amortization (9,420) (7,154) Property and equipment, net $14,251 $11,456 Depreciation and amortization expense was approximately $2.6 million, $1.7 million and $1.6 million for the years ended December31, 2013, 2012 and 2011, respectively. Machinery and equipment included $0.6 million of equipment acquired under capital leases (seeNote 10) with accumulated depreciation of $0.2 million as of December 31, 2013.Accrued Expenses and Other Current LiabilitiesAccrued expenses and other current liabilities consist of the following at December 31 (in thousands): 2013 2012Employee benefits and compensation $5,323 $3,242 Research and development accruals 4,469 3,396 Other accrued expenses 1,356 592 Accrued interest 75 45 Accrued expenses and other current liabilities $11,223 $7,275 Note 10 — Capital LeasesThe Company leases equipment under capital leases with effective interest rates ranging from 3.25% to 6.5%. Capital leases arerecorded at the present value of the future minimum lease payments. Future minimum capital lease payments under capital lease agreementsat December 31, 2013 are as follows (in thousands): Year Amount2014 $122 2015 85 2016 84 2017 47 338 Less – amounts representing interest (35) Present value of net minimum lease payments 303 Less – current portion of capital leases (108) Non-current portion of capital leases $195 F-21  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 11 — Long-Term DebtNotes PayableNotes payable consist of the following at December 31 (in thousands): 2013 2012Equipment loan; 12.1%, principal payments due in monthly installments totaling$48 through December 2016 $1,538 $510 Loan agreements; bear interest at 3% per annum; repayment isconditional 200 400 Bank loans; 7.50% – 8.50%, principal payments due quarterly totaling$26 through May 2015 143 — Total 1,881 910 Less – current portion (877) (157) Long-term portion $1,004 $753 Equipment LoanIn September 2012, the Company entered into a master security agreement with General Electric Capital Corporation (“GE”), wherebythe Company could borrow up to $2.0 million to finance the purchases of equipment (each, an “Equipment Loan”). Each Equipment Loanbears interest at the three-year U.S. Government treasury rate plus 11.68%, provided that the rate shall not be less than 12.1%, and is to berepaid over forty-two (42) months. GE will maintain a security interest in all equipment financed under the Equipment Loan. During 2013and 2012, the Company financed $1.5 million and $0.5 million, respectively, under the Equipment Loans at interest rates of 12.1% withmonthly principal payments totaling $47,618. Interest accrues on the outstanding balance until paid in full. As of December 31, 2013, theCompany has financed $2.0 million in total under the Equipment Loans.Loan AgreementsIn May 2008, the Company entered into loan agreements with the State of Maryland. The repayment of loan amounts and accruedinterest, if any, is conditioned upon the Company meeting the capital investment and employment requirements during the term of the loanthrough 2014, as amended. In 2013, the loan agreement with Montgomery County was forgiven as the Company met the capital investmentand employment requirements.Bank LoansAs a result of the acquisition of Isconova, the Company has assumed bank loans with AMLI. The bank loans bear interest ratesranging from 7.50% to 8.50% and are to be repaid through 2015.Aggregate future minimum principal payments on long-term debt at December 31, 2013 are as follows (in thousands): Year Amount2014 $877 2015 608 2016 396 Total minimum principal payments $1,881 F-22  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 12 — Warrant LiabilityIn July 2008, the Company completed a registered direct offering of 6,686,650 units, raising approximately $17.5 million in netproceeds. Each unit consisted of one share of Common Stock and one Warrant. The Warrants represented the right to acquire an aggregate of3,343,325 shares of common stock at an exercise price of $3.62 per share and were exercisable through July 31, 2013.During 2013, 2012 and 2011, the Company recorded as other income in its statements of operations a change in fair value of warrantliability of $0.3 million, $0.1 million and $2.5 million, respectively. All Warrants expired unexercised on July 31, 2013.Note 13 — Stockholders’ EquityOn June 13, 2013, the Company’s stockholders of record as of April 16, 2013 approved the amendment of the Company’s certificate ofincorporation to increase the total number of shares of Common Stock that the Company is authorized to issue from 200,000,000 shares to300,000,000 shares.In October 2012, the Company entered into an At Market Issuance Sales Agreement (“2012 Sales Agreement”), under which the Boardof Directors of the Company (the “Board”) approved the Company’s sale of up to an aggregate of $50 million in gross proceeds of itscommon stock. The shares of common stock are being offered pursuant