2015 Annual Report | MOMENTUM NOVAVAX, INC. is a clinical-stage vaccine company committed to delivering novel products to prevent a broad range of infectious diseases. Our recombinant nanoparticles and adjuvant technology are the foundation for groundbreaking innovation that improves global health through safe and effective vaccines. PRODUCT PIPELINE Our product pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical development for respiratory syncytial virus (RSV), seasonal influenza, pandemic influenza, and Ebola virus (EBOV). We also have additional preclinical stage programs, including the Middle East Respiratory Syndrome coronavirus (MERS). CORPORATE OVERVIEW Novavax is headquartered in Gaithersburg, Maryland with additional facilities in Rockville, Maryland and Uppsala, Sweden. Novavax is traded on the Nasdaq Stock Market under the symbol NVAX and employs over 450 individuals dedicated to developing novel vaccines to address infectious disease. MOMENTUM 2015 was a transformational year for Novavax. We announced positive data from five clinical trials in the third quarter, including the first respiratory syncytial virus (RSV) vaccine to demonstrate protection in any population. Our RSV program continues to be focused on the populations where there is the greatest need: older adults (60 years of age and older), infants via maternal immunization and pediatrics, and we were very pleased to announce positive clinical data in all three populations. Further, our data directly supported the initiation of our first Phase 3 clini- cal trials, known as Resolve™ in older adults and Prepare™ in infants via maternal immunization, as well as the initiation of a Phase 2 roll- over clinical trial in older adults enrolled in our prior Phase 2 trial. We recently announced that the Resolve trial was fully enrolled ahead of the RSV season and we initiated the Prepare trial in the fourth quarter of 2015, ahead of schedule. These accomplishments are a true tes- tament to our entire team and I am proud to work with this group of incredibly dedicated, passionate professionals. RSV REPRESENTS A SIGNIFICANT MARKET OPPORTUNITY Adults 60 years of age and older are at increased risk for RSV dis- ease due to age related declines in their immune systems. In this population, RSV is an important respiratory virus, distinct from influ- enza viruses, that is responsible for serious lower respiratory tract disease and may lead to hospitalization or even death. Additionally, RSV infection can lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma and conges- tive heart failure. RSV infection occurs as a recurrent and predictable annual epidemic throughout the world. In the U.S., the incidence rate is 2.5 million infections per year, and RSV is increasingly recognized as a significant cause of morbidity and mortality in the population of 64 million older adults.1,2 Based on our analysis of published literature applied to 2014 population estimates, the disease causes 207,000 hospitalizations and 16,000 deaths among adults older than 65. Annually, we estimate that there are approximately 900,000 medical interventions directly caused by RSV disease across all populations in the U.S. We are proud to have been awarded a grant of up to $89 million from the Bill & Melinda Gates Foundation to support development of the RSV F Vaccine Phase 3 clinical trial in pregnant women. This grant will also support regulatory licensing efforts, providing a path to WHO prequalification. BREAKING NEW GROUND IN SEASONAL INFLUENZA Our seasonal and pandemic influenza programs are supported by a contract from the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority (BARDA). In July 2015, we reported positive data from a Phase 2 clin- ical trial of our quadrivalent seasonal influenza VLP vaccine candi- date in 400 healthy adults that was initiated in November 2014 under our contract with BARDA. These data demonstrate our quadrivalent seasonal influenza vaccine candidate is well-tolerated, with results that met the immunogenicity targets. We are assessing our clinical and development paths for seasonal and pandemic influenza and expect to announce our plans for these programs in 2016. ADDITIONAL PRODUCT OPPORTUNITIES Given the ongoing development of our seasonal influenza vaccine candidate and our RSV F Vaccine, we see an important oppor- tunity to develop a combination respiratory vaccine candidate. Early preclinical development efforts have given us confidence that such a combination vaccine is viable, and in animal models, provides encouraging immunogenicity. We expect to initiate a Phase 1 clinical trial of a combination respiratory vaccine in the first half of 2017. EMERGING INFECTIOUS DISEASES Novavax’ vaccine platform allows us to quickly react to emerging viral threats. In 2015, a Phase 1 clinical trial of our Ebola GP Vaccine, used in conjunction with our proprietary Matrix-M adjuvant, demon- strated a highly immunogenic, well-tolerated vaccine candidate with significant antigen dose-sparing potential. On the heels of our suc- cess in Ebola, we have recently initiated an early-stage Zika vaccine program with the goal of rapidly progressing a vaccine candidate through animal studies. As with all our efforts towards providing bet- ter vaccines to the world that address emerging potential pandem- ics, we will continue to work with government and non-government entities for potential funding and development pathways. EXPERIENCED MANAGEMENT TEAM We have grown to over 450 SuperNovas strong and have contin- ued to strengthen our management team with the addition of key individuals in commercial operations and manufacturing. With the addition of Gail Boudreaux to our Board of Directors, we now have significant leadership and experience with health payors that will be critical as we prepare and launch the first ever RSV vaccine. We have also expanded to a new facility on Firstfield Road and are very pleased to have been named a Washington Post Top Workplace for the third year running. Finally, I’m proud that Novavax was short- listed for two prestigious awards this year. Our RSV F Vaccine was named a Vaccine Industry Excellence Awards finalist for Best Prophylactic Vaccine and our RSV F Vaccine Clinical Research team was shortlisted for the Clinical and Research Excellence Awards after completing enrollment in our Phase 3 Resolve trial in only five weeks, ahead of the RSV season. LOOKING AHEAD TO 2016 With complete enrollment of our Phase 3 trial in older adults, we are poised to announce clinical data from this trial, as well as our Phase 2 rollover trial, in the third quarter of 2016. We also expect to expand our Phase 3 Prepare clinical trial globally to South America, Africa, Australia and New Zealand. Finally, we also look forward to initiating a Phase 1 trial of our combination respiratory vaccine can- didate by the first quarter of 2017. I am very excited to work with our talented team members, management and Board of Directors to carry our success in 2015 forward into 2016 and would like to express my appreciation for your support. Stanley C. Erck President and Chief Executive Officer 1 Falsey, A.R. et al., (2005) NEJM. 352:1749–59 extrapolated to 2015 census population. 2 Falsey, A.R. et al., (1995) JID. 172:389–94. TO OUR SHAREHOLDERS RSV F Vaccine: First to demonstrate efficacy. First to market opportunity. We are developing a respiratory syncytial virus F-protein nanoparticle vaccine candidate (RSV F Vaccine) for the benefit of three susceptible target populations: older adults, infants (receiving protection through antibodies transferred from their mothers who would be immunized during the last trimester of pregnancy) and pediatrics. Adults 60 years of age and older are at increased risk for respiratory syncytial virus (RSV) disease due to age related declines in their immune systems. In this popula- tion, RSV is an important respiratory virus, distinct from influenza viruses, that is responsible for serious lower respiratory tract disease and may lead to hospitaliza- tion or even death. Additionally, RSV infection can lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma and con- gestive heart failure. RSV infection occurs as a recurrent and predictable annual epidemic throughout the world. In the U.S. alone, the incidence rate is 2.5 million infections per year, and RSV is increasingly recognized as a signifi- cant cause of morbidity and mortality in the population of 64 million older adults.3,4 Based on our analysis of pub- lished literature applied to 2014 population estimates in the U.S., the disease causes 207,000 hospitalizations and 16,000 deaths among adults older than 65. RSV is the most common cause of lower respiratory tract infections and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide.5 In the U.S., RSV is the leading cause of hospi- talization of infants, and globally, is second only to malaria as a cause of death in children under one year of age.6,7 Despite the induction of post-infection immunity, repeat infection and lifelong susceptibility to RSV is common.8,9 While RSV is a lower respiratory tract infection that impacts all individuals, there is an acute unmet need in our 3 target populations. Older Adults Infants via Maternal Immunization Pediatrics Novavax RSV Older Adult and Maternal vaccines have first-to-market potential 60 years of age and older Birth–6 months >6 months–5 years >2.5 million* Annual US Infections Annual US Cost Burden >$28 billion* Targeted US Population ~65 million ~1.4 million Annual US Infections Annual US Cost Burden ~$770 million ~4 million Targeted US Population ~9.8 million Annual US Infections Annual US Cost Burden ~$2.3 billion Targeted US Population ~18 million *Based on current available data for 65 and older population. 3 Falsey, A.R. et al., (2005) NEJM. 352:1749–59 extrapolated to 2015 census population. 4 Falsey, A.R. et al., (1995) JID. 172:389–94. 5 Nair, H. et al., (2010) Lancet. 375:1545–1555. 6 Hall, C.B. et al., (2013) Pediatrics. 132(2):E341–348. 7 Oxford Vaccine Group. http://www.ovg.ox.ac.uk/rsv. 8 Glezen, W.P. et al., (1986) Am J Dis Child. 140:543–546. 9 Glenn, G.M. et al., (2016) JID. 213(3):411–12. Novavax nanoparticle vaccines represent a new paradigm Our proprietary nanoparticle vaccine technology is a platform for efficient pro- duction of a new class of highly immunogenic nanoparticles addressing urgent unmet medical needs. Unlike traditional vaccines that ‘mimic’ viruses, nanopar- ticles can be engineered to elicit differentiated immune responses, increasing vaccine efficacy. Our nanoparticle technology platform targets antigens with conserved, hidden epitopes essential for viral function and our robust pipeline targets large market opportunities and includes late-stage, de-risked products with first-to-market potential. Clinical Stage Pipeline Novavax’ clinical pipeline includes vaccine candidates engineered to elicit differentiated immune responses with potential to provide increased protection. Our recombinant nanoparticles and Matrix™ adjuvant technology are the foundation for groundbreaking innovation that holds the promise of improving immune responses and protection from traditional seasonal infectious disease and the threat of infectious pathogens with pandemic potential. Preclinical Phase 1 Phase 2 Phase 3 RSV Older Adults (60+ yrs) Infants (Maternal Immunization) Pediatrics (6 mos–5 yrs) Influenza Quadrivalent Seasonal Pandemic (H7N9 + Matrix-M™) New Product Opportunities Ebola + Matrix-M™ Combination Respiratory (RSV + Flu) INFLUENZA VACCINE Influenza is a world-wide infectious disease that causes illness in humans with symptoms ranging from mild to life-threatening or even death. Serious illness occurs not only in susceptible populations such as pediatrics and older adults, but also in the general population when unique strains of influenza arise, for which most humans have not developed protective antibodies. We are develop- ing vaccine candidates for both seasonal and pandemic influenza. In July 2015, we reported positive data from a Phase 2 clinical trial of our quadrivalent seasonal influ- enza virus-like particle (VLP) vaccine candidate in 400 healthy adults that we initiated in November 2014. These data show that our quadrivalent