Novavax
Annual Report 2014

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2014OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to . Commission File No. 0-26770NOVAVAX, INC.(Exact name of Registrant as specified in its charter) Delaware(State of incorporation)20 Firstfield Road Gaithersburg, Maryland 20878(Address of principal executive offices) 22-2816046(I.R.S. Employer Identification No.) Registrant’s telephone number, including area code: (240) 268-2000 Securities 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 Market Securities 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 ¨ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during 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 filingrequirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer xAccelerated filer ¨Non-accelerated filer ¨(Do not check if a smaller reporting company)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 ¨ No x The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant (based on the last reported sale price ofRegistrants common stock on June 30, 2014 on the NASDAQ Global Select Market) was approximately $934,600,000. As of February 23, 2015, there were 239,379,766 shares of the Registrant’s common stock outstanding. Documents incorporated by reference: Portions of the Registrant’s Definitive Proxy Statement to be filed no later than 120 days after the fiscal year endedDecember 31, 2014 in connection with the Registrant’s 2015 Annual Meeting of Stockholders are incorporated by reference into Part III of this AnnualReport on Form 10-K to the extent indicated herein.  NOVAVAX, INC. TABLE OF CONTENTS Page PART I Item 1.BUSINESS1Item 1A.RISK FACTORS16Item 1B.UNRESOLVED STAFF COMMENTS34Item 2.PROPERTIES34Item 3.LEGAL PROCEEDINGS34Item 4MINE SAFETY DISCLOSURES34 PART II Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS35Item 6.SELECTED FINANCIAL DATA37Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS38Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK55Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA55Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE55Item 9A.CONTROLS AND PROCEDURES55Item 9B.OTHER INFORMATION56 PART III Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE57Item 11.EXECUTIVE COMPENSATION57Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS57Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE57Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES57 PART IV Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES58 i CERTAIN DEFINITIONS All references in this Annual Report on Form 10-K to “Novavax,” the “Company,” “we,” “us,” and “our” refer to Novavax, Inc. and its consolidatedsubsidiary, Novavax AB (unless the context otherwise indicates). NOTE REGARDING TRADEMARKS Matrix-M™ and Matrix™ are trademarks of Novavax. Any other trademarks referred to in this Annual Report on Form 10-K are the property of their owners.All rights reserved. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by suchcompanies, or any relationship with any of these companies. FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act that involve risksand uncertainties. In some cases, forward-looking statements are identified by words such as “believe,” “anticipate,” “intend,” “plan,” “will,” “may” “expect”and similar expressions. All of these forward-looking statements are based on information available to us at this time, speak only as of the date of this AnnualReport on Form 10-K, and we assume no obligation to update any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of many factors, including those identified in the section titled “Risk Factors,” “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and elsewhere. We urge you to review and consider the various disclosures made by us in this report, andthose detailed from time to time in our filings with the Securities and Exchange Commission (“SEC”), that attempt to advise you of the risks and factors thatmay affect our future results. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. i PART I Item 1. BUSINESS Overview Novavax, Inc., together with its wholly-owned subsidiary, Novavax AB, is a clinical-stage vaccine company focused on the discovery, developmentand commercialization of recombinant nanoparticle vaccines and adjuvants. Using innovative proprietary recombinant nanoparticle vaccine technology, weproduce vaccine candidates to efficiently and effectively respond to both known and newly emerging diseases. We were incorporated in 1987 under the laws of the State of Delaware. Our principal executive offices are located at 20 Firstfield Road,Gaithersburg, Maryland, 20878, and our telephone number is (240) 268-2000. Our common stock is currently listed on the Nasdaq Global Select Marketunder the symbol “NVAX.” Our vaccine candidates are genetically engineered three-dimensional nanostructures that incorporate immunologically important proteins. Ourproduct pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical development for respiratory syncytial virus (“RSV”),seasonal influenza, pandemic influenza, and the Ebola virus (“EBOV”). We have additional pre-clinical stage programs in a variety of infectious diseases,including the Middle East respiratory syndrome coronavirus (“MERS”). Further, CPL Biologics Private Limited (“CPLB”), our joint venture company inIndia, is actively developing a number of vaccine candidates that were genetically engineered by Novavax, including a seasonal influenza VLP vaccinecandidate that completed enrollment of its Phase 3 clinical trial in India in 2014, and its rabies vaccine that completed its Phase 1/2 clinical trial in India in2014. We are also developing proprietary technology for the production of immune stimulating saponin-based adjuvants, through our Swedish wholly-owned subsidiary, Novavax AB. Our Matrix™ adjuvant technology utilizes selected quillaja fractions that, through our manufacturing process form separatematrix structures, to develop modern, multi-purpose immune-modulating adjuvant products for a broad range of potential vaccine applications. Our leadadjuvant for human applications, Matrix-M™, has been successfully tested in a Phase 1/2 clinical trial for our pandemic influenza H7N9 vaccine candidate,conducted under our contract with the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“HHSBARDA”) and we are currently testing Matrix-M in conjunction with our EBOV vaccine candidate in a Phase 1 clinical trial. Genocea Biosciences, Inc. haslicensed rights to our Matrix technology and is conducting clinical trials with its herpes simplex 2 vaccine candidate using Matrix-M. Our joint venture with Cadila Pharmaceuticals Limited (“Cadila”), CPLB, is developing and manufacturing vaccines, biological therapeutics anddiagnostics in India. CPLB is owned 20% by us and 80% by Cadila. CPLB operates a manufacturing facility in India for the production of vaccines and isactively developing a number of vaccine candidates that were genetically engineered by us. 1 Clinical Product Pipeline A current summary of our significant research and development programs and status of related products in development follows: Program Development Stage Funding Collaborator Respiratory Syncytial Virus (RSV) · Elderly Phase 2 · Maternal Immunization Phase 2 PATH· Pediatric Phase 1 Influenza · Seasonal Quadrivalent Phase 2 HHS BARDA· Pandemic H7N9 Phase 2 HHS BARDA Other · Ebola Virus (EBOV) Phase 1 · Combination (Influenza/RSV) Pre-Clinical CPLB Programs (India) · Seasonal Influenza Phase 3 · Rabies Phase 1/2 Respiratory Syncytial Virus (RSV) RSV is a major respiratory pathogen with a significant burden of disease in the very young and in the elderly. In healthy adults, RSV infections aregenerally mild to moderate in severity, but are typically more severe in infants and young children as well as adults over the age of 601. Globally, RSV is acommon cause of childhood respiratory infection, with a disease burden of 64 million cases and approximately 160,000 deaths annually2. Severe RSVdisease results in 3.4 million hospital admissions per year globally3 and disproportionately affects infants below six months of age. In infants, toddlers andyoung pre-school and school-age children, RSV infections result in the need for frequent medical care, including emergency room and office visits and areassociated with increased recurrent wheezing that can persist for years. In the U.S., nearly all children become infected with RSV before they are two years ofage; it has been associated with 20% of hospitalizations and 15% of office visits for acute respiratory infection in young children4. It is also estimated thatbetween 11,000 and 17,000 elderly and high risk adults die of RSV infection or its complications annually in the U.S., and up to 180,000 are hospitalized forserious respiratory symptoms.5 Currently, there is no approved RSV vaccine available for any of these populations, so an RSV vaccine has the potential toprotect millions of persons from this far-reaching unmet medical need. We are developing our respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F vaccine candidate”) for the benefit ofthree susceptible target populations: the elderly, infants (receiving protection through antibodies transferred from their mothers who would be immunizedduring the last trimester of pregnancy) and pediatrics. 1 Dawson-Caswell, D, et al., (2011) Am Fam Physician. 83:143 - 1462 Nair, H., et al., (2010) Lancet. 375:1545 - 15553 WHO, (2014) “RSV Vaccine Status;” www.who.int/immunization/research/meetings_workshops/WHO_PDVAC_RSV.pdf4 Hall, CB, et al., (2009) N Engl J Med. 360(6):588-985Falsey, A., et al., (2014) Infectious Disorders. 12(2): 98-102 2 RSV Elderly Program In October 2014, we initiated enrollment in a Phase 2 dose-confirmation clinical trial of our RSV F vaccine candidate in 1,600 older adults (>60years of age). Recruitment was completed in November, and the preliminary data from this trial are expected in the third quarter of 2015. We believe thesedata will inform the next steps in the development of our RSV elderly program. Data from our earlier Phase 1 clinical trial in the elderly, initiated in October2012, corroborates our previous clinical experiences with our RSV F vaccine candidate. In May 2014, we released one-year follow-up data from that Phase 1clinical trial demonstrating that, for the group receiving the 90μg antigen dose without adjuvant, anti-F levels and palivizumab competing antibodies weresignificantly elevated over baseline at day 180, with neutralizing antibody levels that were considered protective for both the RSV A and RSV B strains. Webelieve these findings support the development of an annual RSV F vaccine candidate dose that can provide protection over the four to five month period ofa typical RSV season. RSV Maternal Immunization Program In September 2014, we initiated a Phase 2 clinical trial of our RSV F vaccine candidate in healthy women in their third trimester of pregnancy. Thistrial, which is designed to enroll fifty (50) pregnant women, will evaluate the safety and immunogenicity of our RSV F vaccine candidate in pregnant womenand assesses the impact of maternal immunization on RSV-specific antibody levels through the baby’s first six months of life and infant safety through thefirst year of life. The preliminary data from this trial are expected in the third quarter of 2015 and will inform the next steps in the development of our RSVmaternal program. In November 2014, we announced that the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (“FDA”) hadgranted Fast Track Designation to our RSV F vaccine candidate for protection of infants via maternal immunization. The Fast Track Designation, establishedby the FDA Modernization Act of 1997, is intended for products that treat serious or life-threatening diseases or conditions, and that demonstrate thepotential to address unmet medical needs for such diseases or conditions. The program is intended to facilitate development and expedite review of drugs totreat serious and life-threatening conditions so that an approved product can reach the market expeditiously. Fast Track Designation specifically facilitatesmeetings to discuss all aspects of development to support licensure and it provides the opportunity to submit sections of a Biologics License Application(“BLA”) on a rolling basis as data become available, which permits the FDA to review modules of the BLA as they are received instead of waiting for theentire BLA submission. In April 2014, we announced positive top-line safety and immunogenicity data from a Phase 2 clinical trial in women of childbearing age that weresimilar to, or exceeded, immune responses seen in our previous clinical trials. This Phase 2 clinical trial evaluated the safety and immunogenicity of two doselevels of our RSV vaccine candidate, in one or two injections, with and without an aluminum phosphate adjuvant, in 720 healthy women of childbearing age.These positive data supported Novavax’ decision to progress to the previously discussed Phase 2 clinical trial in pregnant women. PATH Vaccine Solutions (“PATH”) Clinical Development Agreement for RSV Maternal Program In conjunction with our development of our RSV F vaccine candidate for maternal immunization, in 2012 we entered into a clinical developmentagreement with PATH to develop our RSV F vaccine candidate in certain low-resource countries. We refer to this as our RSV Collaboration Program. We wereawarded approximately $2.0 million by PATH for initial funding under the agreement to partially support our Phase 2 dose-ranging clinical trial in women ofchildbearing age described above. In October 2013, the funding under this agreement was increased by $0.4 million to support reproductive toxicologystudies, which was necessary before we began conducting clinical trials in pregnant women. In December 2013, we entered into an amendment with PATHproviding an additional $3.5 million in funding to support the Phase 2 dose-confirmation clinical trial in 720 women of childbearing age. In October 2014,we entered into an amendment with PATH providing an additional $1.0 million towards the development of a strategy for approaching a Phase 3 clinical trialin our RSV maternal immunization program and are in ongoing discussion with PATH for additional funding. We retain global rights to commercialize theproduct and will support 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 continue development, wewould then grant PATH a fully-paid license to our RSV F vaccine candidate technology for use in pregnant women in certain contractually defined low-resource countries. 3 RSV Pediatric Program While the burden of RSV disease falls heavily on newborn infants, RSV is also a prevalent and currently unaddressed problem in pediatrics. Thisthird market segment for our RSV vaccine candidate remains an important opportunity. In November 2014, we initiated a Phase 1 clinical trial of our RSV Fvaccine candidate in 150 healthy children two to six years of age. This trial is designed to evaluate the safety and immunogenicity of our RSV F vaccinecandidate in children. The data from this trial are expected in late 2015 or in the first half of 2016 and will inform the next steps in the development of ourRSV pediatric program. Influenza Influenza is a world-wide infectious disease that causes illness in humans with symptoms ranging from mild to life-threatening; serious illness occursnot only in susceptible populations such as pediatrics and the elderly, but also in the general population when unique strains of influenza arise, for whichmost humans have not developed protective antibodies. Influenza is a major burden on public health worldwide; estimates of one million deaths each yearare attributed to influenza.6 It is further estimated that, each year, influenza attacks 5%-10% of adults and 20%-30% of children, causing significant levels ofillness, hospitalization and death.7 Although a number of licensed seasonal influenza vaccines are currently commercially available in most geographies, and these manufacturers havecapabilities to develop influenza vaccines that are responsive to unique and emerging influenza strains, we believe our influenza virus-like particle (“VLP”)vaccine candidates have immunological advantages over currently available vaccines. These advantages stem from the fact that our influenza VLPs containthree of the major structural virus proteins that are important for fighting influenza: hemagglutinin (“HA”) and neuraminidase (“NA”), both of whichstimulate the body to produce antibodies that neutralize the influenza virus and prevent its spread through the cells in the respiratory tract, and the matrix 1protein (“M1”), which stimulates cytotoxic T lymphocytes to kill cells that may already be infected. Our VLPs are not made from live viruses and have noinfluenza genetic nucleic material in their inner core, which render them incapable of replicating and causing the disease. Seasonal Quadrivalent Influenza Vaccine Developing and commercializing a seasonal influenza vaccine is an important business opportunity and strategic goal for Novavax. The AdvisoryCommittee for Immunization Practices of the Center for Disease Control and Prevention (“CDC”) recommends that all persons aged six months and oldershould be vaccinated annually against seasonal influenza. In conjunction with these universal recommendations, attention from the 2009 influenza H1N1pandemic, along with reports of cases of avian-based influenza strains, has increased public health awareness of the importance of seasonal influenzavaccination, the market for which is expected to continue to grow worldwide in both developed and developing global markets. In recent years, trivalent influenza vaccines (three influenza strains: two influenza A strains and one influenza B strain) have been made generallyavailable on a worldwide basis. With two distinct lineages of influenza B viruses circulating, public health authorities have advocated for the addition of asecond influenza B strain to provide additional protection. Vaccine manufacturers have responded through the development and licensure of quadrivalent(i.e., four influenza strains: two influenza A strains and two influenza B strains) influenza vaccines. It is expected that quadrivalent seasonal influenzavaccines will ultimately replace trivalent seasonal influenza vaccines in the global market. There are currently four quadrivalent influenza vaccines licensedin the U.S., although additional quadrivalent seasonal influenza vaccines are expected to be licensed over the next several years. Current estimates forseasonal influenza vaccine growth in the top seven markets (U.S., Japan, France, Germany, Italy, Spain and UK), show potential growth from approximately$3.2 billion in the 2012/13 season to $5.3 billion by the 2021/2022 season.8 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-effectively manufacturedwithout the use of either the live influenza virus or eggs. 6 Resolution of the World Health Assembly. Prevention and control of influenza pandemics and annual epidemics. WHA56.19. 28 May 20037 WHO. Vaccines against influenza. WHO position paper – November 2012 Weekly Epidemiol Record 2012;87(47):461–76.8 Influenza Vaccines Forecasts. Datamonitor (2013) 4 In November 2014, under our contract with HHS-BARDA, we initiated a Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccinecandidate in 400 healthy adults. The primary outcomes of the trial will assess safety and tolerability of the seasonal influenza VLP vaccine candidate andquantify immune responses to each of the four influenza strains based on hemagglutination-inhibiting antibody titers. In addition, secondary outcomes willevaluate neuraminidase-inhibition antibody titers for all four influenza strains. The preliminary data from this trial are expected in the second quarter of 2015and will inform the next steps in the development of our quadrivalent seasonal influenza VLP vaccine candidate. Data from our previous Phase 2 clinicaltrial, announced in July 2012, showed that our quadrivalent seasonal influenza VLP vaccine candidate demonstrated immunogenicity against all four viralstrains based on hemagglutination inhibition responses at day 21, was well-tolerated, and met the FDA accelerated approval seroprotection rates criterion forall four viral strains, although the potential to fulfill the seroconversion rates criterion was demonstrated in just three of the four viral strains. Following thatPhase 2 clinical trial, we focused our activities on manufacturing processes that will better ensure consistent, enhanced immune responses for all four strains. Pandemic H7N9 Influenza Vaccine In the aftermath of the 2009 pandemic of the A(H1N1) influenza strain, prevention of the potential devastation of a human influenza pandemicremains a key priority with both governmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1 influenza pandemicled to the production of approximately 126 million doses of monovalent (single strain) vaccine. Public health awareness and government preparedness forthe next potential influenza pandemic are driving development of vaccines that can be manufactured quickly against a potentially threatening influenzastrain. Until the spring of 2013, industry and health experts focused attention on developing a monovalent H5N1 influenza vaccine as a potential keydefense against a future pandemic threat; however, a significant number of reported cases in China of an avian-based influenza strain, known as A(H7N9), hasshifted attention to the potential development of a monovalent H7N9 influenza vaccine. In collaboration with HHS BARDA, we have now developed and delivered compelling safety and immunogenicity data on two pandemic vaccinecandidates, H5N1 and H7N9, which provide the U.S. government with alternatives for dealing with future potential threats. In September 2014, weannounced positive results from a Phase 1/2 clinical trial of our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M in 610 healthyadults. Under our contract with HHS BARDA, the Phase 1/2 clinical trial was designed as a dose-ranging, randomized, observer-blinded, placebo-controlledclinical trial, to determine the contribution of Matrix-M to potential antigen dose sparing regimens. Our pandemic H7N9 influenza VLP vaccine candidate,with and without Matrix-M, was well tolerated and demonstrated a safety profile similar to the company’s prior experience with another saponin-basedadjuvant. Matrix-M adjuvanted formulations demonstrated immunogenicity and dose-sparing benefits relative to unadjuvanted antigen. Hemagglutination-inhibiting antibody titers were generally comparable to those reported in prior studies with another saponin adjuvant and the vaccine also elicited significantanti-neuraminidase antibodies. In October 2014, we announced that the FDA had granted Fast Track Designation to our pandemic H7N9 influenza VLPvaccine candidate with Matrix-M. Potential Accelerated Approval Pathway for Influenza In the past, we have referenced attainment of accelerated approval immunogenicity endpoints for seroprotection and seroconversion as a potentialpathway for licensure of our influenza vaccines. The criteria for granting such accelerated approval of a BLA, the biologic equivalent to a New DrugApplication or “NDA,” for new seasonal and pandemic influenza vaccines was published by the FDA. Under FDA guidance, developers that can demonstrateresults that meet or exceed certain specified immunogenicity endpoint criteria in their clinical trials may, at the FDA’s discretion, be granted a license tomarket a product prior to submission of traditional clinical endpoint efficacy trial data. It should be noted that FDA licensure based on accelerated approvalnevertheless requires sponsors to conduct a post-licensure efficacy study to demonstrate the clinical benefit of the vaccine, which would thereby supporttraditional approval of the vaccine. Because it is not possible to conduct a clinical endpoint efficacy study for a pandemic vaccine in advance of a declaredpandemic, FDA’s pandemic guidance allows for submission of seasonal influenza clinical efficacy data for the purpose of confirming clinical benefit of apandemic vaccine manufactured 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 population recommended to receivesuch vaccine, a situation that persists with seasonal influenza vaccines. 5 Although we have not ruled out this accelerated approval approach, particularly for our pandemic influenza program or certain populations withinour seasonal influenza program, we do not expect to pursue accelerated approval of our quadrivalent seasonal influenza VLP vaccine candidate, largelybecause of the uncertainty as to whether the accelerated approval pathway will be available to us at the time of our BLA submissions and the unknownability of current and new influenza strains to meet such accelerated approval criteria. We are planning, therefore, to pursue traditional licensure of ourquadrivalent seasonal influenza VLP vaccine candidate by conducting a clinical endpoint efficacy study for the purpose of submitting the data within theoriginal BLA. These efficacy data will also support the requirement for clinical efficacy data for our pandemic influenza program. We plan to discuss with theFDA our licensure pathways (both the traditional pathway for seasonal and possible accelerated pathways for pandemic and certain populations within theseasonal influenza program) during future formal meetings. The likely impact of such an efficacy trial would be an additional year or more before the FDAgrants licensure to our quadrivalent seasonal influenza VLP vaccine candidate. HHS BARDA Contract for Recombinant Influenza Vaccines HHS BARDA awarded us a contract in 2011 that funds the development of both our multivalent seasonal influenza and monovalent pandemicinfluenza VLP vaccine candidates. Our contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses us for allowable direct contract costsincurred plus allowable indirect costs and a fixed-fee earned in the ongoing clinical development and product scale-up of our multivalent seasonal andmonovalent pandemic influenza vaccines. In September 2014, we announced that HHS BARDA had exercised and initiated a two-year option to our contract,which not only extended the contract until September 2016, but also added scope to support our development activities leading up to planned Phase 3clinical studies and $70 million of funding on top of the remainder of the $97 million base period funding. During 2014, we recognized revenue of $26.0million and have recognized approximately $78 million in revenue since the inception of the contract. Ebola virus (EBOV) Recent news reports have centered around EBOV, formerly known as Ebola hemorrhagic fever, which is a severe, often fatal illness in humans.Multiple strains of EBOV have been identified, the most recent of which, the 2014 Makona strain (previously referred to as the Guinea strain), is associatedwith a case fatality rate of between 50% and 90%. There are currently no licensed treatments proven to neutralize the virus, but a range of blood,immunological and drug therapies are under development. It should be noted, however, that recent vaccine approaches target either a previous strain of thevirus or were initially developed to be delivered by genetic vectors. Our EBOV glycoprotein (GP) vaccine candidate, which was modeled using the 2014Makona strain, has been successfully tested in rodent, rabbit, and non-human primate pre-clinical models. We have also tested the vaccine with our Matrix-Madjuvant, which appears to significantly contribute to enhanced immunogenicity and dose-sparing. We initiated production under good manufacturing practices (“GMP”) of our EBOV GP vaccine in the fourth quarter of 2014 and in February 2015,we announced the initiation of enrollment in a Phase 1 clinical trial of our EBOV GP vaccine candidate in 150 healthy adults to evaluate the safety andimmunogenicity of this vaccine candidate in ascending doses, with and without our Matrix-M adjuvant. We expect preliminary data from this trial to beavailable in mid-2015. In addition, we announced successful preliminary data from a non-human primate challenge study of our EBOV GP vaccine candidatein which the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected. Plans for the subsequent clinical trial(s)will be developed based on the results of our Phase 1 clinical trial and in collaboration with global regulatory authorities and world health agencies. Combination Respiratory (Influenza and RSV) Given the ongoing development of our quadrivalent seasonal influenza VLP vaccine candidate and our RSV F vaccine candidate, we see animportant opportunity to develop a combination respiratory vaccine candidate. This opportunity presents itself most evidently in the elderly, although wehave not ruled out developing a combination respiratory vaccine for the non-elderly. Early pre-clinical development efforts have given us confidence thatsuch a combination vaccine is viable and in animal models, provides acceptable immunogenicity. We intend to explore this development opportunity byconducting a Phase 1 clinical trial in such a combination vaccine in 2015. 6 CPLB Programs (India) Seasonal Influenza CPLB completed enrollment of an on-going Phase 3 clinical trial of its seasonal influenza VLP vaccine candidate in the second half of 2014.Assuming positive safety and immunogenicity data from this Phase 3 clinical trial, CPLB would expect to seek regulatory market authorization, the Indianequivalent of a BLA, for its seasonal influenza VLP vaccine candidate. Rabies CPLB is developing a rabies G protein vaccine candidate that we genetically engineered and completed enrollment of an ongoing Phase 1/2 clinicaltrial in India in 2014. The objective is to develop a recombinant vaccine that can be administered both as a pre-exposure prophylaxis for residents of certainhigher-risk geographies and travelers to such locations, and as a post-exposure prophylaxis using fewer doses than the current standard of care. In October2014, CPLB presented clinical results from Stage I of the Phase 1/2 clinical trial, demonstrating that all vaccine recipients, at various doses levels andschedules, showed seroprotective antibody levels at day 14 that were sustained through day 180. The vaccine candidate, which was found to be safe andwell-tolerated, also induced seroprotective levels with two-dose and three-dose regimens. Assuming positive clinical data from Stage II of the Phase 1/2clinical trial, CPLB would plan to initiate a Phase 3 clinical trial. Discovery Programs Our vaccine platform technology provides an efficient system to rapidly develop antigens to selected targets, refine manufacturing processes andoptimize development across multiple vaccine candidates. We pay close attention to global reports of emerging diseases for which there do not appear to beimmediate cures and where a vaccine protocol could offer potential protection. In addition to our response to the A(H7N9) influenza strain (as previouslydiscussed), we have been monitoring reports concerning MERS, a novel coronavirus first identified in September 2012 by an Egyptian virologist. MERSbecame an emerging threat in 2013, with the WHO currently reporting more than 850 confirmed cases of infection and more than 350 deaths. The MERSvirus is a part of the coronavirus family that includes the severe acute respiratory syndrome coronavirus (“SARS”). Because of the public health priority givento MERS, within weeks 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 earlieridentified as the antigen of choice in our work with a SARS vaccine candidate. In April 2014, in collaboration with the University of Maryland, School ofMedicine, we published results that showed our investigational vaccine candidates against both MERS and SARS blocked infection in laboratory studies.Although the development of a MERS vaccine candidate currently remains a pre-clinical program, we believe that our MERS vaccine candidate offers aviable option to interested global public health authorities. Vaccine Platform Technologies We believe that our platform technology offers time-saving advantages both in terms of production time against traditional egg-based vaccinemanufacturing, and in terms of establishing a vaccine production facility (either as a new green-field project or through a retrofit of an existing facility). Forexample, currently approved influenza vaccines are typically produced by growing virus in chicken eggs, from which the virus is extracted and furtherprocessed. This 50-year-old egg-based production method requires four to six months of lead time for production of a new strain of virus and significantinvestment in fixed production facilities. Moreover, there can be additional delays because manufacturers must modify the selected influenza virus strain inorder for it to be produced efficiently in the egg. The vaccine shortage during the 2004 influenza season (caused in part by a contamination issue at a facilityin the United Kingdom) highlighted the limitations of current production methods and the need for increased vaccine manufacturing capacity. It alsoheightened concerns regarding manufacturers’ capacity to respond to a pandemic, when the number of vaccine doses required will be higher than the numberrequired for seasonal influenza vaccines and manufacturing lead times will be even shorter. This concern was borne out again in the 2009 H1N1 influenzapandemic as, “despite an intensive effort to develop a pandemic vaccine, the 2009 H1N1 vaccine arrived too late to have a significant effect on the dynamicsof the fall disease wave.”9 Compared with traditional vaccine production, we believe our processes allow for faster production of vaccine. Because ourprocess uses genetic information and not the virus itself, we can quickly construct clones of the virus as soon as the genetic information is available. Thisfactor alone can shorten the time for creating new vaccine by several weeks compared to traditional vaccine manufacturing. 7 Importantly, we also believe that a manufacturing facility that produces our vaccines can be implemented and validated in significantly less timethan traditional cell-based vaccine manufacturing facilities and without the costly containment features associated with handling live viruses. We produceour vaccine candidates using a baculovirus expression system in insect cells with lower-cost equipment that can be readily deployed both nationally andinternationally. By not requiring significant production batch sizes, production capacity can be employed quickly. We estimate the time to qualify a facilitythat utilizes our processes can be months faster than a fixed-pipe bioreactor facility used in cell-based manufacturing. Virus-Like Particles (VLPs) Our VLP vaccine technology platform is based on protein structures that visually resemble viruses. However, these are non-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 withrepeating protein structures that can elicit broad and strong antibody and cellular immune responses, but lack the genetic material required for replication.VLP technology is a proven technology that is employed in currently marketed products. Our proprietary VLPs include multiple proteins and lipids that canbe tailored to induce robust and broad immune responses similar to natural infections. Our advanced VLP technology has the potential to develop vaccinesfor a wide range of human infectious diseases where there are significant unmet medical needs, some of which have not been addressed by other technologies.We have used formal criteria based upon medical need, technical feasibility 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 pandemic influenza.There are several points of differentiation of our influenza vaccines when compared to traditional egg-based, or new mammalian-based approaches that formthe basis to address unmet medical needs and capitalize on commercial opportunities. Our influenza VLPs contain components that provide a broad androbust immune response. Specifically, the VLPs contain the viral components HA, NA and M1. Traditional egg-based vaccines contain meaningful levels ofHA, but not of NA or M1. The HA sequence in our VLPs is the same as in the wild-type virus and could prove to be more effective or immunogenic thaninfluenza 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 theseverity of the disease by inducing antibody responses and cell mediated immunity. NA and M1 are both highly conserved, and immunity to these viralcomponents may help provide 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 the antibody thatblocks NA activity. Finally, because of the VLP structure and components, they may have greater immunogenicity in two vulnerable populations –pediatricsand the elderly. 9 BARDA Strategic Plan 2011-2016 (2010) 8 Recombinant Protein Nanoparticle Vaccines Our recombinant protein nanoparticle vaccine technology is based on self-assembling protein structures, which differ from traditional VLPs in thatthese particles do not generally occur in nature and can be made from key antigenic proteins from pathogenic organisms, including viruses, bacteria, parasitesor even cancer cells. Protein nanoparticles closely resemble the natural structure of surface antigens of disease organisms, but lack the genetic materialrequired for replication and therefore are not infectious. An advantage of this technology is that the formation of nanoparticles is done in vitro therebymaking it possible to assemble nanoparticles from one or more highly purified proteins. This results in high purity vaccines with certain manufacturingadvantages over more traditional products. Potential immunological advantages of protein nanoparticle vaccines are presentation of epitopes (antibodybinding sites) in a more native configuration for improved efficacy, efficient recognition by the immune system’s antigen presenting cells (“APCs”) andtriggering robust immune responses. Recognition of the nanoparticle vaccine’s repeating protein patterns by the APCs toll-like receptors to stimulate innateimmunity and the high purity and lack of synthetic material adds to the potential safety of recombinant nanoparticle vaccines. Protein nanoparticle vaccinetechnology has expanded our early-stage vaccines in development to include both virus and non-virus disease targets. Our most advanced proteinnanoparticle vaccine candidate is our RSV F vaccine candidate, which is manufactured from highly purified F protein. Matrix Adjuvants Adjuvants are mostly used as an additional component in various vaccines in order to enable the vaccine to induce a strong immune response forprotection against microbial infections. Novavax AB has developed a number of adjuvant formulations, all based on our proprietary Matrix™ technology.These adjuvant formulations possess excellent immunostimulatory features with the ability to increase and prolong the protective benefits of vaccines. Ourresearch and development over the years have resulted in a range of high-quality products on both the human vaccine and international veterinary vaccinemarkets. The goals of our adjuvant technology are strong antibody and cell-mediated immune responses induced by low antigen doses, long-durationimmune responses, with low risk for allergic reactions or other adverse events. We believe these qualities give our Matrix adjuvants a number of importantadvantages over many other types of adjuvants, where novel, less well-characterized substances are often hampered by safety concerns or limited efficacy.Our Matrix-M adjuvant provides a potent adjuvant effect that has been well tolerated in clinical trials. We also believe that the strong immune response andopportunity to reduce the quantity of antigen dose can significantly reduce the production cost of our vaccines. This means that our Matrix-M adjuvant hasthe potential to be of immense value when there is inadequate vaccine manufacturing capacity during an emerging threat such as an influenza pandemic. Competition in RSV, Influenza and Ebola Vaccines The biopharmaceutical industry and the vaccine market are intensely competitive and are characterized by rapid technological progress. Ourtechnology is based upon utilizing the baculovirus expression system in insect cells to make VLPs and protein nanoparticle vaccines. We believe this systemoffers many advantages when compared to other technologies and is uniquely suited for developing an RSV vaccine, seasonal and pandemic influenzavaccines, as well as vaccines against other infectious diseases. There is currently no approved RSV vaccine for sale in the world; however, a number of vaccine manufacturers, academic institutions and otherorganizations currently have, or have had, programs to develop such a vaccine. In addition, many other companies are developing products to preventdisease caused by RSV using a variety of technology platforms, including various viral vector technologies and competitive VLP technologies. We believethat our RSV vaccine candidates, utilizing recombinant F-protein antigens, are more effective than RSV vaccine candidates in development by ourcompetitors; however, such efficaciousness cannot be guaranteed. Although we are not aware of all our competitors’ efforts, we believe that MedImmuneLLC, a subsidiary of AstraZeneca PLC, may have the second most advanced RSV vaccine program after Novavax, as it has reported testing in Phase 1 andPhase 1/2 clinical trials, in an intranasal, recombinant, live attenuated, RSV vaccine for the prevention of lower respiratory tract disease caused by RSV, aswell as a combination intranasal vaccine for the prevention of several infant respiratory illnesses, including RSV. Additional entities have also entered intoearly clinical trials including GlaxoSmithKline and the National Institute of Allergy and Infectious Diseases, an institute under the U.S. National Institutes ofHealth. Unlike the comparatively low amount of competition developing RSV vaccines, there are a number of companies developing and selling vaccinesfor seasonal and pandemic influenza employing historic vaccine technology, as well as new technologies. The table below provides a list of major vaccinecompetitors and corresponding licensed influenza vaccine technologies. 9 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)CSL Ltd (formerly Novartis, Inc.) Inactivated sub-unit (cell and egg-based)Protein Sciences Corporation Recombinant HA trivalent (insect cell-based) There are many seasonal influenza vaccines currently approved and marketed, and most of these are marketed by major pharmaceutical companiesthat have significantly greater financial and technical resources, experience and expertise than we have. 