to a shelf registration statement filed with the SEC in March 2013,which replaced the previous shelf registration statement filed in 2010. The Board’s standing Finance Committee (the “Committee”) assistswith its responsibilities to monitor, provide advice to senior management of the Company and approve all capital raising activities. TheCommittee has been authorized by the Board, absent any action by the Board to the contrary, to take any additional actions necessary tocarry out the Board’s authorization of the issuance and sale of the common stock sold pursuant to the 2012 Sales Agreement. In doing so,the Committee is authorized to set the amount of shares to be sold, the period of time during which such sales may occur and the minimumsales price per share. During 2013, the Company sold 12.6 million shares at sales prices ranging from $2.06 to $3.38 per share, resultingin $34.0 million in net proceeds. As of December 31, 2013, the Company has approximately $15.0 million available under the 2012 SalesAgreement. The most recent sales to occur under the 2012 Sales Agreement were on September 10, 2013.In September 2013, the Company completed a public offering of 31,846,950 shares of its common stock, including 4,153,950 sharesof common stock that were issued upon the exercise in full of the over-allotment granted to the underwriters, at a price of $3.14 per shareresulting in net proceeds of approximately $95 million.Note 14 — Stock-Based CompensationStock OptionsThe Company has granted equity awards under several plans, two of which remain active. Under the 2005 Stock Incentive Plan (the“2005 Plan”), equity awards may be granted to officers, directors, employees, consultants and advisors to the Company and any present orfuture subsidiary. The 2005 Plan, approved in May 2005 and amended most recently in June 2013 by the Company’s stockholders,currently authorizes the grant of equity awards for up to 22,312,192 shares of common stock, which included, at the time of approval ofthe 2005 Plan, a maximum 5,746,468 shares of common stock subject to stock options outstanding under the Company’s 1995 StockOption Plan (the “1995 Plan”) that may revert to and become issuable under the 2005 Plan if such options expire or otherwise terminateunexercised. The Company received approval at its 2013 annual meeting of stockholders to increase the number of shares of common stockavailable for issuance under the 2005 Plan by 4,000,000 shares. The term of the Company’s 1995 Plan has expired and no new awards willbe made under the 1995 Plan; however, outstanding stock options remain in existence in accordance with their terms.F-23  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 14 — Stock-Based Compensation – (continued)Under the 2005 Plan and the 1995 Plan, incentive stock options, having a maximum term of 10 years, can be or were granted at noless than 100% of the fair value of the Company’s common stock at the time of grant and are generally exercisable over periods ranging fromsix months to four years. There is no minimum exercise price for non-statutory stock options.Stock Options AwardsThe following is a summary of option activity under the 2005 Plan and the 1995 Plan for the year ended December 31, 2013: 2005 Stock Incentive Plan 1995 Stock Option Plan StockOptions Weighted-AverageExercise Price Stock Options Weighted-AverageExercise PriceOutstanding at January 1, 2013 9,143,825 $1.87 211,900 $4.94 Granted 4,370,000 $2.07 — $— Exercised (667,867) $2.24 — $— Forfeited (790,833) $1.71 — $— Expired (267,025) $4.73 (23,750) $4.05 Outstanding at December 31, 2013 11,788,100 $1.87 188,150 $5.04 Vested and expected to vest at December31, 2013 10,667,911 $1.85 188,150 $5.04 Shares exercisable at December 31, 2013 4,418,123 $1.95 188,150 $5.04 Shares available for grant at December31, 2013 6,463,969 The fair value of the stock options granted for the years ended December 31, 2013, 2012 and 2011, was estimated at the date of grantusing the Black-Scholes option-pricing model with the following assumptions: 2013 2012 2011Weighted average fair value ofoptions granted $1.07 $0.71 $1.14 Risk-free interest rate 0.54% - 1.36% 0.55% - 1.54% 0.48% - 1.91% Dividend yield 0% 0% 0% Volatility 51.55% - 73.72% 75.5% - 78.6% 73.3% - 81.0% Expected term (in years) 3.91 - 7.05 3.34 - 7.09 3.26 - 4.47 Expected forfeiture rate 0% - 23.15% 0% - 23.15% 0% - 23.15% The aggregate intrinsic value and weighted average remaining contractual term of stock options exercisable as of December 31, 2013 wasapproximately $14.2 million and 6.0 years, respectively. The aggregate intrinsic value and weighted average remaining contractual term ofoptions vested and expected to vest as of December 31, 2013 was $35.0 million and 7.4 years, respectively. The aggregate intrinsic valuerepresents the total intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2013 and the exerciseprice, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holdersexercised