seasonal influenza VLP vaccine candidate is well-tolerated, and can induce influ- enza antibody responses that met the immunogenicity targets. These results demonstrate the potential for our seasonal quadrivalent influenza VLP vaccine candidate to meet the FDA criteria for accelerated approval. We have also developed and delivered compelling safety and immunogenicity data on two pandemic vaccine candidates, H5N1 and H7N9. In September 2014, we announced positive results from a Phase 1/2 clinical trial of our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M in 610 healthy adults. In October 2014, the FDA granted Fast Track designation to our pan- demic H7N9 influenza vaccine candidate with Matrix-M. COMBINATION RESPIRATORY VACCINE (RSV AND INFLUENZA) Given the ongoing development of our seasonal influenza vaccine candidate and our RSV F Vaccine, we see an important opportunity to develop a combination respi- ratory vaccine candidate. Early preclinical development efforts have given us confidence that such a combina- tion vaccine is viable, and in animal models, provides encouraging immunogenicity. VACCINES FOR EMERGING THREATS EBOV, formerly known as Ebola hemorrhagic fever, is a severe, often fatal illness in humans. Multiple strains of EBOV have been identified, the most recent of which, the Makona EBOV strain, is associated with a case fatality rate of between 50% and 90%.3 In July 2015, we announced data from our Phase 1 clinical trial of our Ebola GP Vaccine in ascending doses, with and with- out our Matrix-M adjuvant, in 230 healthy adults. These Phase 1 data demonstrated that our Ebola GP Vaccine is highly immunogenic, well-tolerated and, in conjunc- tion with our proprietary Matrix-M adjuvant, resulted in significant antigen dose-sparing. In 2015, we also announced successful data from two separate non- human primate challenge studies of our Ebola GP Vaccine in which, in both cases, the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected. 3 WHO. http://www.who.int/mediacentre/factsheets/fs103/en/. 20 Firstfield Road Gaithersburg, MD 20878 T 240-268-2000 F 240-268-2100 www.novavax.com Nasdaq: NVAX April 20, 2016 Dear Novavax Stockholder: You are cordially invited to our Annual Meeting of Stockholders on Thursday, June 9, 2016, beginning at 8:30 a.m., local time, at Novavax’ offices located at 9920 Belward Campus Drive, Rockville, Maryland 20850. We are pleased to also provide a copy of our 2015 Annual Report to Stockholders with this proxy statement. Your vote is important, and we hope you will be able to attend the Annual Meeting. You may vote over the Internet, by telephone, or, if you requested printed proxy materials, by mailing a proxy card or voting instruction form. Please review the instructions on each of your voting options described in this proxy statement. Also, please let us know if you plan to attend our Annual Meeting by marking the appropriate box on the proxy card, if you requested printed proxy materials, or, if you vote by telephone or over the Internet, by indicating your plans when prompted. We look forward to seeing you there. Very truly yours, Stanley C. Erck President and Chief Executive Officer 1 2015 Proxy NOVAVAX, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, JUNE 9, 2016 To the Stockholders of Novavax, Inc.: NOTICE IS HEREBY GIVEN that the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) of Novavax, Inc., a Delaware corporation (the “Company,” “Novavax,” “we,” or “us”), will be held on Thursday, June 9, 2016 at 8:30 a.m., local time, at the Company’s offices located at 9920 Belward Campus Drive, Rockville, Maryland 20850, to consider and act upon the following matters: 1. To elect three directors as Class III directors to serve on the board of directors of the Company (the “Board”), each for a three-year term expiring at the 2019 Annual Meeting of Stockholders; 2. To amend and restate the Novavax, Inc. 2015 Stock Incentive Plan (the “2015 Stock Plan”) and to increase the number of shares of the Company’s common stock, par value $0.01 (our “Common Stock”), available for issuance thereunder by 6,000,000 shares; 3. To amend and restate the Novavax, Inc. 2013 Employee Stock Purchase Plan (the “ESPP”) and to increase the number of shares of the Company’s Common Stock available for issuance thereunder by 1,000,000 shares; 4. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016; and 5. To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. The Board has fixed the close of business on April 13, 2016 (the “Record Date”) as the record date for determining stockholders of the Company entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. The following Proxy Statement is included with the Company’s Annual Report to Stockholders for the fiscal year ended December 31, 2015, which contains financial statements and other information of interest to stockholders. By Order of the Board of Directors, John A. Herrmann III Senior Vice President, General Counsel and Corporate Secretary Gaithersburg, Maryland April 20, 2016 WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY VOTE OVER THE INTERNET OR BY TELEPHONE AS PER THE INSTRUCTIONS ON THE ENCLOSED PROXY OR COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. POSTAGE IS NOT NEEDED IF MAILED IN THE UNITED STATES. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS ANNUAL MEETING TO BE HELD ON JUNE 9, 2016: Notice of Annual Meeting, Proxy Statement, and Annual Report are available free of charge at http://www.edocumentview.com/NVAX. 2 NOVAVAX, INC Proxy Statement TABLE OF CONTENTS PAGE Proxy Statement _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4 Information Concerning the Annual Meeting _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4 BOARD OF DIRECTORS AND CORPORATE GOVERNANCE Proposal No. 1—Election of Directors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8 Nominees for Election as Class III Directors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8 Directors Continuing as Class I Directors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 10 Directors Continuing as Class II Directors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 11 Information Regarding the Board and Corporate Governance Matters _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 13 Board Committees _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 14 Nomination Procedures _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16 Certain Relationships and Related Transactions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 18 Compensation of Directors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 19 Section 16(A) Beneficial Ownership Reporting Compliance _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 21 EXECUTIVE OFFICERS AND COMPENSATION Executive Officers _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 21 Compensation Discussion and Analysis _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 22 Summary Compensation Table _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 29 Grants of Plan-Based Awards Table _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 30 Outstanding Equity Awards at 2015 Fiscal Year End _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 31 Options Exercised and Stock Vested _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _32 Equity Compensation Plan Information _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _32 Overview of Employment and Change in Control Agreements _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _33 Potential Payments Upon Termination _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _36 Compensation Committee Report _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _38 Audit Committee Report _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _38 SECURITY OWNERSHIP INFORMATION Security Ownership of Certain Beneficial Owners and Management _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 39 OTHER PROXY PROPOSALS Proposal No. 2—Amendment of 2015 Stock Plan _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 41 Proposal No. 3—Amendment of ESPP _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 50 Proposal No. 4—Ratification of Appointment of Independent Registered Public Accounting Firm _ _ _ _ _ _ _ _ _ _ _ _ _ _ _50 Fees and Services _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 54 ADDITIONAL INFORMATION Stockholder Proposals _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _57 Other Matters _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 58 Appendix A _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ A-1 Appendix B _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ B-1 3 2015 Proxy Novavax, Inc. 20 Firstfield Road Gaithersburg, Maryland 20878 Proxy Statement FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, JUNE 9, 2016 INFORMATION CONCERNING THE ANNUAL MEETING This Proxy Statement (“Proxy Statement”) is being furnished to stockholders in connection with the solicitation of proxies by the Board for use at the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 9, 2016 at 8:30 a.m. local time at the Company’s offices located at 9920 Belward Campus Drive, Rockville, Maryland 20850 and at any adjournments or postponements thereof. This Proxy Statement, the form of proxy, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “Annual Report”) are being made available via the Internet and, upon request, will be mailed to our stockholders on or about April 29, 2016. Why am I receiving these materials? The Company has made these proxy materials available to you on the Internet or, upon your request, has delivered print ver- sions of these proxy materials to you by mail, in order to provide you with information regarding the matters on which you may vote at the Annual Meeting. You are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement. Can I access the materials on the Internet instead of receiving paper copies? Yes, stockholders may access the Proxy Statement and the Annual Report via the Internet and vote online at www.envision- reports.com/NVAX. On or about April 29, 2016, a Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to stockholders of record as of the close of business on the Record Date. We are furnishing our proxy materials to our stock- holders on the Internet in lieu of mailing a printed copy of our proxy materials. You will not receive a printed copy of our proxy materials unless you request one. If you would like to receive a printed or electronic copy of the proxy materials, free of charge, you should follow the instructions for requesting such materials in the Notice. The Notice instructs you as to how you may access and review on the Internet all of the important information contained in these proxy materials or request a printed copy of those materials. The Notice also instructs you as to how you may vote your proxy. The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of printing and mailing annual meeting materials. What is “householding” and how does it affect me? The Company has adopted the process called “householding” for mailing annual meeting materials to stockholders who share the same address. Such stockholders will have received a notice from their bank, broker, or other holder of record, indicating that they will receive only one copy of this Proxy Statement and Annual Report. If you own your shares through a bank, broker, or other holder of record and wish to either stop or begin householding, you may do so, or you may request a separate copy of this Proxy Statement and Annual Report, either by contacting your bank, broker, or other holder of record at the telephone number or address provided in the above referenced notice, or contacting Novavax by telephone at (240) 268-2000 or in writing to Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878, Attention: Corporate Secretary. If you request to begin or stop householding, you should provide your name, the name of your broker, bank, or other record holder, and your account information. 