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 have commercial success. Inorder to show differentiation in the seasonal influenza market, a product should be more efficacious and/or be less expensive and quicker to manufacture.Many of our competitors are working on new products and new generations of current products, some by adding an adjuvant that is used to increase theimmunogenicity of that product, each of which is intended to be more efficacious than currently marketed products. Another differentiating factor isrecombinant manufacturing, which we believe can be quicker and less-expensive than traditional egg-based manufacturing. The FDA approved the firstrecombinant seasonal influenza vaccine called “Flublok” manufactured by Protein Sciences Corporation in 2013. Despite the significant competition and advancing technologies, some of which are similar to our own, we believe that our seasonal influenzaproduct will be as efficacious as, or more so than, current products or products being developed by our competitors, and that our manufacturing systemprovides savings in both time and money; however, there can be no guarantee that our seasonal influenza vaccine will prove to be efficacious or that ourmanufacturing system will prove to be sufficiently effective and differentiated to ensure commercial success. Vaccine candidates against Ebola virus have been in development for more than a decade; however, with the recent epidemic in West Africa, focuson viable vaccine candidates has intensified. In addition to the Phase 1 clinical trial that we recently initiated in February 2015, WHO reports two othervaccine candidates that are currently being tested in humans: one by GlaxoSmithKline in collaboration with the United States National Institute of Allergyand Infectious Diseases, and the other by a collaboration of NewLink Genetics, Merck Vaccines USA and the Public Health Agency of Canada. While theseother vaccine candidates offer promise, we believe there are accompanying challenges, including: high-dose level requirements; utilization of glycoproteinfrom older strains that have a significant number of amino acid changes when compared to the 2014 Makona strain; difficult storage requirements attemperatures below –60°C; and difficulties associated with immune response to the viral vectors which could limit their multi-dose vaccine potential. Incontrast, we have developed a Phase 1 vaccine candidate that has performed well with low doses utilizing our Matrix-M adjuvant; was derived from the 2014Makona strain; appears to be stable at 2–8°C; and appears to provide enhanced immunogenicity as a multi-dose vaccine. In general, competition among pharmaceutical products is based in part on product efficacy, safety, reliability, availability, price and patentposition. An important factor is the relative timing of the market introduction of our products and our competitors’ products. Accordingly, the speed withwhich we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market is animportant competitive factor. Our competitive position also depends upon our ability to show differentiation with a product that is more efficacious,particularly in the relevant target populations and/or be less expensive and quicker to manufacture. It also depends upon our ability to attract and retainqualified personnel, obtain patent protection or otherwise develop proprietary products or processes and secure sufficient capital resources for the oftensubstantial period between technological conception and commercial sale. Patents and Proprietary Rights We generally seek patent protection for our technology and product candidates in the U.S. and abroad. The patent position of biopharmaceuticalfirms generally is highly uncertain and involves complex legal and factual questions. Our success will depend, in part, on whether we can: 10 ·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 process and othertechnologies. Currently, we have or have rights to over 100 U.S. patents and corresponding foreign patents and patent applications relating to vaccines andbiologics. Our core vaccine-related intellectual property extends beyond the year 2025. In 2007, we entered into a non-exclusive license agreement with Wyeth Holdings Corporation, a subsidiary of Pfizer Inc. (Wyeth), to obtain rights toa family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early2022. In July 2010, U.S. Patent No. 7,763,450 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent & Trademark Office. The patentcovers, in part, the use of influenza gene sequences for high-yield production of consistent influenza VLP vaccines to protect against current and futureseasonal and pandemic strains of influenza viruses. In December 2011, European Patent No. 1644037 was issued by the European Patent Office covering thistechnology. In December 2011, U.S. Patent No. 8,080,255 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent & Trademark Office. Thepatent covers, in part, methods of inducing substantial immunity to an influenza virus infection in a human and administering to the human a VLPcomprising M1, HA and NA proteins. The M1 protein is derived from a particular avian influenza strain, 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 patentcovers, in part, vaccine compositions containing VLPs that contain M1, HA, and NA proteins. The VLPs are self-assembled from 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 & Trademark Office. Thepatent covers, in part, methods of inducing substantial immunity to an influenza virus infection in a human and administering to the human a VLPcomprising M1, HA and NA proteins. The M1 protein is from an avian influenza M1 protein from a different strain of influenza virus than the influenza HAprotein 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. Thepatent covers, in part, influenza VLP vaccines containing M1, HA, and NA proteins where the M1 protein is from a different stain than the HA and NAproteins. In April 2014, U.S Patent No. 8,697,088 for Novel VLPs Derived From Cells That do not Express a Viral Matrix or Core Protein was issued by theU.S. Patent & Trademark Office. The patent covers, in part, methods of making influenza VLP that contain HA and NA proteins but lack any viral matrix orcore protein. In May 2014, U.S Patent No. 8,715,692 for Modified RSV F Proteins and Methods of Their Use was issued by the U.S. Patent & Trademark Office.The patent covers, in part, RSV F vaccines. In February 2015, U.S Patent No. 8,951,537 for Functional Influenza Virus-Like Particles (VLPS) was issued by the U.S. Patent & Trademark Office.The patent covers, in part, methods of making influenza VLP vaccines that contain M1 from a particular influenza strain and HA and NA proteins from adifferent strain. 11 The Federal Technology Transfer Act of 1986 and related statutory guidance encourages the dissemination of science and technology innovation.While our recent contract with HHS BARDA provides us with the right to retain ownership in our inventions that may arise during performance of thatcontract, with respect to certain other collaborative research efforts with the U.S. government, certain developments and results that may have commercialpotential are to be freely published, not treated as confidential and we may be required to negotiate a license to developments and results in order tocommercialize products. There can be no assurance that we will be able to successfully obtain any such license at a reasonable cost, or that such developmentand results will not be made available to our competitors on 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 our policy torequire employees, consultants, contractors, manufacturers, collaborators and other advisors to execute confidentiality agreements upon the commencementof employment, consulting or collaborative relationships with us. We also require confidentiality agreements from any entity that is to receive confidentialinformation from us. With respect to employees, consultants and contractors, the agreements generally provide that all inventions made by the individualwhile rendering services to us shall be assigned to us as our property. Government Regulations The development, production and marketing of biological products, which included the vaccine candidates being developed by Novavax or ourcollaborators, are subject to regulation for safety, efficacy and quality by numerous governmental authorities in the U.S. and other countries. As a U.S. basedcompany, we focus on the U.S. regulatory process and the standards imposed by the FDA, International Conference on Harmonisation (ICH) and otheragencies because we believe, for the most part, meeting U.S. and ICH standards will allow us to satisfy regulatory agencies in other countries where we intendto do business. We are aware that expectations in some venues, notably in the European Union, differ to some degree and we are taking proactive steps toaddress such differences. In the U.S., the development, manufacturing and marketing of human pharmaceuticals and vaccines are subject to extensiveregulation under the Federal Food, Drug, and Cosmetic Act, and biological products are subject to regulation under provisions of that Act and the PublicHealth Service Act. The FDA not only assesses the safety and efficacy of these products but it also regulates, among other things, the testing, manufacture,labeling, storage, record-keeping, advertising and promotion of such products. The process of obtaining FDA licensure 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 FDA licensure tomarket any new vaccine candidate, we must first submit an investigational new drug application (“IND”) that explains to the FDA, among other things, theresults of pre-clinical testing conducted in laboratory animals, the method of manufacture, quality control tests for release and what we propose to do forhuman testing. At this stage, the FDA decides whether it is reasonably safe to move forward with testing the vaccine in humans. We must then conduct Phase1 clinical trials and larger-scale Phase 2 and 3 clinical trials that demonstrate the safety and efficacy of our vaccine candidate to the satisfaction of the FDA.Once these trials are complete, a BLA can be submitted to the FDA requesting licensure of the vaccine for marketing based on the vaccine’s safety andefficacy. During the FDA’s review of a BLA, the proposed manufacturing facility undergoes a pre-approval inspection during which the FDA examines indetail the production of the vaccine as it is in progress. Vaccine licensure also requires the provision of adequate product labeling to allow health careproviders to understand the vaccine’s proper use, including its potential benefits and risks, to communicate with patients and parents, and to safely deliverthe vaccine to the public. Until a vaccine is given to the general population, all potential adverse events cannot be anticipated. Thus, the FDA may requirePhase 4 post-marketing clinical trials for vaccines after licensure to continue gathering safety, and sometimes effectiveness/efficacy data in the indicated andadditional populations. In order to ensure continuing safety, the FDA continues to oversee the production of vaccines even after the vaccine and manufacturing processesare approved. For example, monitoring of the vaccine and of production activities, including periodic facility inspections, must continue as long as themanufacturer holds a license for the product. Manufacturers may also be required to submit to the FDA the results of their own tests for potency, safety andpurity for each vaccine lot, if requested by the FDA. They may also be required to submit samples of each vaccine lot to the FDA for testing. 12 In addition to obtaining FDA licensure for each product, each domestic manufacturing establishment must be registered with the FDA, is subject toFDA inspection and must comply with GMP regulations. To supply products for use either in the U.S. or outside the U.S., including clinical trials, U.S. andforeign manufacturing establishments, including third-party facilities, must comply with GMP regulations and are subject to periodic inspection by the FDAor 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-clinical studies may takeseveral years to complete and there is no guarantee that the FDA will permit an IND to become effective and allow the investigational product to advance toclinical testing. Clinical trials may take several years to complete. After the completion of the required phases of clinical trials, if the data indicate that thevaccine is safe and effective, a BLA is submitted to the FDA to approve the marketing and commercial shipment of the vaccine. This process takes substantialtime and effort and the FDA may not accept the BLA for filing. Even if accepted, the FDA might not grant licensure. The FDA license process may take up totwo years and may take longer if substantial questions about the submission arise. The FDA may require post-marketing testing and surveillance to monitorthe safety of the applicable products. In 1992, the FDA instituted regulations that allow approval of certain products that treat serious or life-threatening illnesses and provide meaningfultherapeutic benefit over existing treatments based on a surrogate endpoint, versus a clinical outcome, which can take many more years to demonstrate.Surrogate endpoints, generally a laboratory measurement or other physical sign shown to have some correlation with clinical benefit, can considerablyshorten the time development time leading up to FDA licensure. The FDA bases its decision on whether to accept a proposed surrogate endpoint on thescientific support for that endpoint. The company developing the product is required to conduct further studies to confirm it’s the clinical benefit in Phase 4confirmatory efficacy trials. We plan to seek traditional approval for our quadrivalent seasonal influenza vaccine, but have not ruled out the potential use ofaccelerated approval for specific populations and for our pandemic influenza vaccine candidates. In addition to regulatory approvals that must be obtained in the U.S., an investigational product is also subject to regulatory approval in othercountries in which it is intended to be marketed. No such product can be marketed in a country until the regulatory authorities of that country have approvedan appropriate marketing application. FDA licensure does not assure approval by other regulatory authorities. In addition, in many countries, the governmentis involved in the pricing of the product. In such cases, the pricing review period often begins after market approval is granted. We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances ControlAct, the Resource Conservation and Recovery Act and other present and potential federal, state or local regulations, including national and local regulationsthat govern our facility in Sweden. These and other laws govern our use, handling and disposal of various biological and chemical substances used in, andwaste generated by our operations. Our research and development involves the controlled use of hazardous materials, chemicals and viruses. Although webelieve that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the riskof accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for anydamages that result 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 pharmaceutical andbiological products, government control and other changes to the healthcare system of the U.S. It is uncertain how such legislative changes will be adoptedor what actions federal, state or private payers for medical goods and services may take in response to such legislation. We cannot predict the effect suchhealthcare changes will have on our business, and no assurance can be given that any such reforms will not have a material adverse effect. Manufacturing Our primary manufacturing facility is located at our corporate headquarters at 20 Firstfield Road in Gaithersburg, Maryland. The facility is our late-stage clinical and commercial-scale manufacturing facility for production of our vaccines. The facility has 53,000 square feet of combined GMPmanufacturing, laboratory and office space. Our Rockville, Maryland facility houses our 10,000 square foot GMP pilot manufacturing facility that producesclinical trial material. Novavax AB, located in Uppsala, Sweden, produces our Matrix adjuvants in an approximately 15,000 square foot facility comprised ofGMP manufacturing, laboratory and office space. 13 Sources of Supply Most of the raw materials and other supplies required in our business are generally available from various vendors in quantities adequate to meet ourneeds. In some cases, we have only qualified one vendor for certain of our manufacturing components. Prior to the initiation of commercial production, weplan, where feasible, to qualify multiple vendors of critical raw materials. One key vendor is GE Healthcare Company (“GEHC”), which supplies disposablecomponents, resins, media and buffers used in our manufacturing process. GEHC and other vendors that supply our key manufacturing materials are or will beaudited for compliance with GMP standards. An important component of our Matrix adjuvant technology is extracted from a species of soap-bark tree (Quillaja saponaria) that grows mainly inChile, and while we have been able to acquire quillaja extract as needed from our current suppliers, we are focused on establishing appropriate alternativesupply arrangements for high-quality quillaja extract. Business Development We believe our proprietary vaccine technology affords us a range of traditional and non-traditional commercialization options that are broader thanthose of existing vaccine companies. We strive to create sustainable value by working to obtain non-dilutive funding, similar to our agreements with HHSBARDA or PATH, to fund future trials in our seasonal and pandemic influenza programs and our RSV program, to continue development of our vaccinecandidates until such vaccines can be licensed on a regional basis, to retain commercial rights in major markets and generate product sales revenue and, incertain markets, to commercialize our products through partners and other strategic relationships. In addition to our aforementioned contracts with HHS BARDA and PATH, some examples of our strategic relationships are our collaboration withGEHC, the joint venture we established with Cadila, and a licensing agreement with LG Life Sciences, Ltd. (“LGLS”). Our relationship with GEHC started in 2007, when we entered a co-marketing agreement for a pandemic influenza vaccine solution for selectinternational countries. More recently, our collaboration uses GEHC’s bioprocessing and manufacturing solutions and design expertise in conjunction withNovavax’ manufacturing platform. CPLB is owned 20% by us and 80% by Cadila. It was established in 2009 to develop and manufacture certain vaccine candidates, biogenericproducts and diagnostic products for the territory of India. CPLB operates a manufacturing facility in India for the production of vaccines and is activelydeveloping a number of vaccine candidates that were genetically engineered by us. CPLB’s seasonal VLP influenza vaccine candidate completed enrollmentof its Phase 3 clinical trial in India in 2014, and CPLB’s rabies vaccine candidate began its Phase 1/2 clinical trial in India in 2014. Employees As of February 23, 2015, we had 308 full-time employees, of whom 62 hold M.D. or Ph.D. degrees and 72 of whom hold other advanced degrees. Ofour total workforce, 251 are engaged primarily in research, development and manufacturing activities and 57 are engaged primarily in executive, businessdevelopment, finance and accounting, legal and administrative functions. None of our U.S. employees are represented by labor unions or covered bycollective bargaining agreements; 29 of our 30 Swedish employees are covered by typical collective bargaining agreements. We consider our relations withour employees to be good. 14 Availability of Information Our website address is www.novavax.com. We make available, free of charge and through our website, our Annual Reports on Form 10-K, QuarterlyReports 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. Further, a copy of this Annual Reporton Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the PublicReference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and informationstatements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. We use our website (www.novavax.com) as a means of disclosing material non-public information and for complying with our disclosure obligationsunder Regulation Fair Disclosure promulgated by the SEC. These disclosures are included on our website (www.novavax.com) in the “Investor Info” or“Newsroom” sections. Accordingly, investors should monitor these portions of our website (www.novavax.com), in addition to following our press releases,SEC filings and public conference calls and webcasts. We webcast our earnings calls and certain events we participate in or host with members of the investment community on the investor relationssection of our website. Additionally, we provide notifications of news or announcements regarding press and earnings releases as part of the investor relationssection of our website. The contents of our website are not part of this Annual Report on Form 10-K, or any other report we file with, or furnish to, the SEC. 15 Item 1A. RISK FACTORS You should carefully consider the following risk factors in evaluating our business. There are a number of risk factors that could cause our actualresults to differ materially from those that are indicated by forward-looking statements. Some of the risks described relate principally to our business and theindustry in which we operate. Others relate principally to the securities market and ownership of our common stock. The risks and uncertainties describedbelow are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may becomeimportant factors that affect us. If any of the following risks occur, our business, financial condition or results of operations could be materially and adverselyaffected. You should also consider the other information included in this Annual Report on Form 10-K. RISKS RELATED TO OUR BUSINESS AND INDUSTRY We 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, 2014 was $493.1 million. Ourrevenue for the last three fiscal years was $30.7 million in 2014, $20.9 million in 2013, and $22.1 million in 2012. Prior to 2011, we recorded limited revenuefrom research contracts, licenses and agreements to provide vaccine candidates, services and technologies. We cannot be certain that we will be successful inentering into strategic alliances or collaborative arrangements with other companies and government agencies that will result in significant revenue to offsetour expenses. Our net losses for the last three fiscal years were $82.9 million in 2014, $52.0 million in 2013, and $28.5 million in 2012. Our recent historical losses have predominantly resulted from research and development expenses for our vaccine candidates, manufacturing-relatedexpenses, costs related to protection of our intellectual property and for other general operating expenses. Our expenses have exceeded our revenue sinceinception. We believe our expenses will continue to increase, as a result of higher research and development efforts to support the development of ourvaccine candidates. Although certain specified costs associated with the development of our influenza vaccines may be reimbursed under our contract with HHSBARDA, and to a more limited extent, certain outside costs associated with the development of our RSV maternal vaccine may be reimbursed under ourcontract with PATH, nevertheless we expect to continue to incur significant operating expenses and anticipate that our losses will increase in the foreseeablefuture as we seek to: ·conduct clinical trials for RSV, Ebola and an RSV-influenza combination respiratory vaccine candidate; ·conduct pre-clinical studies for other early-stage vaccine candidates; ·comply with the FDA’s manufacturing facility and compliance requirements; ·invest in our manufacturing process for commercial-scale and cost-efficiency; 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 might achieve profitability andcannot be certain that we will be able to sustain profitability, if achieved. 16 We have limited financial resources and we are not certain that we will be able to maintain our current level of operations or be able to fund thefurther 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 an amountsufficient to fully fund our operations for the foreseeable future, and we will therefore use our cash resources and expect to require additional funds tomaintain our operations, continue our research and development programs, commence future pre-clinical studies and clinical trials, seek regulatory approvalsand manufacture and market our products. We will seek such additional funds through public or private equity or debt financings, collaborative licensingand development arrangements, non-dilutive government contracts and grants and other sources. While we continue to apply for contracts or grants fromacademic institutions, non-profits and governmental entities, there are no assurances that we would be successful. We cannot be certain that adequateadditional funding will be available to us on acceptable terms, if at all. If we cannot raise the additional funds required for our anticipated operations, we maybe required to delay significantly, reduce the scope of or eliminate one or more of our research or development programs, downsize our general andadministrative infrastructure, or seek alternative measures to avoid insolvency, including arrangements with collaborative partners or others that may requireus to relinquish rights 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 could be substantial.Future offerings also could have a material and adverse effect on the price of our common stock. Economic uncertainty may adversely affect our access to capital, cost of capital and ability to execute our business plan as scheduled. Generally, worldwide economic conditions remain uncertain. Access to capital markets is critical to our ability to operate. Traditionally,biopharmaceutical companies have funded their research and development expenditures through raising capital in the equity markets. Declines anduncertainties in these markets in the past have severely restricted raising new capital and have affected companies’ ability to continue to expand or fundexisting research and development efforts. We require significant capital for research and development for our vaccine candidates and clinical trials. Thegeneral economic and capital market conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected ouraccess to capital and 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 be adversely affected.In addition, if we are unable to access the capital markets on favorable terms, this could affect our ability to execute our business plan as scheduled.Moreover, we rely and intend to rely on third-parties, including our clinical research organizations and certain other important vendors and consultants. As aresult of the global economic situation, there may be a disruption or delay in the performance of our third-party contractors and suppliers. If such third-partiesare unable to adequately satisfy their contractual commitments to us in a timely manner, our business could be adversely affected. Even with the HHS BARDA contract award and the exercise of the contract option period, we may not be able to fully fund our influenzaprograms. The HHS BARDA contract is a cost-plus-fixed-fee contract that only reimburses certain specified activities that have been previously authorized byHHS BARDA. There is no guarantee that additional activities will not be needed and, if so, that HHS BARDA will reimburse us for these activities.Additionally, there are significant requirements associated with operating as a federal government contractor, which includes having appropriate accounting,project tracking and earned-value management systems implemented and operational, and we may not be able to consistently meet these requirements.Performance under the HHS BARDA contract requires that we comply with appropriate regulations and operational mandates, which require us to engageinternal and external expertise for compliance. Our ability to be regularly and fully reimbursed for our activities will depend on our ability to comply anddemonstrate compliance with such requirements. The HHS BARDA contract award does not guarantee that we will be successful in future clinical trials, that the vaccine candidates will belicensed 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 development activities, butwe remain fully responsible for conducting these approved activities. The award of the HHS BARDA contract does not guarantee that any of these activitieswill be successful. Our inability to be successful with certain key clinical or development activities could jeopardize our ability to obtain FDA licensure tosell our vaccines. 17 HHS BARDA could decide to potentially delay certain of our activities, and we may elect to move forward with certain activities at our own riskand without HHS BARDA reimbursement. Under the HHS BARDA contract, HHS BARDA regularly reviews our development efforts and clinical activities. Under certain circumstances, HHSBARDA may advise us to delay certain activities and invest additional time and resources before proceeding. If we follow such HHS BARDA advice, overallprogram delays and costs associated with additional resources for which we had not planned may result. Also, the costs associated with following such advicemay 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 insteadpursue activities that we believe are in the best interest of the program and of the Company, even if HHS BARDA would not reimburse us under our contract. HHS BARDA may decide not to extend our contract beyond the recently exercised option period. The HHS BARDA contract has recently been extended by an additional two years through the option period for a total performance period ofapproximately five and a half years. Depending on how we perform during the option period, HHS BARDA may decide whether or not to extend the contractto include additional periods of time to complete the contract deliverables. For example, the HHS BARDA contract anticipates that we file BLAs for licensureof both our seasonal influenza vaccine and our pandemic influenza vaccine; however, there is no guarantee that we will successfully complete all of the tasksrequired to file BLAs during this period. Although we believe that, based on our progress to date and the activities that we have planned in the future, HHSBARDA will want to extend the contract, there can be no guarantee that HHS BARDA will decide to extend our contract beyond September 2016. Because of changes to the influenza vaccine industry and regulatory environment, accelerated approval by the FDA of our seasonal influenzavaccine candidate may not be available. FDA regulations allow for the accelerated approval of a seasonal influenza vaccine based on a surrogate endpoint (i.e., HAI data) when there is ashortage of vaccine because influenza is a serious and sometimes, life-threatening disease. This may allow developers to obtain licensure well ahead of thetimeline for demonstrating clinical efficacy, which is necessary for traditional approval. Because the seasonal influenza vaccine industry has made significantsteps to provide sufficient supply to the recommended population in the U.S, the FDA may no longer view the development of our seasonal influenza vaccineas meeting an unmet medical need. Our expectation that our pandemic influenza vaccine candidate will be granted accelerated approval by the FDA is not guaranteed. As is the case with seasonal influenza, the FDA has articulated the immunogenicity criteria for accelerated approval of vaccines that addresspotential pandemic influenza strains. Because a controlled efficacy clinical trial of a pandemic vaccine candidate is not logistically or ethically possible,accelerated approval will require evidence that a seasonal vaccine made by the same manufacturing process as the pandemic vaccine is efficacious. There isno guarantee the FDA will grant accelerated approval of our pandemic vaccine before we provide seasonal influenza efficacy data. Also, because we currentlyanticipate that our seasonal influenza vaccine would not get accelerated approval from the FDA, it is likely that we would need to conduct larger and moreexpensive efficacy clinical trials and that licensure of our seasonal vaccine will be materially delayed for a year or more, assuming such licensure occurs atall, which may, in turn, delay the FDA approval of our pandemic vaccine. Our wholly-owned subsidiary Novavax AB, collaborations with regional partners, such as Cadila, LGLS, and PATH, as well as contracts withinternational providers, expose us to additional risks associated with doing business outside the U.S., and any adverse event could have a materialnegative impact on our operations. Swedish-based Novavax AB is a wholly-owned subsidiary of Novavax, Inc. 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 and arrangements withcompanies in other countries. We plan to continue to enter into collaborations or partnerships with companies, non-profit organizations and localgovernments in other parts of the world. Risks of conducting business outside the U.S. include: 18 ·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 other jurisdictions;·trade protections measures and import and export licensing requirements;·difficulties in and costs of staffing, managing and operating our international operations;·changes in environmental, health and safety laws;·fluctuations in foreign currency 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; and·possible nationalization and expropriation. These risks, individually or in the aggregate, could have a material adverse effect on our business, financial conditions, results of operations andcash 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 into additionalregional collaborations. Our relationships with Cadila, LGLS, and PATH are examples of these regional relationships. These relationships are likely toinvolve the licensing of our technology to our partner or entering into a distribution agreement, frequently on an exclusive basis. Generally, these exclusiveagreements are restricted to certain territories. Because we have entered into exclusive license and distribution agreements, larger companies may not beinterested, or able, to enter into collaborations with us on a worldwide-scale. Also, these regional relationships may make us an unattractive target for anacquisition. We are a biopharmaceutical company and face significant risk in developing, manufacturing and commercializing our products. We focus our research and development activities on vaccines, an area in which we have particular strengths and a technology that appearspromising. The outcome of any research and development program is highly uncertain. Only a small fraction of biopharmaceutical development programsultimately result in commercial products or even product candidates and a number of events could delay our development efforts and negatively impact ourability to obtain regulatory approval for, and to manufacture, market and sell, a vaccine. Vaccine candidates that initially appear promising often fail to yieldsuccessful products. In many cases, pre-clinical studies or clinical trials will show that a product candidate is not efficacious or that it raises safety concerns orhas other side effects that outweigh its intended benefit. Success in pre-clinical or early clinical trials may not translate into success in large-scale clinicaltrials. Further, success in clinical trials will likely lead to increased investment, accelerating cumulative losses to bring such products to market. Even ifclinical trial results appear 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 or post-marketingclinical trials may identify safety or other previously unknown problems with the product, which may result in regulatory approvals being suspended, limitedto narrow indications or revoked, which may otherwise prevent successful commercialization. Intense competition in the vaccine industry could also limitthe successful commercialization of our products. Many of our competitors have significantly greater resources and experience, which may negatively impact our commercial opportunities andthose of our current and future licensees. The biotechnology and pharmaceutical industries are subject to intense competition and rapid and significant technological change. We have manypotential competitors, including major pharmaceutical companies, specialized biotechnology firms, academic institutions, government agencies and privateand public research institutions. Many of our competitors have significantly greater financial and technical resources, experience and expertise in: 19 ·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;·the range of capabilities, from target identification and validation to drug discovery and development to manufacturing and marketing; 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, CSL Ltd, Sanofi Pasteur, SA, Pfizer Inc. and MedImmune, LLC (asubsidiary of AstraZeneca PLC), among others, compete in the vaccine market. In particular, these companies have greater experience and expertise insecuring government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatoryapprovals to market products, manufacturing such products on a broad scale and marketing approved products. There are many seasonal influenza vaccines currently approved and marketed. Competition in the sale of these seasonal influenza vaccines isintense. Therefore, newly developed and approved products must be differentiated from existing vaccines in order to have commercial success. In order toshow differentiation in the seasonal influenza market, a product must be more efficacious, particularly in older adults, and/or be less expensive and quicker tomanufacture. Many of our competitors are working on new products and new generations of current products, each of which is intended to be moreefficacious than products currently being marketed. Our seasonal influenza vaccine candidate may not prove to be more efficacious than current products orproducts under development by our competitors. Further, our manufacturing system may not provide enough savings of time or money to provide therequired differentiation for commercial success. We are also aware that there are multiple companies with active RSV vaccine programs at various stages of development. Thus, while there is noRSV vaccine currently on the market, there is likely to be significant and consistent competition as these active programs mature. Different RSV vaccinesmay work better for different segments of the population, so it may be difficult for a single RSV vaccine manufacturer to provide vaccines that are marketableto multiple population segments. Geographic markets are also likely to vary significantly, which may make it difficult to market a single RSV vaccineworldwide. Even if a manufacturer brings an RSV vaccine to license, it is likely that competitors will continue to work on new products that could be moreefficacious and/or less expensive. Our RSV vaccine candidate may not be as far along in development as other active RSV vaccine programs about which weare not aware, nor as efficacious as products under development by competing companies. We believe that there are at least two EBOV vaccine candidates that are currently being tested in humans: one by GlaxoSmithKline in collaborationwith the United States National Institute of Allergy and Infectious Diseases, and the other by a collaboration of NewLink Genetics, Merck Vaccines USA andthe Public Health Agency of Canada. Vaccine candidates against EBOV have been in development for more than a decade by large pharmaceuticalcompanies, smaller biotech companies, government agencies and academic labs worldwide, and with the high visibility of the recent West Africa epidemic,continued development activities are likely to continue and potentially increase. 20 Regardless of the disease, smaller or early-stage companies and research institutions may also prove to be significant competitors, particularlythrough collaborative arrangements with large and established pharmaceutical companies. As these companies develop their technologies, they may developproprietary positions, which may prevent or limit our product development and commercialization efforts. We will also face competition from these parties inrecruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and subject registration for clinical trials and inacquiring and in-licensing technologies and products complementary to our programs or potentially advantageous to our business. If any of our competitorssucceed in obtaining approval from the FDA or other regulatory authorities for their products sooner than we do or for products that are more effective or lesscostly than ours, our commercial opportunity could be significantly reduced. In order to effectively compete, we will have to make substantial investments in development, testing, manufacturing and sales and marketing orpartner with one or more established companies. There is no assurance that we will be successful in gaining significant market share for any vaccine. Ourtechnologies and vaccines also may be rendered obsolete or non-competitive as a result of products introduced by our competitors to the marketplace morerapidly and at a lower cost. If we are unable to attract or retain key management or other personnel, our business, operating results and financial condition could bematerially adversely affected. We depend on our senior executive officers, as well as key scientific and other personnel. The loss of these individuals could harm our business andsignificantly delay or prevent the achievement of research, development or business objectives. We have had turnover situations in key executive positionsand the lack of management continuity and resulting lack of long-term history with our Company along with the learning curve that executives experiencewhen they join our management team could result in operational and administrative inefficiencies and added costs. If we were to experience additionalturnover at the executive level, these risks could be exacerbated. We may not be able to attract qualified individuals for other key management or other personnel positions on terms acceptable to us. Competitionfor qualified employees is intense among pharmaceutical and biotechnology companies, and the loss of qualified employees, or an inability to attract, retainand motivate additional highly skilled employees required for the expansion of our activities, could hinder our ability to complete clinical trials successfullyand 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. We may not beable to attract and retain these individuals on acceptable terms, which could have a material adverse effect on our business, financial condition and results ofoperations. 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 in product liabilityclaims. We maintain product liability insurance coverage in the total amount of $20 million aggregate for all claims arising from the use of products inclinical trials prior to FDA approval. Coverage is relatively expensive, and the market pricing can significantly fluctuate. Therefore, we may not be able tomaintain insurance at a reasonable cost. There can be no assurance that we will be able to maintain our existing insurance coverage or obtain coverage for theuse of our other products in the future. This insurance coverage and our resources may not be sufficient to satisfy all liabilities resulting from product liabilityclaims. A successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable items, if at all. Even ifa claim is not successful, defending such a claim would be time-consuming and expensive, may damage our reputation in the marketplace and would likelydivert management’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; 21 ·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 government agencies, academic institutions, and non-profit entities. Such contracts orgrants can be highly attractive because they provide capital to fund the ongoing development of our technologies and vaccine candidates without dilutingour stockholders. However, there is often significant competition for these contracts or grants. Entities offering contracts or grants may have requirements toapply for or to otherwise be eligible to receive certain contracts or grants that our competitors may be able to satisfy that we cannot. In addition, such entitiesmay make arbitrary decisions as to whether to offer contracts or make grants, to whom the contracts or grants will be awarded and the size of the contracts orgrants to each awardee. Even if we are able to satisfy the award requirements, there is no guarantee that we will be a successful awardee. Therefore, we may notbe able to win any contracts or grants in a timely manner, if at all. Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholdersor 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 raise moneythrough additional debt or equity financings. To the extent that we raise additional capital by issuing equity securities, our stockholders will experienceimmediate dilution, which may be significant. There is also a risk that such equity issuances may cause an ownership change under the Internal RevenueCode of 1986, as amended, and similar state provisions, thus limiting our ability to use our net operating loss carryforwards and credits. To the extent that weraise additional capital through licensing arrangements or arrangements with collaborative partners, we may be required to relinquish, on terms that may notbe favorable to us, rights to some of our technologies or vaccine candidates that we would otherwise seek to develop or commercialize ourselves. In addition,current economic conditions may also negatively affect the desire or ability of potential collaborators to enter into transactions with us. They may also haveto delay or cancel research 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 andin-licensing of products, technologies and companies or the entry into strategic alliances and collaborations. The availability of high quality opportunities islimited, and we may fail to identify candidates that we and our stockholders consider suitable or complete transactions on terms that prove advantageous. Inorder 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 weare able to successfully identify and complete acquisitions, like our business combination with Novavax AB, we may not be able to integrate the assets ortake 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 and managementprocesses and to effectively expand, train and manage our employee base. Supporting our growth initiatives will require significant expenditures andmanagement resources, including investments in research and development, manufacturing and other areas of our business. If we do not successfully manageour growth and do not successfully execute our growth initiatives, then our business and financial results may be adversely impacted, and we may incur assetimpairment or restructuring charges. 