their options on December 31, 2013. This amount is subject to change based on changes to the fair market value of the Company’scommon stock. The aggregate intrinsic value of options exercised for 2013, 2012 and 2011 was $0.6 million, $0.1 million and $0.3million, respectively.F-24  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 14 — Stock-Based Compensation – (continued)Employee Stock Purchase PlanThe Company received approval at its 2013 annual meeting of stockholders to adopt an ESPP, which currently authorizes an aggregateof 2,000,000 shares of Common Stock to be purchased. The ESPP allows employees to purchase shares of Common Stock of the Companyat each purchase date through payroll deductions of up to a maximum of 15% of their compensation, at 85% of the lesser of the marketprice of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the optionperiod when the employee was first eligible to participate). The first option period under the ESPP commenced on August 1, 2013.The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at thedate of grant using the Black-Scholes option-pricing model with the following assumptions: Year EndedDecember 31,2013Weighted-average fair value of ESPP shares granted $0.78 Risk-free interest rate 0.04% Dividend yield 0% Volatility 50.80% Expected term (in years) 0.5 Expected forfeiture rate 5% Restricted Stock AwardsUnder the 2005 Plan, the Company granted restricted stock awards subject to certain performance-based or time-based vestingconditions which, if not met, would result in forfeiture of the shares and reversal of any previously recognized related stock-basedcompensation expense.The following is a summary of restricted stock awards activity for the year ended December 31, 2013: Number ofShares Per ShareWeighted-AverageGrant-Date FairValueOutstanding at January 1, 2013 33,334 $1.39 Restricted stock granted — $— Restricted stock vested (16,667) $1.39 Restricted stock forfeited — $— Outstanding at December 31, 2013 16,667 $1.39 The Company recorded stock-based compensation expense for awards issued under the above mentioned plans in the statements ofoperations as follows (in thousands): Years ended December 31, 2013 2012 2011Research and development $1,262 $873 $610 General and administrative 1,218 1,218 1,437 Total stock-based compensation expenses $2,480 $2,091 $2,047 F-25  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 14 — Stock-Based Compensation – (continued)As of December 31, 2013, there was approximately $4.6 million of total unrecognized compensation expense (net of estimatedforfeitures) related to unvested options and restricted stock awards. This unrecognized compensation expense is expected to be recognizedover a weighted average period of 1.3 years.Note 15 — Employee BenefitsThe Company maintains a defined contribution 401(k) retirement plan, pursuant to which employees who have completed 90 days ofservice may elect to contribute up to 100% of their compensation on a tax deferred basis up to the maximum amount permitted by the InternalRevenue Code of 1986, as amended.During 2012, the Company increased its match from 25% to 50% of the first 6% of the participants’ deferral. Contributions to the401(k) plan vest equally over a three-year period. The Company has expensed, net of forfeitures, approximately $0.4 million, $0.1 millionand $0.1 million in 2013, 2012 and 2011, respectively.The Company’s foreign subsidiary has a pension plan under local tax and labor laws and is obligated to make contributions to thisplan. Contributions and other expenses related to this plan were approximately $0.2 million in 2013.Note 16 — Income TaxesThe Company recorded a current income tax expense for foreign taxes of $0.4 million in 2011. The components of the income taxprovision are as follows (in thousands): 2013 2012 2011Current U.S. $— $— $— Current foreign 25 — 412 Deferred — — — Net provision $25 $— $412 Deferred tax assets (liabilities) consist of the following at December 31 (in thousands): 2013 2012Net operating losses U.S. $123,907 $122,731 Net operating losses foreign 6,405 — Research tax credits 9,175 5,693 Other 6,844 7,326 Total deferred tax assets 146,331 135,750 Intangibles (3,573) — Other (227) (335) Total deferred tax liabilities (3,800) (335) Net deferred tax assets 142,531 135,415 Less valuation allowance (142,531) (135,415) Deferred tax assets, net $— $— F-26  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 16 — Income Taxes – (continued)The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate are as follows: 2013 2012 2011Statutory federal tax rate (34)% (34)% (34)% State income taxes, net of federal benefit (3)% (8)% (9)% Research and development and other tax credits (7)% 0% (5)% Expiration of net operating losses 0% 6% 10% Other 3% 3% (3)% Change in valuation allowance 41% 33% 43% 0% 0% 2% Realization of net deferred tax assets is dependent on the Company’s ability