4 NOVAVAX, INC What is the purpose of the Annual Meeting? At the Annual Meeting, stockholders will vote on the following matters: • To elect three directors as Class III directors to serve on the Board, each for a three-year term expiring at the 2019 Annual Meeting of Stockholders; • To approve an amendment and restatement of the 2015 Stock Plan and to increase the number of shares of the Company’s Common Stock available for issuance thereunder by 6,000,000 shares; • To approve an amendment and restatement of the ESPP and to increase the number of shares of the Company’s Common Stock available for issuance thereunder by 1,000,000 shares; • To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016; and • To transact such other business that may properly come before the Annual Meeting or any adjournments or postponements thereof. In addition, management will report on the Company’s performance during fiscal year 2015 and respond to questions from stockholders. Who is entitled to vote? The only class of stock of the Company entitled to vote at the Annual Meeting is its Common Stock. Only the record holders of shares of Common Stock at the close of business on the Record Date may vote at the Annual Meeting. On the Record Date, there were 270,778,671 shares of Common Stock outstanding and entitled to be voted. Each share entitles the holder to one vote on each of the matters to be voted upon at the Annual Meeting. What is the quorum requirement for the Annual Meeting? The presence in person or by proxy of the holders of a majority of the shares of Common Stock issued and outstanding on the Record Date and entitled to vote is required to constitute a quorum at the Annual Meeting. If a quorum is not present, the stock- holders entitled to vote who are present in person or represented by proxy at the Annual Meeting have the power to adjourn the Annual Meeting until a quorum is present, without notice other than an announcement at the Annual Meeting, so long as such adjournment is less than 30 days and a new record date is not fixed. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the Annual Meeting as originally scheduled. Abstentions and broker non-votes will count in determining whether a quorum is present at the Annual Meeting. A broker non-vote occurs when a broker or other nominee who holds shares represented by a proxy has not received voting instructions with respect to a particular item and does not have discretionary authority to vote such shares on the item. How do I vote? You may vote using any of the following methods: • Proxy card or voting instruction card. You may vote by filling out the proxy card or voting instruction form (if received by mail) and returning it in the envelope provided. • By telephone or the Internet. You may vote by calling 1-800-652-VOTE (8683) or visiting the website www.envisionreports. com/NVAX. The telephone and Internet voting procedures established by the Company for stockholders are designed to authenticate your identity, to allow you to give your voting instructions and to confirm that these instructions have been properly recorded. The availability of telephone and Internet voting for beneficial owners will depend on the voting pro- cesses of your broker, bank, or nominee. Therefore, we recommend that you follow the voting instructions in the materials you receive. • In person at the Annual Meeting. All stockholders may vote in person at the Annual Meeting. You may also be represented by another person at the Annual Meeting by executing a proper proxy designating that person. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank, or nominee and present it to the inspector of election with your ballot when you vote at the meeting. 5 2015 Proxy What is the difference between a stockholder of record and a beneficial owner of shares held in street name? Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare, Inc., you are considered the stockholder of record with respect to those shares, and the proxy materials were sent directly to you by the Company. Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the “beneficial owner” of shares held in “street name.” As a beneficial owner, you have the right to instruct your broker, bank, trustee, or nominee how to vote your shares. How does discretionary voting authority apply? All properly executed proxies will be voted in accordance with the instructions of the stockholder. If you are a stockholder of record and you sign and return a proxy card without giving specific instructions, then the persons named as proxy holders, Stanley C. Erck and Barclay A. Phillips, will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting, including any floor proposals. Broker non-votes occur when a beneficial owner of shares held in street name does not give instructions to the broker or nom- inee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NASDAQ and the New York Stock Exchange, which generally govern this issue regardless of the exchange on which the company is listed, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, equity compensation matters, and the election of directors, even if they are not contested. Most brokers are permitted to vote your shares only with respect to the ratification of the appointment of Ernst & Young LLP as the Company’s independent auditor for the year ending December 31, 2016, even if they do not receive instructions from you in a timely manner, so long as they hold your shares in their name and have requested your instructions. Brokers do not have authority, discretionary or otherwise, to vote your shares for the election of directors or the increase of authorized shares under our equity incentive plan and ESPP unless they receive proper instructions to do so from you in a timely manner. In order to minimize the number of broker non-votes, the Company encourages you to vote or to provide voting instructions with respect to each proposal to the organization that holds your shares by carefully following the instructions provided in the proxy card or voting instruction form. What are the Board’s recommendations? PROPOSAL No. 1—Election of Directors BOARD RECOMMENDATION For all nominees No. 2—Amendment and Restatement of the 2015 Stock Plan No. 3—Amendment and Restatement of the ESPP No. 4—Ratification of Ernst & Young LLP as Independent Auditors for 2016 For For For 6 NOVAVAX, INC What is the voting requirement to approve each of the proposals? PROPOSAL VOTE REQUIRED No. 1—Election of Directors Plurality of Votes Cast No. 2—Amendment and Restatement of the 2015 Stock Plan Majority of Votes Cast No. 3—Amendment and Restatement of the ESPP No. 4—Ratification of Ernst & Young LLP Majority of Votes Cast BROKER NON-VOTES ALLOWED No No No ABSTENTIONS YOU MAY VOTE No Effect FOR or WITHHOLD No Effect FOR, AGAINST, ABSTAIN No Effect FOR, AGAINST, ABSTAIN as Independent Auditors for 2016 Majority of Votes Cast Yes No Effect FOR, AGAINST, ABSTAIN Can I change my vote after I have voted? Stockholders may revoke proxies at any time before they are exercised at the Annual Meeting by (a) signing and submitting a later-dated proxy to the Secretary of the Company; (b) delivering written notice of revocation to the Secretary of the Company; or (c) voting in person at the Annual Meeting. Attendance at the Annual Meeting will not itself be deemed to revoke a proxy unless the stockholder gives affirmative notice at the Annual Meeting that the stockholder intends to revoke the stockholder’s proxy and vote in person. Where can I find the voting results of the Annual Meeting? Preliminary voting results will be announced at the Annual Meeting. The Company will publish the final voting results in a Current Report on Form 8-K, which the Company is required to file with the Securities and Exchange Commission (“SEC”) within four business days following the Annual Meeting. Who bears the cost of solicitation of proxies? The Company will bear the cost of soliciting proxies. In addition to solicitations by mail, the Company’s directors, officers, and regular employees may, without additional remuneration, solicit proxies in person, by telephone, or by electronic trans- mission and/or facsimile transmission. The Company may also utilize the assistance of third parties in connection with our proxy solicitation efforts, and will compensate such third parties for their efforts. The Company has retained Georgeson Inc., to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reim- bursement of expenses that are not expected to exceed $16,300 in the aggregate. The Company will also request brokerage houses, custodians, nominees and fiduciaries or other similar organizations to forward copies of the proxy materials to those persons for whom they hold shares and request instructions for voting the proxies. The Company will reimburse such broker- age houses, custodians, nominees and fiduciaries or other similar organizations for their reasonable expenses in connection with this distribution. 7 2015 Proxy Proposal No. 1 ELECTION OF CLASS III DIRECTORS Pursuant to the Company’s charter, the Board may consist of no fewer than three directors, with the specific number to be authorized by the Board from time to time at its discretion. The Board is presently authorized to consist of eight members, and currently includes the following seven individuals: Gail K. Boudreaux, Richard H. Douglas, Ph.D., Stanley C. Erck, Gary C. Evans, Michael A. McManus, Jr., J.D., Rajiv I. Modi, Ph.D., and James F. Young, Ph.D. Mr. John O. Marsh, Jr., J.D. resigned from the Board effective June 12, 2014, and the Board bestowed upon Mr. Marsh the honorary title of Director Emeritus. The members of the Company’s Board are divided into three classes, designated as Class I, Class II, and Class III, each serving staggered three-year terms. The term of the Class III directors expires at the Annual Meeting. The terms of the Class I and Class II directors will expire at the 2017 and 2018 Annual Meetings of Stockholders, respectively. A director of any class who is elected by the Board to fill a vacancy resulting from an increase in the number of directors holds office for the remaining term of the class to which he or she is elected. A director who is elected by the Board to fill a vacancy arising in any other manner holds office for the remaining term of his or her predecessor. Directors elected by the stockholders at an annual meeting to succeed those whose terms expire at such meeting are of the same class as the directors they succeed and are elected for a term to expire at the third annual meeting of stockholders after their election and until their successors are duly elected and qualified. In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships must be apportioned by the Board among the three classes so as to ensure that no one class has more than one director more than any other class, unless otherwise determined by a resolution of the Board. However, existing directors cannot move across classes and, therefore, the number of directors in each class may become temporarily imbalanced. Nominees for Election as Class III Directors After recommendation by the Nominating and Corporate Governance Committee, the Board has designated Ms. Boudreaux, Mr. McManus, and Dr. Young as nominees for election as Class III directors of the Company at the Annual Meeting. If elected, each such nominee will serve until the expiration of his or her term at the 2019 Annual Meeting of Stockholders and until his or her successor is elected and qualified. Ms. Boudreaux, Mr. McManus, and Dr. Young have consented to being named in this Proxy Statement and to serve if elected. The Board has no reason to believe that Ms. Boudreaux, Mr. McManus, and Dr. Young will be unable or unwilling to serve if elected. If any nominee becomes unavailable to serve as a director, the persons named in the proxy will vote the proxy for a substitute nominee or nominees as they, in their discretion, shall determine. 