22 Litigation could have a material adverse impact on our results of operation and financial condition. In addition to intellectual property litigation, from time to time, we may be subject to other litigation. Regardless of the merits of any claims thatmay be brought against us, litigation could result in a diversion of management’s attention and resources and we may be required to incur significantexpenses defending against these claims. If we are unable to prevail in litigation, we could incur substantial liabilities. Where we can make a reasonableestimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomesavailable, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of ourestimates could be wrong. PRODUCT DEVELOPMENT RISKS Because our vaccine product development efforts depend on new and rapidly evolving technologies, we cannot be certain that our efforts will besuccessful. Our vaccine development efforts depend on new, rapidly evolving technologies and on the marketability and profitability of our products. Ourdevelopment efforts and, if those are successful, commercialization of our vaccines could fail for a variety of reasons, and include the possibility that: ·our recombinant nanoparticle vaccine technologies, any or all of the products based on such technologies or our proprietary manufacturingprocess will be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances or commercial viability;·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 marketing products;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 licensure necessary to sell suchvaccine products. The development, manufacture and marketing of our pharmaceutical and biological products are subject to government regulation in the U.S. andother countries, including the European Medicines Agency and the Swedish Medical Products Agency with respect to our adjuvant product being developedin Sweden. In the U.S. and most foreign countries, we must complete rigorous pre-clinical testing and extensive clinical trials that demonstrate the safety andefficacy of a product in order to apply for regulatory approval to market the product. None of our vaccine candidates have yet gained regulatory approval inthe U.S. or elsewhere. We also have vaccine candidates in clinical trials and pre-clinical laboratory or animal studies. The steps generally 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 the intendedtarget population;·performance of a consistent and reproducible manufacturing process intended for commercial use, including appropriate manufacturing dataand regulatory inspections;·submission to the FDA of a BLA or a NDA; andŸFDA approval of the BLA or NDA before any commercial sale or shipment of the product. 23 The processes are expensive and can take many years to complete, and we may not be able to demonstrate the safety and efficacy of our vaccinecandidates to the satisfaction of regulatory authorities. The start of clinical trials can be delayed or take longer than anticipated for many and varied reasons,many of which are out of our control. Safety concerns may emerge that could lengthen the ongoing clinical trials or require additional clinical trials to beconducted. Promising results in early clinical trials may not be replicated in subsequent clinical trials. Regulatory authorities may also require additionaltesting, and we may be required to demonstrate that our proposed products represent an improved form of treatment over existing therapies, which we may beunable to do without conducting further clinical trials. Moreover, if the FDA or a foreign regulatory body grants regulatory approval of a product, theapproval may be limited to specific indications or limited with respect to its distribution. Expanded or additional indications for approved products may notbe approved, which could limit our revenue. Foreign regulatory authorities may apply similar limitations or may refuse to grant any approval. Consequently,even if we believe that pre-clinical and clinical data are sufficient to support regulatory approval for our vaccine candidates, the FDA and foreign regulatoryauthorities may not 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 regulatory approvals for amanufacturing facility for our vaccines, we may experience delays in product development, clinical trials, regulatory approval and commercialdistribution. Completion of our clinical trials and commercialization of our vaccine candidates require access to, or development of, facilities to manufacture ourvaccine candidates at sufficient yields and at commercial-scale. We have limited experience manufacturing any of our vaccine candidates in the volumes thatwill be necessary to support large-scale clinical trials or commercial sales. Efforts to establish these capabilities may not meet initial expectations as toscheduling, 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 to manufacture ourvaccine candidates in clinical quantities or, when necessary, in commercial quantities and at sufficient yields, then we must rely on third-parties. Other third-party manufacturers must also receive FDA approval before they can produce clinical material or commercial products. Our vaccines may be in competitionwith other products for access to these facilities and may be subject to delays in manufacture if third-parties give other products greater priority. We may notbe able to enter into any necessary third-party manufacturing arrangements on acceptable terms, or on a timely basis. In addition, we have to enter intotechnical 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 have difficulty sellingthe vaccine. Further, pandemic outbreaks present only short-term opportunities for us. There is no way to predict when there will be a pandemic outbreak, thestrain of the influenza or how long the pandemic will last. For these reasons, any delay in the delivery of an influenza vaccine could result in lower salesvolumes, lower sale prices, or no sales. Because the strain of the seasonal influenza changes annually, inventory of seasonal vaccine cannot be sold during asubsequent influenza season. Any delay in the manufacture of our influenza 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 our control.Because of contractual restraints and the limited number of third-party manufacturers with the expertise, required regulatory approvals and facilities tomanufacture our bulk vaccines on a commercial-scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions inthe production of our vaccine. A third-party manufacturer may also encounter difficulties in production. 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. 24 As a result, any delay or interruption could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our manufacturing facilities may not be “Phase 3 ready” during 2015, which may impede or delay our ability to manufacture one or morevaccine candidates for subsequent clinical trials or obtain BLA for such vaccines. Our manufacturing facility in Gaithersburg, Maryland, which is designed to manufacture Phase 3 vaccine candidates, has completed refurbishmentand relocation of equipment from our Belward facility, as well as installation of new equipment, and although validation to begin manufacturing has beenlargely completed, additional equipment and validation work is ongoing, and there are risks associated with bringing the facility to “Phase 3 readiness.”These risks include but are not limited to contractor issues and delays, licensing and permitting delays or rejections, limitations and delays on the installationof new or custom-ordered equipment, issues associated with validating equipment, processes or other aspects of ensuring GMP manufacturing. There aremany aspects of the project that rely on third party contractors and subcontractors, and delays are frequently encountered. 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 strategic collaborationswith pharmaceutical and biotechnology companies, non-profit organizations and government agencies. Establishing strategic collaborations and obtaininggovernment funding is difficult and time-consuming. Potential collaborators may reject collaborations based upon their assessment of our financial,regulatory or intellectual property position or based on their internal pipeline; government agencies may reject contract or grant applications based on theirassessment of public need, the public interest, our products’ ability to address these areas, or other reasons beyond our expectations or control. If we fail toestablish a sufficient number of collaborations or government relationships on acceptable terms, we may not be able to commercialize our vaccine candidatesor generate sufficient revenue to fund further research and development efforts. Even if we establish new collaborations or obtain government funding, these relationships may never result in the successful development orcommercialization of any vaccine candidates for several reasons, including the fact that: ·we may not have the ability to control the activities of our partners and cannot provide assurance that they will fulfill their obligations to 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 property rights;·any failure on the part of our partners to perform or satisfy their obligations to us could lead to delays in the development or commercializationof our vaccine candidates and affect our ability to realize product revenue; and·disagreements, including disputes over the ownership of technology developed with such collaborators, could result in litigation, which wouldbe time-consuming and expensive, and may delay or terminate research and development efforts, regulatory approvals and commercializationactivities. Our collaborators will be subject to the same regulatory approval of their manufacturing facility and process as Novavax. Before we could begincommercial manufacturing of any of our vaccine candidates, we and our collaborators must pass a pre-approval inspection before FDA approval and complywith the FDA’s GMP regulations. If our collaborators fail to comply with these requirements, our vaccine candidates would not be approved. If ourcollaborators fail to comply with these requirements after approval, we could be subject to possible regulatory action and may be limited in the jurisdictionsin 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 be requiredto undertake research, development, manufacturing and commercialization activities solely at our own expense. These activities would significantly increaseour capital requirements and, given our lack of sales, marketing and distribution capabilities, significantly delay the commercialization of our vaccinecandidates. 25 Because we depend on third-parties to conduct some of our laboratory testing, clinical trials, and manufacturing, we may encounter delays in orlose 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 manufacturing activities. If weare unable to obtain any necessary services on acceptable terms, we may not complete our product development efforts in a timely manner. We may lose somecontrol over these activities and become too dependent upon these parties. These third-parties may not complete testing or manufacturing activities onschedule, within budget, or when we request. We may not be able to secure and maintain suitable research organizations to conduct our laboratory testing,clinical trials and manufacturing activities. We have not manufactured any of our vaccine candidates at a commercial level and may need to identifyadditional third-party manufacturers to scale-up and manufacture our products. We are responsible for confirming that each of our clinical trials is conducted in accordance with its general investigational plan and protocol.Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards, commonly referred to as good clinical practices, forconducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the clinical trialparticipants are adequately protected. The FDA and foreign regulatory agencies also require us to comply with good manufacturing practices. Our reliance onthird-parties does not relieve us of these responsibilities and requirements. These third-parties may not successfully carry out their contractual duties orregulatory obligations or meet expected deadlines. In addition, these third-parties may need to be replaced or the quality or accuracy of the data they obtainmay be compromised or the product they manufacture may be contaminated due to the failure to adhere to our clinical and manufacturing protocols,regulatory requirements or for other reasons. In any such event, our pre-clinical development activities or clinical trials may be extended, delayed, suspendedor terminated, and we may not be able to obtain regulatory approval of, or commercially manufacture, our vaccine candidates. Our collaborations may not be profitable. We have formed CPLB with Cadila in India and, in connection with it, entered into a master services agreement pursuant to which we may requestcertain services from Cadila in the areas of biologics research, pre-clinical development, clinical development, process development, manufacturing scale-upand general manufacturing related services in India. We and Cadila amended the master services agreement first in July 2011, and subsequently in March2013, March 2014 and February 2015, in each case to extend the term by one year for which services can be provided by Cadila under this agreement. Underthe revised terms, if, by March 2016, the amount of services provided by Cadila under the master services agreement is less than $7.5 million, we will payCadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion of the shortfall amount that exceeds $2.0 million.We and Cadila also agreed to an amendment that allows CPLB, as of the beginning of 2013, to provide services on behalf of Cadila. Through December 31,2014, we have purchased $5.7 million in services from Cadila pursuant to this agreement, including amounts in which CPLB provided the services on behalfof Cadila. We have entered into a license agreement with LGLS that allows them to use our manufacturing and production technology to develop and sell ourinfluenza vaccines. We have also entered into a clinical development agreement with PATH related to our RSV vaccine for maternal immunization in low-resource countries. To the extent PATH continues to fund 50% of the Company’s external clinical development costs, but the Company does not continuedevelopment, the Company would grant PATH a fully-paid license to its RSV F vaccine technology for use in pregnant women in such low-resourcecountries 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 Company or becomeprofitable. 26 We have limited marketing capabilities, and if we are unable to enter into collaborations with marketing partners or develop our own sales andmarketing capability, we may not be successful in commercializing any approved products. Although we have initiated preliminary activities in anticipation of commercialization of our vaccine candidates, we currently have no dedicatedsales, marketing or distribution capabilities. As a result, we will depend on collaborations with third-parties that have established distribution systems andsales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenue will depend upon the efforts of third-parties, overwhich we may have little or no control. If we are unable to reach and maintain agreements with one or more pharmaceutical companies or collaborators, wemay be required to market our products directly. Developing a marketing and sales force is expensive and time-consuming and could delay a product launch.We cannot be certain that we will be able to attract 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 vaccine candidates willdepend on, among other things, their acceptance by physicians, patients, third-party payers, such as health insurance companies and other members of themedical community, as a vaccine and cost-effective alternative to competing products. If our vaccine candidates fail to gain market acceptance, we may beunable to earn sufficient revenue to continue our business. Market acceptance of, and demand for, any product that we may develop and commercialize willdepend 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 be accepted in themarket, we must demonstrate differentiation from other seasonal vaccines that are currently approved and marketed. This can mean that the vaccine is moreeffective in certain populations, such as in older adults, or cheaper and quicker to produce. There are no assurances that our vaccine will be more efficaciousthan other vaccines. If our vaccine candidates do not become widely accepted by physicians, patients, third-party payers and other members of the medical community,our business, financial condition and results of operations could 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 adjuvant technology is extracted from a species of soap-bark tree (Quillaja saponaria) grown in Chile, weneed long term access to quillaja extract with a consistent and sufficiently high quality. We need a secure supply of raw material, as well as back-up suppliers,or our adjuvant products may be delayed. If reforms in the health care industry make reimbursement for our potential products less likely, the market for our potential products will bereduced, 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-party payers, such asgovernment health administration authorities, private health insurers, managed care programs and other organizations. Over the past decade, the cost ofhealth 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 certain products. Similar federal or state health care legislation maybe adopted in the future and any products that we or our collaborators seek to commercialize may not be considered cost-effective. Adequate third-partyinsurance coverage may not be available for us to establish and maintain price levels that are sufficient for realization of an appropriate return on ourinvestment in product development. Moreover, the existence or threat of cost control measures could cause our corporate collaborators to be less willing orable to pursue research and development programs related to our vaccine candidates. 27 REGULATORY RISKS We may fail to obtain regulatory approval for our products on a timely basis or comply with our continuing regulatory obligations after approvalis obtained. Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities, loss of any potential marketing advantage ofbeing early to market and increased clinical trial costs. The speed with which we begin and complete our pre-clinical studies necessary to begin clinical trials,clinical trials and our applications for marketing approval will depend on several factors, including the following: ·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 or patientpopulation, the proximity of subjects and patients to clinical sites, the eligibility criteria for the clinical trial and the nature of the 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 which interpretationscould 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 regulatory applications;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 regulatory marketingapprovals. We may not be permitted to continue or commence additional clinical trials. We also face the risk that the results of our clinical trials may beinconsistent with the results obtained in pre-clinical studies or clinical trials of similar products or that the results obtained in later phases of clinical trialsmay be inconsistent with those 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 a finding thatthe subjects or patients are being exposed to an unacceptable health risk. In addition, we or our collaborators may be unable to submit applications toregulatory agencies within the time frame we currently expect. Once submitted, applications must be approved by various regulatory agencies before we orour collaborators can commercialize the product described in the application. All statutes and regulations governing the conduct of clinical trials are subjectto change in the future, which could affect the cost of such clinical trials. Any unanticipated costs or delays in our clinical trials could delay our ability togenerate revenue and harm our financial condition and results of operations. 28 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 relationships with Cadilain India, LGLS in South Korea and PATH. In order to market our products in the European Union, India, Asia and many other non-U.S. jurisdictions, we mustobtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries andcan involve additional testing and data review. The time required to obtain foreign regulatory approval may differ from that required to obtain FDA approval.The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatoryapprovals 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, forexample in other foreign countries. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on theregulatory approval process in other jurisdictions, including approval by the FDA. The failure to obtain regulatory approval in foreign jurisdictions couldharm our business. Even if regulatory approval is received for our vaccine candidates, the later discovery of previously unknown problems with a product,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 the product and themanufacturer of the product will be subject to continuing regulatory review, including adverse event reporting requirements and the FDA’s generalprohibition against promoting products for unapproved uses. Failure to comply with any post-approval requirements can, among other things, result inwarning letters, product seizures, recalls, substantial fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminalprosecutions. Any of these enforcement actions, any unanticipated changes in existing regulatory requirements or the adoption of new requirements, or anysafety issues that arise with any approved products, could adversely affect our ability to market products and generate revenue and thus adversely affect ourability to continue our business. We also may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknownproblems with the product or its manufacture are subsequently discovered and we cannot provide assurance that newly discovered or developed safety issueswill not arise following any regulatory approval. With the use of any vaccine by a wide patient population, serious adverse events may occur from time totime that initially do not appear to relate to the vaccine itself, and only if the specific event occurs with some regularity over a period of time does thevaccine become suspect as having a causal relationship to the adverse event. Any safety issues could cause us to suspend or cease marketing of our approvedproducts, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenue and our financial condition. Because we are subject to environmental, health and safety laws, we may be unable to conduct our business in the most advantageous manner. We are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use ofanimals, emissions and wastewater discharges, and the use and disposal of hazardous or potentially hazardous substances used in connection with ourresearch, including infectious disease agents. We also cannot accurately predict the extent of regulations that might result from any future legislative oradministrative action. Any of these laws or regulations could cause us to incur additional expense or restrict our operations. Our facilities in Maryland are subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals,microorganisms and various hazardous compounds used in connection with our research and development activities. In the U.S., these laws include theOccupational Safety and Health Act, the Toxic Test Substances Control Act and the Resource Conservation and Recovery Act. Similar national and localregulations govern our facility in Sweden. We cannot eliminate the risk of accidental contamination or discharge or injury from these materials. Federal, state,and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to civil damages in theevent of an improper or unauthorized release of, or exposure of individuals to, these hazardous materials. In addition, claimants may sue us for injury orcontamination that results from our use or the use by third-parties of these materials, and our liability may exceed our total assets. Compliance withenvironmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or productionefforts. 29 Although we have general liability insurance, these policies contain exclusions from insurance against claims arising from pollution from chemicalsor pollution from conditions arising from our operations. Our collaborators are working with these types of hazardous materials in connection with ourcollaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury we or our collaborators cause to persons or property byexposure to, or release of, any hazardous materials. However, we believe that we are currently in compliance with all applicable environmental andoccupational health and safety regulations. Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face uncertainty with respect to pricing,third-party reimbursement and healthcare reform, all of which could adversely affect any commercial success 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 potential futurecollaboration partners or customers, to obtain adequate levels of coverage and reimbursement for such products from third-party payers 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 inadequate levels ofreimbursement if they determine that a prescribed product has not received appropriate clearances from the FDA, or foreign equivalent, or other governmentregulators, is not used in accordance with cost-effective treatment methods as determined by the third-party payer, or is experimental, unnecessary orinappropriate. Prices could also be driven down by health maintenance organizations that control or 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 to change the healthcare system in ways that could affect our ability to sell vaccines. Some of these proposed and implemented reforms could result in reduced reimbursementrates for medical products, and while we have no current vaccines available for commercial sale, the impact of such reform could nevertheless adversely affectour business strategy, operations and financial results. In March 2010, President Obama signed into law a legislative overhaul of the U.S. healthcare system,known as the Patient Protection and Affordable Care Act of 2010, as amended by the Healthcare and Education Affordability Reconciliation Act of 2010(PPACA). As a result of this new legislation, substantial changes could be made to the current system for paying for healthcare in the United States, includingchanges made in order to extend medical benefits to those who currently lack insurance coverage. The long-term ramifications of PPACA remain unclear andmany details regarding implementation of PPACA are yet to be determined, however, the cost-containment measures that healthcare providers are institutingand the results of healthcare reforms may negatively impact the commercial prospects of one or more of our vaccine candidates currently in development. INTELLECTUAL PROPERTY RISKS Our 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 mustprosecute and maintain existing patents, obtain new patents and pursue trade secret and other intellectual property protection. We also must operate withoutinfringing the proprietary rights of third-parties or allowing third-parties to infringe our rights. We currently have or have rights to over 100 U.S. patents andcorresponding foreign patents and patent applications covering our technologies. However, patent issues relating to pharmaceuticals and biologics involvecomplex legal, scientific and factual questions. To date, no consistent policy has emerged regarding the breadth of biotechnology patent claims that aregranted by the U.S. Patent and Trademark Office or enforced by the federal courts. Therefore, we do not know whether our patent applications will result inthe issuance of patents, or that any patents issued to us will provide us with any competitive advantage. We also cannot be sure that we will developadditional proprietary products that are patentable. Furthermore, there is a risk that others will independently develop or duplicate similar technology orproducts or circumvent the patents issued to us. 30 There is a risk that third-parties may challenge our existing patents or claim that we are infringing their patents or proprietary rights. We could incursubstantial costs in defending patent infringement suits or in filing suits against others to have their patents declared invalid or claim infringement. It is alsopossible that we may be required to obtain licenses from third-parties to avoid infringing third-party patents or other proprietary rights. We cannot be surethat such third-party licenses would be available to us on acceptable terms, if at all. If we are unable to obtain required third-party licenses, we may bedelayed in or prohibited from developing, manufacturing or selling products requiring such licenses. Although our patent filings include claims covering various features of our vaccine candidates, including composition, methods of manufacture anduse, our patents do not provide us with complete protection against the development of competing products. Some of our know-how and technology is notpatentable. To protect our proprietary rights in unpatentable intellectual property and trade secrets, we require employees, consultants, advisors andcollaborators to enter into confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or otherproprietary information. Third parties may claim we infringe their intellectual property rights. Our research, development and commercialization activities, including any vaccine candidates resulting from these activities, may infringe or beclaimed to infringe patents owned by third-parties and to which we do not hold licenses or other rights. There may be rights we are not aware of, includingapplications that have been filed, but not published that, when issued, could be asserted against us. These third-parties could bring claims against us, and thatwould cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suitwere brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or biologic drug candidate that isthe 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 the third-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 likely obligate us to pay licensefees or royalties or 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 ofactual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. All of the issues described above could also impactour 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 pharmaceutical andbiotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, includinginterference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectualproperty rights with respect to our products and technology. We may become involved in litigation to protect or enforce our patents or the patents of our collaborators or licensors, which could be expensiveand time-consuming. Competitors may infringe our patents or the patents of our collaborators or licensors. As a result, we may be required to file infringement claims tocounter infringement for unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. In addition, in aninfringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using thetechnology at issue on the grounds that our patents do not cover its technology. An adverse determination of any litigation or defense proceeding could putone or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at the risk of not issuing. 31 Interference proceedings brought by the U.S. Patent and Trademark Office may be necessary to determine the priority of inventions with respect toour patent applications or those of our collaborators or licensors. Litigation or interference proceedings may fail and, even if successful, may result insubstantial costs and distraction to our management. We may not be able, alone or with our collaborators and licensors, to prevent misappropriation of ourproprietary rights, particularly in countries where the 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 risk that some ofour confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, therecould be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results to benegative, 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 is affected, our ability todevelop 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 our business.We will not own the patents or patent applications that underlie these licenses, and we will not control the enforcement of the patents. We will rely upon ourlicensors 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 in early 2022,covering VLP technology for use in human vaccines in certain fields of use, is non-exclusive. These applications are very significant to our business. If eachmilestone is achieved for any particular vaccine candidate, we would likely be obligated to pay an aggregate of $14 million to Wyeth for each vaccinecandidate developed and commercialized under the agreement. Achievement of each milestone is subject to many risks, including those described in theseRisk Factors. Annual license fees under the Wyeth agreement aggregate to $0.2 million per year. We are currently in discussion with Wyeth to potentiallyamend the agreement and restructure a $3 million milestone payment owed as a result of CPLB’s initiation of a Phase 3 clinical trial for its seasonal influenzaVLP vaccine candidate in the third quarter of 2014; however, there is no guarantee that Wyeth will agree to such an amendment in which case Novavaxwould be obligated to promptly pay the milestone payment. An additional milestone payment associated with commercialization may also be triggered byCPLB activities and there is no guarantee that Wyeth would agree to restructure such milestone payment through another amendment. While many of the licenses under which we have rights provide us with rights in specified fields, the scope of our rights under these and otherlicenses may be subject to dispute by our licensors or third-parties. In addition, our rights to use these technologies and practice the inventions claimed in thelicensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Any of our licenses maybe terminated 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 license agreement. Thecumulative license fees and royalties for these components may make the commercialization of these vaccine candidates uneconomical. If patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize our discoveries. Important legal issues remain to be resolved as to the extent and scope of available patent protection for biopharmaceutical products and processesin the U.S. and other important markets outside the U.S., such as Europe and Japan. In addition, foreign markets may not provide the same level of patentprotection as provided under the U.S. patent system. Litigation or administrative proceedings may be necessary to determine the validity and scope of certainof our and others’ proprietary rights. Any such litigation or proceeding may result in a significant commitment of resources in the future and could force us todo one or more of the following: cease selling or using any of our products that incorporate the challenged intellectual property, which would adverselyaffect our revenue; obtain a license from the holder of the intellectual property right alleged to have been infringed, which license may not be available onreasonable terms, if at all; and redesign our products to avoid infringing the intellectual property rights of third-parties, which may be time-consuming orimpossible 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 othersto use our discoveries or develop and commercialize our products. We cannot provide assurance that the patents we obtain or the unpatented technology wehold will afford us significant commercial protection. 32 RISKS RELATED TO OUR COMMON STOCK AND ORGANIZATIONAL STRUCTURE Because our stock price has been and will likely continue to be highly volatile, the market price of our common stock may be lower or morevolatile than expected. Our stock price has been highly volatile. The stock market in general and the market for biopharmaceutical companies in particular haveexperienced extreme volatility that has often been unrelated to the operating performance of particular companies. From January 1, 2014 throughDecember 31, 2014, the closing sale price of our common stock has been as low as $3.69 per share and as high as $6.65 per share. The market price of ourcommon stock may be influenced by many factors, including: ·future announcements about us or our collaborators or competitors, including the results of testing, technological innovations or newcommercial 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 vaccine candidates;·developments in our relationships with our collaboration partners;·announcements relating to health care reform and reimbursement levels for new vaccines and other matters affecting our business and results,regardless of accuracy;·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;·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;·recommendations by securities analysts or changes in earnings estimates; and·the other factors described in this Risk Factors section. In addition, the stock market in general, and the market for emerging and biopharmaceutical companies in particular, have experienced extremeprice and volume fluctuations that have particularly affected the market price for many of those companies. These fluctuations have often been unrelated tothe operating performance of these companies. These broad market fluctuations may cause the market price of our common stock to be lower or more volatilethan expected. Provisions of our Certificate of Incorporation and By-laws and Delaware law could delay or prevent the acquisition of the Company, even if suchacquisition would be beneficial to stockholders, and could impede changes in our Board. Provisions in 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. Our organizational documentsalso could limit the price investors are willing to pay in the future for our securities and make it more difficult to change the composition of our Board in anyone year. Certain provisions include the right of the existence of a staggered board with three classes of directors serving staggered three-year terms andadvance notice requirements for stockholders to nominate directors and make proposals. 33 As a Delaware corporation, we are also 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 date such personacquired 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 or prevent thecompletion of a transaction in which our stockholders could receive a substantial premium over the then current market price for their shares. We have never paid dividends on our capital stock, and we do not anticipate paying any such dividends in the foreseeable future. We have never paid cash dividends on our common stock. We currently anticipate that we will retain all of our earnings for use in the developmentof our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, of our common stock wouldbe the only source of gain for stockholders until dividends are paid, if at all. Item 1B.UNRESOLVED STAFF COMMENTS None. Item 2.PROPERTIES We lease three facilities in Gaithersburg, Maryland and one in Rockville, Maryland. In conjunction with our acquisition of Novavax AB in 2013, weacquired a facility lease in Uppsala, Sweden. A summary of our current facilities is set forth below. Property Approximate Location Square Footage Rockville, MD 51,200 Vaccine research and development and manufacturing facility 20FF Gaithersburg, MD 53,000 Corporate headquarters, vaccine research and development and manufacturing facility 21FF Gaithersburg, MD 19,400 Research and development laboratory facility and offices 22FF Gaithersburg, MD 21,000 Administrative, clinical and regulatory offices Uppsala, Sweden 15,400 Adjuvant manufacturing facility and research and development and administrativeofficesTotal square footage 160,000 Item 3.LEGAL PROCEEDINGS We currently have no material pending legal proceedings. Item 4.MINE SAFETY DISCLOSURES Not applicable. 34 PART II Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock trades on The NASDAQ Global Select Market under the symbol “NVAX.” The following table sets forth the range of high andlow closing sale prices for our common stock as reported on The NASDAQ Global Select Market for each quarter in the two most recent years: Quarter Ended High Low December 31, 2014 $5.98 $4.05 September 30, 2014 $5.01 $4.08 June 30, 2014 $5.13 $3.69 March 31, 2014 $6.65 $4.13 December 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 On February 23, 2015, the last sale price reported on The NASDAQ Global Select Market for our common stock was $9.49. Our common stock washeld by approximately 433 stockholders of record as of February 23, 2015, one of which is Cede & Co., a nominee for Depository Trust Company (or DTC).All of the shares of common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited intoparticipant 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 onour common stock since our inception. We do not anticipate declaring or paying any cash dividends in the foreseeable future. Securities Authorized for Issuance under our Equity Compensation Plans Information regarding our equity compensation plans, including both stockholder approved plans and non-stockholder approved plans, is includedin Item 12 of this Annual Report on Form 10-K (Annual Report). 35 Performance Graph The graph below compares the cumulative total stockholders return on our common stock for the last five fiscal years with the cumulative totalreturn on the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index (which includes Novavax) over the same period, assuming theinvestment of $100 in our common stock, the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index on December 31, 2009, andreinvestments of all dividends. Value of $100 invested on December 31, 2009 in stock or index, including reinvestment of dividends, for fiscal years ended December 31: 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 Novavax, Inc. $100.00 $91.35 $47.37 $71.05 $192.48 $222.93 NASDAQ Composite Index $100.00 $117.61 $118.70 $139.00 $196.83 $223.74 RUSSELL 2000 Growth Biotechnology Index $100.00 $111.52 $108.02 $124.06 $193.76 $240.78 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 the Companyunder the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporationlanguage in any such filing. 36 Item 6.SELECTED FINANCIAL DATA The following table sets forth selected financial data for each of the years in the five-year period ended December 31, 2014, which has been derivedfrom our audited financial statements. The information below should be read in conjunction with our financial statements and notes thereto and“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report. These historicalresults are not necessarily indicative of results that may be expected for future periods. For The Years Ended December 31, 2014(1) 2013(2) 2012 2011 2010 (in thousands, except per share amounts) Statements of Operations Data: Revenue $30,659 $20,915 $22,076 $14,688 $343 Net loss (82,947) (51,983) (28,507) (19,364) (35,708)Basic and diluted net loss per share (0.37) (0.31) (0.22) (0.17) (0.34)Weighted average shares used in computing basic and diluted net lossper share 225,848 169,658 131,726 113,610 104,768 As of December 31, 2014(1) 2013(2) 2012 2011 2010 (in thousands) Balance Sheet Data: Cash and marketable securities(3) $168,056 $133,068 $50,344 $18,309 $31,676 Total current assets 188,158 145,001 50,408 26,109 33,337 Working capital(4) 154,042 126,879 38,733 18,530 23,071 Total assets 276,002 235,125 102,345 66,576 74,844 Long-term debt, less current portion(5) 503 1,199 990 300 320 Accumulated deficit (493,093) (410,146) (358,163) (329,656) (310,292)Total stockholders’ equity 229,618 203,234 80,240 53,849 59,050 ____________________(1)In 2014, we completed a public offering of 28,750,000 shares of common stock resulting in net proceeds of approximately $108 million.