to generate future taxable income, which is uncertain.Accordingly, a full valuation allowance was recorded against these assets as of December 31, 2013 and 2012 as management believes it ismore likely than not that the assets will not be realizable.During 2011, the Company incurred a $0.4 million foreign withholding tax related to a payment received in accordance with a licenseagreement. This withholding tax gives rise to an increase to the U.S. net operating loss for which a full valuation allowance has beenrecorded.As of December 31, 2013, the Company had tax return reported federal net operating losses and tax credits available as follows (inthousands): AmountFederal net operating losses expiring through the year 2033 $335,892 Research tax credits expiring through the year 2033 9,081 Alternative-minimum tax credit (no expiration) 94 Foreign net operating losses (no expiration) 29,115 Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to prior ownership change ofthe Company. The Company has analyzed the impact of these changes and determined that such annual limitation will not ultimatelyimpact its ability to utilize the net operating losses and business tax credits before they expire.Beginning in 2006, the windfall equity-based compensation deductions are tracked, but will not be recorded to the balance sheet untilmanagement determines more likely than not that such amounts will be utilized. As of December 31, 2013 and 2012, the Company had$2.4 million of windfall stock compensation deductions. If and when realized, the tax benefit associated with these deductions will becredited to additional paid-in capital. These excess benefit deductions are included in the total federal net operating losses disclosed above.F-27  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 16 — Income Taxes – (continued)Tabular Reconciliation of Unrecognized Tax Benefits (in thousands): AmountUnrecognized tax benefits as of January 1, 2012 $4,875 Gross increases – tax positions in prior period — Gross decreases – tax positions in prior period (74) Gross increases – current-period tax positions — Increases (decreases) from settlements — Unrecognized tax benefits as of December 31, 2012 $4,801 Gross increases – tax positions in prior period — Gross decreases – tax positions in prior period — Gross increases – current-period tax positions — Increases (decreases) from settlements — Unrecognized tax benefits as of December 31, 2013 $4,801 To the extent these unrecognized tax benefits are ultimately recognized, it would affect the annual effective income tax rate unlessotherwise offset by a corresponding change in the valuation allowance.The Company files income tax returns in the U.S. federal jurisdiction and in various states. The Company had tax net operating lossesand credit carryforwards that are subject to examination for a number of years beyond the year in which they are generated for tax purposes.Since a portion of these carryforwards may be utilized in the future, many of these attribute carryforwards remain subject to examination.The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31,2013 and 2012, the Company had no accruals for interest or penalties related to income tax matters.Note 17 — Commitments and ContingenciesOperating LeasesThe Company conducts its operations from leased facilities, under operating leases with terms expiring in 2017 for its Rockville,Maryland facility, 2023 for its Gaithersburg, Maryland facilities and 2017 for its Uppsala, Sweden facility. The leases contain provisionsfor future rent increases and periods in which rent payments are reduced (abated). Also, the leases obligate the Company to also paybuilding operating costs. Under the terms of one lease agreement, the landlord provided the Company with a tenant improvement allowanceof $2.5 million and an additional tenant improvement allowance of $3 million, such additional tenant improvement allowance is to be paidback to the landlord during the remainder of the term of such lease agreement through additional rent payments (collectively, the“Improvement Allowance”). The Company has been funded $0.7 million in 2013, and has been funded $5.0 million in total under theImprovement Allowance. The Company records a deferred rent liability to account for the funding under the Improvement Allowance and torecord rent expense on a straight-line basis for these operating leases. The Company also leased space in Malvern, Pennsylvania, its formercorporate headquarters, under an operating lease with a term expiring in 2014. The Company has subleased this facility under an amendedsublease agreement expiring in 2014.F-28  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 17 — Commitments and Contingencies – (continued)Future minimum rental commitments under non-cancelable leases as of December 31, 2013 are as follows (in thousands): Year OperatingLeases Sublease Net OperatingLeases2014 $4,528 $(201) $4,327 