8 NOVAVAX, INC Information on the nominees follows: GAIL K. BOUDREAUX AGE: YEAR FIRST ELECTED DIRECTOR: 55 2015 Former Chief Executive Officer of UnitedHealthcare where she was responsible for the largest health benefits provider in the nation, serving 45 million individuals. Through November 2014, Ms. Boudreaux oversaw UnitedHealthcare’s Commercial, Medicare, Medicaid and Tricare Military Healthcare businesses with a workforce of more than 60,000 employees. Ms. Boudreaux has been honored six years in a row as one of Fortune’s 50 Most Powerful Women in American Business. She has been recognized by Modern Healthcare as one of the Most Powerful People in Healthcare and among the Top 25 Women in Healthcare, named to the Forbes 100 Most Powerful Women list, ranked by the Minneapolis/St. Paul Business Journal as a top 25 industry leader; and included on Today’s Chicago Woman’s list of 100 Women of Influence. OTHER DIRECTORSHIPS: Ms. Boudreaux currently serves on the board of directors for Xcel Energy, Inc. (XEL) and Zimmer Biomet Holdings, Inc. (ZBH). Ms. Boudreaux currently serves on Dartmouth College’s Board of Trustees and recently served as a member of the college’s Alumni Council. EDUCATION: Ms. Boudreaux earned a B.A. with honors from Dartmouth College and an M.B.A. in finance and health care administration from Columbia Business School. SKILLS/QUALIFICATIONS: We believe that Ms. Boudreaux is well-suited to serve on our Board due to her successful growth and development of businesses and products, experience as a chief executive officer of a public company, her significant experience in governance, legal, and risk management, and reading and understanding financial statements. MICHAEL A. McMANUS, JR., J.D. AGE: YEAR FIRST ELECTED DIRECTOR: 73 1998 President and Chief Executive Officer of Misonix, Inc. since October 1998. Mr. McManus served as President, Chief Executive Officer and Director of New York Bancorp Inc. from 1991 through March 1998. He also served as President and Chief Executive Officer of Home Federal Savings Bank, the principal subsidiary of New York Bancorp Inc., from February 1995 through March 1998. From 1990 through November 1991, Mr. McManus was President and Chief Executive Officer of Jamcor Pharmaceuticals Inc. Mr. McManus served as an Assistant to the President of the United States from 1982 to 1985 and held positions with Pfizer Inc. and Revlon Group. Mr. McManus served in the U.S. Army Infantry from 1968 through 1970. Mr. McManus is a recipient of the Ellis Island Medal of Honor. OTHER DIRECTORSHIPS: Mr. McManus serves as a member of the board of directors of Misonix, Inc. (MSON) and A. Schulman Inc. (SHLM). EDUCATION: Mr. McManus received a B.A. in economics from the University of Notre Dame and a J.D. from the Georgetown University Law Center. SKILLS/QUALIFICATIONS: We believe that Mr. McManus is well-suited to serve on our Board due to his successful growth and development of businesses and products, experience as a chief executive officer of a public company, his significant experience in governance, legal, and risk management, and reading and understanding financial statements. 9 2015 Proxy JAMES F. YOUNG, Ph.D. AGE: YEAR FIRST ELECTED DIRECTOR: 63 2010 Former President, Research and Development, at MedImmune, Inc. Dr. Young has been Chairman of the Board of Novavax, Inc. since April 2011 and a Director since April 2010. Dr. Young held the posi- tion of President, Research and Development, at MedImmune, Inc. from 2000 until 2008 and pre- viously served as Executive Vice President, Research and Development from 1999 to 2000, Senior Vice President from 1995 to 1999, and as Senior Vice President, Research and Development from 1989 to 1995. OTHER DIRECTORSHIPS: Dr. Young currently sits on the board of directors of 3-V Biosciences, Inc., a privately-held biophar- maceutical company developing novel antiviral therapeutics, and is the chairman of the board of Targeted Microwave Solutions Inc., a company developing clean-coal technology. EDUCATION: Dr. Young received B.S. degrees in general science and biology from Villanova University, as well as a Ph.D. in microbiology and immunology from Baylor College of Medicine. SKILLS/QUALIFICATIONS: We believe that Dr. Young is well-suited to serve on our Board due to his over 30 years of experience in the fields of molecular genetics, microbiology, immunology, and pharmaceutical development. In addition, Dr. Young brings extensive scientific background and experiences, particularly in the areas of vaccine research and development. Directors Continuing as Class I Directors STANLEY C. ERCK AGE: YEAR FIRST ELECTED DIRECTOR: 67 2009 President and Chief Executive Officer of Novavax, Inc. since April 2011. Former Executive Chairman of Novavax, Inc. from February 2010 until April 2011, and a Director since June 2009. From 2000 to 2008, Mr. Erck served as President, Chief Executive Officer and Director of Iomai Corporation, a vaccine development company, which was acquired in 2008 by Intercell. Prior to that, Mr. Erck previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme, and Baxter International. OTHER DIRECTORSHIPS: Mr. Erck serves as a member of the boards of BioCryst Pharmaceuticals, Inc. (BCRX), MaxCyte, Inc., and MDBio Foundation. EDUCATION: Mr. Erck received a B.S. in economics from the University of Illinois and a M.B.A from the University of Chicago. SKILLS/QUALIFICATIONS: We believe that Mr. Erck is well-suited to serve on our Board due to his leadership experience in the biotechnology industry, having held CEO positions for several companies, and his extensive experi- ence of serving on other companies’ boards. 10 NOVAVAX, INC RAJIV I. MODI, Ph.D. AGE: YEAR FIRST ELECTED DIRECTOR: 55 2009 Managing Director of Cadila Pharmaceuticals, Ltd. (“Cadila”), a company organized in India, since 1995. Dr. Modi was elected to Novavax, Inc.’s Board based upon his relationship with the Company’s largest stockholder at the time. As of April 13, 2016, Satellite Overseas (Holdings) Limited, a subsid- iary of Cadila, holds approximately 0.9% of the Company’s outstanding Common Stock. Dr. Modi serves as a member of the boards of other Cadila group companies. EDUCATION: Dr. Modi received a bachelor’s degree of technology in chemical engineering from the Indian Institute of Technology, a master’s degree in biological engineering from University College, London, and a Ph.D. in biological science from the University of Michigan. SKILLS/QUALIFICATIONS: We believe that Dr. Modi is well-suited to serve on our Board due to his extensive leadership experi- ence, as well as technical expertise in the development and manufacturing of pharmaceutical prod- ucts. He also brings broad experience in international joint ventures and pharmaceutical sales. Directors Continuing as Class II Directors RICHARD H. DOUGLAS, Ph.D. AGE: YEAR FIRST ELECTED DIRECTOR: 63 2010 Former Senior Vice President, Corporate Development, Genzyme Corporation. From 1989 to 2011, Dr. Douglas led Genzyme Corporation’s Corporate Development team, and was involved in numer- ous acquisitions, licenses, financings, joint ventures, and strategic alliances. From 1982 until its merger with Genzyme Corporation in 1989 (now Sanofi Genzyme), Dr. Douglas served in science and corporate development capacities at Integrated Genetics. Dr. Douglas was a postdoctoral fellow in Leroy Hood’s laboratory at the California Institute of Technology. OTHER DIRECTORSHIPS: Dr. Douglas serves on the University of Michigan Technology Transfer National Advisory Board. EDUCATION: Dr. Douglas received a B.S. in chemistry from the University of Michigan and a Ph.D. in biochemistry from the University of California, Berkeley. SKILLS/QUALIFICATIONS: We believe that Dr. Douglas is well-suited to serve on our Board due to his significant business expe- rience and scientific background. 11 2015 Proxy GARY C. EVANS AGE: YEAR FIRST ELECTED DIRECTOR: 58 1998 Gary C. Evans presently serves as Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources Corporation, a Dallas based oil and gas exploration and production company specializing in unconventional resource plays predominately in the Appalachian Basin. Mr. Evans is also President and CEO of Eureka Hunter Holdings, LLC, a mid-stream gas gathering company trans- porting and managing up to 1 BCF of daily natural gas volumes from production in West Virginia and Ohio on approximately 200 miles of pipe. He has held these positions since May 2009. Mr. Evans previously founded and served as the Chairman and Chief Executive Officer of Magnum Hunter Resources Inc. (MHRI), a NYSE listed company, for twenty years before selling MHRI to Cimarex Energy for approximately $2.2 billion in June 2005. Later that year, Mr. Evans formed Wind Hunter Energy, LLC, a renewable energy company which was subsequently acquired in December 2006 by GreenHunter Energy, Inc., an emerging water resource company focusing on oil field water manage- ment and clean water technologies active in the Marcellus and Utica resource plays in Appalachia. Mr. Evans has served as Chairman and Chief Executive Officer of GreenHunter Energy, Inc. since December 2006 and is currently Chairman and Interim CEO. Mr. Evans was recognized by Ernst & Young as the Southwest Area 2004 Entrepreneur of the Year for the Energy Sector and was sub- sequently inducted into the World Hall of Fame for Ernst & Young Entrepreneurs. Mr. Evans was recognized as the Energy Industry Leader of the year in 2013. He speaks regularly at energy industry conferences around the world on the current affairs of the oil and gas industry with a specialty in the unconventional shale business. OTHER DIRECTORSHIPS: Mr. Evans serves as a member of the boards of Magnum Hunter Resources Corporation (MHRCQ) and GreenHunter Energy, Inc. (GRH). Mr. Evans serves as an Individual Trustee of TEL Offshore Trust, a publicly listed oil and gas trust, and on the Board of the Maguire Energy Institute at Southern Methodist University. SKILLS/QUALIFICATIONS: We believe that Mr. Evans is well-suited to serve on our Board due to his entrepreneurial experience in the development of a number of companies as well as his extensive leadership experience and his aptitude for reading and understanding financial statements. FOR PROPOSAL 1, THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF THE NOMINEES. 12 NOVAVAX, INC INFORMATION REGARDING THE BOARD AND CORPORATE GOVERNANCE MATTERS On March 15, 2016, the Board determined, upon a recommendation by the Nominating and Corporate Governance Committee, that, with the exception of Dr. Modi and Mr. Erck, all of the members of the Board are “independent” directors, as that term is defined in the NASDAQ listing standards. Mr. Erck is currently the President and Chief Executive Officer of the Company. Dr. Modi is not an “independent” director due to his interest in Cadila and the joint venture it has with the Company, as described in the section titled “Certain Relationships and Related Transactions.” During 2015, the Board met six (6) times and acted by written consent in lieu of a meeting two (2) times. In addition, the non-employee directors met six (6) times in executive session during the same period. Each of the directors attended at least 75% of the aggregate of the total number of meetings of the Board they were eligible to attend and the total number of meetings held by all committees on which they served. Recognizing that director attendance at the Company’s annual meetings of stockholders provides stockholders with an oppor- tunity to communicate with members of the Board, Novavax strongly encourages (but does not require) members of the Board to attend such meetings. All members of the Board attended the 2015 Annual Meeting of Stockholders. Leadership Structure and Risk Oversight The Board has elected to separate the roles of Chief Executive Officer and Chairman of the Board. On April 19, 2011, Mr. Erck was elected to the role of President and Chief Executive Officer and Dr. Young was elected as Chairman of the Board. Mr. Erck had served as Executive Chairman from February 2010 until April 19, 2011. Before being elected as Chairman of the Board, Dr. Young had served as a member of the Board from April 2010 until April 19, 2011. The Chief Executive Officer and Chairman work closely together to execute the strategic plan of the Company. The Chairman mentors and advises the senior scientific team, provides an extensive network of contacts, and reports regularly to the Board. The Company believes that the combination of Mr. Erck as the President and Chief Executive Officer and Dr. Young as the Chairman of the Board is an effective leadership structure for the Company. The additional avenues of communication between the Board and management associated with having Dr. Young serve as Chairman provides the basis for the proper functioning of the Board and its oversight of management. Management of the Company is primarily responsible for managing the risks Novavax faces in the ordinary course of oper- ating the business. The Board actively oversees potential risks and risk management activities by receiving operational and strategic presentations from management, which include discussions of key risks to the business. In addition, the Board has delegated risk oversight to each of its key committees within their areas of responsibility. For example, the Audit Committee assists the Board in its risk oversight function by reviewing and discussing with management the system of disclosure con- trols and internal controls over financial reporting and discusses the key risks facing the Company and the processes or actions being taken to mitigate those risks. The Nominating and Corporate Governance Committee assists the Board in its risk oversight function by periodically reviewing and discussing with management important compliance and quality issues. The Compensation Committee assists the Board in its risk oversight function by overseeing strategies with respect to incentive compensation programs and key employee retention issues. The Board committees are chaired by independent directors and, at each Board meeting, each of the committee chairs delivers a report to the full Board on the activities and decisions made by the committees at recent meetings. There is also a significant amount of cross-over with respect to the membership of the various committees, allowing information to flow freely outside of a full board meeting. 