(2)In 2013, we completed the acquisition of Novavax AB (see Note 4 to consolidated financial statements in Item 8) and a public offering of 31,846,950shares of common stock resulting in net proceeds of approximately $95 million.(3)Includes non-current marketable securities of $6,233 at December 31, 2012.(4)Working capital is computed as the excess of current assets over current liabilities.(5)Includes non-current portion of capital leases. 37 Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Any statements in the discussion below and elsewhere in this report, about the expectations, beliefs, plans, objectives, assumptions or future eventsor performance of Novavax, Inc. (“Novavax,” and together with its wholly-owned subsidiary, Novavax AB, the “Company,” “we” or “us”) are not historicalfacts and are forward-looking statements. Such forward-looking statements include, without limitation, statements with respect to our capabilities; goals;expectations regarding future revenue and expense levels; potential market sizes and demand for our product candidates; the efficacy, safety and intendedutilization of our product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; thedevelopment of our pre-clinical product candidates; the conduct, timing and potential results from clinical and other trials; plans regarding regulatoryfilings; the expected timing and content of regulatory actions; reimbursement by the Department of Health and Human Services, Biomedical AdvancedResearch and Development Authority (“HHS BARDA”); the potential modification to our license agreement with Wyeth Holdings Corporation, a subsidiaryof Pfizer Inc. (“Wyeth”); our available cash resources and the availability of financing generally; plans regarding partnering activities, business developmentinitiatives and the adoption of stock incentive plans, and other factors referenced herein. You can identify these forward-looking statements by the use ofwords or phrases such as “believe,” “may,” “could,” “will,” “would,” “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 notall forward-looking statements contain these words. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actualresults to differ materially from those expressed or implied in them. Any or all of our forward-looking statements in this Annual Report may turn out to beinaccurate or materially different than actual results. Because the risk factors discussed in this Annual Report, and other risk factors of which we are not aware, could cause actual results or outcomes todiffer materially from those expressed in any forward-looking statements made by or on behalf of us, you should not place undue reliance on any suchforward-looking statements. These statements are subject to risks and uncertainties, known and unknown, which could cause actual results and developmentsto differ materially from those expressed or implied in such statements. We have included important factors in the cautionary statements included in thisAnnual Report, particularly those identified in Part I, Item 1A, “Risk Factors” of this Annual Report, that we believe could cause actual results or events todiffer materially from the forward-looking statements that we make. These and other risks may also be detailed and modified or updated in our reports andother documents filed with the Securities and Exchange Commission (SEC) from time to time under the Securities Act and/or the Exchange Act. You areencouraged to read these filings as they are made. 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. Further, any forward-looking statements speak only as of the date on which it is made, and we undertake noobligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Newfactors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on ourbusiness or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Overview We are a clinical-stage vaccine company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines andadjuvants. Using innovative proprietary recombinant nanoparticle vaccine technology, we produce vaccine candidates to efficiently and effectively respondto both known and newly emerging diseases. Our vaccine candidates are genetically engineered three-dimensional nanostructures that incorporateimmunologically important proteins. Our product pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical developmentfor respiratory syncytial virus (“RSV”), seasonal influenza, pandemic influenza and the Ebola virus (“EBOV”). We have additional pre-clinical stageprograms in a variety of infectious diseases, including Middle East Respiratory Syndrome (“MERS”). Further, CPL Biologics Private Limited (“CPLB”), ourjoint venture company with Cadila Pharmaceuticals Limited (“Cadila”) in India, is actively developing a number of vaccine candidates that were geneticallyengineered by Novavax, including its seasonal VLP influenza vaccine candidate that completed enrollment of a Phase 3 clinical trial in India in 2014, and itsrabies vaccine that completed its Phase 1/2 clinical trial in India in 2014. CPLB is owned 20% by us and 80% by Cadila. CPLB operates a manufacturingfacility in India for the production of vaccines 38 We are also developing proprietary technology for the production of immune stimulating saponin-based adjuvants, through our Swedish wholly-owned subsidiary, Novavax AB. Our Matrix adjuvant technology utilizes selected quillaja fractions, which form separate matrix structures, to developmodern, multi-purpose immune-modulating adjuvant products for a broad range of potential vaccine applications. Our lead adjuvant for human applications,Matrix-M™, has been successfully tested in a Phase 1/2 clinical trial for our pandemic influenza H7N9 vaccine candidate, conducted under our contract withHHS BARDA, and we are currently testing Matrix-M in conjunction with our EBOV vaccine candidate in a Phase 1 clinical trial. Genocea Biosciences, Inc.(“Genocea”) has licensed rights to our Matrix technology and is conducting clinical trials with its herpes simplex 2 vaccine candidate using Matrix-M. Clinical Product Pipeline A current summary of our significant research and development programs and status of related products in development follows: Program Development Stage Funding Collaborator Respiratory Syncytial Virus (RSV) · Elderly Phase 2 · Maternal Immunization Phase 2 PATH· Pediatric Phase 1 Influenza · Seasonal Quadrivalent Phase 2 HHS BARDA· Pandemic H7N9 Phase 2 HHS BARDA Other · Ebola Virus (EBOV) Phase 1 · Combination (Influenza/RSV) Pre-Clinical CPLB Programs (India) · Seasonal Influenza Phase 3 · Rabies Phase 1/2 Respiratory Syncytial Virus (RSV) RSV is a major respiratory pathogen with a significant burden of disease in the very young and in the elderly. In healthy adults, RSV infections aregenerally mild to moderate in severity, but are typically more severe in infants and young children, as well as adults over the age of 60.10 Globally, RSV is acommon cause of childhood respiratory infection, with a disease burden of 64 million cases and approximately 160,000 deaths annually.11 Severe RSVdisease results in 3.4 million hospital admissions per year globally12 and disproportionately affects infants below six months of age. In infants, toddlers andyoung pre-school and school-age children, RSV infections result in the need for frequent medical care, including emergency room and office visits and areassociated with increased recurrent wheezing that can persist for years. In the U.S., nearly all children become infected with RSV before they are two years ofage, and it has been associated with 20% of hospitalizations and 15% of office visits for acute respiratory infection in young children13. It is also estimatedthat between 11,000 and 17,000 elderly and high risk adults die of RSV infection or its complications annually in the U.S., and up to 180,000 arehospitalized for serious respiratory symptoms.14 Currently, there is no approved RSV vaccine available for any of these populations, so an RSV vaccine hasthe potential to protect millions of persons from this far-reaching unmet medical need. 10 Dawson-Caswell, D, et al., (2011) Am Fam Physician. 83:143 - 14611 Nair, H., et al., (2010) Lancet. 375:1545 - 155512 WHO, (2014) “RSV Vaccine Status;” www.who.int/immunization/research/meetings_workshops/WHO_PDVAC_RSV.pdf 39 We are developing our respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) for the benefit of threesusceptible target populations: the elderly, infants (receiving protection through antibodies transferred from their mothers who would be immunized duringthe last trimester of pregnancy) and pediatrics. RSV Elderly Program In October 2014, we initiated enrollment in a Phase 2 dose-confirmation clinical trial of our RSV F Vaccine in 1,600 elderly adults (>60 years ofage). Recruitment was completed in November, and the preliminary data from this trial are expected in the third quarter of 2015. We believe these data willinform the next steps in the development of our RSV elderly program. Data from our earlier Phase 1 clinical trial in the elderly, initiated in October 2012,corroborates our previous clinical experiences with our RSV F vaccine candidate. In May 2014, we released one-year follow up data from that Phase 1clinical trial demonstrating that, for the group receiving the 90μg antigen dose without adjuvant, anti-F levels and palivizumab competing antibodies weresignificantly elevated over baseline at day 180, with neutralizing antibody levels that were considered protective for both the RSV A and RSV B strains. Webelieve these findings support the development of an annual RSV F vaccine candidate dose that can provide protection over the four-to-five month period ofa typical RSV season. RSV Maternal Immunization Program In September 2014, we initiated a Phase 2 clinical trial of our RSV F Vaccine in fifty (50) healthy women in their third trimester of pregnancy. Thistrial is designed to evaluate the safety and immunogenicity of our RSV F Vaccine in pregnant women and assesses the impact of maternal immunization onRSV-specific antibody levels through the baby’s first six months of life and infant safety through the first year of life. The preliminary data from this trial areanticipated in the third quarter of 2015 and will inform the next steps in the development of our RSV maternal program. In November 2014, we announcedthat the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (“FDA”) had granted Fast Track Designation to our RSV FVaccine for protection of infants via maternal immunization. The Fast Track designation, established by the FDA Modernization Act of 1997, is intended forproducts that treat serious or life-threatening diseases or conditions, and that demonstrate the potential to address unmet medical needs for such diseases orconditions. The program is intended to facilitate development and expedite review of drugs to treat serious and life-threatening conditions so that anapproved product can reach the market expeditiously. Fast Track designation specifically facilitates meetings to discuss all aspects of development tosupport licensure and it provides the opportunity to submit sections of a Biologics License Application (“BLA”) on a rolling basis as data become available,which permits the FDA to review modules of the BLA as they are received instead of waiting for the entire BLA submission. In April 2014, we announced positive top-line safety and immunogenicity data from a Phase 2 clinical trial in women of childbearing age that weresimilar to, or exceeded, immune responses seen in our previous clinical trials. This Phase 2 clinical trial evaluated the safety and immunogenicity of two doselevels of our RSV F vaccine candidate, in one or two injections, with and without an aluminum phosphate adjuvant, in 720 healthy women of childbearingage. These positive data supported Novavax’ decision to progress to the previously discussed Phase 2 clinical trial in pregnant women. 13 Hall, CB, et al., (2009) N Engl J Med. 360(6):588-9814 Falsey, A., et al., (2014) Infectious Disorders. 12(2): 98-102 40 PATH Vaccine Solutions (“PATH”) Clinical Development Agreement for RSV Maternal Program In conjunction with our development of our RSV F vaccine candidate for maternal immunization, in 2012 we entered into a clinical developmentagreement with PATH to develop our RSV F vaccine candidate in certain low-resource countries. We refer to this as our RSV Collaboration Program. We wereawarded approximately $2.0 million by PATH for initial funding under the agreement to partially support our Phase 2 dose-ranging clinical trial in women ofchildbearing age described above. In October 2013, the funding under this agreement was increased by $0.4 million to support reproductive toxicologystudies, which was necessary before we began conducting clinical trials in pregnant women. In December 2013, we entered into an amendment with PATHproviding an additional $3.5 million in funding to support the Phase 2 dose-confirmation clinical trial in 720 women of childbearing age. In October 2014,we entered into an amendment with PATH providing an additional $1.0 million towards the development of a strategy for approaching Phase 3 clinical trialsof our RSV maternal immunization program and are in ongoing discussion with PATH for additional funding. We retain global rights to commercialize theproduct and will support 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 continue development, wewould then grant PATH a fully-paid license to our RSV F vaccine candidate technology for use in pregnant women in certain contractually defined, low-resource countries. RSV Pediatric Program While the burden of RSV disease falls heavily on newborn infants, RSV is also a prevalent and currently unaddressed problem in pediatrics. Thisthird market segment for our RSV vaccine candidate remains an important opportunity. In November 2014, we initiated a Phase 1 clinical trial of our RSV FVaccine in 150 healthy children two to six years old. This trial is designed to evaluate the safety and immunogenicity of our RSV F Vaccine in children. Thepreliminary data from this trial are expected in late 2015 or in the first half of 2016 and will inform the next steps in the development of our RSV pediatricprogram. Influenza Influenza is a world-wide infectious disease that causes illness in humans with symptoms ranging from mild to life-threatening; serious illness occursnot only in susceptible populations such as pediatrics and the elderly, but also in the general population because of unique strains of influenza for whichmost humans have not developed protective antibodies. Influenza is a major burden on public health worldwide: estimates of one million deaths each yearare attributed to influenza.15 It is further estimated that, each year, influenza attacks between five and ten percent of adults and 20% to 30% of children,causing significant levels of illness, hospitalization and death.16 Although a number of licensed seasonal influenza vaccines are currently commercially available in most geographies, and these manufacturers havecapabilities to develop influenza vaccines that are responsive to unique and emerging influenza strains, we believe our influenza virus-like particle (“VLP”)vaccine candidates have immunological advantages over currently available vaccines. These immunological advantages stem from the fact that our influenzaVLPs contain three of the major structural virus proteins that are important for fighting influenza: hemagglutinin (“HA”) and neuraminidase (“NA”), both ofwhich stimulate the body to produce antibodies that neutralize the influenza virus and prevent its spread through the cells in the respiratory tract, and matrix1 (“M1”), which stimulates cytotoxic T lymphocytes to kill cells that may already be infected. Our VLPs are not made from live viruses and have no geneticnucleic material in their inner core, which render them incapable of replicating and causing disease. 15 Resolution of the World Health Assembly. Prevention and control of influenza pandemics and annual epidemics. WHA56.19. 28 May 200316 WHO. Vaccines against influenza. WHO position paper – November 2012 Weekly Epidemiol Record 2012;87(47):461–76. 41 Seasonal Quadrivalent Influenza Vaccine Developing and commercializing a seasonal influenza vaccine is an important business opportunity and strategic goal for Novavax. The AdvisoryCommittee for Immunization Practices of the Center for Disease Control and Prevention (“CDC”) recommends that all persons aged six months and oldershould be vaccinated annually against seasonal influenza. In conjunction with these universal recommendations, attention from the 2009 influenza H1N1pandemic, along with reports of other cases of avian-based influenza strains, has increased public health awareness of the importance of seasonal influenzavaccination, the market for which is expected to continue to grow worldwide in both developed and developing global markets. In recent years, trivalent influenza vaccines (three influenza strains: two influenza A strains and one influenza B strain) have been made generallyavailable on a worldwide basis. With two distinct lineages of influenza B viruses circulating, public health authorities have advocated for the addition of asecond influenza B strain to provide additional protection. Vaccine manufacturers have responded through the development and licensure of quadrivalent(i.e., four influenza strains: two influenza A strains and two influenza B strains) influenza vaccines. It is expected that quadrivalent seasonal influenzavaccines will ultimately replace trivalent seasonal influenza vaccines in the global market. There are currently four quadrivalent influenza vaccines licensedin the U.S., although additional quadrivalent seasonal influenza vaccines are expected to be licensed over the next several years. Current estimates forseasonal influenza vaccine growth in the top seven markets (U.S., Japan, France, Germany, Italy, Spain and UK), show potential growth from approximately$3.2 billion in the 2012/13 season to $5.3 billion by the 2021/2022 season.17 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-effectively manufacturedwithout the use of either the live influenza virus or eggs. In November 2014, under our contract with HHS BARDA, we initiated a Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccinecandidate in 400 healthy adults. The primary outcomes of the trial will assess safety and tolerability of the seasonal influenza VLP vaccine candidate andquantify immune responses to each of the four influenza strains based on hemagglutination-inhibiting antibody titers. In addition, secondary outcomes willevaluate neuraminidase-inhibition antibody titers for all four influenza strains. The preliminary data from this trial are expected in the second quarter of 2015and will inform the next steps in the development of our quadrivalent seasonal influenza VLP vaccine candidate. Data from our previous Phase 2 clinicaltrial, announced in July 2012, showed that our quadrivalent seasonal influenza VLP vaccine candidate demonstrated immunogenicity against all four viralstrains based on hemagglutination inhibition responses at day 21, was well-tolerated, and met the FDA accelerated approval seroprotection rates criterion forall four viral strains, although the potential to fulfill the seroconversion rates criterion was demonstrated in just three of the four viral strains. Following thatPhase 2 clinical trial, we focused our activities on manufacturing processes that will better ensure consistent, enhanced immune responses in all four strains. Pandemic H7N9 Influenza Vaccine In the aftermath of the 2009 pandemic of the A(H1N1) influenza strain, prevention of the potential devastation of a human influenza pandemicremains a key priority with both governmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1 influenza pandemicled to the production of approximately 126 million doses of monovalent (single strain) vaccine. Public health awareness and government preparedness forthe next potential influenza pandemic are driving development of vaccines that can be manufactured quickly against a potentially threatening influenzastrain. Until the spring of 2013, industry and health experts focused attention on developing a monovalent H5N1 influenza vaccine as a potential keydefense against a future pandemic threat; however, a significant number of reported cases in China of an avian-based influenza strain, known as A(H7N9), hasshifted attention to the potential development of a monovalent H7N9 influenza vaccine. In collaboration with HHS BARDA, we have now developed and delivered compelling safety and immunogenicity data on two pandemic vaccinecandidates, H5N1 and H7N9, which provide the U.S. government with alternatives for dealing with future potential threats. In September 2014, weannounced positive results from a Phase 1/2 clinical trial of our H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M in 610 healthy adults.Under our contract with HHS BARDA, the Phase 1/2 clinical trial was designed as a dose-ranging, randomized, observer-blinded, placebo-controlled clinicaltrial, to determine the contribution of Matrix-M to potential antigen dose sparing regimens. Our H7N9 influenza VLP vaccine candidate, with and withoutMatrix-M, was well tolerated and demonstrated a safety profile similar to the company’s prior experience with another saponin-based adjuvant. Matrix-Madjuvanted formulations demonstrated immunogenicity and dose-sparing benefits relative to unadjuvanted antigen. Hemagglutination-inhibiting antibodytiters were generally comparable to those reported in prior studies with another saponin adjuvant and the vaccine also elicited significant anti-neuraminidaseantibodies. In October 2014, we announced that the FDA had granted fast track designation to our H7N9 influenza VLP vaccine candidate with Matrix-M. 17 Influenza Vaccines Forecasts. Datamonitor (2013) 42 Potential Accelerated Approval Pathway for Influenza In the past, we have referenced attainment of accelerated approval immunogenicity endpoints for seroprotection and seroconversion as a potentialpathway for licensure of our influenza vaccines. The criteria for granting such accelerated approval of a BLA (the biologic equivalent to a New DrugApplication or “NDA”) for new seasonal and pandemic influenza vaccines was published by the FDA. Under FDA guidance, developers that can demonstrateresults that meet or exceed certain specified immunogenicity endpoint criteria in their clinical trials may, at the FDA’s discretion, be granted a license tomarket a product prior to submission of traditional clinical endpoint efficacy trial data. It should be noted that FDA licensure based on accelerated approvalnevertheless requires sponsors to conduct a post-licensure efficacy study to demonstrate the clinical benefit of the vaccine, which would thereby supporttraditional approval of the vaccine. Because it is not possible to conduct a clinical endpoint efficacy study for a pandemic vaccine in advance of a declaredpandemic, FDA’s pandemic guidance allows for submission of seasonal influenza clinical efficacy data for the purpose of confirming clinical benefit of apandemic vaccine manufactured 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 population recommended to receivesuch vaccine, a situation that persists with seasonal influenza vaccines. Although we have not ruled out this accelerated approval approach, particularly for our pandemic influenza program or certain populations withinour seasonal influenza program, we do not expect to pursue accelerated approval of our quadrivalent seasonal influenza VLP vaccine candidate, largelybecause of the uncertainty as to whether the accelerated approval pathway will be available to us at the time of our BLA submission and the unknown abilityof current and new influenza strains to meet such accelerated approval criteria. We are planning, therefore, to pursue traditional licensure of our quadrivalentseasonal influenza VLP vaccine candidate by conducting a clinical endpoint efficacy study for the purpose of submitting the data within the original BLA.These efficacy data will also support the requirement for clinical efficacy data for our pandemic vaccine program. We plan to discuss with the FDA ourlicensure pathways (both the traditional pathway for seasonal and possible accelerated pathways for pandemic and certain populations within the seasonalprogram) 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 ourquadrivalent seasonal influenza VLP vaccine candidate. HHS BARDA Contract for Recombinant Influenza Vaccines HHS BARDA awarded us a contract in 2011, which funds the development of both our multivalent seasonal influenza and pandemic influenza VLPvaccine candidates. Our contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses us for allowable direct contract costs incurred plusallowable indirect costs and a fixed-fee earned in the ongoing clinical development and product scale-up of our multivalent seasonal and monovalentpandemic influenza vaccines. In September 2014, we announced that HHS BARDA had exercised and initiated a two-year option to our contract, which notonly extended the contract until September 2016, but also added scope to support our development activities leading up to planned Phase 3 clinical studiesand $70 million of funding on top of the remainder of the $97 million base period funding. During 2014, we recognized revenue of $26.0 million and haverecognized approximately $78 million in revenue since the inception of the contract. 43 Ebola Virus (EBOV) Recent news reports have centered around EBOV, formerly known as Ebola hemorrhagic fever, which is a severe, often fatal illness in humans. Fivestrains of EBOV have been identified, the most recent of which, the 2014 Guinea-based EBOV strain, is associated with a case fatality rate of 50% to 90%.There are currently no licensed treatments proven to neutralize the virus, but a range of blood, immunological and drug therapies are under development.Despite the development of such therapies, current vaccine approaches target either a previous strain of the virus or were initially developed to be deliveredby genetic vectors. Our EBOV glycoprotein (“GP”) vaccine candidate, which was modeled using the 2014 Guinea-based EBOV strain, has been successfullytested in rodent, rabbit, and non-human primate pre-clinical models. We have also tested the vaccine with our Matrix-M adjuvant, which appears tosignificantly contribute to enhanced immunogenicity and dose-sparing. We initiated large-scale GMP production of our EBOV GP vaccine candidate in the fourth quarter of 2014. In February 2015, we announced theinitiation of enrollment in a Phase 1 clinical trial of our EBOV GP vaccine candidate in 150 healthy adults to evaluate the safety and immunogenicity of thisvaccine candidate in ascending doses, with and without our Matrix-M adjuvant. We expect preliminary data from this trial to be available in mid-2015. Inaddition, we announced successful preliminary data from a non-human primate challenge study of our EBOV GP vaccine candidate in which the challengewas lethal for the control animal, whereas 100% of the immunized animals were protected. Plans to demonstrate the safety and efficacy in a large-scale globalclinical trial will be developed based on the results of our Phase 1 clinical trial and in collaboration with global regulatory authorities and world healthagencies. Combination Respiratory (Influenza and RSV) Given the ongoing development of our quadrivalent seasonal influenza VLP vaccine candidate and our RSV F vaccine candidate, we see animportant opportunity to develop a combination respiratory vaccine candidate. This opportunity presents itself most evidently in the elderly, although wehave not ruled out developing a combination respiratory vaccine for the non-elderly. Early pre-clinical development efforts have given us confidence thatsuch a combination vaccine is viable and in animal models, provides acceptable immunogenicity. We intend to explore this development opportunity byconducting a Phase 1 clinical trial in such a combination vaccine in 2015. CPLB Programs (India) Seasonal Influenza CPLB completed enrollment of its on-going Phase 3 clinical trial of its seasonal VLP influenza vaccine candidate in the second half of 2014.Assuming positive safety and immunogenicity data from this Phase 3 clinical trial, CPLB plans to file for regulatory market authorization, the Indianequivalent of a BLA, for its seasonal VLP vaccine candidate. Rabies CPLB is developing a rabies G protein vaccine candidate that we genetically engineered and completed enrollment of an ongoing Phase 1/2 clinicaltrial in India in 2014. The objective is to develop a recombinant vaccine that can be administered both as a pre-exposure prophylaxis for residents of certainhigher-risk geographies and travelers to such locations, and as a post-exposure prophylaxis using fewer doses than the current standard of care. In October2014, CPLB presented clinical results from Stage I of the Phase 1/2 clinical trial, demonstrating that all vaccine recipients, at various doses levels andschedules, showed seroprotective antibody levels at day 14 that were sustained through day 180. The vaccine candidate, which was found to be safe andwell-tolerated, also induced seroprotective levels with two-dose and three-dose regimens. Assuming positive clinical data from Stage II of the Phase 1/2clinical trial, CPLB would plan to initiate a Phase 3 clinical trial. 44 Discovery Programs Our vaccine platform technology provides an efficient system to rapidly develop antigens to selected targets, refine manufacturing processes andoptimize development across multiple vaccine candidates. We pay close attention to global reports of emerging diseases for which there do not appear to beimmediate cures and where a vaccine protocol could offer potential protection. In addition to our response to the A(H7N9) influenza strain (as previouslydiscussed), we have been monitoring reports concerning MERS, a novel coronavirus first identified in September 2012 by an Egyptian virologist. MERSbecame an emerging threat in 2013, with the WHO currently reporting more than 850 confirmed cases of infection and more than 350 deaths. The MERSvirus is a part of the coronavirus family that includes the severe acute respiratory syndrome coronavirus (“SARS”). Because of the public health priority givento MERS, within weeks 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 earlieridentified as the antigen of choice in our work with a SARS vaccine candidate. In April 2014, in collaboration with the University of Maryland, School ofMedicine, we published results that showed our investigational vaccine candidates against both MERS and SARS blocked infection in laboratory studies.Although the development of a MERS vaccine candidate currently remains a pre-clinical program, we believe that our MERS vaccine candidate offers aviable option to interested global public health authorities. Sales of Common Stock In June 2014, we completed a public offering of 28,750,000 shares of our common stock, including 3,750,000 shares of common stock that wereissued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $4.00 per share resulting in net proceedsof approximately $108 million. In September 2013, we completed a public offering of 31,846,950 shares of our common stock, including 4,153,950 shares of common stock thatwere issued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $3.14 per share resulting in netproceeds of approximately $95 million. In 2012, we entered into an At Market Issuance Sales Agreement (“Sales Agreement”), under which our Board of Directors (the “Board”) approvedthe sale of up to an aggregate of $50 million in gross proceeds of our common stock. The shares of common stock are being offered pursuant to a shelfregistration statement filed with the SEC in March 2013, which replaced the previous shelf registration statement filed in 2010. The Board’s standing FinanceCommittee (the “Committee”) assists with its responsibilities to monitor, provide advice to our senior management and approve all capital raising activities.The Committee has been authorized by the Board, absent any action by the Board to the contrary, to take any additional actions necessary to carry out theBoard’s authorization of the issuance and sale of the common stock sold pursuant to the Sales Agreement. In doing so, the Committee is authorized to set theamount 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 millionshares at sales prices ranging from $2.06 to $3.38 per share, resulting in approximately $34.0 million in net proceeds. The most recent sales to occur under theSales Agreement were in September 2013. As of December 31, 2014, we have approximately $15 million available under the Sales Agreement. Critical Accounting Policies and Use of Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which havebeen 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 the reported amountsof assets, liabilities and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenueand expenses during the reporting period. These estimates, particularly estimates relating to accounting for revenue, the valuation of our marketablesecurities, stock-based compensation, long-lived assets, goodwill and estimated recovery of our net deferred tax assets have a material impact on ourconsolidated financial statements and are discussed 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, the results ofwhich form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources. Actualresults and outcomes could differ from these estimates and assumptions. 45 Revenue We recognize revenue under research contracts when a contract has been executed, the contract price is fixed or determinable, delivery of services orproducts has occurred and collection of the contract price is reasonably assured. Payments received in advance of work performed are recorded as deferredrevenue and losses on contracts, if any, are recognized in the period in which they become known. We are currently performing a research and development contract for a U.S. Government agency under a cost reimbursable fixed price contract.Under such cost reimbursable contracts, we are reimbursed and recognize revenue as allowable costs are incurred plus a portion of the fixed-fee earned. Weconsider fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred in performance of the work as compared tototal estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. Underour HHS BARDA contract, certain activities must be pre-approved by HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costsincurred under cost reimbursable contracts are recorded as cost of government contracts revenue. Our HHS BARDA contract provides the U.S. government theability to terminate the contract for convenience or to terminate for default if the Company fails to meet its obligations as set forth in the statement of work.We believe that if the government were to terminate the HHS BARDA contract for convenience, the costs incurred through the effective date of suchtermination and any settlement costs resulting from such termination would be allowable costs. Payments to us under cost reimbursable contracts, such as theHHS BARDA contract, are provisional payments subject to adjustment upon annual audit by the government. An audit by the U.S government of fiscal years2011 and 2012 was completed in the first quarter of 2014, which resulted in no significant adjustments. An audit of fiscal year 2013 has been initiated, buthas not been completed as of the date of this filing. Management believes that revenue for periods not yet audited has been recorded in amounts that areexpected to be realized upon final audit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billingsmay be adjusted accordingly in the period that the adjustment is known. Our collaborative research and development agreements may include an upfront payment, payments for research and development services,milestone payments and royalties. Agreements with multiple deliverables are evaluated to determine if the deliverables can be divided into more than oneunit of accounting. A deliverable can generally be considered a separate unit of accounting if both of the following criteria 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 right of return relative to the delivered item(s), delivery orperformance of the undelivered item(s) is considered probable and substantially in our control. Deliverables that cannot be divided into separate units arecombined and treated as one unit of accounting. Consideration received is allocated among the separate units of accounting based on the relative sellingprice method. Deliverables under these arrangements typically include rights to intellectual property, research and development services and involvement bythe parties in steering committees. Historically, deliverables under our collaborative research and development agreements have been deemed to have nostand-alone value and as a result have been treated as a single unit of accounting. In addition, we analyze our contracts and collaborative agreements todetermine whether the payments received should be recorded as revenue or as a reduction to research and development expenses. In reaching thisdetermination, 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 core operations. Historically, payments received under its contracts and collaborative agreements have been recognized asrevenue since we act as a 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 total estimated contractcosts. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of the work. Direct costs incurred undercollaborative research and development agreements are recorded as research and development expenses. If the performance under a fixed price contractcannot be reasonably estimated, we recognize the revenue on a straight-line basis over the contract term. Revenue associated with upfront payments under arrangements is recognized over the contract term or when all obligations associated with theupfront payment have been satisfied. 46 Revenue from the achievement of research and development milestones, if deemed substantive, is recognized as revenue when the milestones areachieved and the milestone payments are due and collectible. If not deemed substantive, we would recognize such milestone as revenue upon itsachievement on a straight-line basis over the remaining expected term of the research and development period. Milestones are considered substantive if all ofthe following conditions are met: (1) the milestone is non-refundable; (2) there is substantive uncertainty of achievement of the milestone at the inception ofthe arrangement; (3) substantive effort is involved to achieve the milestone and such achievement relates to past performance; and (4) the amount of themilestone appears reasonable in relation to the effort expended and all of the deliverables and payment terms in the arrangement. Marketable Securities Our marketable securities are classified as available-for-sale securities and are carried at fair value. Unrealized gains and losses on these securities, ifdetermined not to be “other-than-temporary,” are included in accumulated other comprehensive income (loss) in stockholders’ equity. Investments areevaluated periodically to determine whether a decline in value is other-than-temporary. Management reviews criteria, such as the magnitude and duration ofthe decline, as well as the Company’s ability to hold the securities until market recovery, to predict whether the loss in value is other-than-temporary. If adecline in value is determined to be other-than-temporary, the value of the security is reduced and the impairment is recorded in the statements of operations.For marketable securities carried at fair value, we disclose the level within the fair value hierarchy as prescribed by Accounting Standard Codification(“ASC”) 820, Fair Value Measurements and Disclosures. We evaluate the types of securities in our investment portfolio to determine the properclassification in the fair value hierarchy based on trading activity and market inputs. We generally obtain information from an independent third-party tohelp us determine the fair value of securities in Level 2 of the fair value hierarchy. Investment income is recorded when earned and included in investmentincome. Stock-Based Compensation We account for our stock-based compensation under our equity compensation plans in accordance with ASC 718, Compensation-StockCompensation. This standard requires us to measure the cost of employee services received in exchange for equity awards based on the grant-date fair valueof the award. Employee stock-based compensation is estimated at the date of grant based on the award’s fair value using the Black-Scholes option-pricingmodel and is recognized as an expense on a straight-line basis over the requisite service period for those awards expected to vest. The Black-Scholes option-pricing model requires the use of certain assumptions, the most significant of which are our estimates of the expected volatility of the market price of ourcommon stock and the expected term of the award. Our estimate of the expected volatility is based on historical volatility over the look-back periodcorresponding to the expected term. The expected term represents the period during which our stock-based awards are expected to be outstanding. Weestimate this amount based on historical experience of similar awards, giving consideration to the contractual terms of the awards, vesting requirements andexpectation of future employee behavior, including post-vesting exercise and forfeiture history. We review our valuation assumptions at each grant date and,as a result, our assumptions in future periods may change. Also, the accounting estimate of stock-based compensation expense is reasonably likely to changefrom period to period as further equity awards are made and adjusted for cancellations. Impairments of Long-Lived Assets We account for the impairment of long-lived assets (including finite-lived intangible assets) by performing an evaluation of the recoverability of thecarrying value of long-lived assets 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 assessed include, but are notlimited to, the following: a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, asignificant physical change in an asset, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, anadverse action or assessment by a regulator, an accumulation of costs significantly in excess of the amount originally expected to acquire or construct anasset, a current period operating or cash flow loss combined with a history of operating or cash flow losses and/or a projection or forecast that demonstratescontinuing losses associated with an asset used for the purpose of producing revenue. We consider historical performance and anticipated future results in ourevaluation of potential impairment. 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 losses are recognizedwhen the sum of expected future cash flows is less than the assets’ carrying value. 47 Goodwill Goodwill was generated from two business acquisitions. Our goodwill is not amortized, but is subject to impairment tests annually, or morefrequently should indicators of impairment arise. Because the Company’s only business is the development of recombinant vaccines, the Company operatesas a single operating segment and reporting unit. We utilize the market approach and, if considered necessary, the income approach to determine if we havean impairment of our goodwill. The market approach serves as the primary approach and is based on market value of invested capital. To ensure that ourcapital stock is the appropriate measurement of fair value, we have considered factors such as, our trading volume, diversity of investors and analystcoverage. The concluded fair value of our reporting unit significantly exceeded the carrying value at December 31, 2014 and 2013. The income approach isused as a confirming look to the market approach, if considered necessary. Goodwill impairment may exist if the carrying value of a reporting unit exceeds itsestimated fair value, which we test annually at December 31. If the carrying value of the reporting unit exceeds its fair value, step two of the impairmentanalysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill overits implied fair value should such a circumstance arise. Given the current economic conditions and the uncertainties regarding their impact on us, there can be no assurance that the estimates andassumptions made for purposes of our goodwill impairment testing will prove to be accurate predictions of the future, or that any change in the assumptionsor the current economic conditions will not trigger more frequently than on an annual basis. If our assumptions are not achieved or economic conditionsdeteriorate further, we may be required to record goodwill impairment charges in future periods. Income Taxes We recognize deferred tax assets and liabilities for expected future tax consequences of temporary differences between the carrying amounts and taxbasis of assets and liabilities. Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred taxassets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expectedto be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in income in the period such changes areenacted. Developing our provision for income taxes and analyzing our tax position requires significant judgment and knowledge of federal and state incometax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and any valuation allowances that may be required fordeferred tax assets. We assess the likelihood of realizing our deferred tax assets to determine whether an income tax valuation allowance is required. Based on suchevidence that can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred tax assets will be realized. Themain factors that we consider include: cumulative losses in recent years; income/losses expected in future years; the applicable statute of limitations; andpotential 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 morelikely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for thetaxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are reversed in the period in whichthe more likely than not recognition threshold is no longer satisfied. 48 A valuation allowance is established when necessary to reduce net deferred tax assets to the amount expected to be realized. We concluded that therealization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, our net deferred taxassets have been fully offset by a valuation allowance. Recent Accounting Guidance Not Yet Adopted For detailed information regarding recently issued accounting pronouncements and the expected impact on our consolidated financial statements,see Note 3, “Summary of Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements included in this Annual Report. Results of Operations for Fiscal Years 2014, 2013 and 2012 (amounts in tables are presented in thousands, except per share information) The following is a discussion of the historical financial condition and results of operations of Novavax, Inc., which includes Novavax AB’soperations since the acquisition date of July 31, 2013, and should be read in conjunction with the consolidated financial statements and notes thereto setforth in this Annual Report. Additional information concerning factors that could cause actual results to differ materially from those in our forward-lookingstatements is described under Part I, Item 1A, “Risk Factors” of this Annual Report. Revenue: 2014 2013 2012 Change 2013 to 2014 Change 2012 to 2013 Revenue: Total revenue $30,659 $20,915 $22,076 $9,744 $(1,161) Revenue for 2014 was $30.7 million as compared to $20.9 million for 2013, an increase of $9.7 million, or 47%. Revenue for 2014 and 2013 wasprimarily comprised of services performed under the HHS BARDA contract, and to a much lesser extent, the PATH clinical development agreement andrevenue from Novavax AB. The increase in revenue is primarily due to the higher level of activity in 2014 associated with our Phase 1/2 clinical trial of ourH7N9 pandemic VLP vaccine candidate and manufacturing work for our Phase 2 seasonal influenza clinical trial under the HHS BARDA contract, ascompared to 2013. We also had increased revenue in 2014 associated with Novavax AB resulting from twelve months of activity in 2014 as compared toonly five months in 2013. 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 and 2012 wasprimarily comprised of services performed under the HHS BARDA contract and, to a much lesser extent, the PATH clinical development agreement and in2013, revenue of $0.7 million from Novavax AB. The decrease in revenue is primarily due to the higher level of activity in 2012 associated with ourinfluenza clinical trials under the HHS BARDA contract as compared to 2013 when no similar clinical trials were initiated. In connection with the February2014 amendment of the HHS BARDA contract, we recorded revenue of $2.7 million in the fourth quarter of 2013 relating to manufacturing and otheractivities that support the Phase 1 clinical trial of our H7N9 influenza VLP candidate and Matrix-M adjuvant, which was conducted in the first half of 2014. For 2015, we expect a significant increase in revenue associated with our increased clinical trial and product development activities under the HHSBARDA contract to support the initiation of later-stage clinical trials of our quadrivalent seasonal influenza and pandemic H7N9 influenza VLP vaccinecandidates. 49 Costs and Expenses: 2014 2013 2012 Change 2013 to 2014 Change 2012 to 2013 Costs and Expenses: Cost of government contracts revenue. $14,987 $8,222 $14,692 $6,765 $(6,470)Research and development 79,435 50,308 26,907 29,127 23,401 General and administrative 19,928 14,819 10,142 5,109 4,677 Total costs and expenses $114,350 $73,349 $51,741 $41,001 $21,608 Cost of Government Contracts Revenue Cost of government contracts revenue includes direct costs of salaries, laboratory supplies, consultants and subcontractors and other direct costsassociated with our process development, manufacturing, clinical, regulatory and quality assurance activities under research contracts. Cost of governmentcontracts revenue increased to $15.0 million for 2014 from $8.2 million for 2013, an increase of $6.8 million, or 82%. The increase in cost of governmentcontracts revenue is primarily related to the costs of our Phase 1/2 clinical trial using our pandemic H7N9 influenza VLP vaccine candidate and Matrix-Madjuvant and manufacturing work for our Phase 2 quadrivalent seasonal VLP influenza clinical trial, as compared to 2013. For 2015, we expect a significantincrease in cost of government contracts revenue associated with our increased clinical trial and product development activities under the HHS BARDAcontract to support the initiation of later-stage clinical trials of our quadrivalent seasonal influenza and pandemic H7N9 influenza VLP vaccine candidates. Cost of government contracts revenue decreased to $8.2 million for 2013 from $14.7 million for 2012, a decrease of $6.5 million, or 44%. Thedecrease in cost of government contracts revenue is primarily related to the levels of activity associated with our influenza clinical trials previouslymentioned, including the 205 Trial (see discussion of the 205 Trial in Note 8 to the financial statements included herewith). Research and Development Expenses Research and development expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associated with ourprocess development, manufacturing, clinical, regulatory and quality assurance activities for internally funded programs. In addition, indirect costs such as,fringe benefits and overhead expenses, are also included in research and development expenses. Research and development expenses increased to $79.4million for 2014 from $50.3 million for 2013, an increase of $29.1 million, or 58%. Excluding the increase in research and development expenses of $3.6million from Novavax AB resulting from twelve months of activity in 2014 as compared to only five months in 2013, the increase in research anddevelopment expenses was primarily due to higher employee-related costs, the preparation and initiation of three RSV F vaccine candidate clinical trials in2014, the initiation of our EBOV GP vaccine candidate program and a $3.0 million milestone payment accrued under the Wyeth agreement, as compared to2013. For 2015, we expect a significant increase in research and development expenses primarily due to additional RSV F vaccine candidate clinical trialsand employee-related and facility costs to support product development of our RSV F vaccine candidate and other potential vaccine candidates. Research and 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 Novavax AB, the increase in research and developmentexpenses was primarily due to increased costs relating to our clinical trials of our RSV F vaccine candidate and pandemic H7N9 influenza VLP vaccinecandidate (internally funded programs at the time) and higher employee-related costs. 50 Costs and Expenses by Functional Area We 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 therefore believe that project-by-project information would not form a reasonable basis for disclosure to our investors. At December 31, 2014, we had 258 employees dedicated to our researchand development programs versus 175 employees as of December 31, 2013. Historically, we did not account for internal research and development expensesby project, since our employees work time is spread across multiple programs and our internal manufacturing clean-room facility produces multiple vaccinecandidates. The following summarizes our cost of government contracts revenue and research and development expenses by functional area for the year endedDecember 31 (in millions). 2014 2013 Manufacturing $53.5 $31.0 Vaccine Discovery 6.2 5.6 Clinical and Regulatory 34.7 21.9 Total cost of government contracts revenue and research anddevelopment expenses $94.4 $58.5 We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertainties associated withvaccine development. As we obtain data from pre-clinical studies and clinical trials, we may elect to discontinue or delay clinical trials in order to focus ourresources on more promising vaccine candidates. Completion of clinical trials may take several years or more, but the length of time can vary substantiallydepending upon the phase, size of clinical trial, primary and secondary endpoints and the intended use of the vaccine candidate. The cost of clinical trialsmay vary significantly over the life of a project as a result of a variety of factors, 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 of ourresearch and development projects or when, and to what extent, we will generate future cash flows from our research projects. General and Administrative Expenses General and administrative expenses increased to $19.9 million for 2014 from $14.8 million for 2013, an increase of $5.1 million, or 34%.Excluding the increase in general and administrative expenses of approximately $0.7 million from Novavax AB resulting from twelve months of activity in2014 as compared to only five months in 2013, the increase was primarily due to higher employee-related costs, as compared to 2013. For 2015, we expectgeneral and administrative expenses to increase primarily due to increased employee costs and pre-commercialization activities. General and administrative expenses increased to $14.8 million for 2013 from $10.1 million for 2012, an increase of $4.7 million, or 46%.Excluding the increase in general and administrative expenses of approximately $1.0 million from Novavax AB, the increase was primarily due to higherprofessional fees, including those associated with our acquisition of Novavax AB. 51 Other Income (Expense): 2014 2013 2012 Change 2013 to 2014 Change 2012 to 2013 Other Income (Expense): Investment income $286 $187 $165 $99 $22 Interest expense (157) (160) (32) 3 (128)Other income, net — 182 45 (182) 137 Realized gains on marketable securities 615 — 879 615 (879)Change in fair value of warrant liability — 267 101 (267) 166 Total other income (expense) $744 $476 $1,158 $268 $(682) We had total other income, net of $0.7 million for 2014 compared to total other income, net of $0.5 million for the same period in 2013. The changein fair value of our warrant liability resulted in a $0.3 million decrease in total other income, net for 2014, as compared to 2013. The warrants expiredunexercised on July 31, 2013. For 2014, we sold our auction rate security and received proceeds of $1.8 million resulting in a realized gain of $0.6 million. We had total other income, net of $0.5 million for 2013 compared to total other income, net of $1.2 million for 2012, a decrease of $0.7 million. In2012, two of our auction rate securities were redeemed at approximately par value and resulted in $0.9 million in realized gains as we had recorded other-than-temporary impairments on these securities in previous periods. Net Loss: 2014 2013 2012 Change 2013 to 2014 Change 2012 to 2013 Net Loss: Net loss $(82,947) $(51,983) $(28,507) $(30,964) $(23,476)Net loss per share $(0.37) $(0.31) $(0.22) $(0.06) $(0.09)Weighted average shares outstanding 225,848 169,658 131,726 56,190 37,932 Net loss for 2014 was $82.9 million, or $0.37 per share, as compared to $52.0 million, or $0.31 per share, for 2013, an increased net loss of $31.0million. The increased net loss was primarily due to higher research and development spending, including increased costs relating to our RSV F vaccinecandidate and higher employee-related costs. 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 net loss of $23.5million. The increased net loss was primarily due to higher research and development spending, including increased costs relating to clinical trials of ourRSV F vaccine candidate and pandemic H7N9 influenza VLP vaccine candidate and higher employee-related costs. The increase in weighted average shares outstanding for 2014 and 2013 is primarily a result of sales of our common stock in 2014 and 2013. Liquidity Matters and Capital Resources Our future capital requirements depend on numerous factors including, but not limited to, the commitments and progress of our research anddevelopment programs, the progress of pre-clinical and clinical testing, the time and costs involved in obtaining regulatory approvals, the costs of filing,prosecuting, defending and enforcing patent claims and other intellectual property rights and manufacturing costs. We plan to continue to have multiplevaccines and products in various stages of development, and we believe our operating expenses and capital requirements will fluctuate depending upon thetiming of certain events, such as the scope, initiation, rate and progress of our pre-clinical studies and clinical trials and other research and developmentactivities. 52 As of December 31, 2014, we had $168.1 million in cash and cash equivalents and marketable securities as compared to $133.1 million as ofDecember 31, 2013. These amounts consisted of $32.3 million in cash and cash equivalents and $135.7 million in marketable securities as of December 31,2014 as compared to $119.5 million in cash and cash equivalents and $13.6 million in marketable securities at December 31, 2013. The following table summarizes cash flows for 2014 and 2013 (in thousands): 2014 2013 Change 2013 to 2014 Summary of Cash Flows: Net cash (used in) provided by: Operating activities $(67,014) $(45,359) $(21,655)Investing activities (129,833) 16,392 (146,225)Financing activities 109,717 131,035 (21,318)Effect on exchange rate on cash and cash equivalents (6) 4 (10)Net increase (decrease) in cash and cash equivalents (87,136) 102,072 (189,208)Cash and cash equivalents at beginning of year 119,471 17,399 102,072 Cash and cash equivalents at end of year $32,335 $119,471 $(87,136) Net cash used in operating activities increased to $67.0 million for 2014 as compared to $45.4 million for 2013. The increase in cash usage wasprimarily due to increased costs relating to our RSV F vaccine candidate, higher employee-related costs and timing of vendor payments. During 2014 and 2013, our investing activities consisted primarily of purchases and sales, maturities and redemptions of marketable securities andcapital expenditures. In 2014, we primarily purchased marketable securities to increase our rate of return on our marketable securities relative to returnsavailable to money market funds. Capital expenditures for 2014 and 2013 were $7.3 million and $5.8 million, respectively. The increase in capitalexpenditures was primarily due to the purchase of laboratory equipment for process development, analytical development and manufacturing scale-uprequired to support our maturing product portfolio. In 2015, we expect our level of capital expenditures to be significantly higher than our 2014 spending aswe continue to scale up our capacity in anticipation of Phase 3 clinical trials and related regulatory obligations in the upcoming years. Our financing activities consisted primarily of sales of our common stock, and to a lesser extent, stock option exercises and purchases under ouremployee stock purchase plan in 2014. In 2014, we received net proceeds of approximately $108 million through our public offering at $4.00 per share. In2013, we received net proceeds of $94.7 million through our public offering at a sales price of $3.14 per share and $34.0 million through our SalesAgreement at an average sales price of $2.76 per share. In November 2011, we entered into lease agreements under which we lease our manufacturing, laboratory and office space in Gaithersburg,Maryland with rent payments for such space to the landlord that commenced April 1, 2014. Under the terms of the arrangement, the landlord provided us witha tenant improvement allowance of $2.5 million and an additional tenant improvement allowance of $3.0 million (collectively, the Improvement Allowance).The additional tenant improvement allowance is to be paid back to the landlord over the remaining term of the lease agreement through additional rentpayments. We were funded $0.5 million and $0.7 million in 2014 and 2013, respectively, and have been funded $5.5 million in total under the ImprovementAllowance. 53 In 2007, we entered into an agreement to license certain rights from Wyeth. The Wyeth license is a non-exclusive, worldwide license to a family ofpatents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. TheWyeth license provides for us to make an upfront payment (previously made), ongoing annual license fees, sublicense payments, milestone payments oncertain development activities and royalties on any product sales. The milestone payments are one-time only payments applicable to each related vaccineprogram. At present, our seasonal influenza VLP vaccine program (including CPLB’s seasonal influenza program) and our pandemic influenza VLP vaccineprogram are the only two programs to which the Wyeth license applies. The license may be terminated by Wyeth only for cause and may be terminated by usonly after we have provided ninety (90) days’ notice that we have absolutely and finally ceased activity, including through any affiliate or sublicense, relatedto the manufacturing, development, marketing or sale of products covered by the license. Payments under the agreement to Wyeth from 2007 through 2014totaled $6.4 million. We are currently in discussion with Wyeth to potentially amend the agreement and restructure the milestone payment owed as a result ofCPLB’s initiation of a Phase 3 clinical trial for its seasonal influenza VLP vaccine candidate in the third quarter of 2014. Such milestone payment is onlyowed once for our seasonal influenza VLP vaccine program and we would not be required to pay again if we or any of our affiliates initiate an additionalPhase 3 clinical trial in a seasonal influenza VLP vaccine candidate. The $3.0 million milestone has been recorded in accrued expenses on the consolidatedbalance sheet at December 31, 2014 and as a research and development expense in 2014. In connection with CPLB, we entered into a master services agreement with Cadila, which we and Cadila amended in July 2011, and subsequently inMarch 2013, March 2014 and February 2015, in each case to extend the term by one year for which services can be provided by Cadila under this agreement.Under the revised terms, if, by March 2016, the amount of services provided by Cadila under the master services agreement is less than $7.5 million, we willpay 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 amount that exceeds $2.0million. The Company and Cadila also agreed to an amendment that allows CPLB, as of the beginning of 2013, to provide services on behalf of Cadila.Through December 31, 2014, we have purchased $5.7 million in services from Cadila pursuant to this agreement, including amounts in which CPLBprovided the services on behalf of Cadila. Based on our December 31, 2014 cash and cash equivalents, marketable securities balances, the anticipated revenue under the contract with HHSBARDA and other resources, we believe we have adequate capital to fund our operating plans at least for the next twelve months. Additional capital may berequired in the future to develop our vaccine candidates through clinical development, manufacturing and commercialization. Our ability to obtain suchadditional capital will likely be subject to various factors, including our ability to perform and thus generate revenue under the HHS BARDA contract, ouroverall business performance and market conditions. Any capital raised by an equity offering will likely be substantially dilutive to the existing stockholders and any licensing or developmentarrangement may require us to give up rights to a product or technology at less than its full potential value. We cannot provide any assurance that newfinancing will be available on commercially acceptable terms, if at all. If we are unable to perform under the HHS BARDA contract or obtain additionalcapital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate one or more of our product research anddevelopment programs, and/or downsize our organization, including our general and administrative infrastructure. Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2014 (in thousands): Contractual Obligations: Total Less than One Year 1 - 3Years 3 - 5Years More than5 Years Operating leases $28,250 $4,903 $7,845 $5,063 $10,439 Capital lease 175 67 108 — — Notes payable 998 603 395 — — Purchase obligation 1,800 1,800 — — — Research funding payment 1,531 — 1,531 — — Accrued milestone payment 3,000 3,000 — — — Total contractual obligations $35,754 $10,373 $9,879 $5,063 $10,439 Our purchase obligation consists of our anticipated timing of future purchases for services pursuant to the master services agreement with Cadila. Weare required to purchase from Cadila, through March 2016, services for biologic research, pre-clinical development, clinical development, processdevelopment, manufacturing scale-up and general manufacturing related services. As of December 31, 2014, our remaining obligation to Cadila under themaster services agreement was $1.8 million. Our research funding payment includes the research funding received under the Genocea agreement (see Note 4to consolidated financial statements in Item 8). Our accrued milestone payment includes the milestone payment incurred in 2014 under the Wyeth agreement(see above for further discussion). 54 Off-Balance Sheet Arrangements We are not involved in any off-balance sheet agreements that have or are reasonably likely to have a material future effect on our financialcondition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary objective of our investment activities is preservation of capital, with the secondary objective of maximizing income. As of December31, 2014, we had cash and cash equivalents of $32.3 million, marketable securities of $135.7 million, all of which are short-term, and working capital of$154.0 million. Our exposure to market risk is primarily confined to our investment portfolio. As of December 31, 2014, our investments were classified as available-for-sale. We do not believe that a change in the market rates of interest would have any significant impact on the realizable value of our investment portfolio.Changes in interest rates may affect the investment income we earn on our marketable securities when they mature and the proceeds are reinvested into newmarketable securities and, therefore, could impact our cash flows and results of operations. Interest and dividend income is recorded when earned and included in investment income. Premiums and discounts, if any, on marketable securitiesare amortized or accreted to maturity and included in investment income. The specific identification method is used in computing realized gains and losseson the sale of our securities. We are headquartered in the U.S. where we conduct the vast majority of our business activities. We have one foreign consolidated subsidiary,Novavax AB, which is located in Sweden. A 10% decline in the exchange rate between the U.S. dollar and Swedish Krona would result in a reduction ofstockholders’ equity of approximately $3.1 million at December 31, 2014. 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 our borrowing activities. Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is set forth on pages F-1 to F-28. Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 9A.CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that aredesigned to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the“Exchange Act”) is recorded, processed, summarized and reported, within time periods specified in the rules and forms of the Securities and ExchangeCommission. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to bedisclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regardingrequired disclosure. 55 The Company’s management, with the participation of the chief executive officer and the chief financial officer, has evaluated the effectiveness ofthe Company’s disclosure controls and procedures as of the end of the period covered by this annual report (the “Evaluation Date”). Based on thatevaluation, the Company’s chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, such controls and procedureswere effective. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, theCompany’s principal executive officer and principal financial officer and effected by the Company’s board of directors, management and other personnel, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith accounting principles generally accepted in the United States (“GAAP”). Such internal 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 the assets of theCompany; ·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP,and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of theCompany; and ·provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of the Company’sassets 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 any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, ourmanagement used the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO). Based on its assessment, our management has determined that, as of December 31, 2014, our internal controls over financialreporting are effective based on those criteria. Ernst & Young LLP has issued an attestation report on our internal control over financial reporting. This report is included in the Reports ofIndependent Registered Public Accounting Firm in Item 15. Changes in Internal Control over Financial Reporting Our management, including our chief executive officer and chief financial officer, has evaluated any changes in our internal control over financialreporting that occurred during the quarterly period ended December 31, 2014, and has concluded that there was no change that occurred during the quarterlyperiod ended December 31, 2014 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B.OTHER INFORMATION None. 56 PART III Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2015 Annual Meeting ofStockholders scheduled to be held in June 2015 (the “2015 Proxy Statement”). We expect to file the 2015 Proxy Statement within 120 days after the close ofthe fiscal year ended December 31, 2014. Item 11.EXECUTIVE COMPENSATION We incorporate herein by reference the information required by this item concerning executive compensation to be contained in the 2015 ProxyStatement. Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS We incorporate herein by reference the information required by this item concerning security ownership of certain beneficial owners andmanagement and related stockholder matters to be contained in the 2015 Proxy Statement. The following table provides our equity compensation plan information as of December 31, 2014. Under these plans, our common stock may beissued upon the exercise of options and purchases under our Employee Stock Purchase Plan (“ESPP”). See also the information regarding our stock optionsand ESPP in Note 13 to the financial statements included herewith. Equity Compensation Plan Information Plan Category Number of Securitiesto be IssuedUpon Exercise ofOutstanding Options,Warrants and Rights(a) Weighted-Average Exercise Price of Outstanding Options,Warrants and Rights (b) Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (ExcludingSecurities Reflected inColumn (a))(c) Equity compensation plans approved by security holders(1) 16,963,098 $3.23 6,150,571 Equity compensation plans not approved 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 DIRECTOR INDEPENDENCE We incorporate herein by reference the information required by this item concerning certain related party transactions set forth in Note 17 to ourfinancial statements included herewith. We incorporate herein by reference other information required by this item concerning certain other relationships andrelated transactions and director independence to be contained in the 2015 Proxy Statement. Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES We incorporate herein by reference the information required by this item concerning principal accountant fees and services to be contained in the2015 Proxy Statement. 57 PART IV Item 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 FirmsF-2Consolidated Balance Sheets as of December 31, 2014 and 2013F-5Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2014, 2013 and 2012F-6Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012F-7Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012F-8Notes to Consolidated Financial StatementsF-9 (2)Financial Statement Schedules Financial statement schedules are omitted because they are not applicable, not required under the instructions or all the information required is setforth in the financial statements or notes thereto. (3)Exhibits Exhibits 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. 58 Exhibit Number Description3.1 Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’sAnnual Report on Form 10-K for the year ended December 31, 1996, filed March 21, 1997), as amended by the Certificate ofAmendment dated December 18, 2000 (Incorporated by reference to Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K forthe year ended December 31, 2000, filed March 29, 2001), as further amended by the Certificate of Amendment dated July 8, 2004(Incorporated by reference to Exhibit 3.1 to the Registrant’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 toExhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, filed August 10, 2009), as furtheramended by the Certificate of Amendment dated June 13, 2013 (Incorporated by reference to Exhibit 3.1 to the Registrant’sQuarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed on August 8, 2013) 3.2 Amended and Restated By-Laws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report onForm 10-K for the year ended December 31, 2012, filed on March 12, 2013) 4.1 Specimen stock certificate for shares of common stock of the Registrant, par value $.01 per share (Incorporated by reference toExhibit 4.1 to the Registrant’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, dated March 31, 2009(Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009,filed on May 11, 2009) 10.1†† Novavax, Inc. 1995 Stock Option Plan, as amended (Incorporated by reference to Appendix A of the Registrant’s Definitive ProxyStatement filed on March 31, 2003 in connection with the Annual Meeting held on May 7, 2003) 10.2†† Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Company’sAnnual Report for the year ended December 31, 2012, filed March 12, 2013) 10.3†† Amendment to Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Appendix 1 of the Registrant’sDefinitive Proxy Statement filed April 30, 2014 in connection with the Annual Meeting held on June 12, 2014) 10.4††* Form of Non-Statutory Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 StockIncentive Plan 10.5††* Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 Stock IncentivePlan 10.6††* Form of Restricted Stock Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan 10.7†† 2013 Employee Stock Purchase Plan (Incorporated by reference to Appendix C to the Registrant’s Definitive Proxy Statement filedon April 30, 2013 in connection with the Annual Meeting held on June 13, 2013) 10.8†† Employment Agreement between Novavax, Inc. and Stanley C. Erck, dated as of February 15, 2010 (Incorporated by reference toExhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on June 1, 2010) 59 10.9†† Employment Agreement between Novavax, Inc. and Stanley C. Erck, dated as of June 22, 2011 (Incorporated by reference to Exhibit10.2 to the Registrant’s Quarterly Report for the quarter ended June 30, 2011, filed on August 9, 2011) 10.10†† Employment Agreement between Novavax, Inc. and Gregory M. Glenn dated July 1, 2010 (Incorporated by reference to Exhibit 10.1to the Registrant’s Current Report on Form 8-K, filed on July 6, 2010) 10.11†† Employment Agreement between Novavax, Inc. and Russell P. Wilson dated November 7, 2011 (Incorporated by reference toExhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on November 14, 2011) 10.12†† Employment Agreement between Novavax, Inc. and Timothy J. Hahn dated June 22, 2011 (Incorporated by reference to Exhibit10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 14, 2012) 10.13†† Employment agreement between Novavax, Inc. and Barclay A. Phillips dated June 24, 2013 (Incorporated by reference to Exhibit99.2 to the Registrant’s Current Report on Form 8-K, filed on June 28, 2013) 10.14†† Novavax, Inc. Amended and Restated Change in Control Severance Benefit Plan, (Incorporated by reference to Exhibit 10.1 to theRegistrant’s Current Report on Form 8-K, filed on January 5, 2009) 10.15†† Form of Indemnification Agreement entered into between the Registrant and its directors and officers (Incorporated by reference toExhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010) 10.16 Lease Agreement between GP Rock One, LLC and Novavax, Inc., dated as of May 7, 2007 (Incorporated by reference to Exhibit 10.4to the Registrant’s Quarterly Report for the quarter ended June 30, 2008, filed on August 11, 2008) 10.17 First Amendment to Lease Agreement between GP Rock One, LLC and Novavax, Inc., dated as of May 30, 2008 (Incorporated byreference to Exhibit 10.5 to the Registrant’s Quarterly Report for the quarter ended June 30, 2008, filed on August 11, 2008) 10.18 Second Amendment to Lease Agreement between BMR-9920 Belward Campus Q, LLC (formerly GP Rock One, LLC) and Novavax,Inc., dated as of June 26, 2008 (Incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report for the quarter endedJune 30, 2008, filed on August 11, 2008) 10.19 Lease Agreement for space at 20 Firstfield between ARE-20/22/1300 Firstfield Quince Orchard, LLC and Novavax, Inc., dated as ofNovember 18, 2011 (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2011, filed on March 14, 2012) 10.20 Lease Agreement for space at 22 Firstfield between ARE-20/22/1300 Firstfield Quince Orchard, LLC and Novavax, Inc., dated as ofNovember 18, 2011 (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2011, filed on March 14, 2012) 10.21** Contract, effective as of February 24, 2011, between Novavax, Inc. and HHS/OS/ASPR/BARDA (Incorporated by reference toExhibit 10.1 to the Registrant’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the quarter ended on March 31, 2011,filed November 4, 2011) 60 10.22** Contract Amendment/Modification No. 5 between Novavax, Inc. and HHS/OS/ASPR/BARDA, dated February 21, 2014(Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013,filed on March 12, 2014) 10.23** Contract Amendment/Modification No. 6 between Novavax, Inc. and HHS/OS/ASPR/BARDA, dated September 22, 2014(Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30,2014, filed on November 6, 2014) 10.24** License Agreement, entered in February 25, 2011, effective as of December 9, 2010, between Novavax, Inc. and LG Life Sciences,Ltd. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A for thequarter ended March 31, 2011, filed on November 4, 2011) 10.25** License Agreement, dated July 5, 2007, between Novavax, Inc. and Wyeth Holdings Corporation (Incorporated by reference toExhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 9, 2007) 10.26** Amendment No. 1 to License Agreement, effective as of March 17, 2010, between Novavax, Inc. and Wyeth Holdings Corporation(Incorporated by reference to Exhibit 10.49 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010,filed on August 6, 2010) 10.27 At Market Issuance Sales Agreement, dated October 1, 2012, between Novavax, Inc. and MLV & Co. LLC (Incorporated by referenceto Exhibit 1.1 to the Registrant’s Current Report on Form 8-K, filed on October 2, 2012) 10.28 Stock Purchase Agreement between Novavax, Inc. and Satellite Overseas (Holdings) Limited, dated March 31, 2009 (Incorporated byreference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed on May 11,2009) 10.29** 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 Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,2009, filed on August 10, 2009) 10.30** Amended and Restated Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Limited, dated as of June 29,2009 (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,2009, filed on August 10, 2009) 10.31 Amendment No. 1 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Limited dated July 27, 2011(Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30,2011, filed on November 8, 2011) 10.32 Amendment No. 2 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Limited dated March 7, 2013(Incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012,filed on March 12, 2013) 10.33 Amendment No. 3 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Ltd. dated October 29, 2013(Incorporated by reference to Exhibit 10.1 to the Registrant’s Report on Form 8-K, filled on October 30, 2013) 10.34 Amendment No. 4 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Ltd. dated March 5, 2014(Incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013,filled on March 12, 2014) 10.35* Amendment No. 5 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Ltd. dated February 25, 2015 61 10.36** Amended and Restated Supply Agreement between Novavax, Inc. and CPL Biologicals Limited, dated as of June 29, 2009(Incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009,filed on August 10, 2009) 10.37** 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 Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,2009, filed on August 10, 2009) 10.38** Amended and Restated Seasonal / Other License Agreement between Novavax, Inc. and CPL Biologicals Limited, dated as ofJune 29, 2009 (Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2009, filed on August 10, 2009) 10.39** 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 Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009,filed on August 10, 2009) 10.40** H1N1 License to Agreement between Novavax, Inc. and CPL Biologicals Private Limited, dated October 6, 2009 (Incorporated byreference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March16, 2010) 14 Code of Business Conduct and Ethics (Incorporated by reference to Exhibit 14 to the Registrant’s Quarterly Report on Form 10-Q forthe quarter ended June 30, 2011, filed on August 9, 2011) 21.1* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 23.2* Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm 31.1* Certification of chief executive officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act 31.2* Certification of chief financial officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act 32.1* Certification of chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. NOVAVAX, INC. By:/s/ Stanley C. Erck President, Chief Executive Officer and Director Date: February 27, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated: Name Title Date /s/ Stanley C. Erck President and Chief Executive Officer and February 27, 2015Stanley C. Erck Director (Principal Executive Officer) /s/ Barclay A. Phillips Senior Vice President, Chief Financial February 27, 2015Barclay A. Phillips Officer and Treasurer (Principal Financial and Principal Accounting Officer) /s/ James F. Young Chairman of the Board of Directors February 27, 2015James F. Young /s/ Richard H. Douglas Director February 27, 2015Richard H. Douglas /s/ Gary C. Evans Director February 27, 2015Gary C. Evans /s/ Michael A. McManus Director February 27, 2015Michael A. McManus /s/ Rajiv I. Modi Director February 27, 2015Rajiv I. Modi 63 INDEX TO FINANCIAL STATEMENTSYears ended December 31, 2014, 2013 and 2012 Contents Reports of Independent Registered Public Accounting FirmsF-2Consolidated Balance Sheets as of December 31, 2014 and 2013F-5Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2014, 2013 and 2012F-6Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012F-7Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012F-8Notes to Consolidated Financial StatementsF-9 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders ofNovavax, Inc. We have audited the accompanying consolidated balance sheet of Novavax, Inc. as of December 31, 2014, and the related consolidated statementsof operations, comprehensive loss, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Novavax, Inc.at December 31, 2014, and the consolidated results of its operations and its cash flows for the year then ended in conformity with U.S. generally acceptedaccounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Novavax, Inc.’sinternal control over financial reporting as of December 31, 2014, based on criteria established in the Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2015 expressed an unqualifiedopinion thereon. /s/ Ernst & Young LLP Baltimore, MDFebruary 26, 2015 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders ofNovavax, Inc. We have audited Novavax, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). NovavaxInc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internalcontrol over financial reporting, included in Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express anopinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides 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 of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate. In our opinion, Novavax, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, basedon the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance of Novavax Inc. as of December 31, 2014 and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity,and cash flows for the period then ended of Novavax Inc. and our report dated February 26, 2015 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Baltimore, MDFebruary 26, 2015 F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders ofNovavax, Inc. We have audited the accompanying consolidated balance sheet of Novavax, Inc. (a Delaware corporation) and subsidiary (the “Company”) as ofDecember 31, 2013, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each ofthe two years in the period ended December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility isto express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditalso includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Novavax, Inc.and subsidiary as of December 31, 2013, and the results of their operations and their cash flows for each of the two years in the period ended December 31,2013 in conformity with accounting principles generally accepted in the United States of America. /s/ Grant Thornton LLP McLean, VirginiaMarch 12, 2014 F-4 NOVAVAX, INC. CONSOLIDATED BALANCE SHEETS December 31, 2014 2013 (in thousands, except share and pershare information) ASSETSCurrent assets: Cash and cash equivalents $32,335 $119,471 Marketable securities 135,721 13,597 Restricted cash 297 1,417 Accounts receivable – billed 7,510 1,911 Accounts receivable – unbilled 3,100 4,988 Prepaid expenses and other current assets 9,195 3,617 Total current assets 188,158 145,001 Property and equipment, net 19,737 14,251 Intangible assets, net 12,577 16,250 Goodwill 54,612 58,707 Other non-current assets 918 916 Total assets $276,002 $235,125 LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities: Accounts payable $12,908 $5,985 Accrued expenses 19,397 10,411 Current portion of notes payable 603 877 Deferred rent 1,138 470 Other current liabilities 70 379 Total current liabilities 34,116 18,122 Deferred revenue 2,500 2,500 Non-current portion of notes payable 395 1,004 Deferred rent 7,734 8,502 Other non-current liabilities 1,639 1,763 Total liabilities 46,384 31,891 Commitments and contingencies — — Stockholders’ equity: Preferred stock, $0.01 par value, 2,000,000 shares authorized; no shares issued and outstanding — — Common stock, $0.01 par value, 300,000,000 shares authorized at December 31, 2014 and 2013; and 239,287,294shares issued and 238,831,864 shares outstanding at December 31, 2014 and 209,110,744 shares issued and208,655,314 shares outstanding at December 31, 2013 2,393 2,091 Additional paid-in capital 729,373 612,900 Accumulated deficit (493,093) (410,146)Treasury stock, 455,430 shares, cost basis (2,450) (2,450)Accumulated other comprehensive income (loss) (6,605) 839 Total stockholders’ equity 229,618 203,234 Total liabilities and stockholders’ equity $276,002 $235,125 The accompanying notes are an integral part of these financial statements. F-5 NOVAVAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years ended December 31, 2014 2013 2012 (in thousands, except per share information) Revenue: Government contracts $26,213 $17,708 $20,671 Research and development collaborations 4,446 3,207 1,405 Total revenue 30,659 20,915 22,076 Costs and expenses: Cost of government contracts revenue 14,987 8,222 14,692 Research and development 79,435 50,308 26,907 General and administrative 19,928 14,819 10,142 Total costs and expenses 114,350 73,349 51,741 Loss from operations (83,691) (52,434) (29,665)Other income (expense): Investment income 286 187 165 Interest expense (157) (160) (32)Other income, net — 182 45 Realized gains on marketable securities 615 — 879 Change in fair value of warrant liability — 267 101 Loss from operations before income tax expense (82,947) (51,958) (28,507)Income tax expense — 25 — Net loss $(82,947) $(51,983) $(28,507) Basic and diluted net loss per share $(0.37) $(0.31) $(0.22) Basic and diluted weighted average number of common shares outstanding 225,848 169,658 131,726 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS For the Years ended December 31, 2014 2013 2012 (in thousands) Net loss $(82,947) $(51,983) $(28,507)Other comprehensive income (loss): Net unrealized gains (losses) on investments available-for-sale (65) 186 (402)Reclassification adjustment for gains included in net loss (615) — — Foreign currency translation adjustment (6,764) 223 — Other comprehensive income (loss) (7,444) 409 (402)Comprehensive loss $(90,391) $(51,574) $(28,909) The accompanying notes are an integral part of these financial statements. F-6 NOVAVAX, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the Years ended December 31, 2014, 2013 and 2012 Accumulated Additional Other Total Common Stock Paid-in Accumulated Treasury Comprehensive Stockholders’ Shares Amount Capital Deficit Stock Income (Loss) Equity (in thousands, except share information)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 and restrictedstock — — 2,091 — — — 2,091 Exercise of stock options 90,534 1 53 — — — 54 Issuance of common stock, net of issuance costs of $365 30,827,346 308 52,847 — — — 53,155 Unrealized gain (loss) on marketable securities — — — — — (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 andrestricted stock — — 2,480 — — — 2,480 Exercise of stock options 667,867 7 1,491 — — — 1,498 Issuance of common stock, net of issuance costs of $6,067 60,044,130 600 169,990 — — — 170,590 Unrealized gain (loss) on marketable securities — — — — — 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 Non-cash compensation cost for stock options, ESPP andrestricted stock — — 6,090 — — — 6,090 Exercise of stock options/Purchase under ESPP 1,411,550 14 2,776 — — — 2,790 Restricted stock issued as compensation 15,000 — — — — — — Issuance of common stock, net of issuance costs of $7,105 28,750,000 288 107,607 — — — 107,895 Unrealized gain (loss) on marketable securities — — — — — (680) (680)Foreign currency translation adjustment — — — — — (6,764) (6,764)Net loss — — — (82,947) — — (82,947)Balance at December 31, 2014 239,287,294 $2,393 $729,373 $(493,093) $(2,450) $(6,605) $229,618 The accompanying notes are an integral part of these financial statements. F-7 NOVAVAX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years ended December 31, 2014 2013 2012 (in thousands) Operating Activities: Net loss $(82,947) $(51,983) $(28,507)Reconciliation of net loss to net cash used in operating activities: Change in fair value of warrant liability ― (267) (101)Depreciation and amortization 4,424 2,591 1,666 Loss (Gain) on disposal of property and equipment 534 (32) (28)Amortization of net premiums (discounts) on marketable securities 415 507 (18)Deferred rent (552) 897 660 Non-cash stock-based compensation 6,090 2,480 2,091 Realized gains on marketable securities (615) ― (879)Other 60 (200) ― Changes in operating assets and liabilities: Restricted cash 1,120 (431) (986)Accounts receivable – billed (5,705) (451) 954 Accounts receivable – unbilled 1,888 (3,418) 266 Prepaid expenses and other assets (5,904) 402 40 Accounts payable and accrued expenses 13,979 4,184 2,009 Deferred revenue (253) (341) 258 Lease incentives received 452 703 4,346 Net cash used in operating activities (67,014) (45,359) (18,229) Investing Activities: Capital expenditures (7,268) (5,785) (4,341)Proceeds from disposal of property and equipment 39 116 324 Net cash received from acquisition ― 3,034 ― Purchases of marketable securities (176,469) (14,754) (48,652)Proceeds from sales, maturities and redemptions of marketable securities 53,865 33,781 20,407 Net cash provided by (used in) investing activities (129,833) 16,392 (32,262) Financing Activities: Principal payments of capital leases (124) (87) (104)Principal payments of notes payable (671) (473) (60)Proceeds from notes payable ― 1,450 650 Changes in restricted cash (2) (1) (756)Cash paid with acquisition (171) ― ― Net proceeds from sales of common stock, net of offering costs of $7.1 million, $6.1 million and $0.4 million, respectively 107,896 128,648 54,002 Proceeds from the exercise of stock options and employee stock purchases 2,789 1,498 54 Net cash provided by financing activities 109,717 131,035 53,786 Effect of exchange rate on cash and cash equivalents (6) 4 ― Net increase (decrease) in cash and cash equivalents (87,136) 102,072 3,295 Cash and cash equivalents at beginning of year 119,471 17,399 14,104 Cash and cash equivalents at end of year $32,335 $119,471 $17,399 Supplemental disclosure of non-cash activities: Common stock issued in connection with acquisition $― $41,942 $― Capital expenditures included in accounts payable and accrued expenses $2,615 $379 $1,321 Deposit applied towards the purchase of equipment $― $― $500 Equipment acquired under a capital lease $― $― $399 Supplemental disclosure of cash flow information: Cash interest payments $179 $177 $20 The accompanying notes are an integral part of these financial statements. F-8 NOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2014, 2013 and 2012 Note 1 – Organization Novavax, Inc. (“Novavax,” and together with its wholly-owned subsidiary, “Novavax AB,” the “Company”) is a clinical-stage vaccine companyfocused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. The Company’s product pipeline targetsa variety of infectious diseases with vaccine candidates currently in clinical development for respiratory syncytial virus (“RSV”), seasonal influenza,pandemic influenza and Ebola virus (“EBOV”). The Company has additional pre-clinical stage programs in a variety of infectious diseases, including MiddleEast Respiratory Syndrome (“MERS”). Note 2 – Operations The Company’s vaccine candidates currently under development, some of which include adjuvants, will require significant additional research anddevelopment efforts that include extensive pre-clinical and clinical testing, and regulatory approval prior to commercial use. As a clinical-stage vaccine company, the Company has primarily funded its operations from proceeds through the sale of its common stock in equityofferings and revenue under its contract with the Department of Health and Human Services, Biomedical Advanced Research and Development Authority(“HHS BARDA”) and, to a lesser degree, revenue under its contract with Path Vaccine Solutions (“PATH”). Management regularly reviews the Company’scash and cash equivalents and marketable securities against its operating budget and forecast to monitor the sufficiency of the Company’s working capital,and anticipates continuing to draw upon available sources of capital to meet its product development activities. Note 3 – Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of Novavax, Inc. and its wholly-owned subsidiary, Novavax AB, sinceJuly 31, 2013, the date Novavax AB was acquired. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States, requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differmaterially from those estimates. F-9 Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase. Cash and cashequivalents consist of the following at December 31 (in thousands): 2014 2013 Cash $4,481 $4,251 Money market funds 20,354 100,049 Government-backed security 7,500 ― Corporate debt securities ― 15,171 Cash and cash equivalents $32,335 $119,471 Cash equivalents are recorded at cost plus accrued interest, which approximate fair value due to their short-term nature. Marketable Securities Marketable securities consist primarily of commercial paper, asset-backed securities and corporate notes. Classification of marketable securitiesbetween current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company’s ability and intent tohold the investment to maturity. Interest and dividend income is recorded when earned and included in investment income in the consolidated statements of operations. Premiumsand discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements ofoperations. The specific identification method is used in computing realized gains and losses on the sale of the Company’s securities. The Company classifies its marketable securities with readily determinable fair values as “available-for-sale.” Investments in securities that areclassified as available-for-sale are measured at fair market value in the consolidated balance sheets, and unrealized holding gains and losses on marketablesecurities are reported as a separate component of stockholders’ equity until realized. Marketable securities are evaluated periodically to determine whether adecline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means thatthe prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than,the carrying value of the security. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company’s ability to holdthe securities until market recovery, to predict whether 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 is reduced and the impairment is recorded as other income, net in the consolidated statements of operations. Concentration of Credit Risk Financial instruments, which possibly expose the Company to concentration of credit risk, consist primarily of cash and cash equivalents andmarketable securities. The Company’s investment policy limits investments to certain types of instruments, including auction rate securities, high-gradecorporate debt securities and money market instruments, places restrictions on maturities and concentrations in certain industries and requires the Companyto maintain a certain level of liquidity. At times, the Company maintains cash balances in financial institutions, which may exceed federally insured limits.The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk on its cash and cashequivalents. Fair Value Measurements The Company applies Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, for financial and non-financial assets and liabilities. ASC 820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of futureincome or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchythat prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: F-10 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 include quoted prices forsimilar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.Restricted Cash The Company’s restricted cash includes payments received under the PATH agreement (See Note 8) until such time as the Company has paid for theoutside services performed under the agreement. In addition, the Company’s non-current restricted cash with respect to its manufacturing, laboratory andoffice space in Gaithersburg, Maryland functions as collateral for letters of credit, which serve as security deposits for the duration of the leases. At December31, 2014 and 2013, non-current restricted cash is $0.8 million and is recorded as other non-current assets on the consolidated balance sheets. Accounts Receivable – Billed Accounts receivable – billed arise primarily from the Company’s contract with HHS BARDA and are reported at amounts expected to be collected infuture periods. No allowance for doubtful accounts is deemed necessary. Accounts Receivable – Unbilled Accounts receivable – unbilled relate to service contracts and agreements for which work has been performed, though invoicing has not yetoccurred. All of the Accounts receivable – unbilled are expected to be billed and collected within the next 12 months. Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, generallythree to seven years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of theimprovements or the remaining term of the lease. Repairs and maintenance costs are expensed as incurred. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not berecoverable based on the criteria for accounting for the impairment or disposal of long-lived assets under FASB ASC Topic 360, Property, Plant andEquipment. Impairment of Goodwill Goodwill is 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 operating segment andreporting unit. The Company utilizes primarily the market approach and, if considered necessary, the income approach to determine if it has an impairment ofits goodwill. The market approach is based on market value of invested capital. To ensure that the Company’s capital stock is the appropriate measurement offair value, the Company considers factors such as its trading volume, diversity of investors and analyst coverage. When utilized, the income approach is usedas a confirming look to the market approach, if considered necessary. Goodwill impairment may exist if the carrying value of the reporting unit exceeds itsestimated fair value. If the carrying value of the reporting unit exceeds its fair value, step two of the impairment analysis is performed. In step two of theanalysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value should such acircumstance arise. F-11 At December 31, 2014 and 2013, the Company used the market approach to determine if the Company had an impairment of its goodwill. Step oneof the impairment test states that if the fair value of a reporting unit exceeds its carrying amount, goodwill is considered not to be impaired. The fair value ofthe Company’s reporting unit was substantially higher than the carrying value, resulting in no impairment to goodwill at December 31, 2014 and 2013. Equity Method Investment The Company has an equity investment in CPL Biologicals Private Limited (“CPLB”). The Company accounts for this investment using the equitymethod (see Note 8). Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments andthe Company’s proportionate share of earnings or losses and distributions up to the amount initially invested or advanced. Revenue Recognition The Company performs research and development for U.S. Government agencies and other collaborators under cost reimbursable and fixed pricecontracts, including license and clinical development agreements. The Company recognizes revenue under research contracts when a contract has beenexecuted, the contract price is fixed or determinable, delivery of services or products has occurred and collection of the contract price is reasonably assured.Payments received in advance of work performed are recorded as deferred revenue and losses on contracts, if any, are recognized in the period in which theybecome known. Under cost reimbursable contracts, the Company is reimbursed and recognizes revenue as allowable costs are incurred plus a portion of the fixed-feeearned. The Company considers fixed-fees under cost reimbursable contracts to be earned in proportion to the allowable costs incurred in performance of thework as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of thework completed. Under its HHS BARDA contract, certain activities must be pre-approved by HHS BARDA in order for their costs to be deemed allowabledirect costs. Direct costs incurred under cost reimbursable contracts are recorded as cost of government contracts revenue. The Company’s HHS BARDAcontract provides the U.S. government the ability to terminate the contract for convenience or to terminate for default if the Company fails to meet itsobligations as set forth in the statement of work. The Company believes that if the government were to terminate the HHS BARDA contract for convenience,the costs incurred through the effective date of such termination and any settlement costs resulting from such termination would be allowable costs. Paymentsto the Company under cost reimbursable contracts with agencies of the U.S. Government, such as the HHS BARDA contract, are provisional payments subjectto adjustment upon annual audit by the government. An audit by the U.S government of fiscal years 2011 and 2012 was completed in the first quarter of2014, which resulted in no significant adjustments. An audit of fiscal year 2013 has been initiated, but has not been completed as of the date of this filing.Management believes that revenue for periods not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement.When the final determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period that theadjustments are known. The Company’s 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 be divided into morethan one unit of accounting. A deliverable can generally be considered a separate unit of accounting if both of the following criteria are met: (1) the delivereditem(s) has value to the customer on a stand-alone basis; and (2) if the arrangement includes a general right of return relative to the delivered item(s), deliveryor performance of the undelivered item(s) is considered probable and substantially in control of the Company. Deliverables that cannot be divided intoseparate units are combined and treated as one unit of accounting. Consideration received is allocated among the separate units of accounting based on therelative selling price method. Deliverables under these arrangements typically include rights to intellectual property, research and development services andinvolvement by the parties in steering committees. Historically, deliverables under the Company’s collaborative research and development agreements havebeen deemed to have no stand-alone value and as a result have been treated as a single unit of accounting. In addition, the Company analyzes its contractsand collaborative agreements to determine whether the payments received should be recorded as revenue or as a reduction to research and developmentexpenses. In reaching this determination, management considers a number of factors, including whether the Company is principal under the arrangement, andwhether the arrangement is significant to, and part of, the Company’s core operations. Historically, payments received under its contracts and collaborativeagreements have been recognized as revenue since the Company acts as a principal in the arrangement and the activities are core to its operations. F-12 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 total estimated contractcosts. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of the work. Direct costs incurred undercollaborative research and development agreements are recorded as research and development expenses. If the performance under a fixed price contractcannot be reasonably estimated, the Company recognizes the revenue on a straight-line basis over the contract term. Revenue associated with upfront payments under arrangements is recognized over the contract term or when all obligations associated with theupfront payment have been satisfied. Revenue from the achievement of research and development milestones, if deemed substantive, is recognized as revenue when the milestones areachieved and the milestone payments are due and collectible. If not deemed substantive, the Company would recognize such milestone as revenue upon itsachievement on a straight-line basis over the remaining expected term of the research and development period. Milestones are considered substantive if all ofthe following conditions are met: (1) the milestone is non-refundable; (2) there is substantive uncertainty of achievement of the milestone at the inception ofthe arrangement; (3) substantive effort is involved to achieve the milestone and such achievement relates to past performance; and (4) the amount of themilestone appears reasonable in relation to the effort expended and all of the deliverables and payment terms in the arrangement. Cost of Government Contracts Revenue Cost of government contracts revenue includes direct costs of salaries, laboratory supplies, consultants and subcontractors and other direct costsassociated with the Company’s process development, manufacturing, clinical, regulatory and quality assurance activities under research contracts. Cost ofgovernment contracts revenue does not include allocations of indirect costs. Stock-Based Compensation The Company accounts for stock-based compensation related to grants of stock options, restricted stock awards and purchases under its EmployeeStock Purchase Plan (the “ESPP”) at fair value. The Company recognizes compensation expense related to such awards on a straight-line basis over therequisite service 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 13 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 on the purchaseperiods included in the offering. The expected volatility was determined using historical volatilities based on stock prices over a look-back periodcorresponding to the expected term. The risk-free interest rate was determined using the yield available for zero-coupon U.S. government issues with aremaining term equal to the expected term. The forfeiture rate was determined using historical pre-vesting forfeiture rates since the inception of the plans. TheCompany has never paid a dividend, and as such, the dividend yield is zero, and the Company does not intend to pay dividends in the foreseeable future. Restricted stock awards have been recorded as compensation expense over the expected vesting period based on the fair value at the award date andthe 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 as consideration forservices rendered to be recognized as compensation expense over the shorter of the vesting or service periods. In cases where an equity award is not fullyvested, such equity award is revalued on each subsequent reporting date until vesting is complete with a cumulative catch-up adjustment recognized for anychanges in its estimated fair value. F-13 Research and Development Expenses Research and development expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associated with theCompany’s process development, manufacturing, clinical, regulatory and quality assurance activities for internally funded programs. In addition, indirectcosts such as, fringe benefits and overhead expenses, are also included in research and development expenses. These expenses exclude costs associated withcost of government contracts revenue. Warrant Accounting The Company accounted for the warrants to purchase 0.5 shares of Common Stock (the “Warrants”) at a price of $2.68 per unit in accordance withapplicable accounting guidance in ASC 815, Derivatives and Hedging, as derivative liabilities, and the Warrants had been classified as such in theCompany’s balance sheet. In compliance with applicable accounting standards, registered warrants that require the issuance of registered shares uponexercise and do not sufficiently preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company used the Monte CarloSimulation model to determine the fair value of the Warrants, which required the input of subjective assumptions, including the expected stock pricevolatility and probability of a fundamental transaction (a strategic merger or sale). All Warrants subject to this accounting treatment expired unexercised onJuly 31, 2013. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under the liability method, deferred income taxes arerecognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities andtheir respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply totaxable income in the year in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred taxassets and liabilities is recognized in income in the period such changes are enacted. A valuation allowance is established when necessary to reduce netdeferred tax assets to the amount expected to be realized. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the morelikely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for thetaxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are reversed in the period in whichthe 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, 2014 and 2013, the Company had noaccruals for interest or penalties related to income tax matters. Net Loss per Share Net loss per share is computed using the weighted average number of shares of common stock outstanding. All outstanding warrants, stock optionsand unvested restricted stock awards totaling 16,978,098, 11,992,918 and 12,732,383 shares at December 31, 2014, 2013 and 2012, respectively, areexcluded from the computation for 2014, 2013 and 2012, as their effect is anti-dilutive. Foreign Currency The accompanying consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s wholly-ownedsubsidiary is the local currency in which the subsidiary is located (Swedish Krona). The translation of assets and liabilities of Novavax AB to U.S. dollars ismade at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of statementof operations data is made at the average exchange rate in effect for the period. The translation of operating cash flow data is made at the average exchangerate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction.Translation gains and losses are recognized as a component of accumulated other comprehensive income (loss) in the accompanying consolidated balancesheets. The foreign currency translation adjustment balance included in accumulated other comprehensive income (loss) was ($6.5) million and $0.2 millionat December 31, 2014 and 2013, respectively. F-14 Segment Information The Company manages its business as one operating segment: developing recombinant vaccines. The Company does not operate separate lines ofbusiness with respect to its vaccine candidates. Accordingly, the Company does not have separately reportable segments as defined by ASC 280, SegmentReporting. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under Topic 605, Revenue Recognition. The new standard requires a company torecognize revenue when it transfers goods and services to customers in an amount that reflects the consideration that the company expects to receive for thosegoods or services. ASU 2014-09 defines a five-step process that includes identifying the contract with the customer, identifying the performance obligationsin the contract, determining the transaction price, allocating the transaction prices to the performance obligations in the contract and recognizing revenuewhen (or as) the entity satisfies the performance obligations. ASU 2014-09 will be effective for the Company on January 1, 2017. The Company is evaluatingthe potential impact that ASU 2014-09 will have on its consolidated financial position and results of operations. Reclassifications Due to new information obtained in the first quarter of 2014 about facts and circumstances that existed on July 31, 2013 (the “Acquisition Date”)regarding certain accrued contingencies related to its pre-existing contractual rights and obligations, the Company reduced at December 31, 2013 suchaccrued expenses and the carrying value of its goodwill retrospectively as of the Acquisition Date related to the acquisition by $0.8 million from $11.2million to $10.4 million and from $26.2 million to $25.4 million, respectively. Note 4 – Acquisition In 2013, Novavax acquired 99.5% of all of the outstanding shares, warrants and stock options of Isconova AB through the issuance of approximately15.6 million shares of its Common Stock valued at $41.9 million (based on the closing price of Novavax’ Common Stock on the Acquisition Date) and cashof approximately $22,000. Upon the acquisition, Isconova AB was renamed Novavax AB. During the second quarter of 2014, the Company completed itspurchase of the remaining 0.5% shares outstanding from the holders of such securities of Novavax AB. 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 the consolidated financialstatements since the Acquisition Date. The table below summarizes the final allocation of the purchase price based upon the fair values of assets acquired and liabilities assumed at theAcquisition Date. (in thousands) Cash and cash equivalents $3,056 Accounts receivable – billed 447 Prepaid expenses and other assets 1,092 Property and equipment 165 Intangible assets 16,620 Goodwill 25,424 Accounts payable and other current liabilities (2,994)Capital leases (94)Notes payable (193)Other non-current liabilities (1,559)Total purchase price $41,964 F-15 A substantial portion of the assets acquired consisted of intangible assets relating to its proprietary adjuvant technology and collaborationagreements. The fair values of the proprietary technology and agreements were determined based on estimates of expected future discounted net cash flows.The fair value measurements are based on significant unobservable inputs that were developed by the Company using publicly available information, marketparticipant assumptions, cost and development assumptions, expected synergies and other cost savings that a market participant would be expected to realizeas a result of the combination and certain other high-level assumptions. Amortization expense for intangible assets is being recorded on a straight-line basisover the expected useful lives of the assets, ranging from seven to 20 years. The weighted average useful lives for the proprietary adjuvant technology andcollaboration agreements are 20 years and 12 years, respectively. The weighted average useful life for all acquired intangible assets is 17 years. The Company incurred approximately $1.3 million in transaction costs related to the acquisition, which is included in general and administrativeexpenses in the Company’s consolidated statement of operations for the year ended December 31, 2013. The following unaudited consolidated pro forma financial information is presented as if the acquisition occurred on January 1, 2012. The unauditedpro forma financial information has been presented for comparative purposes only and is not necessarily indicative of results of operations that would havebeen achieved had the Company completed the acquisition during the periods presented, or the future consolidated results of operations of the combinedcompany. The unaudited pro forma financial information combines the historical results of operations of Novavax and Isconova AB for the periods presentedbelow: Year EndedDecember 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 research funding prior to the acquisition that is required to be repaidupon notice in the first quarter of 2016. At December 31, 2014, such research funding liability is $1.5 million and is included in other non-current liabilitiesin the consolidated balance sheet. Note 5 – Fair Value Measurements The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis: Fair Value at December 31, 2014 Fair Value at December 31, 2013 Assets Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Auction rate security $― $― $— $1,790 $― $— Money market funds 20,354 ― — 100,049 — — Government-backed security — 7,500 — ― — — Asset-backed securities — 46,624 — — — — Corporate debt securities — 89,097 — — 26,978 — Total cash equivalents and marketable securities $20,354 $143,221 $— $101,839 $26,978 $— During the years ended December 31, 2014 and 2013, the Company did not have any transfers between levels. The amounts in the Company’s consolidated balance sheet for accounts receivable – billed, accounts receivable – unbilled and accounts payableapproximate fair value due to their short-term nature. Based on borrowing rates available to the Company, the fair value of capital lease and notes payableapproximates their carrying value. F-16 Note 6 – Marketable Securities Marketable securities classified as available-for-sale as of December 31, 2014 and 2013 were comprised of (in thousands): December 31, 2014 December 31, 2013 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value Auction rate security $— $— $— $— $1,175 $615 $— $1,790 Asset-backed securities 46,660 — (36) 46,624 — — — — Corporate debt securities 89,126 8 (37) 89,097 11,806 1 — 11,807 Total $135,786 $8 $(73) $135,721 $12,981 $616 $— $13,597 In 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, allof which resulted from reclassification adjustments out of accumulated other comprehensive income (loss) in 2014. Marketable Securities – Unrealized Losses The Company owned 41 available-for-sale securities as of December 31, 2014. Of these 41 securities, 38 had unrealized losses of less than $0.1million as of December 31, 2014. The Company did not have any investments in a loss position for greater than 12 months as of December 31, 2014. TheCompany has evaluated its marketable securities and has determined that none of these investments has an other-than-temporary impairment, as it has nointent to sell securities with unrealized losses and it is not more likely than not that the Company will be required to sell any securities with unrealized losses,given the Company’s current and anticipated financial position. Note 7 – Goodwill and Intangible Assets Goodwill The changes in the carrying amounts of goodwill for the year ended December 31, 2014 and 2013 were as following (in thousands): Year EndedDecember 31, 2014 2013 Beginning balance $58,707 $33,141 Goodwill resulting from acquisition of business — 25,424 Currency translation (4,095) 142 Ending balance $54,612 $58,707 F-17 Intangible Assets Purchased intangible assets consisted of the following as of December 31, 2014 and 2013 (in thousands): December 31, 2014 December 31, 2013 GrossCarryingAmount AccumulatedAmortization IntangibleAssets, Net GrossCarryingAmount AccumulatedAmortization IntangibleAssets, Net Finite-lived intangible assets: Proprietary adjuvant technology $9,565 $(678) $8,887 $11,514 $(240) $11,274 Collaboration agreements 4,319 (629) 3,690 5,199 (223) 4,976 Total identifiable intangible assets $13,884 $(1,307) $12,577 $16,713 $(463) $16,250 Amortization expense for the years ended December 2014 December 31, 2013 was $1.1 million and $0.5 million, respectively. Estimatedamortization expense for existing intangible assets for each of the five succeeding years ending December 31, is as follows (in thousands): Year Amount 2015 $923 2016 923 2017 923 2018 923 2019 923 Note 8 – U.S. Government Agreement, Joint Venture and Collaborations HHS BARDA Contract for Recombinant Influenza Vaccines HHS BARDA initially awarded the Company a contract in 2011, which funds the development of both the Company’s seasonal and pandemicinfluenza VLP vaccine candidates. The contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses the Company for allowable directcontract costs incurred plus allowable indirect costs and a fixed-fee earned in the ongoing clinical development and product scale-up of its multivalentseasonal and monovalent pandemic H7N9 influenza VLP vaccine candidates. In September 2014, HHS BARDA exercised and initiated a two-year option tothe contract, which included scope to support development activities leading up to planned Phase 3 clinical studies, added $70 million of funding on top ofthe remainder of the $97 million base period funding, and extended the contract until September 2016. During 2014, the Company recognized revenue of$26.0 million and has recognized approximately $78 million in revenue since the inception of the contract. Billings under the contract are based onapproved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. These indirect ratesare subject to audit by HHS BARDA on an annual basis. An audit by the U.S government of fiscal years 2011 and 2012 was completed in the first quarter of2014, which resulted in no significant adjustments. An audit of fiscal year 2013 has been initiated, but has not been completed as of the date of this filing.Management believes that revenue for periods not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement.When the final determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period that theadjustments are known. In 2012, the Company decided to conduct a Phase 2 clinical trial of its quadrivalent seasonal influenza VLP vaccine candidate in Australia (“205Trial”) under appropriate local regulatory authorization. Based on the Company’s discussions with HHS BARDA in 2012, the outside clinical trial costs forthe 205 Trial were withheld and may only be submitted for consideration of reimbursement to HHS BARDA and recorded as revenue by the Company after itsubmits the 205 Trial data in a quadrivalent investigational new drug application (“Quadrivalent IND”), and those costs are approved by HHS BARDA. Theoutside clinical trial costs of the 205 Trial conducted in 2012 totaled $2.9 million. These costs were recorded as an expense in the period incurred as a cost ofgovernment contracts revenue. The FDA accepted the Quadrivalent IND in the fourth quarter of 2014, prior to the Company’s initiation of its Phase 2 dose-confirmatory clinical trial; however, despite ongoing discussions with HHS BARDA, the Company is still awaiting HHS BARDA’s approval for thereimbursement of its 205 Trial costs, thus no revenue has been recorded in 2014. F-18 CPLB Joint Venture The Company is party to a Joint Venture Agreement with Cadila Pharmaceuticals Limited (“Cadila”) pursuant to which the Company and Cadilaformed CPLB, of which 20% is owned by the Company and 80% is owned by Cadila. CPLB was established to develop and manufacture certain of theCompany’s vaccine candidates and certain of Cadila’s biogeneric and diagnostic products for the territory of India. CPLB has the right to negotiate definitivelicense arrangements in India to certain of the Company’s future vaccine products and certain of Cadila’s future biogeneric and diagnostic products, prior tothe Company or Cadila licensing such rights to third-parties. The Company has the right to negotiate definitive license arrangements for vaccines developedby CPLB using Company technology for commercialization in every country except India and for vaccines developed by CPLB using Cadila technology forcommercialization in certain other countries, including the U.S. Cadila has supported and continues to support CPLB’s operations. CPLB is activelydeveloping a number of vaccine candidates that were genetically engineered by Novavax. CPLB’s lead vaccine candidates are its seasonal influenza vaccinecandidate, which completed enrollment of its Phase 3 clinical trial in India in 2014, and its rabies vaccine, which completed enrollment of its Phase 1/2clinical trial in India in 2014. In connection with the Joint Venture Agreement, in 2009, the Company also entered into additional agreements, including amaster services agreement with Cadila (see Note 16). Because CPLB’s activities and operations are controlled and funded by Cadila, the Company accountsfor its investment using the equity method. Since the carrying value of the Company’s initial investment was nominal and there is no guarantee orcommitment to provide future funding, the Company has not recorded nor expects to record losses related to this investment in the foreseeable future. LG Life Sciences, Ltd. (“LGLS”) License Agreement In 2011, the Company entered into a license agreement with LGLS that allows LGLS to use the Company’s technology to develop andcommercially sell influenza vaccines exclusively in South Korea and non-exclusively in certain other specified countries. At its own cost, LGLS isresponsible for funding both its clinical development of the influenza VLP vaccines and a manufacturing facility to produce such vaccines in South Korea.Under the license agreement, the Company is obligated to provide LGLS with information and materials related to the manufacture of the licensed products,provide on-going project management and regulatory support and conduct clinical trials of its influenza vaccines in order to obtain FDA approval in the U.S.The term of the license agreement is expected to terminate in 2027. Payments to the Company under the license agreement include an upfront payment of$2.5 million, reimbursements of certain development and product costs, payments related to the achievement of certain milestones and royalty payments inthe high single digits from LGLS’s future commercial sales of influenza VLP vaccines. The upfront payment has been deferred and recorded in deferredrevenue in the consolidated balance sheets and will be recognized when the previously mentioned obligations in the agreement are satisfied, which may notoccur until the end of the term of the agreement. Payments for milestones under the agreement will be recognized on a straight-line basis over the remainingterm of the research and development period upon achievement of such milestone. Any royalties under the agreement will be recognized as earned. PATH Vaccine Solutions (“PATH”) Clinical Development Agreement In 2012, the Company entered into a clinical development agreement with PATH (the “RSV Collaboration Program”) to develop its RSV F vaccinecandidate in certain low-resource countries. The Company was awarded approximately $2.0 million by PATH for initial funding under the agreement topartially support its Phase 2 dose-ranging clinical trial in women of childbearing age. In October 2013, the funding under this agreement was increased by$0.4 million to support reproductive toxicology studies, which was necessary before we began conducting clinical trials in pregnant women. In December2013, the Company entered into an amendment with PATH providing an additional $3.5 million in funding to support the Phase 2 dose-confirmation clinicaltrial in women of childbearing age. In October 2014, the Company entered into an amendment with PATH providing an additional $1.0 million towards thedevelopment of a strategy for approaching Phase 3 clinical trials of our RSV maternal immunization program and is in ongoing discussion with PATH foradditional funding. The Company retains global rights to commercialize the product and will support PATH in its goal to make an RSV maternal vaccineproduct affordable and available in low-resource countries. To the extent PATH elects to continue to fund 50% of the Company’s external clinicaldevelopment costs for the RSV Collaboration Program, but the Company does not continue development, the Company would then grant PATH a fully-paidlicense to the Company’s RSV F vaccine candidate technology for use in pregnant women in certain contractually defined, low-resource countries. The termof the agreement has been extended to April 2015. The Company recognized revenue of approximately $2.6 million in 2014, and has recognizedapproximately $6.4 million in revenue since the inception of the agreement. Revenue under this arrangement is being recognized under the proportionalperformance method and earned in proportion to the contract costs incurred in performance of the work as compared to total estimated contract costs. Costsincurred under this agreement represent a reasonable measurement of proportional performance of the services being performed. F-19 Note 9 – Other Financial Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following at December 31 (in thousands): 2014 2013 Laboratory supplies $7,564 $1,754 Other prepaid expenses and other current assets 1,631 1,863 Prepaid expenses and other current assets $9,195 $3,617 Property and Equipment, net Property and equipment is comprised of the following at December 31 (in thousands): 2014 2013 Machinery and equipment $16,712 $11,951 Leasehold improvements 8,843 8,192 Computer software and hardware 1,733 1,200 Construction in progress 3,719 2,328 31,007 23,671 Less ― accumulated depreciation and amortization (11,270) (9,420)Property and equipment, net $19,737 $14,251 Depreciation and amortization expense was approximately $4.4 million, $2.6 million and $1.7 million for the years ended December 31, 2014, 2013and 2012, respectively. Machinery and equipment included $0.4 million and $0.6 million of equipment acquired under a capital leases with accumulateddepreciation of $0.2 million as of December 31, 2014 and 2013, respectively. Accrued Expenses Accrued expenses consist of the following at December 31 (in thousands): 2014 2013 Employee benefits and compensation $8,597 $5,323 Research and development accruals 9,826 3,657 Other accrued expenses 974 1,431 Accrued expenses $19,397 $10,411 F-20 Note 10 – Long-Term Debt Notes Payable Notes payable consist of the following at December 31 (in thousands): 2014 2013 Equipment loan; 12.1%, principal payments due in monthly installments totaling $48 through December 2016 $967 $1,538 Loan agreement; bearing interest at 3% per annum; repayment is conditional — 200 Bank loans; 7.50%-8.50%, principal payments due quarterly totaling $22 through May 2015 31 143 Total 998 1,881 Less ― current portion (603) (877)Long-term portion $395 $1,004 Equipment Loan In September 2012, the Company entered into a master security agreement with General Electric Capital Corporation (“GE”), whereby the Companycould borrow up to $2.0 million to finance the purchases of equipment (each, an “Equipment Loan”). Each Equipment Loan bears interest at the three-yearU.S. Government treasury rate plus 11.68%, provided that the rate shall not be less than 12.1%, and is to be repaid over forty-two (42) months. GE willmaintain a security interest in all equipment financed under the Equipment Loan. Interest accrues on the outstanding balance until paid in full. As ofDecember 31, 2013, the Company financed $2.0 million in total under the Equipment Loans. Loan Agreements In May 2008, the Company entered into a loan agreement with the State of Maryland. The repayment of loan amount and accrued interest wasconditioned upon the Company meeting the capital investment and employment requirements during the term of the loan. In 2014, the loan agreement withState of Maryland was forgiven as the Company met the capital investment and employment requirements and is recorded as other income, net in theCompany’s consolidated statements of operations. Aggregate future minimum principal payments on long-term debt at December 31, 2013 are as follows (in thousands): Year Amount 2015 $603 2016 395 Total minimum principal payments $998 Note 11 – Warrant Liability In July 2008, the Company completed a registered direct offering of 6,686,650 units, raising approximately $17.5 million in net proceeds. Eachunit consisted of one share of Common Stock and one Warrant. The Warrants represented the right to acquire an aggregate of 3,343,325 shares of commonstock at an exercise price of $3.62 per share and expired unexercised on July 31, 2013. During 2013 and 2012, the Company recorded as other income in its statements of operations a change in fair value of warrant liability of $0.3million and $0.1 million, respectively. Note 12 – Stockholders’ Equity In June 2014, the Company completed a public offering of 28,750,000 shares of its common stock, including 3,750,000 shares of common stock thatwere issued upon the exercise in full of an option to purchase additional shares granted to the underwriters, at a price of $4.00 per share resulting in netproceeds of approximately $108 million. F-21 In September 2013, the Company completed a public offering of 31,846,950 shares of its common stock, including 4,153,950 shares of commonstock that were issued upon the exercise in full of an option to purchase additional shares granted to the underwriters, at a price of $3.14 per share resulting innet proceeds of approximately $95 million. In 2012, the Company entered into an At Market Issuance Sales Agreement (“Sales Agreement”), under which the Board of Directors of theCompany (the “Board”) approved the Company’s sale of up to an aggregate of $50 million in gross proceeds of its common stock. The shares of commonstock are being offered pursuant to a shelf registration statement filed with the SEC in March 2013, which replaced the previous shelf registration statementfiled in 2010. The Board’s standing Finance Committee (the “Committee”) assists with its responsibilities to monitor, provide advice to the Company’ssenior management and approve all capital raising activities. The Committee has been authorized by the Board, absent any action by the Board to thecontrary, to take any additional actions necessary to carry out the Board’s authorization of the issuance and sale of the common stock pursuant to the SalesAgreement. 