2015 4,912 — 4,912 2016 4,944 — 4,944 2017 2,901 — 2,901 2018 2,429 — 2,429 Thereafter 12,659 — 12,659 Total minimum lease payments $32,373 $(201) $32,172 Total rent expenses approximated $3.4 million, $3.2 million and $1.6 million for the years ended December 31, 2013, 2012 and 2011,respectively.Purchase ObligationsIn March 2009, the Company and Cadila entered into a master services agreement pursuant to which the Company may requestservices from Cadila in the areas of biologics research, pre-clinical development, clinical development, process development, manufacturingscale-up and general manufacturing related services in India. In July 2011, and subsequently in March 2013 and March 2014, in each casethe Company and Cadila amended the master services agreement to extend the term by one year for which services can be provided byCadila under this agreement. Under the revised terms, if, by March 31, 2015, the amount of services provided by Cadila is less than $7.5million, the Company will pay Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion ofthe shortfall amount that exceeds $2.0 million. When calculating the shortfall, the amount of services provided by Cadila includes amountsthat have been paid under all project plans, the amounts that will be paid under ongoing executed project plans and amounts for services thathad been offered to Cadila, that Cadila was capable of performing, but exercised its right not to accept such project. The term of the masterservices agreement is six years, but may be terminated by either party if there is a material breach that is not cured within 30 days of noticeor, at any time after three years, provided that 90 days prior notice is given to the other party. Through December 31, 2013, the Companyhas purchased $3.0 million in services from Cadila pursuant to this agreement, which includes $1.2 million of services provided, since thebeginning of 2013, by CPLB to the Company on behalf of Cadila pursuant to an October 2013 amendment authorizing such CPLBservices. As of December 31, 2013, the Company’s remaining obligation to Cadila under the master services agreement is $4.5 million.ContingenciesLicense Agreement with Wyeth Holdings CorporationThe Company entered into a license agreement in 2007 with Wyeth Holdings Corporation, a subsidiary of Pfizer Inc. (“Wyeth”). Thelicense is a non-exclusive, worldwide license to a family of patent applications covering VLP technology for use in human vaccines incertain fields, with expected patent expiration in early 2022. The agreement provides for an upfront payment, annual license fees, milestonepayments and royalties on any product sales. If each milestone is achieved for any particular vaccine candidate, the Company would likelybe obligated to pay an aggregate of $14 million to Wyeth for each product developed and commercialized under the agreement. Annual licensefees under the agreement total $0.2 million per annum. The royalty to be paid by the Company under the agreement, if a product isapproved by the FDA for commercialization, will be based on single digit percentage of net sales. Payments under the agreement to Wyeth asof December 31, 2013 aggregated $5.9 million, of which the Company paid the annual license fees during the three years ended December31, 2013. The agreement will remain effective as long as at least oneF-29  TABLE OF CONTENTSNOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2013, 2012 and 2011Note 17 — Commitments and Contingencies – (continued)claim of the licensed patent rights cover the manufacture, sale or use of any product unless terminated sooner at the Company’s option or byWyeth for an uncured breach by the Company.LitigationThere are currently no asserted claims against the Company. Management has determined that a material loss resulting from eitherasserted claims or unasserted claims (situations where claims may be reasonably anticipated even if not yet asserted) is not reasonablypossible.Employment AgreementsThe Company has entered into employment agreements with certain of its executive officers and key employees. The employmentagreements have one year terms that automatically renew annually and provide for base salaries and other incentives. The agreementsinclude a provision whereby if the Company terminates the employment of such an employee other than for cause, including pursuant to achange of control under its severance plan, or the employee leaves the Company for good reason, such employee shall be entitled to receivepayment of existing salary and benefits for a period that ranges from 12 to 24 months.Note 18 — Related Party TransactionsDr. Rajiv Modi, a director of Novavax, is also the managing director of Cadila. The Company and Cadila have formed a joint venturecalled CPL Biologicals Private Limited, of which the Company owns 20% and Cadila owns 80%. The Company and Cadila also haveentered into a master services agreement, pursuant to