13 2015 Proxy Board Committees The Board currently has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. In addition to the descriptions below, please refer to the “Compensation Committee Report” and “the Audit Committee Report” included in this Proxy Statement. The members of the committees are shown below. DIRECTOR Gail K. Boudreaux Richard H. Douglas, Ph.D. Stanley C. Erck Gary C. Evans Michael A. McManus, Jr., J.D. Rajiv I. Modi, Ph.D. James F. Young, Ph.D. Audit Committee AUDIT COMMITTEE COMPENSATION COMMITTEE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE — Member — Member Chair — — Member Member — — Member — Chair Member — — Chair Member — Member Each Audit Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), “outside director,” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and an “independent director,” as defined by the listing standards of the NASDAQ. The Board has deter- mined that each of Mr. McManus and Mr. Evans qualifies as an “audit committee financial expert” as that term is defined by the rules and regulations of the SEC, and is financially sophisticated as required by the listing standards of the NASDAQ. During 2015, the Audit Committee met five (5) times and did not act by written consent in lieu of a meeting. The Audit Committee acts pursuant to a written charter as adopted by the Board. A current copy of the charter is available on the Company’s website at www.novavax.com. The Audit Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy, and is charged with performing an annual self-evaluation with the goal of continuing improvement. In 2015, the Audit Committee approved its charter in its current form. The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company. To this end, the Audit Committee meets with the Company’s inde- pendent registered public accounting firm to discuss the scope and results of its examination and reviews the financial state- ments and reports contained in the Company’s periodic and other filings. The Audit Committee also reviews the adequacy and efficacy of the Company’s accounting, auditing and financial control systems, as well as the Company’s disclosure controls and procedures; monitors the adequacy of the Company’s accounting and financial reporting processes and practices; and considers any issues raised by its members, the Company’s independent registered public accounting firm and the Company’s employees. To assist in carrying out its duties, the Audit Committee is authorized to investigate any matter brought to its atten- tion, retain the services of independent advisors (including legal counsel, auditors, and other experts), and receive and respond to concerns and complaints relating to accounting, internal accounting controls, and auditing matters. The Audit Committee regularly meets with both the Company’s management and its independent auditor collectively and, at times, independently and without the other present, and meets in executive session without management or the independent auditor present. Compensation Committee Each Compensation Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Exchange Act, “out- side director,” as defined in Section 162(m) of the Code (“Section 162(m)”), and an “independent director,” as defined by the listing standards of the NASDAQ, including the heightened standards that apply to compensation committee members. The Compensation Committee is tasked with meeting at least four times during the year, and more frequently, if necessary. During 2015, the Compensation Committee met five (5) times and did not act by written consent in lieu of a meeting. The Compensation Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com. The Compensation Committee reviews and evaluates the charter annually to ensure its ade- quacy and accuracy. In 2015, the Compensation Committee approved its charter in its current form. 14 NOVAVAX, INC The Compensation Committee reviews and recommends salaries and other compensatory benefits for the employees, execu- tive officers, and directors of Novavax. The Compensation Committee also recommends actions to administer the Company’s equity incentive plans and recommends stock option grants and other awards for employees, executive officers, and directors of Novavax. As set forth in its charter, the Compensation Committee’s authority and responsibilities include but are not limited to: • providing advice and guidance with respect to the Company’s compensation strategy and philosophy; • evaluating and providing recommendations regarding executive compensation programs tied to the strategic and financial objectives of the Company and which will motivate and incentivize executives by tying their compensation to the Company’s performance and stockholder returns; • reviewing and recommending to the Board the goals and objectives relevant to the compensation of the Company’s Chief Executive Officer, annually evaluating the Chief Executive Officer’s performance, and recommending to the independent members of the Board the Chief Executive Officer’s total compensation package; • annually reviewing and making recommendations regarding executive officers and senior management compensation; and • evaluating and making recommendations annually regarding the appropriate level and form of compensation for members of the Board and its committees. The Compensation Committee has the authority to engage independent compensation consultants or advisors, as it may deem appropriate in its sole discretion, and to approve related fees and retention terms of such consultants or advisors. The Compensation Committee routinely holds meetings, some of which management attends, as well as executive sessions without management, where compensation is discussed. The chair of the Compensation Committee is responsible for leader- ship of the Compensation Committee and sets meeting agendas. The Compensation Committee may request that any executive officer or employee of the Company, outside counsel, or con- sultant attend Compensation Committee meetings or confer with any members of, or consultants to, the Compensation Committee. The Compensation Committee is supported in its efforts by the Company’s Legal and Human Resources teams, to which the Compensation Committee delegates authority for certain administrative functions. The Chief Executive Officer gives performance assessments and compensation recommendations for each executive officer of the Company (other than himself). The Chairman gives performance assessments and compensation recommendations for the Chief Executive Officer. The Compensation Committee considers the Chief Executive Officer’s and the Chairman’s recommendations and the informa- tion provided by the Human Resources team in its deliberations regarding executive compensation and sets the compensation of the executive officers based on such deliberations and recommends that the Board ratify such compensation. The Chief Executive Officer and the Vice President, Human Resources and Administration generally attend Compensation Committee meetings but are not present for executive sessions or any discussion of their own compensation. Nominating and Corporate Governance Committee Each Nominating and Corporate Governance Committee member is an “independent director,” as defined by the listing stan- dards of the NASDAQ. During 2015, the Nominating and Corporate Governance Committee met five (5) times and acted by written consent in lieu of a meeting once. The Nominating and Corporate Governance Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com. The Nominating and Corporate Governance Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy. In 2015, the Nominating and Corporate Governance Committee approved its charter in its current form. As provided in the charter, the primary function of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its responsibilities by: reviewing and making recommendations to the Board regarding the Board’s size, struc- ture and composition; establishing criteria for Board membership; identifying and evaluating candidates qualified to become members of the Board, including candidates proposed by stockholders; selecting, or recommending for selection, director nominees to be presented for approval at the annual meeting of stockholders and to fill vacancies on the Board; overseeing our corporate governance guidelines; evaluating Company policies relating to the recruitment of Board members; developing and recommending to the Board corporate governance policies and practices applicable to the Company; monitoring compliance with the Company’s Code of Business Conduct and Ethics and handling such other matters as the Board or committee deems 15 2015 Proxy appropriate. The Nominating and Corporate Governance Committee’s goal is to contribute to the effective representation of the Company’s stockholders and to play a leadership role in shaping the Company’s corporate governance. As noted above, it is the Nominating and Corporate Governance Committee’s responsibility to review and evaluate director candidates, including candidates submitted by stockholders. In performing its evaluation and review, the Nominating and Corporate Governance Committee does not differentiate between candidates based on the proposing constituency, but rather applies the same criteria to each candidate. Dissolved Committees Finance Committee During 2015, the Finance Committee members were Dr. Douglas, Mr. Erck, Mr. Evans (Chair), and Mr. McManus, and with the exception of Mr. Erck, each Finance Committee member was a “non-employee director,” as defined by Rule 16b-3 of the Exchange Act, “outside director,” as defined in Section 162(m), and an “independent director,” as defined by the listing stan- dards of the NASDAQ. During 2015, the Finance Committee met three (3) times and did not act by written consent in lieu of a meeting. The purpose of the Finance Committee was to assist the Board with its responsibilities and provide advice to senior management of the Company relating to the financial condition and the equity and debt capital raising strategies and activities of the Company, as well as oversight of the Company’s investment and cash management policies, all in the context of the Company’s overall strategic business plan, and to carry out such other functions as the Board may have authorized from time to time. In 2015, the Finance Committee was dissolved and, in its place, the Board reassumed responsibility for advising the Company’s senior management with respect to the Company’s financial condition, as well as equity and debt capital