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 theminimum sales price per share. During 2013, the Company sold 12.6 million shares at sales prices ranging from $2.06 to $3.38 per share, resulting in $34.0million in net proceeds. The most recent sales that occurred under the Sales Agreement were in September 2013. As of December 31, 2014, the Company hadapproximately $15 million available under the Sales Agreement. Note 13 – Stock-Based Compensation Stock Options The Company has granted equity awards under several plans, two of which remain active. Under the Amended and Restated 2005 Stock IncentivePlan (the “2005 Plan”), equity awards may be granted to officers, directors, employees, consultants and advisors to the Company and any present or futuresubsidiary. The 2005 Plan, approved in May 2005 and amended most recently in June 2014 by the Company’s stockholders, currently authorizes the grant ofequity awards for up to 26,312,192 shares of common stock, which included, at the time of approval of the 2005 Plan, a maximum 5,746,468 shares ofcommon stock subject to stock options outstanding under the Company’s 1995 Stock Option Plan (the “1995 Plan”) that may revert to and become issuableunder the 2005 Plan if such options expire or otherwise terminate unexercised. The Company received approval at its 2014 annual meeting of stockholders toincrease the number of shares of common stock available for issuance under the 2005 Plan by 4,000,000 shares. The term of the Company’s 1995 Plan hasexpired and no new awards will be made under the 1995 Plan; however, outstanding stock options remain in existence in accordance with their terms. Under the 2005 Plan and the 1995 Plan, incentive stock options, having a maximum term of 10 years, can be or were granted at no less than 100% ofthe fair value of the Company’s common stock at the time of grant. Grants of stock options are generally exercisable over periods ranging from six months tofour years. Because the 2005 Plan expired in the first quarter of 2015, the Company intends to adopt a 2015 stock incentive plan and submit it for approval toits stockholders at the 2015 annual meeting of stockholders. F-22 Stock Options Awards The following is a summary of option activity under the 2005 Plan and the 1995 Plan for the year ended December 31, 2014: 2005 Stock Incentive Plan 1995 Stock Option Plan Stock Options Weighted-AverageExercise Price Stock Options Weighted-AverageExercise Price Outstanding at January 1, 2014 11,788,100 $1.87 188,150 $5.04 Granted 6,418,000 $5.50 — $— Exercised (898,302) $1.67 (32,450) $4.81 Forfeited (378,450) $2.79 — $— Expired (1,250) $1.57 (120,700) $5.76 Outstanding at December 31, 2014 16,928,098 $3.24 35,000 $2.21 Vested and expected to vest at December 31, 2014 15,445,657 $3.09 35,000 $2.21 Shares exercisable at December 31, 2014 6,069,997 $2.07 35,000 $2.21 Shares available for grant at December 31, 2014 4,531,369 The fair value of the stock options granted for the years ended December 31, 2014, 2013 and 2012, was estimated at the date of grant using theBlack-Scholes option-pricing model with the following assumptions: 2014 2013 2012 Weighted average fair value of options granted $2.39 $1.07 $0.71 Risk-free interest rate 1.24%-2.22% 0.54%-1.36% 0.55%-1.54%Dividend yield 0% 0% 0%Volatility 52.47%-67.93% 51.55%-73.72% 75.5%-78.6%Expected term (in years) 4.04-6.96 3.91-7.05 3.34-7.09 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, 2014 wasapproximately $23.6 million and 6.3 years, respectively. The aggregate intrinsic value and weighted average remaining contractual term of options vestedand expected to vest as of December 31, 2014 was $44.3 million and 7.6 years, respectively. The aggregate intrinsic value represents the total intrinsic value(the difference between the Company’s closing stock price on the last trading day of 2014 and the exercise price, multiplied by the number of in-the-moneyoptions) that would have been received by the option holders had all option holders exercised their options on December 31, 2014. This amount is subject tochange based on changes to the fair market value of the Company’s common stock. The aggregate intrinsic value of options exercised for 2014, 2013 and2012 was $3.4 million, $0.6 million and $0.1 million, respectively. Stock options issued to non-employees are measured at their estimated fair value. Stock-based compensation expense is recognized when servicesare rendered; however, the expense may fluctuate with changes in the fair value of the underlying common stock, until the award is vested. The Companyrecorded $0.3 million and $0.1 million in stock-based compensation expense related to stock options granted to non-employees in 2014 and 2013,respectively. Employee Stock Purchase Plan In 2013, the Company adopted an Employee Stock Purchase Plan (the “ESPP”), which authorized an aggregate of 2,000,000 shares of common stockto be purchased, which will increase 5% on each anniversary of its adoption up to a maximum of 3,000,000 shares. The ESPP allows employees to purchaseshares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15% of their compensation, at 85% of thelesser of the market price 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 theoption period when the employee was first eligible to participate). At December 31, 2014, there were 1,619,202 shares available for issuance under the ESPP. F-23 The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant usingthe Black-Scholes option-pricing model with the following assumptions: Year Ended December 31, Year Ended December 31, 2014 2013 Range of Black-Scholes fair value of ESPP shares granted $0.78-$2.08 $0.78 Risk-free interest rate 0.04%-0.24% 0.04% Dividend yield 0% 0% Volatility 50.80%-67.57% 50.80% Expected term (in years) 0.5-1.5 0.5 Expected forfeiture rate 5% 5% Stock-based compensation related to the ESPP for 2014 and 2013 was $0.7 million and $0.1 million, respectively. Restricted Stock Awards The following is a summary of restricted stock awards activity for the year ended December 31, 2014: Number ofShares Per ShareWeighted-AverageGrant-DateFairValue Outstanding at January 1, 2014 16,667 $1.39 Restricted stock granted 15,000 $4.48 Restricted stock vested (16,667) $1.39 Restricted stock forfeited — $— Outstanding at December 31, 2014 15,000 $4.48 The Company recorded stock-based compensation expense for awards issued under the above mentioned plans in the statements of operations asfollows (in thousands): Years ended December 31, 2014 2013 2012 Research and development $2,843 $1,262 $873 General and administrative 3,247 1,218 1,218 Total stock-based compensation expense $6,090 $2,480 $2,091 As of December 31, 2014, there was approximately $13.3 million of total unrecognized compensation expense (net of estimated forfeitures) relatedto unvested options and restricted stock awards. This unrecognized compensation expense is expected to be recognized over a weighted average period of1.3 years. Note 14 – Employee Benefits The Company maintains a defined contribution 401(k) retirement plan, pursuant to which employees who have completed 90 days of service mayelect to contribute up to 100% of their compensation on a tax deferred basis up to the maximum amount permitted by the Internal Revenue Code of 1986, asamended. During 2012, the Company increased its match from 25% to 50% of the first 6% of the participants’ deferral. Contributions to the 401(k) plan vestequally over a three-year period. The Company has recorded expense, net of forfeitures, of approximately $0.5 million, $0.4 million and $0.1 million in2014, 2013 and 2012, respectively. F-24 The Company’s foreign subsidiary has a pension plan under local tax and labor laws and is obligated to make contributions to this plan.Contributions and other expenses related to this plan were approximately $0.4 million and $0.2 million in 2014 and 2013, respectively. Note 15 – Income Taxes The Company losses by jurisdiction are as follows (in thousands): 2014 2013 2012 Domestic $(76,742) $(48,691) $(28,507)Foreign (6,205) (3,292) — Total net loss $(82,947) $(51,983) $(28,507) The components of the income tax provision are as follows (in thousands): 2014 2013 2012 Current U.S. $— $— $— Current foreign — 25 — Deferred — — ― Net provision $— $25 $— Deferred tax assets (liabilities) consist of the following at December 31 (in thousands): 2014 2013 Net operating losses U.S. $148,451 $123,907 Net operating losses foreign 6,535 6,405 Research tax credits 11,068 9,175 Other 9,963 6,844 Total deferred tax assets 176,017 146,331 Intangibles (2,773) (3,573)Other (321) (227)Total deferred tax liabilities (3,094) (3,800)Net deferred tax assets 172,923 142,531 Less valuation allowance (172,923) (142,531)Deferred tax assets, net $— $— The valuation allowance increased by $30.4 million, $7.1 million and $9.4 million for the years ended December 31, 2014, 2013 and 2012,respectively, due to increases in net deferred tax assets. The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate are as follows: 2014 2013 2012 Statutory federal tax rate (34)% (34)% (34)%State income taxes, net of federal benefit (3)% (3)% (8)%Research and development and other tax credits (2)% (7)% 0%Expiration of net operating losses 0% 0% 6%Other 2% 3% 3%Change in valuation allowance 37% 41% 33% 0% 0% 0% Realization of net deferred tax assets is dependent on the Company’s ability to generate future taxable income, which is uncertain. Accordingly, afull valuation allowance was recorded against these assets as of December 31, 2014 and 2013 as management believes it is more likely than not that the assetswill not be realizable. The increase in the valuation allowance was due to increased continued losses and credits in the current year. F-25 As of December 31, 2014, the Company had tax return reported federal net operating losses and tax credits available as follows (in thousands): Amount Federal net operating losses expiring through the year 2034 $402,192 Foreign net operating losses (no expiration) 29,705 Research tax credits expiring through the year 2034 10,975 Alternative-minimum tax credit (no expiration) 94 Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to prior ownership change of the Company.The Company does not expect such limitation, if any, to impact the use of the net operating losses. Beginning in 2006, the windfall equity-based compensation deductions are tracked, but will not be recorded to the balance sheet until managementdetermines more likely than not that such amounts will be utilized. As of December 31, 2014 and 2013, the Company had $5.0 million and $2.4 million ofwindfall stock compensation deductions, respectively. If and when realized, the tax benefit associated with these deductions will be credited to additionalpaid-in capital. These excess benefit deductions are included in the total federal and state net operating losses disclosed above. Tabular Reconciliation of Unrecognized Tax Benefits (in thousands): Amount Unrecognized tax benefits as of January 1, 2013 $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 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, 2014 $4,801 To the extent these unrecognized tax benefits are ultimately recognized, it would affect the annual effective income tax rate unless otherwise offsetby a corresponding change in the valuation allowance. The Company does not expect that the amounts of unrecognized tax benefits will changesignificantly within the next twelve months. The Company files income tax returns in the U.S. federal jurisdiction and in various states, as well as in Sweden. The Company has U.S. tax netoperating losses and credit carryforwards that are subject to examination from 1998 through 2014. The statute extends for a number of years beyond the yearin which the losses were generated for tax purposes. Since a portion of these carryforwards may be utilized in the future, many of these attribute carryforwardsremain subject to examination. The returns in Sweden are subject to examination from 2009 through 2014. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2014 and2013, the Company had no accruals for interest or penalties related to income tax matters. Note 16 – Commitments and Contingencies Operating Leases The 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 provisions for future rent increases and periods inwhich rent payments are reduced (abated). Also, the leases obligate the Company to pay building operating costs. Under the terms of one lease agreement, thelandlord provided the Company with a tenant improvement allowance of $2.5 million and an additional tenant improvement allowance of $3 million, suchadditional tenant improvement allowance is to be paid back to the landlord during the remainder of the term of such lease agreement through additional rentpayments (collectively, the “Improvement Allowance”). The Company has been funded $0.5 million and $0.7 million in 2014 and 2013, respectively, andhas been funded $5.5 million in total under the Improvement Allowance. The Company records a deferred rent liability to account for the funding under theImprovement Allowance and to record rent expense on a straight-line basis for these operating leases. F-26 Future minimum rental commitments under non-cancelable leases as of December 31, 2014 are as follows (in thousands): Year OperatingLeases 2015 $4,903 2016 4,934 2017 2,911 2018 2,500 2019 2,563 Thereafter 10,439 Total minimum lease payments $28,250 Total rent expenses approximated $3.6 million, $3.4 million and $3.2 million for the years ended December 31, 2014, 2013 and 2012, respectively. Purchase Obligations The Company and Cadila entered into a master services agreement pursuant to which the Company may request services from Cadila in the areas ofbiologics research, pre-clinical development, clinical development, process development, manufacturing scale-up and general manufacturing related servicesin India. In July 2011, and subsequently in March 2013, March 2014 and February 2015, the Company and Cadila amended the master services agreement toextend the term by one year for which services can be provided by Cadila under this agreement. Under the revised terms, if, by March 31, 2016, the amount ofservices provided by Cadila is less than $7.5 million, 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 of the shortfall amount that exceeds $2.0 million. When calculating the shortfall, the amount of services provided byCadila includes amounts that have been paid under all project plans, the amounts that will be paid under ongoing executed project plans and amounts forservices that had 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 seven years, but may be terminated by either party if there is a material breach that is not cured within 30 days of notice or, at any timeafter three years, provided that 90 days prior notice is given to the other party. Through December 31, 2014, the Company has purchased $5.7 million inservices from Cadila pursuant to this agreement, which includes services provided, since the beginning of 2013, by CPLB to the Company on behalf ofCadila pursuant to an October 2013 amendment authorizing such CPLB services. During 2014, the Company purchased $2.7 million in services from Cadilapursuant to this agreement, $1.0 million of which were provided by CPLB on behalf of Cadila. As of December 31, 2014, the Company’s remainingobligation to Cadila under the master services agreement is $1.8 million. The Company has recognized as expense the entire amount related to CPLB as theCompany has not recorded any equity income (loss) of CPLB (see Note 8). Contingencies License Agreement with Wyeth Holdings Corporation In 2007, the Company entered into an agreement to license certain rights from Wyeth Holding Corporation, a subsidiary of Pfizer Inc. (“Wyeth”).The Wyeth license is a non-exclusive, worldwide license to a family of patents and patent applications covering VLP technology for use in human vaccinesin certain fields, with expected patent expiration in early 2022. The Wyeth license provides for the Company to make an upfront payment (previously made),ongoing annual license fees, sublicense payments, milestone payments on certain development activities and royalties on any product sales. The milestonepayments are one-time only payments applicable to each related vaccine program. At present, the Company’s seasonal influenza VLP vaccine program(including CPLB’s seasonal influenza program) and its pandemic influenza VLP vaccine program are the only two programs to which the Wyeth licenseapplies. The license may be terminated by Wyeth only for cause and may be terminated by the Company only after it has provided ninety (90) days’ noticethat the Company has absolutely and finally ceased activity, including through any affiliate or sublicense, related to the manufacturing, development,marketing or sale of products covered by the license. If each milestone is achieved for any particular vaccine candidate, the Company would likely beobligated to pay an aggregate of $14 million to Wyeth for each product developed and commercialized under the agreement. Annual license fees under theagreement total $0.2 million per annum. The royalty to be paid by the Company under the agreement, if a product is approved by the FDA forcommercialization, will be based on a single digit percentage of net sales. Payments under the agreement to Wyeth as of December 31, 2014 aggregated$6.4 million, of which the Company paid the annual license fees during each of the three years ended December 31, 2014 and a $0.3 million sublicensepayment in 2014. The Company is currently in discussions with Wyeth to potentially amend the agreement and restructure the milestone payment owed as aresult of CPLB’s initiation of a Phase 3 clinical trial for its seasonal influenza VLP vaccine candidate in the third quarter of 2014. Such milestone payment isonly owed once for the Company’s seasonal influenza VLP vaccine program and it would not be required to make another payment if it or any of its affiliatesinitiate an additional Phase 3 clinical trial in a seasonal influenza VLP vaccine candidate. The $3.0 million milestone has been accrued for on theconsolidated balance sheet at December 31, 2014 and recorded as a research and development expense in 2014. Litigation There are currently no asserted claims against the Company. Management has determined that a material loss resulting from either asserted claims orunasserted claims (situations where claims may be reasonably anticipated even if not yet asserted) is not reasonably possible. Note 17 – Related Party Transactions Dr. Rajiv Modi, a director of Novavax, is also the managing director of Cadila. The Company and Cadila have formed the CPLB joint venture (seeNote 8). The Company and Cadila also have entered into a master services agreement, pursuant to which Cadila may perform certain research, developmentand manufacturing services for the Company up to $7.5 million. A subsidiary of Cadila owns 7.5 million shares of the Company’s outstanding common stockas of December 31, 2014. Since entering into the master services agreement and through December 31, 2014, the Company has incurred $5.7 million underthe agreement. The amount due and unpaid for services performed under the master services agreement at both December 31, 2014 and 2013 was $0.4million. F-27 Note 18 – Quarterly Financial Information (Unaudited) The Company’s unaudited quarterly information for the years ended December 31, 2014 and 2013 is as follows: Quarter Ended March 31 June 30 September 30 December 31 (in thousands, except per share data) 2014: Revenue $7,462 $8,259 $8,214 $6,724 Net loss $(13,810) $(17,864) $(19,727) $ (31,546)Net loss per share $(0.07) $(0.08) $(0.08) $(0.13) 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) 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 share for the fourquarters may not equal the net loss per share for the respective twelve-month period. F-28  Exhibit 10.4 NOVAVAX, INC. Non-Statutory Stock Option Agreement 1. Grant of Option. Novavax, Inc., a Delaware corporation (“Company”), hereby grants to [•] (“Optionee”), as of [•] (“Date of Grant”), an option,pursuant to the Company’s 2005 Stock Incentive Plan (“Plan”), to purchase an aggregate of [•] shares of Common Stock (“Shares”) of the Company at a priceof $[•] per share, purchasable as set forth in, and subject to the terms and conditions of this Stock Option Agreement and the Plan. Except where the contextotherwise requires, the term “Company” shall include the parent and all present and future subsidiaries of the Company as defined in Sections 424(e) and424(f) of the Internal Revenue Code of 1986, as amended and replaced from time to time (“Code”); (provided, however, that status as a “parent” or“subsidiary” corporation depends on satisfaction of the criteria in Sections 424(e) and (f) as of the date on which such determination is being made, and doesnot necessarily continue to exist merely because it did so as of the date of grant of the option). Any words or terms that begin with capitalized letters shall bedefined terms and shall have the meaning set forth in the Plan (if such word or term is not otherwise defined in this Agreement). 2. Non-statutory Stock Option. This option is not intended to qualify as an incentive stock option under Section 422 of the Code. 3. Exercise of Option and Provisions for Termination. (a) Regular Vesting Schedule. Except as otherwise provided in this Agreement, as of the six-month anniversary of the Date of Grant (the“Vesting Date”), this option may be exercised with respect to one-hundred percent of the Shares subject to the option; provided however, that the Optioneemust have remained in the continuous service of the Company in the capacity of a member of the Company’s Board of Directors from the Date of Grantthrough the Vesting Date. This option shall not vest or become exercisable if the Optionee terminates service as a director prior to the Vesting Date (unlesssuch termination results in accelerated vesting under Section 3(d) below, or unless the option has previously vested as a result of a Corporate Transaction orother event). Additionally, notwithstanding the above, this option shall expire and may not be exercised after the tenth anniversary of the Date of Grant (the“Expiration Date”). (b) Exercise Procedure. Subject to the conditions set forth in this Agreement, this option shall be exercised by the Optionee’s delivery ofwritten notice of exercise to the Treasurer of the Company, specifying the number of Shares to be purchased and the purchase price to be paid therefore andaccompanied by payment in full in accordance with Section 4. Such exercise shall be effective upon receipt by the Treasurer of the Company of such writtennotice together with the required payment. The Optionee may purchase less than the number of Shares covered hereby, provided that no partial exercise ofthis option may be for any fractional Share or for fewer than ten whole Shares. 1. (c) Exercise Period Upon Termination of Service. Subject to Section 3(d) below, if the Optionee ceases to provide services to the Companyin the capacity of a member of the Company’s Board of Directors for any reason, then the option to the extent it is unvested and not yet exercisable shall beimmediately forfeited and cancelled, and the right to exercise this option (as to any portion of the option that has vested and is exercisable) shall terminatethree (3) years after such cessation of service (but in no event may the option be exercised after the Expiration Date and the Company retains the right toterminate or cancel the option earlier if permitted by Section 12 of the Plan). (d) Accelerated Vesting Upon Death or Disability. If the Optionee dies or terminates service as a director of the Company because of theOptionee’s disability (within the meaning of Section 22(e)(3) of the Code), then, notwithstanding the above, the vesting of this option shall accelerate, andthe option may be exercised in full with respect to one hundred percent of the Shares subject to the option by the Optionee or his or her estate orrepresentative, as applicable, within the time periods set forth in Section 3(c) above. 4. Payment of Purchase Price. (a) Method of Payment. Payment of the purchase price for Shares purchased upon exercise of this option shall be made (i) by delivery to theCompany of cash or a check to the order of the Company in an amount equal to the purchase price of such Shares, (ii) subject to the consent of the Company,by delivery to the Company of shares of Common Stock of the Company then owned by the Optionee having a fair market value equal in amount to thepurchase price of such Shares, (iii) by any other means which the Board of Directors determines is consistent with the purpose of the Plan and with applicablelaws and regulations (including, without limitation, the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 and Regulation T promulgatedby the Federal Reserve Board if then applicable), or (iv) subject to the consent of the Company, by any combination of such methods of payment. In theevent that the Company consents to the Optionee’s use of already-acquired shares of the Company’s Common Stock to pay the exercise price, the Companymay further require that such shares have been owned or held by the Optionee for a sufficient period to avoid a change to earnings for financial accountingpurposes. (b) Valuation of Shares or Other Non-Cash Consideration Tendered in Payment of Purchase Price. For the purposes hereof, the fair marketvalue of any share of the Company’s Common Stock or other non-cash consideration which may be delivered to the Company in exercise of this option shallbe determined in good faith by the Board of Directors of the Company. (c) Delivery of Shares Tendered in Payment of Purchase Price. If the Optionee exercises the option by delivery of shares of Common Stockof the Company, the certificates representing the shares of Common Stock of the Company to be delivered shall be duly executed in blank by the Optionee orshall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to the Company. Fractional shares ofCommon Stock of the Company will not be accepted in payment of the purchase price of Shares acquired upon exercise of this option. 2. 5. Delivery of Shares; Compliance With Securities Laws, Etc. (a) General. The Company shall, upon payment of the option price for the number of Shares purchased and paid for, make prompt deliveryof such Shares to the Optionee, provided that if any law or regulation requires the Company to take any action with respect to such Shares before the issuancethereof, then the date of delivery of such Shares shall be extended for the period necessary to complete such action. (b) Listing, Qualification, Etc. This option shall be subject to the requirement that if, at any time, counsel to the Company shall determinethat the listing, registration or qualification of the Shares subject hereto upon any securities exchange or under any state or federal law, or the consent orapproval of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares hereunder, this option may not beexercised, in whole or in part, unless such listing, registration, qualification, consent or approval, disclosure or satisfaction of such other condition shall havebeen affected or obtained on terms acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for, effect or obtainsuch listing, registration, qualification, or disclosure, or to satisfy such other condition. 6. Nontransferability of Option. Except as provided in paragraph (d) of Section 3, this option is personal and no rights granted hereunder may betransferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) nor shall any such rights be subject to execution,attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of such rights contrary to theprovisions hereof, or upon the levy of any attachment or similar process upon this option or such rights, this option and such rights shall, at the election ofthe Company, become null and void. 7. No Special Service Rights. Nothing contained in the Plan or this option shall be construed or deemed by any person under any circumstances tobind the Company to continue the service of the Optionee for the period within which this option may be exercised. 8. Rights as a Stockholder. The Optionee shall have no rights as a stockholder with respect to any Shares which may be purchased by exercise of thisoption (including, without limitation, any rights to receive dividends or non-cash distributions with respect to such Shares) unless and until a certificaterepresenting such Shares is duly issued and delivered to the Optionee. No adjustment shall be made for dividends or other rights for which the record date isprior to the date such stock certificate was issued. 9. Adjustment Provisions. (a) General. If (i) the outstanding shares of Common Stock are (A) exchanged for a different number or kind of shares or other securities ofthe Company, or (B) increased or decreased as a result of any recapitalization, reclassification, stock dividend, stock split or reverse stock split, or(ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares ofCommon Stock or other securities, the Optionee shall, with respect to this option or any unexercised portion hereof, be entitled to the rights and benefits, andbe subject to the limitations, set forth in Section 11(a) of the Plan. 3. (b) Board Authority to Make Adjustments. Any adjustments under this Section 9 will be made by the Board of Directors, whosedetermination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issuedpursuant to this option on account of any such adjustments. (c) Limits on Adjustments. No adjustment shall be made under this Section 9 which would, within the meaning of any applicable provisionof the Code, constitute a modification, extension or renewal of this option or a grant of additional benefits to the Optionee. 10. Mergers, Consolidation, Distributions, Liquidations, Etc. In the event of a Corporate Transaction prior to the expiration or termination of thisoption, the Optionee shall, with respect to this option or any unexercised portion hereof, be entitled to the rights and benefits, and be subject to thelimitations, set forth in Section 12(a) of the Plan. Notwithstanding the foregoing, in the event of a Corporate Transaction or a Change in the IncumbentBoard, then any unvested portion of the option that has not previously been cancelled or forfeited (e.g., for failure to satisfy the vesting requirements ofSection 3(a) above) shall become immediately vested and exercisable, and the Company may take any other actions permitted under Section 12 of the Plan. 11. Withholding Taxes. The Company’s obligation to deliver Shares upon the exercise of this option shall be subject to the Optionee’s satisfactionof all applicable federal, state and local income and employment tax withholding requirements. 12. Miscellaneous. (a) Except as provided herein, this option may not be amended or otherwise modified unless evidenced in writing and signed by theCompany and the Optionee. (b) All notices under this option shall be mailed or delivered by hand to the parties at their respective addresses set forth beneath theirnames below or at such other address as may be designated in writing by either of the parties to one another. (c) This option shall be governed by and construed in accordance with the laws of the State of Delaware. (d) This option is subject to the terms of the Plan. In the event of any conflict or inconsistency between the terms of this Stock OptionAgreement and the terms of the Plan, the Plan shall control. (e) This Agreement is intended to bind and inure to the benefit of, and be enforceable by, the Optionee, the Company, any surviving entityresulting from a Corporate Transaction and any other person or entity who is a successor by merger, acquisition, consolidation or otherwise to the business ofthe Company. 4. (f) All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the laws of the State ofDelaware, without regard to such State’s conflict of law rules. Date of Grant: [•]NOVAVAX, INC. By: OPTIONEE’S ACCEPTANCE The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receiptof a copy of the Company’s 2005 Stock Incentive Plan. OPTIONEE PRINT NAME SIGN NAME PRINT ADDRESS 5. Exhibit 10.5 NOVAVAX, INC. Incentive Stock Option Agreement 1. Grant of Option. Novavax, Inc., a Delaware corporation (“Company”), hereby grants to [•] (“Optionee”), as of [•] (“Date of Grant”), an option,pursuant to the Company’s 2005 Stock Incentive Plan (“Plan”), to purchase an aggregate of [•] shares of Common Stock (“Shares”) of the Company at a priceof $[•] per share, purchasable as set forth in, and subject to the terms and conditions of this Stock Option Agreement and the Plan. Except where the contextotherwise requires, the term “Company” shall include the parent and all present and future subsidiaries of the Company as defined in Sections 424(e) and424(f) of the Internal Revenue Code of 1986, as amended and replaced from time to time (“Code”); (provided, however, that status as a “parent” or“subsidiary” corporation depends on satisfaction of the criteria in Sections 424(e) and (f) as of the date on which such determination is being made, and doesnot necessarily continue to exist merely because it did so as of the date of grant of the option). Any words or terms that begin with capitalized letters shall bedefined terms and shall have the meaning set forth in the Plan (if such word or term is not otherwise defined in this Agreement). 2. Status of Stock Option. This option is not intended to qualify as an incentive stock option under Section 422 of the Code, unless otherwisespecified by the Company’s Board of Directors or its designee at the time of grant of the option, as outlined in Section 12 (e). 3. Exercise of Option and Provisions for Termination. (a) Vesting Schedule. Except as otherwise provided in this Agreement, this option may be exercised prior to the tenth anniversary of theDate of Grant (hereinafter the “Expiration Date”) in installments as to not more than that percentage of the Shares set forth in the table below during therespective installment periods set forth in the table below. Exercise PeriodPercentage of Shares as to which Option is Exercisable Prior to [•][•]% On or after [•] but prior to [•][•]% On or after [•] but prior to [•][•]% On or after [•] but prior to [•][•]% On or after [•][•]%  The right of exercise shall be cumulative so that if the option is not exercised to the maximum extent permissible during any exercisable period, itshall be exercisable, in whole or in part, with respect to all Shares not so purchased at any time prior to the Expiration Date or the earlier termination of thisoption. This option may not be exercised at any time on or after the Expiration Date. (b) Exercise Procedure. Subject to the conditions set forth in this Agreement, this option shall be exercised by the Optionee’s delivery ofwritten notice of exercise to the Treasurer of the Company, specifying the number of Shares to be purchased and the purchase price to be paid therefore andaccompanied by payment in full in accordance with Section 4. Such exercise shall be effective upon receipt by the Treasurer of the Company of such writtennotice together with the required payment. The Optionee may purchase less than the number of Shares covered hereby, provided that no partial exercise ofthis option may be for any fractional Share or for fewer than ten whole Shares. (c) Exercise Period Upon Termination of Service. Subject to Section 10, if the Optionee ceases to provide all services to the Company(whether as an employee, director or consultant), for any reason, then, except as provided in subsections (d) and (e) below, the right to exercise this optionshall terminate three months after such cessation of service (but in no event after the Expiration Date and the Company retains the right to terminate or cancelthe option earlier if permitted by Section 12 of the Plan), provided that this option shall be exercisable only with respect to the number of Shares as to whichthe option was vested and exercisable under Section 3(a) above on the date the Optionee ceases to provide services. The option shall not vest or becomeexercisable with respect to any additional shares after the Optionee ceases to provide services to the Company. Notwithstanding the foregoing, if theOptionee, prior to the Expiration Date, materially violates the non-competition, non-solicitation or confidentiality provisions of any employment contract,confidentiality and nondisclosure agreement or other agreement between the Optionee and the Company, the right to exercise this option shall terminateimmediately upon such violation. (d) Exercise Period Upon Death or Disability. If the Optionee dies or terminates service with the Company because of the Optionee’sdisability (within the meaning of Section 22(e)(3) of the Code) prior to the Expiration Date and while he or she is providing services to the Company, or if theOptionee dies within three months after the Optionee has terminated the provision of services to the Company (other than as the result of a discharge for“cause” as specified in paragraph (e) below), this option shall be exercisable, within the period of one year following the date of death or termination ofservice because of disability of the Optionee (but in no event after the Expiration Date and the Company retains the right to terminate or cancel the optionearlier if permitted by Section 12 of the Plan), by the Optionee or by the person to whom this option is transferred by will or the laws of descent anddistribution, provided that this option shall be exercisable only with respect to the number of Shares as to which the option was vested and exercisable underSection 3(a) above on the date the Optionee dies or terminates services due to disability (with no further vesting occurring thereafter). Except as otherwiseindicated by the context, the term “Optionee,” as used in this option, shall be deemed to include the estate of the Optionee or any person who acquires theright to exercise this option by bequest or inheritance or otherwise by reason of the death of the Optionee. 1. (e) Discharge for Cause. If the Optionee, prior to the Expiration Date, is discharged from employment or from the provision of any furtherservices to the Company for “cause” (as defined below), the right to exercise this option shall terminate immediately upon such cessation of the Optionee’sservices. “Cause” shall mean willful misconduct in connection with the Optionee’s employment or service on behalf of the Company, or the willful failure ofthe Optionee to perform his or her responsibilities in the best interests of the Company (including, without limitation, breach, whether willful or not, by theOptionee of any provision of any employment or services agreement, nondisclosure, non-competition, non-solicitation or other similar agreement betweenthe Optionee and the Company), as determined by the Company, which determination is conclusive. The Optionee shall be considered to have beendischarged “for cause” if the Company determines, within 30 days after the Optionee’s termination for any other purported reason, that discharge for causewas warranted (and the Company may rescind any exercise of the option in those circumstances). 