which Cadila may perform certain research, development and manufacturing servicesfor the Company up to $7.5 million. A subsidiary of Cadila owns 12.5 million shares of the Company’s outstanding common stock. Sinceentering into the master services agreement and through December 31, 2013, the Company has incurred $3.0 million under the agreement.The amount due for services performed under the master services agreement at December 31, 2013 and 2012 was $0.4 million and $0.1million, respectively.Note 19 — Quarterly Financial Information (Unaudited)The Company’s unaudited quarterly information for the years ended December 31, 2013 and 2012 is as follows: Quarter Ended March 31 June 30 September 30 December 31 (in thousands, except per share data)2013: Revenue $3,833 $3,531 $4,802 $8,748 Net loss $(9,996) $(12,633) $(15,300) $(14,054) Net loss per share $(0.07) $(0.08) $(0.09) $(0.07) Quarter Ended March 31 June 30 September 30 December 31 (in thousands, except per share data)2012: Revenue $4,642 $7,103 $5,765 $4,567 Net loss $(7,336) $(5,920) $(7,217) $(8,035) Net loss per share $(0.06) $(0.05) $(0.05) $(0.06) The net loss per share was calculated for each three-month period on a stand-alone basis. As a result, the sum of the net loss per sharefor the four quarters may not equal the net loss per share for the respective twelve-month period.F-30  TABLE OF CONTENTSNOVAVAX, INC. SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTSDecember 31, 2013, 2012 and 2011(in thousands) Balance atBeginning of Year Additions Deductions Balance atEnd of YearNet Deferred Tax Asset Valuation Allowance: 2013 $135,415 $7,116 $— $142,531 2012 126,020 9,395 — 135,415 2011 108,004 18,016 — 126,020  THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [**] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1.CONTRACT ID CODE PAGE 1 OF PAGES 3 2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable) Five (5) See Block 16C 6. ISSUED BY CODE 7. ADMINISTERED BY (If other than Item 6) CODE HHS/OS/ASPR/AMCG 330 Independence Avenue, SW Room G640 Washington, DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) 9A. AMENDMENT OF SOLICITATI0N NO. Novavax, Inc 9920 Belward Campus Drive Rockville, MD 20850 9B. DATED (SEE ITEM 11) 10A.MODIFICATION OF CONTRACT/ORDER NO. HHS0100201100012C 10B. DATED (SEE ITEM 13) CODE FACILITY CODE 02/24/2011 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended, is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing items B and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BERECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment your desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (if required) N/A 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVENUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: Mutual Agreement of the Parties D. OTHER (Specify type of modification and authority) E. IMPORTANT: Contractor is not, [X] is required to sign this document and return 2 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) PURPOSE: 1) Revise ARTICLE B.2. to extend the base period of performance, and reallocation of CLINS, and 2) Revise ARTICLE G.3. KeyPersonnel. The above numbered contract is hereby changed as reflected in the attached pages. Total contract amount remains unchanged ($97,260,881). Contract expiration date is changed from February 23, 2014 to (September 23, 2014). Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) John A. Herrmenn III, VP General Counsel Dorothy McMillan 15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED (Signature of person authorized to sign) (Signature of Contracting Officer) NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83) Previous edition unusable Prescribed by GSA FAR (48 CFR) 53.243 21-Feb-2014 2/21/2014  THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [**] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 2 BEGINNING WITH THE EFFECTIVE DATE OF THIS MODIFICATION, THE CONTRACTOR AND THE GOVERNMENT MUTUALLY AGREE AS FOLLOWS: SECTION B – SUPPLIES OR SERVICES AND PRICES/COSTS ARTICLE B.2. CONTRACT LINE ITEM NUMBERS (CLINs), - paragraph (b), the CLINs for the Base Period are revised to support CLIN 0008 shortfall, and the transition of CLIN 0005B Scope from H5N1 to H7N9 as follows: (b) Consideration and Payment (CPFF) The base period is extended for a period of seven (7) months from February 24, 2014 to September 23, 2014 at no additional cost to the Government. BASEPERIOD is changed from (36 Months to 43 Months) all as follows: CLIN SUPPLIES / SERVICES OTY/UNIT EST. COST FIXED FEE TOTAL EST. CPFF 0001 Product Development Plan (Milestone 1) 1 Job [**] [**] [**] 0002 Clinical Development and Regulatory Plan (Milestone 2) 1 Job [**] [**] [**] 0003 Manufacturing Facility Plan (Milestone 3) 1 Job [**] [**] [**] 0004 Feasibility Plan (Milestone 4) 1 Job [**] [**] [**] 0005A Contractor Defined Milestones - Recombinant Seasonal Influenza Vaccine Milestones (Milestone 5A) 1 Job [**] [**] [**] 0005B Contractor Defined Milestones — Recombinant Pandemic Influenza Vaccine Milestones (Milestone 5B) 1 Job [**] [**] [**] 0006 Draft Security Plan [**] [**] [**] [**] 0007 Final Security Plan - [**] [**] [**] [**] 0008 Technical Progress Reports (Including EVM) andExecutive Summary 43 reports of each [**] [**] [**] 0009 Draft Final Report [**] [**] [**] [**] 0010 Final Report 1 Report [**] [**] [**] Contract No. HHSO100201100012C (Mod. #5)  THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [**] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 3 SECTION G - CONTRACT ADMINISTRATION DATA ARTICLE G.3. KEY PERSONNEL, HHSAR 352.242-70 (JANUARY 2006), is revised as follows: The following individual(s) are removed as Key Personnel: Jane Halpern, Ph.D VP Regulatory Affairs and Quality Assurance Frederick W. Driscoll VP, Chief Financial Officer, Treasurer The following individual(s) are added as Key Personnel: Barclay “Buck” Phillips Sr. VP, Chief Financial Officer, Treasurer ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED Contract No. HHSO100201100012C (Mod. #5)   Exhibit 10.37 AMENDMENT No 4 to MASTER SERVICES AGREEMENT This Amendment, dated as of March 5, 2014 (the “Amendment Effective Date”) to that certain Master Services Agreement dated as of March 31, 2009 (the“Original Agreement”), as amended by Amendment No 1 dated as of July 27, 2011 (the “First Amendment”), Amendment No 2 dated as of March 7, 2013(the “Second Amendment”) Amendment No 3 dated as of October 29, 2013 (the “Third Amendment” and, together with the Original Agreement, the FirstAmendment and the Second Amendment, the “Agreement”), is between Cadila Pharmaceuticals Limited (“Cadila”), and Novavax, Inc. (“Novavax”). WHEREAS the parties to the Original Agreement initially agreed that Novavax would guarantee its use of Services for the initial three (3) years of the Term; WHEREAS pursuant to the terms of the First Amendment, the parties amended the Original Agreement to, among other things, extend the period of use ofServices for an additional one (1) year to March 31, 2013; WHEREAS pursuant to the terms of the Second Amendment, the parties amended the Original Agreement to, among other things, extend the period of use ofServices for an additional one (1) year to March 31, 2014; WHEREAS the parties now wish to extend the period of time during which Novavax would guarantee its use of Services an additional one (1) year to March31, 2015; Now therefore, the parties hereto agree as follows: The second paragraph of Section 4 entitled “Payment by Novavax; Guaranty of Services” is deleted in its entirety and replaced with the following new secondparagraph: It is the intent of the parties that, during the first six (6) years of the term of this Agreement (the “Services Period”), Novavax will have engaged Cadila toperform Services hereunder that will in the aggregate equal $7.5 million in fees paid to Cadila. If, at the end of the Services Period, the Services Amount(defined below) does not equal or exceed $7.5 million, then Novavax shall pay Cadila an amount (the “Final Amount”) equal to the sum of (a) the portion ofthe Shortfall Amount that is less than or equal to $2.0 million, plus (b) the product of fifty percent (50%) times the portion, if any, of the Shortfall Amountthat exceeds $2.0 million. For purposes of this Section 4 and Section 9.2, “Services Amount” equals the sum of (A) the amounts paid under all Project Plans,and (B) amounts to be paid under executed Project Plans if the Services under such Project Plans are completed as provided therein, and (C) any amounts thatwould have been paid for services under a reasonable Service Request provided to Cadila under this Agreement, which Service Request (i) concerns legitimateproducts or projects within Novavax’s scope of its own business and (ii) involves services that Cadila is reasonably able to provide within its scope ofresources and expertise, but for the fact that Cadila exercised its right not to prepare a Project Estimate or agree to a Project Plan reasonably offered to Cadila byNovavax containing terms substantially consistent with those contained in Cadila’s Project Estimate therefor (which amounts shall be reasonably determinedbased on amounts that would be reasonably charged for such services had Cadila actually provided a Project Estimate and the parties had entered into aProject Plan therefor); and “Shortfall Amount” equals the difference between $7.5 million and the Services Amount.  