raising strategies. In addition, the Audit Committee was empowered to oversee the Company’s investment and cash management policies, which were previously exercised by the Finance Committee. The Board believes that this change will serve the best interests of the Company. Nomination Procedures Stockholders who wish to nominate qualified candidates to serve as directors of the Company may do so in accordance with the procedures set forth in the Company’s Amended and Restated By-laws (“By-laws”), which procedures did not change during the last fiscal year. As set forth in the By-laws, a stockholder must notify the Company in writing, by notice delivered to the attention of the Secretary of the Company at the address of the Company’s principal executive offices, of a proposed nom- inee. In order to ensure meaningful consideration of such candidates, notice must be received not less than 60 days nor more than 90 days prior to the anniversary date of this year’s Annual Meeting; provided, however, that in the event that the date of the current year’s annual meeting of stockholders is more than 30 days before or after the anniversary date of the prior year’s annual meeting of stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first. The notice must set forth as to each proposed nominee: • name, age, business and residence address; • his or her principal occupation or employment; • the class and number of shares of capital stock and other securities of the Company, if any, which are beneficially owned by such nominee and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power or economic interest of, such person with respect to the Company’s securities; and • any other information concerning the nominee that must be disclosed as to nominees in proxy solicitations, or is otherwise required, in each case pursuant to applicable law. The notice must also set forth with respect to the stockholder giving the notice and each Stockholder Associated Person: • the name and address, as they appear on the Company’s books, of such stockholder; • a description of all direct and indirect compensation and other material monetary arrangements, agreements or understand- ings during the past three years, and any other material relationship, if any, between or concerning such stockholder and each Stockholder Associated Person, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand; 16 NOVAVAX, INC • the class and number of shares of capital stock and other securities of the Company that are owned by such person; and • any derivative positions held of record or beneficially by such person and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power or economic interest of, such person, with respect to the Company’s securities. For purposes of this Proxy Statement, a “Stockholder Associated Person” of any stockholder means (i) any “affiliate” or “asso- ciate” (as those terms are defined in Rule 12b-2 under the Exchange Act) of the stockholder who owns beneficially or of record any capital stock or other securities of the Company or, through one or more derivative positions, has an economic interest (whether positive or negative) in the price of securities of the Company and (ii) any person acting in concert with such stock- holder or any affiliate or associate of such stockholder with respect to the capital stock or other securities of the Company. In addition, any nominee proposed by a stockholder shall complete a questionnaire, in a form provided by the Company, and such completed questionnaire shall be submitted promptly, and in any event within ten days, after the Company provides the form of such questionnaire. The Company may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of the nominee to serve as a director. Nominations received through this process will be forwarded to the Nominating and Corporate Governance Committee for review. The Nominating and Corporate Governance Committee strives to maintain a board of directors with a diverse set of skills and qualifications, to ensure that the board of directors is adequately serving the needs of the Company’s stockholders. Before evaluating director candidates, the Nominating and Corporate Governance Committee reviews the skills and qualifications of the directors currently serving on the Board and identifies any areas of weakness or skills of particular importance. On the basis of that review, the Nominating and Corporate Governance Committee will evaluate director candidates with those iden- tified skills. While the Nominating and Corporate Governance Committee does not have a formal policy on Board diversity, the committee takes into account a broad range of diversity considerations when assessing director candidates, including individ- ual backgrounds and skill sets, professional experiences, and other factors that contribute to the Board having an appropriate range of expertise, talents, experiences, and viewpoints, and considers those diversity considerations, in view of the needs of the Board as a whole, when making decisions on director nominations. The Nominating and Corporate Governance Committee considers the following skills and experiences necessary to the Board: industry knowledge, clinical development expertise, commercialization expertise, manufacturing expertise, financial expertise and capital raising experience, and scientific or med- ical education and experience, particularly in vaccine-related fields. While there are no set minimum requirements, a candidate should: • be intelligent, thoughtful, and analytical; • possess superior business-related knowledge, skills, and experience; • reflect the highest integrity, ethics, and character; • have excelled in both academic and professional settings; • demonstrate achievement in his or her chosen field; • be free of actual or potential conflicts of interest; • have the ability to devote sufficient time to the business and affairs of the Company; and • demonstrate the capacity and desire to represent the best interests of the Company’s stockholders as a whole. In addition to the above criteria (which may be modified from time to time), the Nominating and Corporate Governance Committee may consider such other factors as it deems in the best interests of the Company and its stockholders and that may enhance the effectiveness and responsiveness of the Board and its committees. Finally, the Nominating and Corporate Governance Committee must consider a candidate’s independence to make certain that the Board includes at least a majority of “independent” directors to satisfy all applicable independence requirements, as well as a candidate’s financial sophistication and special competencies. The Nominating and Corporate Governance Committee identifies potential candidates through referrals and recommenda- tions, including by incumbent directors, management, and stockholders, as well as through business and other organizational networks. To date, the Nominating and Corporate Governance Committee has not retained or paid any third party to identify or 17 2015 Proxy evaluate, or assist in identifying or evaluating, potential director nominees, although it reserves the right to engage executive search firms and other third parties to assist in finding suitable candidates. Current members of the Board with the requisite skills and experience are considered for re-nomination, balancing the value of the member’s continuity of service with that of obtaining a new perspective, and considering each individual’s contributions, performance and level of participation, the current composition of the Board, and the Company’s needs. The Nominating and Corporate Governance Committee also must consider the age and length of service of incumbent directors. In March 2005, the Nominating and Corporate Governance Committee recommended to the Board, and the Board adopted, a rule not to re-nominate a director for re-election if such director has served ten years as a director or has reached 75 years of age, unless circumstances exist which cause the Nominating and Corporate Governance Committee to believe that despite such factors, such a nomination was in the best interest of the Company. If any existing members do not wish to continue in service or if it is decided not to re-nominate a director, new candidates are identified in accordance with those skills, experience, and characteristics deemed necessary for new nominees, and are evaluated based on the qualifications set forth above. In every case, the Nominating and Corporate Governance Committee meets (in person or telephonically) to discuss each candidate, and may require personal interviews before final approval. Once a slate of nominees is selected, the Nominating and Corporate Governance Committee presents it to the full Board. Corporate Governance Guidelines In 2015, the Board adopted corporate governance guidelines which are available on the Company’s website at www.novavax.com. Code of Business Conduct and Ethics The Board has adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to each of Novavax’ employees, officers, and directors, including, but not limited to, the Company’s Chief Executive Officer and Chief Financial Officer. The Code of Ethics is reviewed at least annually by the Nominating and Corporate Governance Committee. A current copy of the Code Ethics, as amended, is available on the Company’s website at www.novavax.com. The Company intends to disclose on its website any future amendments to and waivers of the Code of Ethics that apply to its Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer, and persons performing similar functions. Stockholder Communications with the Board of Directors The Board welcomes communications from stockholders and has adopted a procedure for receiving and addressing such communications. Stockholders may send written communications to the entire Board or individual directors, addressing them to Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878, Attention: Corporate Secretary. Communications by email should be addressed to ir@novavax.com and marked “Attention: Corporate Secretary” in the “Subject” field. All such commu- nications will be forwarded to the full Board or to any individual director or directors to whom the communication is directed unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal, or similarly inappropriate, in which case the Company has the authority to discard the communication or take appropriate legal action. Certain Relationships and Related Transactions The Company’s Code of Ethics provides that the Audit Committee is responsible for approving all transactions or business relationships involving Novavax and any director or executive officer, including any transactions between Novavax and either the director or officer personally, members of their immediate families or entities in which they have an interest. In evaluat- ing related party transactions, the Audit Committee members apply the same standards of good faith and fiduciary duty they apply to their general responsibilities as a committee of the Board and as individual directors. The Audit Committee will approve a related party transaction when, in its good faith judgment, the transaction is in the best interest of the Company. Dr. Modi, a director of Novavax, is also a managing director of Cadila Pharmaceuticals Ltd. (“Cadila”). Novavax and Cadila have formed a joint venture called CPL Biologicals Private Limited (“CPLB”), of which Novavax owns 20% and Cadila owns the remaining 80%. Novavax and Cadila have also entered into a master services agreement, the terms of which provide that if, by March 2016, the amount of services provided by Cadila under the agreement was less than $7.5 million, the Company would have paid Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion of the short- fall amount that exceeds $2.0 million. The Company fulfilled its financial obligation under the agreement in the fourth quarter of 2015; thus, while the agreement continues to allow Novavax to use Cadila’s and/or CPLB’s services, there are no further financial obligations under the agreement or any other agreements related to CPLB. As of December 31, 2015, the Company had purchased $2.2 million in services from Cadila pursuant to this agreement. In