4. Payment of Purchase Price. (a) Method of Payment. Payment of the purchase price for Shares purchased upon exercise of this option shall be made (i) by delivery to theCompany of cash or a check to the order of the Company in an amount equal to the purchase price of such Shares, (ii) subject to the consent of the Company,by delivery to the Company of shares of Common Stock of the Company then owned by the Optionee having a fair market value equal in amount to thepurchase price of such Shares, (iii) by any other means which the Board of Directors determines is consistent with the purpose of the Plan and with applicablelaws and regulations (including, without limitation, the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 and Regulation T promulgatedby the Federal Reserve Board if then applicable), or (iv) subject to the consent of the Company, by any combination of such methods of payment. In theevent that the Company consents to the Optionee’s use of already-acquired shares of the Company’s Common Stock to pay the exercise price, the Companymay further require that such shares have been owned or held by the Optionee for a sufficient period to avoid a change to earnings for financial accountingpurposes. (b) Valuation of Shares or Other Non-Cash Consideration Tendered in Payment of Purchase Price. For the purposes hereof, the fair marketvalue of any share of the Company’s Common Stock or other non-cash consideration which may be delivered to the Company in exercise of this option shallbe determined in good faith by the Board of Directors of the Company. (c) Delivery of Shares Tendered in Payment of Purchase Price. If the Optionee exercises the option by delivery of shares of Common Stockof the Company, the certificates representing the shares of Common Stock of the Company to be delivered shall be duly executed in blank by the Optionee orshall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to the Company. Fractional shares ofCommon Stock of the Company will not be accepted in payment of the purchase price of Shares acquired upon exercise of this option. 2. 5. Delivery of Shares; Compliance With Securities Laws, Etc. (a) General. The Company shall, upon payment of the option price for the number of Shares purchased and paid for, make prompt deliveryof such Shares to the Optionee, provided that if any law or regulation requires the Company to take any action with respect to such Shares before the issuancethereof, then the date of delivery of such Shares shall be extended for the period necessary to complete such action. (b) Listing, Qualification, Etc. This option shall be subject to the requirement that if, at any time, counsel to the Company shall determinethat the listing, registration or qualification of the Shares subject hereto upon any securities exchange or under any state or federal law, or the consent orapproval of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares hereunder, this option may not beexercised, in whole or in part, unless such listing, registration, qualification, consent or approval, disclosure or satisfaction of such other condition shall havebeen affected or obtained on terms acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for, effect or obtainsuch listing, registration, qualification, or disclosure, or to satisfy such other condition. 6. Nontransferability of Option. Except as provided in paragraph (d) of Section 3, this option is personal and no rights granted hereunder may betransferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) nor shall any such rights be subject to execution,attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of such rights contrary to theprovisions hereof, or upon the levy of any attachment or similar process upon this option or such rights, this option and such rights shall, at the election ofthe Company, become null and void. 7. No Special Service Rights. Nothing contained in the Plan or this option shall be construed or deemed by any person under any circumstances tobind the Company to continue the employment or service of the Optionee for the period within which this option may be exercised. 8. Rights as a Stockholder. The Optionee shall have no rights as a stockholder with respect to any Shares which may be purchased by exercise of thisoption (including, without limitation, any rights to receive dividends or non-cash distributions with respect to such Shares) unless and until a certificaterepresenting such Shares is duly issued and delivered to the Optionee. No adjustment shall be made for dividends or other rights for which the record date isprior to the date such stock certificate was issued. 9. Adjustment Provisions. (a) General. If (i) the outstanding shares of Common Stock are (A) exchanged for a different number or kind of shares or other securities ofthe Company, or (B) increased or decreased as a result of any recapitalization, reclassification, stock dividend, stock split or reverse stock split, or(ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares ofCommon Stock or other securities, the Optionee shall, with respect to this option or any unexercised portion hereof, be entitled to the rights and benefits, andbe subject to the limitations, set forth in Section 11(a) of the Plan. 3. (b) Board Authority to Make Adjustments. Any adjustments under this Section 9 will be made by the Board of Directors, whosedetermination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issuedpursuant to this option on account of any such adjustments. (c) Limits on Adjustments. No adjustment shall be made under this Section 9 which would, within the meaning of any applicable provisionof the Code, constitute a modification, extension or renewal of this option or a grant of additional benefits to the Optionee. 10. Mergers, Consolidation, Distributions, Liquidations, Etc. (a) In the event of a Corporate Transaction or a Change in the Incumbent Board (as such terms are defined in Section 12 of the Plan) prior tothe Expiration Date or termination of this option, the Optionee shall, with respect to this option or any unexercised portion hereof, be entitled to the rightsand benefits, and be subject to the limitations, set forth in Section 12 of the Plan. (b) Notwithstanding anything in this Agreement to the contrary, in the event of “Service Termination Event” (as defined in Subsection (c),below) during the period of «COC» after the effective date of a Change in Control (as defined in Subsection (c), below) or before the effective date of aChange in Control, but after the first date on which the Board and/or senior management of the Company has entered into formal negotiations with apotential acquiror that results in the consummation of a Change in Control (provided, however, that in no event shall a termination of employment occurringmore than one (1) year before the effective date of a Change in Control be deemed to be a Service Termination Event), then any unvested portion of theoption that has not previously expired or been terminated shall become immediately vested and exercisable on the date of such Service Termination Event(or, in the case of a Service Termination Event that precedes a Change in Control, on the date of the Change in Control). (c) For purposes of this Section, (i) a Change in Control means (A) a sale, lease, license or other disposition of all or substantially all of the assets of the Company,(B) a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which theshareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the outstanding votingpower of the surviving entity and its parent following the consolidation, merger or reorganization, or (C) any transaction or series of related transactionsinvolving a person or entity, or a group of affiliated persons or entities (but excluding any employee benefit plan or related trust sponsored or maintained bythe Company or an Affiliate) in which such persons or entities that were not shareholders of the Company immediately prior to their acquisition of Companysecurities as part of such transaction become the owners, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of thecombined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction and other than aspart of a private financing transaction by the Company, or (D) a Change in the Incumbent Board. 4. (ii) a Service Termination Event is: (1) a termination of Optionee’s service by the Company other than for Cause, or (2) a constructive termination initiated by the Optionee because any of the following events or conditions have occurred: A. a change in the Optionee’s status, title, position or responsibilities (including reporting responsibilities)which represents an adverse change from the Optionee’s status, title, position or responsibilities as in effect immediately preceding the effective date of aChange in Control or at any time thereafter; the assignment to the Optionee of any duties or responsibilities which are inconsistent with the Optionee’s status,title, position or responsibilities as in effect immediately preceding the effective date of a Change in Control or at any time thereafter; except in connectionwith the termination of the Optionee’s employment for Cause or the termination of an Optionee’s employment because of an Optionee’s disability or death,or except as the result of a voluntary termination by the Optionee other than as a result of a constructive termination; B. a reduction in the Optionee’s pay or any failure to pay the Optionee any compensation or benefits to whichthe Optionee is entitled within five (5) days of the date due; C. the Company’s requiring the Optionee to relocate his principal worksite to any place outside a thirty (30) mileradius of the Optionee’s current worksite, except for reasonably required travel on the business of the Company or its affiliates which is not materially greaterthan such travel requirements prior to the Change in Control; D. the failure by the Company to (A) continue in effect (without reduction in benefit level and/or rewardopportunities) any material compensation or employee benefit plan in which the Optionee was participating immediately preceding the effective date of aChange in Control or at any time thereafter, unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to theOptionee, or (B) provide the Optionee with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities)to those provided for under each other employee benefit plan, program and practice in which the Optionee was participating immediately preceding the dateof a Change in Control or at any time thereafter. E. the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of theCompany, which petition is not dismissed within sixty (60) days; 5. F. any material breach by the Company of any provision of this Agreement; G. the failure of the Company to obtain an agreement, satisfactory to the Optionee, from any successors andassigns to assume and agree to perform the obligations created under this Plan as a result of a Change in Control, as contemplated in Section 12(f) hereof. 11. Withholding Taxes. The Company’s obligation to deliver Shares upon the exercise of this option shall be subject to the Optionee’s satisfactionof all applicable federal, state and local income and employment tax withholding requirements. 12. Miscellaneous. (a) Except as provided herein, this option may not be amended or otherwise modified unless evidenced in writing and signed by theCompany and the Optionee. (b) All notices under this option shall be mailed or delivered by hand to the parties at their respective addresses set forth beneath theirnames below or at such other address as may be designated in writing by either of the parties to one another. (c) This option shall be governed by and construed in accordance with the laws of the State of Delaware. (d) This option is subject to the terms of the Plan. In the event of any conflict or inconsistency between the terms of this Stock OptionAgreement and the terms of the Plan, the Plan shall control. (e) To the extent that this option has been designated by the Company’s Board of Directors as an incentive stock option under Section 422of the Code, then the Optionee acknowledges that the option may be converted, in whole or in part, to a non-statutory stock option to the extent theprovisions of Section 422 of the Code are not satisfied. (f) This Agreement is intended to bind and inure to the benefit of, and be enforceable by, the Optionee, the Company, any surviving entityresulting from a Corporate Transaction and any other person or entity who is a successor by merger, acquisition, consolidation or otherwise to the business ofthe Company. 6. (g) All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the laws of the State ofDelaware, without regard to such State’s conflict of law rules. Date of Grant: [•]NOVAVAX, INC. By: OPTIONEE’S ACCEPTANCE The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receiptof a copy of the Company’s 2005 Stock Incentive Plan. OPTIONEE PRINT NAME SIGN NAME PRINT ADDRESS 7. Exhibit 10.6 NOVAVAX RESTRICTED STOCK AGREEMENT This Restricted Stock Agreement (“Agreement”) is made as of [•] by and between Novavax, Inc., a Delaware corporation (“Company”), and [•](“Stockholder”). Whereas, the Company desires to issue, and Stockholder desires to acquire, stock of the Company as herein described, on the terms and conditionshereinafter set forth; Whereas, the issuance of common stock hereby is pursuant to Section 8(a) of the Company’s 2005 Stock Incentive Plan (“Plan”), which is acompensatory benefit arrangement for the employees, officers, directors, consultants and advisors of the Company. Now, Therefore, It Is Agreed between the parties as follows: 1. Issuance of Stock. The Company hereby agrees to issue to Stockholder, and Stockholder agrees to accept, an aggregate of [•] shares of the Common Stockof the Company (the “Stock”), having a value as determined by the Board of Directors of the Company of $[•] per share (for an aggregate value of $[•]), inexchange for Stockholder’s past services and/or expected provision of future services on behalf of the Company or its affiliated entities. Delivery of the Stockshall occur electronically following the execution of this Agreement, or at such other time and place as the parties may mutually agree. 2. Risk of Forfeiture (a) With respect to Stock that has vested pursuant to Section 2(b), if Stockholder ceases to be employed (as an employee, consultant or director asfurther described in Section 2(b)) by the Company and its subsidiaries for any reason, including but not limited to death or disability, all then-outstandingand unvested Stock acquired by Stockholder hereunder shall be automatically and immediately forfeited. Stockholder, or Stockholder’s personalrepresentative as the case may be, hereby (i) appoints the Company as the attorney-in-fact of the undersigned to take such actions as may be necessary orappropriate to effectuate a transfer of the record ownership, at no cost to the Company, of any such shares that are unvested and forfeited hereunder, (ii) agreesto deliver to the Company, as a precondition to the issuance of any certificate(s) of Stock, one or more stock powers, endorsed in blank, with respect to suchStock, and (iii) agrees to take such other actions as the Company may reasonably request to accomplish the transfer or forfeiture of any such Stock hereunder. (b) On the date that is one (1) year after the “Vesting Commencement Date” (as set forth on the signature page to this Agreement), 25% equal to [•]shares of Stock shall vest, and such vesting will continue on each anniversary thereafter for the next three years at 25% per year. In order for the Stock to veston a particular vesting installment date, the Stockholder must have been and must be an employee, director or consultant of the Company or a parent orsubsidiary of the Company continuously until such vesting installment date. By way of example, if an employee terminates and immediately thereafterbecomes a consultant of the company, such individual will be deemed to have a continuous qualifying role with the Company. Accordingly, all of the Stockshall vest as of the anniversary of the Vesting Commencement Date. The final vesting installment may cover additional shares to take into account anyfractional shares.  3. Adjustments to Stock. If, from time to time, prior to full vesting, there is any change affecting the Company’s outstanding Common Stock as a class that iseffected without the receipt of consideration by the Company (through merger, consolidation, reorganization, reincorporation, stock dividend, dividend inproperty other than cash, stock split, liquidating dividend, combination of shares, change in corporation structure or other transaction not involving thereceipt of consideration by the Company), then any and all new, substituted or additional securities or other property to which Stockholder is entitled byreason of Stockholder’s ownership of Stock shall be immediately subject to vesting hereunder and be included in the word “Stock” for all purposes of thisAgreement with the same force and effect as the shares of the Stock presently subject to vesting. 4. Escrow of Unvested Stock. As security for Stockholder’s faithful performance of the terms of this Agreement and to insure the availability for delivery ofStockholder’s Stock, Stockholder agrees, at the closing hereunder, to deliver to and deposit with the Secretary of the Company or the Secretary’s designee(“Escrow Agent”), as Escrow Agent in this transaction, three (3) stock assignments duly endorsed (with date and number of shares blank) in a form attachedhereto as Exhibit A, together with a certificate or certificates evidencing all of the Stock subject to vesting; said documents are to be held by the EscrowAgent and delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the Company and Stockholder set forth in Exhibit B attached heretoand incorporated by this reference, which instructions shall also be delivered to the Escrow Agent at the closing hereunder. Stockholder herebyacknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the Escrow Agent. Stockholder agrees that the Escrow Agentshall not be liable to any party hereof (or to any other party), and may rely upon any letter, notice or other document executed by any signature purported tobe genuine and may resign at any time. Stockholder agrees that if the Secretary of the Company, or the Secretary’s designee, resigns as Escrow Agent for anyor no reason, the Board of Directors of the Company shall have the power to appoint a successor to serve as Escrow Agent pursuant to the terms of thisAgreement. Stockholder agrees that if the Secretary of the Company resigns as Secretary, the successor Secretary shall serve as Escrow Agent pursuant to theterms of this Agreement. 5. Rights of Stockholder. Subject to the provisions of Sections 6, 8, 12 and 13 herein, Stockholder shall exercise all rights and privileges of a shareholder ofthe Company with respect to the Stock deposited in escrow. Stockholder shall be deemed to be the holder for purposes of receiving any dividends that maybe paid with respect to such shares of Stock and for the purpose of exercising any voting rights relating to such shares of Stock, even if some or all of suchshares of Stock have not yet vested. 6. Limitations on Transfer. In addition to any other limitation on transfer created by applicable securities laws, Stockholder shall not assign, hypothecate,donate, encumber or otherwise dispose of any interest in the Stock while the Stock is not fully vested. After any Stock has been fully vested, Stockholdershall not assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Stock except in compliance with the provisions herein andapplicable securities laws. During the period of time during which the Stockholder holds the Common Stock, the value of the Common Stock may increase ordecrease, and any risk associated with such Common Stock and such fluctuation in value shall be borne by the Stockholder. 2. 7. Restrictive Legends. All certificates representing the Stock shall have endorsed thereon legends in substantially the following forms (in addition to anyother legend which may be required by other agreements between the parties hereto): (a) “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THECOMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THEPRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOIDWITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.” (b) Any legend required by Company officials. 8. Investment Representations. In connection with the issuance of the Stock, Stockholder represents to the Company the following: (a) Stockholder is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company toreach an informed and knowledgeable decision to acquire the Stock. Stockholder is acquiring the Stock for investment for Stockholder’s own account onlyand not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Act. Stockholder is familiar with the provisions of Rule 144, under the Securities Act of 1933, as in effect from time to time, which, in substance, permitlimited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-publicoffering subject to the satisfaction of certain conditions. The Stock may be resold by Stockholder in certain limited circumstances subject to the provisions ofRule 144, which requires, among other things: (i) the availability of certain public information about the Company and (ii) the resale occurring following therequired holding period under Rule 144 after the Stockholder has acquired, and made full payment of (within the meaning of Rule 144), the securities to besold. (b) Stockholder further understands that at the time Stockholder wishes to sell the Stock there may be no public market upon which to make such asale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that,in such event, Stockholder would be precluded from selling the Stock under Rule 144 even if the minimum holding period requirement had been satisfied. 3. 9. Section 83(b) Election. Stockholder understands that Section 83(a) of the Code, taxes as ordinary income the difference between the amount paid for theStock and the fair market value of the Stock as of the date any restrictions on the Stock lapse. In this context, “restriction” includes the right of the Companyto receive transfer of the Stock as set forth in Section 2 above. Stockholder understands that Stockholder may elect to be taxed at the time the Stock isacquired, rather than when and as vesting occurs, by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal RevenueService within thirty (30) days from the date of transfer. Even if the fair market value of the Stock at the time of the execution of this Agreement equals theamount paid for the Stock, the 83(b) Election must be made to avoid income under Section 83(a) in the future. Stockholder understands that failure to filesuch an 83(b) Election in a timely manner may result in adverse tax consequences for Stockholder. Stockholder further understands that an additional copy ofsuch 83(b) Election is required to be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Stockholderfurther acknowledges and understands that it is Stockholder’s sole obligation and responsibility to timely file such 83(b) Election, and neither theCompany nor the Company’s legal or financial advisors shall have any obligation or responsibility with respect to such filing. Stockholderacknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to acquisition of the Stock hereunder,and does not purport to be complete. Stockholder further acknowledges that the Company has directed Stockholder to seek independent advice regarding theapplicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Stockholder may reside, and the taxconsequences of Stockholder’s death. Stockholder assumes all responsibility for filing an 83(b) Election and paying all taxes resulting from such election orthe lapse of the restrictions on the Stock. 10. Refusal to Transfer. The Company shall not be required (a) to transfer on its books any shares of Stock of the Company which shall have been transferredin violation of any of the provisions set forth in this Agreement, or (b) to treat as owner of such shares or to accord the right to vote as such owner or to paydividends to any transferee to whom such shares shall have been so transferred. 11. No Service Rights. This Agreement is not an employment or service contract and nothing in this Agreement shall affect in any manner whatsoever theright or power of the Company (or a parent or subsidiary of the Company) to terminate Stockholder’s employment or service for any reason at any time, withor without cause and with or without notice. 12. Miscellaneous. (a) Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to theparty to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, and if not during normal businesshours of the recipient, then on the next business day, (iii) five (5) calendar days after having been sent by registered or certified mail, return receipt requested,postage prepaid, or (iv) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with writtenverification of receipt. All communications shall be sent to the other party hereto at such party’s address hereinafter set forth on the signature page hereof, orat such other address as such party may designate by ten (10) days advance written notice to the other party hereto. (b) Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictionson transfer herein set forth, be binding upon Stockholder, Stockholder’s successors, and assigns. Company’s rights hereunder shall be assignable by theCompany at any time or from time to time, in whole or in part. 4. (c) Attorneys’ Fees; Specific Performance. Stockholder shall reimburse the Company for all costs incurred by the Company in enforcing theperformance of, or protecting its rights under, any part of this Agreement, including reasonable costs of investigation and attorneys’ fees. It is the intention ofthe parties that, upon a forfeiture pursuant to the terms of this Agreement, the Company shall be entitled to receive the Stock, in specie, in order to have suchStock available for future issuance without dilution of the holdings of other shareholders. Furthermore, it is expressly agreed between the parties that moneydamages are inadequate to compensate the Company for the Stock and that the Company shall be entitled to specific enforcement of its rights to purchaseand receive said Stock. (d) Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. The partiesagree that any action brought by either party to interpret or enforce any provision of this Agreement shall be brought in, and each party agrees to, and doeshereby, submit to the jurisdiction and venue of, the appropriate state or federal court for the district encompassing the Company’s principal place of business. (e) Further Execution. The parties agree to take all such further action(s) as may reasonably be necessary to carry out and consummate thisAgreement as soon as practicable, and to take whatever steps may be necessary to obtain any governmental approval in connection with or otherwise qualifythe issuance of the securities that are the subject of this Agreement. (f) Independent Counsel. Stockholder acknowledges that Stockholder has been provided with an opportunity to consult with their own legalcounsel and tax or other advisors with respect to this Agreement. (g) Entire Agreement; Amendment. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subjectmatter hereof and supersede and merge all prior agreements or understandings, whether written or oral. This Agreement may not be amended, modified orrevoked, in whole or in part, except by an agreement in writing signed by each of the parties hereto. The provisions of the Plan apply to the Stock awardedunder this Agreement, and any word or term that is capitalized, but not otherwise defined in this Agreement, shall have the meaning set forth in the Plan. (h) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate suchprovision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) suchprovision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) thebalance of the Agreement shall be enforceable in accordance with its terms. (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which togethershall constitute one instrument. 5. In Witness Whereof, the parties hereto have executed this Agreement as of the day and year first above written. Novavax, Inc. By: Stockholder acknowledges and agrees that the vesting of shares pursuant to Section 2 hereof is earned only by continuing service as an employee,consultant or director at the will of the company. Stockholder further acknowledges and agrees that nothing in this agreement shall confer uponStockholder any right with respect to continuation of such employment or service relationship with the company, nor shall it interfere in any way withStockholder’s right or the company’s right to terminate Stockholder’s employment or consulting relationship at any time, with or without cause. Stockholder further acknowledges that any risk related to the fluctuation in the value of the stock from and after the date hereof, including any losses toStockholder as a result of forfeiture pursuant to Section 2, shall be borne by Stockholder. Stockholder acknowledges that Stockholder has read all tax related sections and further acknowledges Stockholder has had an opportunity to consultStockholder’s own Tax, Legal and Financial Advisors regarding the purchase of common stock under this Agreement. Stockholder acknowledges and agrees that in making the decision to acquire the common stock hereunder Stockholder has not relied on any statement,whether written or oral, regarding the subject matter hereof, except as expressly provided herein and in the attachments and exhibits hereto. Stockholder: Address: Vesting Commencement Date:[•] 6. Attachments: Exhibit A – Stock Assignment Exhibit B – Joint Escrow Instructions 7. Exhibit A STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE For Value Received, [•] hereby sells, assigns and transfers unto Novavax, Inc., a Delaware corporation (the “Company”), pursuant to the RestrictedStock Agreement, dated [•], by and between the undersigned and the Company (the “Agreement”) [•] shares of Common Stock of the Company standing inthe undersigned’s name on the books of the Company and does hereby irrevocably constitute and appoint both the Company’s Secretary and the Company’sattorney, or either of them, to transfer said stock on the books of the Company with full power of substitution in the premises. This Assignment may be usedonly in accordance with and subject to the terms and conditions of the Agreement, in connection with the redemption of shares of Common Stock issued tothe undersigned pursuant to the Agreement, and only to the extent that such shares remain unvested under the Agreement. Dated: (Signature) (Print Name) [Instruction: Please do not fill in any blanks other than the signature line. The purpose of this Assignment is to enable the Company to exercise itsredemption rights set forth in the Agreement without requiring additional signatures on the part of Stockholder.] 8. Exhibit B JOINT ESCROW INSTRUCTIONS Corporate SecretaryNovavax, Inc.20 Firstfield RoadGaithersburg, MD 20878 Sir or Madam: As Escrow Agent for both Novavax, Inc., a Delaware Company (“Company”) and [•] (“Stockholder”), you are hereby authorized and directed to hold thedocuments delivered to you pursuant to the terms of that certain Restricted Stock Agreement dated as of [•] (“Agreement”), to which a copy of these JointEscrow Instructions is attached as Exhibit B, in accordance with the following instructions: 1. In the event Company or an assignee shall elect to exercise any redemption rights set forth in the Agreement, the Company or its assignee willgive to Stockholder and you a written notice specifying the number of shares of stock to be redeemed, the redemption price, if any, and the time for a closingthereunder at the principal office of the Company. Stockholder and the Company hereby irrevocably authorize and direct you to close the transactioncontemplated by such notice in accordance with the terms of said notice. 2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares beingtransferred, and (c) to deliver the same, together with the certificate evidencing the shares of stock to be transferred, to the Company against the simultaneousdelivery to you of the redemption price, if any (which may include suitable acknowledgment of cancellation of indebtedness) for the number of shares ofstock being redeemed pursuant to the exercise of the its redemption rights. 3. Stockholder irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder andany additions and substitutions to said shares as specified in the Agreement. Stockholder does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securitiesnegotiable and complete any transaction herein contemplated, including but not limited to any appropriate filing with state or government officials or bankofficials. Subject to the provisions of this paragraph 3, Stockholder shall exercise all rights and privileges of a shareholder of the Company while the stock isheld by you. 4. This escrow shall terminate upon the exercise in full or expiration of such redemption rights, whichever occurs first. 9. 5. If at the time of termination of this escrow under Section 4 herein you should have in your possession any documents, securities, or other propertybelonging to Stockholder, you shall deliver all of the same to Stockholder and shall be discharged of all further obligations hereunder; provided, however,that if at the time of termination of this escrow you are advised by the Company that any property subject to this escrow is the subject of a pledge or othersecurity agreement, you shall deliver all such property to the pledgeholder or other person designated by the Company. 6. Except as otherwise provided in these Joint Escrow Instructions, your duties hereunder may be altered, amended, modified or revoked only by awriting signed by all of the parties hereto. 7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying orrefraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. Youshall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Stockholder while acting in goodfaith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusiveevidence of such good faith. 8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or Company,excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. Incase you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person, firmor Company by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside,vacated or found to have been entered without jurisdiction. 9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting toexecute or deliver these Joint Escrow Instructions documents or papers deposited or called for hereunder. 10. You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or anydocuments deposited with you. 11. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be Secretary of the Company or if you shall resign bywritten notice to the Company. In the event of any such termination, the Secretary of the Company shall automatically become the successor Escrow Agentunless the Company shall appoint another successor Escrow Agent, and Stockholder hereby confirms the appointment of such successor as Stockholder’sattorney-in-fact and agent to the full extent of your appointment. 12. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, thenecessary parties hereto shall join in furnishing such instruments. 10. 13. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securitiesheld by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until suchdispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competentjurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any suchproceedings. 14. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party tobe notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, and if not during normal business hours of therecipient, then on the next business day, (c) five (5) calendar days after having been sent by registered or certified mail, return receipt requested, postageprepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification ofreceipt. All communications shall be sent to the other party hereto at such party’s address set forth below, or at such other address as such party may designateby ten (10) days advance written notice to the other party hereto. Company:novavax, inc.20 Firstfield RoadGaithersburg, MD 20878Stockholder:[•]Escrow Agent:Corporate Secretarynovavax, inc.20 Firstfield RoadGaithersburg, MD 20878 15. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not becomea party to the Agreement. 16. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with yourobligations hereunder. You may rely upon the advice of such counsel, and you may pay such counsel reasonable compensation therefor. The Company shallbe responsible for all fees generated by such legal counsel in connection with your obligations hereunder. 17. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. It isunderstood and agreed that references to “you” and “your” herein refer to the original Escrow Agents. It is understood and agreed that the Company may atany time or from time to time assign its rights under the Agreement and these Joint Escrow Instructions. 11. 18. These Joint Escrow Instructions shall be governed by and interpreted and determined in accordance with the laws of the State of Delaware, assuch laws are applied by Delaware courts to contracts made and to be performed entirely in Delaware by residents of that state. Very truly yours, novavax, inc.: By Stockholder: Acknowledged Escrow Agent: 12. Exhibit 10.35 AMENDMENT No 5 to MASTER SERVICES AGREEMENT This Amendment, dated as of February 25, 2015 (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 to Master Services Agreement dated as of July 27, 2011 (the “First Amendment”) and AmendmentNo 2 to Master Services Agreement dated as of March 7, 2013 (the “Second Amendment”) Amendment No 3 to Master Services Agreement dated as ofOctober 29, 2013 (the “Third Amendment”) and Amendment No 4 to Master Services Agreement dated as of March 5, 2014 (the “Fourth Amendment” and,together with the Original Agreement, First Amendment, Second Amendment, Third Amendment, the “Agreement”), is between Cadila PharmaceuticalsLimited (“Cadila”), and Novavax, Inc. (“Novavax”). WHEREAS the parties to the Original Agreement initially agreed that Cadila would provide Services to Novavax; WHEREAS pursuant to the terms of the First Amendment, Second Amendment and Fourth Amendment, the parties amended the Original Agreement to,among other things, extend the period of use of Services for successive additional one (1) year periods to March 31, 2015; 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, 2016; 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 newsecond paragraph: It is the intent of the parties that, during the first seven (7) 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) concernslegitimate products or projects within Novavax’s scope of its own business and (ii) involves services that Cadila is reasonably able to provide within itsscope of resources and expertise, but for the fact that Cadila exercised its right not to prepare a Project Estimate or agree to a Project Plan reasonably offeredto Cadila by Novavax containing terms substantially consistent with those contained in Cadila’s Project Estimate therefor (which amounts shall bereasonably determined based on amounts that would be reasonably charged for such services had Cadila actually provided a Project Estimate and the partieshad entered into a Project 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 shouldsuch force 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 notequal or exceed a pro rata portion of $5.5 million (taking into consideration the time between the Effective Date and such termination versus the seven yearServices 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) theportion of the FM 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 FMShortfall Amount that exceeds 2.0 million. For purposes of this Section 9.2, “FM Shortfall Amount” equals the difference between the Pro Rata Amount andthe Services Amount. 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 21.1 LIST OF SUBSIDIARIES The following is a list of subsidiaries of the Company as of December 31, 2014. Name of SubsidiaryJurisdiction of Incorporation or Organization Novavax ABSweden  Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-3 No. 333-193549) pertaining to Novavax Inc. common stock,(2)Registration Statement (Form S-3 No. 333-187267) pertaining to Novavax Inc. common stock,(3)Registration Statement (Form S-8 No. 333-198121) pertaining to the Novavax Inc. stock incentive plan,(4)Registration Statement (Form S-8 No. 333-190600) pertaining to the Novavax Inc. stock incentive plan,(5)Registration Statement (Form S-8 No. 333-190599) pertaining to the Novavax Inc. 2013 employee stock purchase plan,(6)Registration Statement (Form S-8 No. 333-183113) pertaining to the Novavax Inc. stock incentive plan,(7)Registration Statement (Form S-8 No. 333-145298) pertaining to the Novavax Inc. stock incentive plan,(8)Registration Statement (Form S-8 No. 333-130990) pertaining to the Novavax Inc. stock incentive plan,(9)Registration Statement (Form S-8 No. 333-110401) pertaining to the Novavax Inc. stock incentive plan,(10)Registration Statement (Form S-8 No. 333-97931) pertaining to the Novavax Inc. stock incentive plan,(11)Registration Statement (Form S-8 No. 333-46000) pertaining to the Novavax Inc. stock incentive plan,(12)Registration Statement (Form S-8 No. 333-77611) pertaining to the Novavax Inc. stock incentive plan,(13)Registration Statement (Form S-8 No. 33-80279) pertaining to the Novavax Inc. stock incentive plan, and(14)Registration Statement (Form S-8 No. 33-80277) pertaining to Novavax Inc. stock incentive plan of our reports dated February 26, 2015, with respect to the consolidated financial statements of Novavax, Inc., and the effectiveness of internal control overfinancial reporting of Novavax, Inc., included in this Annual Report (Form 10-K) of Novavax, Inc. for the year ended December 31, 2014. /s/ Ernst & Young LLP Baltimore, MDFebruary 26, 2015  Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our report dated March 12, 2014 with respect to the consolidated financial statements, as of December 31, 2013 and for each of the two yearsin the period ended December 31, 2013 included in the Annual Report of Novavax, Inc. on Form 10-K for the year ended December 31, 2014. We herebyconsent to the incorporation by reference of said report 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. 333-198121 effective August 13, 2014, No. 333-190600 effective August 13, 2013,No. 333-190599 effective August 13, 2013, No. 333-183113 effective August 7, 2012, No. 333-145298 effective August 9, 2007, No. 333-130990 effectiveJanuary 12, 2006, No. 333-110401 effective November 12, 2003, No. 333-97931 effective August 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, VirginiaFebruary 26, 2015  Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, 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 to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, 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 (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand we have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose 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 under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: February 27, 2015By: /s/ Stanley C. Erck President and Chief Executive Officer  Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER I, 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 to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, 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 (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: February 27, 2015By: /s/ Barclay A. Phillips Senior Vice President, Chief Financial Officer and Treasurer  Exhibit 32.1 CERTIFICATION 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, 2014 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley C. Erck, President and Chief Executive Officer of the Company, herebycertify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 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; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companyfor the dates and periods covered by this Report. Date: February 27, 2015By: /s/ Stanley C. Erck President and Chief Executive Officer  Exhibit 32.2 CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO 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, 2014 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Barclay A. Phillips, Senior Vice President, Chief Financial Officer andTreasurer, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 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; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companyfor the dates and periods covered by this Report. Date: February 27, 2015By: /s/ Barclay A. Phillips Senior Vice President, Chief Financial Officer and Treasurer 

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