Section 9.2 entitled “Force Majeure” is deleted in its entirety and replaced with the following: 9.2 Force Majeure. Neither party will be responsible for delays or failures in performance resulting from causes beyond the reasonable control ofsuch party (except for any delay or failure to pay amounts due hereunder), including without limitation fire, explosion, flood, war, strike, or riot, providedthat the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under thisAgreement with reasonable dispatch whenever such causes are removed. Either party shall have the right to immediately terminate this Agreement should suchforce majeure event continue for more than ninety (90) days. If, at the time of such a termination, the Services Amount (defined in Section 4) does not equal orexceed a pro rata portion of $5.5 million (taking into consideration the time between the Effective Date and such termination versus the six year Services Period(the “Pro Rata Amount”)) plus $2.0 million, then Novavax shall pay Cadila an amount (the “FM Final Amount”) equal to the sum of (a) the portion of the FMShortfall Amount that is less than or equal to $2.0 million, plus (b) the product of fifty percent (50%) times the portion, if any, of the FM Shortfall Amountthat exceeds 2.0 million. For purposes of this Section 9.2, “FM Shortfall Amount” equals the difference between the Pro Rata Amount and the ServicesAmount. In all other respects the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives as of the Amendment EffectiveDate. NOVAVAX, INC.CADILA PHARMACEUTICALS LIMITED By: /s/Stanley C. Erck By: /s/Rajiv I. Modi Stanley C. Erck Rajiv I. Modi President and Chief Executive Officer Managing Director Exhibit 21.1LIST OF SUBSIDIARIESThe following is a list of subsidiaries of the Company as of December 31, 2013. Company Where Incorporated or OrganizedNovavax AB (formerly Isconova AB) Sweden Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We have issued our reports dated March 11, 2014, with respect to the consolidated financial statements, schedule, and internal control over financial reportingincluded in the Annual Report of Novavax, Inc. on Form 10-K for the year ended December 31, 2013. We hereby consent to the incorporation by reference ofsaid reports in the Registration Statements of Novavax, Inc. on Forms S-3 (No. 333-193549 effective January 24, 2014 and No. 333-187267 effective May 2,2013) and on Forms S-8 (No. 333-190600 effective August 8, 2013, No. 333-190599 effective August 8, 2013, No. 333-183113 effective August 7, 2012, No.333-145298 effective August 9, 2007, No. 333-130990 effective January 12, 2006, No. 333-110401 effective November 12, 2003, No. 333-97931 effectiveAugust 9, 2002, No. 333-46000 effective September 18, 2000, No. 333-77611 effective May 3, 1999, No. 33-80279 effective December 11, 1995, and No.33-80277 effective December 11, 1995). /s/ Grant Thornton LLP McLean, VirginiaMarch 11, 2014 Exhibit 31.1CERTIFICATION OF CHIEF EXECUTIVE OFFICERI, Stanley C. Erck, certify that:1.I have reviewed this Annual Report on Form 10-K of Novavax, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and we have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluations; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalentfunctions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting. Date: March 12, 2014 By:/s/ Stanley C. ErckPresident and Chief Executive OfficerExhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICERI, Barclay A. Phillips, certify that:1.I have reviewed this Annual Report on Form 10-K of Novavax, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and we have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluations; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalentfunctions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting. Date: March 12, 2014 By:/s/ Barclay A. PhillipsSenior Vice President, Chief Financial Officer andTreasurerExhibit 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANTTO 18 UNITED STATES C. §1350(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)In connection with the Annual Report of Novavax, Inc. (the “Company”) on Form 10-K for the fiscal period ended December 31, 2013as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley C. Erck, President and Chief ExecutiveOfficer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, to the best of my knowledge, that:1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofthe Company for the dates and periods covered by this Report. Date: March 12, 2014 By:/s/ Stanley C. ErckPresident and Chief Executive OfficerExhibit 32.2CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANTTO 18 UNITED STATES C. §1350(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)In connection with the Annual Report of Novavax, Inc. (the “Company”) on Form 10-K for the fiscal period ended December 31, 2013as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barclay A. Phillips, Senior Vice President, ChiefFinancial Officer and Treasurer, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002, to the best of my knowledge, that:1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofthe Company for the dates and periods covered by this Report. Date: March 12, 2014 By:/s/ Barclay A. PhillipsSenior Vice President, Chief Financial Officer andTreasurer

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