addition, as of April 13, 2016, a subsidiary of Cadila owns 2,500,000 million shares of Novavax’ outstanding Common Stock. See also the information regarding the master 18 NOVAVAX, INC services agreement in Note 16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016. There are no family relationships among any of the directors or executive officers (or any nominee therefor) of Novavax. No director, executive officer, nominee, or any associate of any of the foregoing has any interest, direct or indirect, in any proposal to be considered and acted upon at the Annual Meeting (other than the election of directors). Compensation Committee Interlocks and Insider Participation During 2015, Ms. Boudreaux, Dr. Douglas, Mr. McManus, Jr. and Dr. Young served as members of the Compensation Committee. None of the members of the Compensation Committee was at any time during 2015 an employee or executive officer of Novavax. No executive officer of the Company currently serves, or during 2015 served, as a member of the board of directors or com- pensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board or Compensation Committee. Compensation of Directors Compensation for non-employee directors is comprised of two components: (i) cash compensation and (ii) equity awards. Cash Compensation Our non-employee director cash compensation arrangement for 2015 was as follows: FEE(S) AMOUNT Annual Director Retainer $40,000—Non-Employee Director Annual Chairperson Retainer $35,000—Board $18,000—Audit Committee $12,500—Compensation Committee $9,500—Nominating and Corporate Governance Committee $7,000—Finance Committee (dissolved after 2015) Committee Member Retainer $10,000—Audit Committee $7,000—Compensation Committee $5,000—Nominating and Corporate Governance Committee $4,000—Finance Committee (dissolved after 2015) Board and Committee Meetings Directors do not receive compensation for attending meetings. Directors are reimbursed for reasonable costs and expenses incurred in connection with attending any Board or committee meetings or any other Company related business activities. Non-Employee Director Deferred Fee Policy During 2015, the Company implemented a Director Deferred Fee Policy (the “Policy”) for its non-employee directors. The Policy permits an eligible director to defer receipt of all or part of the director’s cash retainer. To defer fees payable during any calendar year, a director must make an election by the end of the preceding calendar year. A director can elect to have 100% of deferred amounts credited to a “cash account” or a “Company Common Stock account,” or, alternatively, a director may elect to have deferred amounts credited 50% to each account. Cash accounts are credited with interest quarterly at the IRS Applicable Federal Rate for short-term debt instruments for the last month of such calendar quarter. Company Common Stock accounts are credited as if amounts were invested in notional stock units based upon the market price of Company Common Stock and are credited with additional notional units if dividends are paid on Company Common Stock. Payment of deferred amounts is to be made in cash upon the occurrence of certain events, including the director’s separation from service, death of the director, or a change in control of the Company. The director may also elect to receive payment of the deferred amounts in a specified year that is not more than ten years from the year in which the director’s fees were earned. A director may elect to receive payment in either a lump sum or in up to ten annual installments. 19 2015 Proxy The directors were not eligible to defer any fees earned in the fiscal year ending December 31, 2015. Two directors elected to defer fees earned in the fiscal year ending December 31, 2016. The following table shows how those directors currently have their deferred fees credited. NAME Gail K. Boudreaux ANNUAL RETAINER Cash account—0% Company Common Stock account—100% Richard H. Douglas, Ph.D. Cash account—0% Company Common Stock account—100% Equity Awards At its meeting on March 5, 2015, the Board granted options to purchase 40,000 shares of Company Common Stock to each of Messrs. Evans and McManus, and Dr. Douglas. Mr. Marsh was granted an option to purchase 20,000 shares of Company Common Stock. Dr. Young was granted an option to purchase 100,000 shares of Company Common Stock. All of the afore- mentioned options have an exercise price of $8.94 per share and vested in full six months after the date of grant. On June 17, 2015, the Board granted options to purchase 40,000 shares of Company Common Stock to Ms. Boudreaux as part of her appointment to the Board. Ms. Boudreaux’ options have an exercise price of $9.13 per share and vested in full six months after the date of grant. Summary Director Compensation Table The Company does not pay employee directors additional compensation for service on the Board. The following table sets forth information concerning the compensation paid by the Company to each individual who served as a non-employee direc- tor at any time during fiscal year 2015: FEES EARNED OR PAID IN CASH(1) ($) STOCK AWARDS ($) OPTION AWARDS(2) ($) Gail K. Boudreaux(3) Richard H. Douglas, Ph.D. Gary C. Evans Jack O. Marsh, Jr., J.D(4) Michael A. McManus, Jr., J.D. Rajiv I. Modi, Ph.D.(5) James Young, Ph.D. 28,022 61,000 66,500 10,000 74,000 — 92,500 — — — — — — — 243,276 256,800 256,800 128,400 256,800 — 642,000 TOTAL ($) 271,298 317,800 323,300 138,400 330,800 — 734,500 (1) Represents fees earned in 2015. (2) The grant date fair value was calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. Assumptions used in the calculation of this amount are included in Note 12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016. As of December 31, 2015, the aggregate number of stock options held by each non-employee director is as follows: Ms. Boudreaux, 40,000, Dr. Douglas, 170,000; Mr. Evans, 305,000; Mr. Marsh, 160,000; Mr. McManus, 105,000; Dr. Modi, none; and Dr. Young, 565,000. (3) Ms. Boudreaux was appointed to the Board on June 17, 2015. (4) Mr. Marsh resigned from the Board effective June 12, 2014. The Company entered into a consulting agreement with Mr. Marsh beginning on June 12, 2014 pursuant to which Mr. Marsh was paid $10,000 during fiscal year 2015. (5) Due to his relationship with Cadila and CPLB, and the commercial transactions between the Company and those companies, Dr. Modi did not receive compensation for his services as a director. 20 NOVAVAX, INC SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and holders of more than 10% of the Company’s Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Based solely on a review of the (i) copies of such reports (and any amendments thereto) furnished to the Company during or with respect to 2015 or (ii) written representations that no reports were required, the Company believes that during 2015 its executive officers, directors, and holders of more than 10% of the Company’s Common Stock complied with all Section 16(a) filing requirements with the possible exception of forthcoming delinquent Form 4 filings by Mr. Evans for sales or direct distribution of up to 330,000 shares of Common Stock in prior years. EXECUTIVE OFFICERS Our executive officers hold office until the first meeting of the Board following the annual meeting of stockholders and until their successors are duly chosen and qualified, or until they resign or are removed from office in accordance with our By-laws. The following information outlines our executive officers and their ages and positions as of April 13, 2016, followed by biographical information of each such executive officer: NAME Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino AGE TITLE 67 53 62 50 56 President and Chief Executive Officer and Director Senior Vice President, Chief Financial Officer and Treasurer President, Research and Development Senior Vice President, General Counsel and Corporate Secretary Senior Vice President, Commercial Operations Stanley C. Erck has served as President and Chief Executive Officer since April 2011 and a Director since June 2009, and previously served as Executive Chairman from February 2010 to April 2011. From 2000 to 2008, Mr. Erck served as President and Chief Executive Officer of Iomai Corporation, a developer of vaccines and immune system therapies, which was acquired in 2008 by Intercell AG. He also previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme, and Baxter International. Mr. Erck also serves on the board of directors of BioCryst Pharmaceuticals, MaxCyte, Inc., and MDBio Foundation. Mr. Erck received a B.S. in economics from the University of Illinois and a M.B.A. from the University of Chicago. Barclay A. Phillips has served as Senior Vice President, Chief Financial Officer and Treasurer since June 2013. Prior to joining the Company, Mr. Phillips served as Senior Vice President and Chief Financial Officer of Micromet, Inc., which was acquired by Amgen in 2012. Previously, he was Managing Director of Vector Fund Management and a Biotechnology Analyst and Director of Venture Investments at Invesco Funds Group, Inc. Mr. Phillips received a B.A. in economics from the University of Colorado at Boulder. Gregory M. Glenn, M.D. has served as President, Research and Development since March 2016, and previously served as Senior Vice President, Research and Development since January 2014, as Senior Vice President, Chief Medical Officer from January 2011 to January 2014, and Senior Vice President and Chief Scientific Officer from June 2010 to January 2011. Prior to joining the Company, Dr. Glenn was the Chief Scientific Officer and founder of Iomai Corporation, which was acquired in 2008 by Intercell AG, an associate in international health at Johns Hopkins University’s School of Public Health and a clinical and basic research scientist at Walter Reed Army Institute of Research. Dr. Glenn received a B.A. in biology and chemistry from Whitman College and a M.D. from Oral Roberts University School of Medicine. He also completed the Medical Research Fellowship at the Walter Reed Army Institute of Research. John A. Herrmann III has served as Senior Vice President, General Counsel and Corporate Secretary since June 2014. He previously served as the Company’s Vice President, General Counsel and Corporate Secretary from March 2012 to June 2014, and its Executive Director, Legal Affairs and Corporate Secretary from April 2010 to March 2012. Prior to joining the Company, Mr. Herrmann was General Counsel at Ore Pharmaceuticals and Deputy General Counsel at Gene Logic before it became Ore Pharmaceuticals. Mr. Herrmann worked as Senior Counsel for Celera Genomics following his position as Senior Corporate Counsel at Baxter Healthcare in its Renal Division. Mr. Herrmann received a B.A. in political science and history from Brown University and a J.D. from the University of Illinois. 21 2015 Proxy John J. Trizzino has served as Senior Vice President, Commercial Operations since March 2014. He previously served as the Company’s Senior Vice President, Business Development from August 2010 to September 2011, and its Senior Vice President, International and Government Alliances from July 2009 to July 2010. Prior to joining the Company, Mr. Trizzino was the CEO of Immunovaccine from September 2011 to September 2013, VP, Vaccine Franchise at Medimmune, LLC, Senior Vice President, Business Development at ID Biomedical, and Vice President, Business Development in the Medical Group of Henry Schein, Inc. following his position as Vice President, General Manager of its GIV division. Mr. Trizzino received a B.S. from Long Island University, CW Post and a M.B.A. from New York University. COMPENSATION DISCUSSION AND ANALYSIS Overview The Compensation Discussion and Analysis (the “CD&A”) discusses the compensation of our five “named executive officers” for 2015 (each an “NEO”): (i) Stanley C. Erck, President and Chief Executive Officer; (ii) Barclay A. Phillips, Senior Vice President, Chief Financial Officer and Treasurer; (iii) Dr. Gregory M. Glenn, President, Research and Development; (iv) John A. Herrmann III, Senior Vice President, General Counsel and Corporate Secretary; and (v) John J. Trizzino, Senior Vice President, Commercial Operations. The CD&A reviews the Company’s executive compensation philosophy, the objectives and operation of the compensation pro- gram, how compensation was set for 2015, and the various elements of compensation paid to the executive officers including the NEOs for services during 2015. Executive Compensation Philosophy Our compensation program is designed to attract, retain, and reward a high-performance workforce in an extremely compet- itive recruitment and retention market to achieve the Company’s mission, vision, and goals. This philosophy is reflected in the components of the Company’s compensation program, which includes: • a competitive compensation package upon hire; • a performance management process that defines objectives, tracks employee performance, and ties into the annual rewards process; • an annual performance increase practice that rewards the individual employee’s contribution for the fiscal year; • an annual incentive bonus that rewards individual and Company performance; • an equity incentive plan that provides initial grants upon hire and additional grants for promotions, strong performance, and retention of high potential personnel; • individual promotions that reward strong performance; and • a market-competitive, comprehensive benefits program. The Compensation Committee believes that these components provide the tools we need to deliver performance-based com- pensation that retains and rewards high-performing employees and aligns with general industry practices. We conducted our most recent advisory vote on executive compensation at our 2014 Annual Meeting of Stockholders. Our Board and our Compensation Committee value the opinions of our stockholders, so we paid close attention to the outcome of this vote even though it is non-binding. More than 95% of the votes cast on the advisory vote on executive compensation were in favor of our named executive officer compensation as disclosed in our 2014 proxy statement. We view this support as an affirmation of our pay practices; and, consequently, we have maintained a consistent approach to executive compensation since that time. Objectives of the Compensation Program The Compensation Committee believes that the compensation for our executive officers, including our NEOs, should be designed to attract, motivate, and retain highly qualified executive officers responsible for the success of Novavax and should be determined within a framework that rewards performance and aligns the interests of the executive officers with the inter- ests of the Company’s stockholders. Within this overall philosophy, the Compensation Committee’s objectives are to: • attract and retain highly qualified employees; • provide compensation that reflects performance and rewards high performance; • reward executives for meeting strategic goals and objectives of the Company; and • align executives’ interests with those of our stockholders. 22 NOVAVAX, INC Attract and Retain Highly Qualified Executives Our compensation program is designed to attract, motivate, and retain, from a limited pool of resources, individuals who are highly experienced with proven records of success, and to provide total compensation that is competitive with the Company’s peers within the biotechnology and pharmaceutical industries. Reflect Performance and Reward High Performance The Compensation Committee believes that a significant portion of an executive officer’s total compensation should reflect overall Company performance and individual performance. Incentives are based on meeting criteria in each of these catego- ries and reflect the executive officer’s overall contribution to the Company. Reward Executives for Meeting Strategic Goals and Objectives of the Company The compensation program rewards the Company’s executive officers for achieving specified performance goals, building stockholder value, and maintaining long-term careers with Novavax. The compensation program is designed to reward these three aspects because the Compensation Committee believes it will motivate the executive team to make balanced annual and long-term decisions resulting in financial performance, scientific and product development innovations, and achievement of the Company’s strategic business objectives. Align Executives’ Interests with Those of Our Stockholders The Compensation Committee believes that Novavax’ long-term success depends upon aligning executives’ and stockholders’ interests. To support this objective, Novavax provides executive officers with equity accumulation opportunities by awarding stock options and, in certain cases, restricted stock. Generally, stock option grants vest annually over four years, although certain options granted in 2010 vest annually over a three-year period. Restricted stock may vest based on either critical mile- stones to be achieved over a limited period of time or over a similar four-year period as stock option grants. Beginning with stock option awards made in 2016, such stock option grants vest as to 25% of the award on the first anniversary of the grant date and the remaining 75% vests monthly thereafter over the next three-year period. Such vesting supports long-term reten- tion of executive officers because executive officers cannot exercise the options or sell shares of restricted stock until they have vested. At times, the Company may elect to grant stock options that vest as an executive achieves certain milestones or to incentivize the achievement of strategic Company goals within that executive’s area of responsibility. Oversight and Operation of the Executive Compensation Program The Compensation Committee is appointed by the Board to assist the Board with its responsibilities related to the compensa- tion of the Company’s directors, officers, and employees and the development and administration of the Company’s compen- sation plans. For details on the Compensation Committee’s oversight of the executive compensation program, see the section titled “Information Regarding the Board and Corporate Governance Matters—Compensation Committee” beginning on page 14 of this Proxy Statement. The Chief Executive Officer (the “CEO”) evaluates and provides to the Compensation Committee performance assessments and compensation recommendations for each executive officer other than himself. The Chairman of the Board evaluates the CEO’s performance and makes compensation recommendations for the CEO to the Compensation Committee. The Compensation Committee considers the CEO’s and the Chairman’s recommendations and information provided by the Human Resources team (as described below) in its deliberations regarding executive compensation and recommends to the Board the compensation of the executive officers based on such deliberations. The Board determines all executive compensation based on the recommendation of the Compensation Committee. In 2015, the CEO and the Vice President, Human Resources and Administration generally attended Compensation Committee meetings, but were not present for executive sessions or any discussion of their own compensation. Process for Setting Executive Compensation Compensation packages for each executive officer are analyzed and discussed separately at the first Compensation Committee meeting each year. Prior to that meeting, LCG Group Compensation & HR Consulting (“LCG”) performs a comprehensive com- petitive analysis on the compensation package for each executive officer. The results of this analysis are presented to the Compensation Committee, and at any time, the Compensation Committee and the Board may request additional information from LCG or the Human Resources team. 23 2015 Proxy Survey Data When setting the compensation for the executive officers for 2015, the Compensation Committee reviewed compensation survey data specific to the life sciences industry that was provided by LCG using the Radford Global Life Sciences Survey (the “Survey”). The Survey provides total compensation and practices data for multinational life sciences companies for 700+ companies and more than 335,000 individuals. Global market data is available for 65 countries and positions at the executive, management, professional, sales, and support levels, as well as overall compensation practices. Target industries include bio- technology, pharmaceutical, diagnostic and clinical research organizations. The Survey is used to determine whether each executive officer’s salary and bonus opportunity are competitive. LCG bench- marks each executive officer’s current compensation against the 50th percentile of the Survey. The Compensation Committee believes this is a common reference point among biotechnology companies similar in size to Novavax and that the Company remains competitive by targeting the 50th percentile of the Survey data. Internal Equity The Compensation Committee considers internal equity when determining compensation to ensure that the Company is fair in its compensation practices across roles similar in scope and level of responsibility. Independent Compensation Analysis In 2015, the Compensation Committee engaged LCG to review and analyze its executive compensation programs and to conduct a competitive market analysis for each member of the senior leadership team. LCG first performed such services for the Company in 2010 and has provided similar services in subsequent years. In addition, LCG reviewed the competitive- ness of long-term incentives, assessed the metrics used to reward executives and Board members, and assessed the mix of equity grants to correctly align risk and performance with long-term incentives. LCG was authorized by the Compensation Committee to work with certain executive officers of the Company, as well as other employees in the Company’s Human Resources, Legal, and Finance departments in connection with LCG’s work for the Compensation Committee. LCG conducted a review of the total compensation of the Company’s executive officers and prepared a report for review by management and subsequently by the Compensation Committee that was used in determining appropriate levels of compensation for the Company’s executive officers for 2015. As required by rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Compensation Committee engaged LCG after assessing LCG’s independence, including taking into consideration the fact that LCG does not provide any services to the Company other than those requested by the Compensation Committee and the absence of any significant business or personal relationships between LCG and members of the Compensation Committee and any executive officer of the Company. Based upon this assessment, it was determined that the engagement of LCG does not raise any conflicts of interest or similar concerns. What the Compensation Program is Designed to Reward Company Performance The executive compensation program is designed to reward both individual performance and Company performance. A signif- icant portion of an executive officer’s total compensation package is based on the Company’s performance and the achieve- ment of corporate goals. Because of the key roles the executive officers play in the success of the Company, a significant portion of the achievement of corporate goals is reflective of the executive officers’ individual performance. During 2015, the Board and the Company’s senior executives jointly developed a set of objectives for 2015 which were based on the Company’s strategic plan (the “2015 Objectives”). These objectives included: • executing on the seasonal influenza and pandemic influenza vaccine development plans; • executing on the respiratory syncytial virus (“RSV”) vaccine development plan; • executing on the Ebola vaccine development program; • advancing preclinical pipeline vaccine candidate programs; • supporting the advancement of vaccine candidates at the Company’s joint venture with CPLB and meeting commitments to Cadila; • managing current partnerships and commercial activities; and • completing financing to end 2015 with 18 months of cash. 24 NOVAVAX, INC Individual Performance For 2015, the CEO reviewed and evaluated the performance of the executive officers and recommended their performance goals and objectives for 2016. This review was conducted in the first quarter of 2016. For 2015, the Chairman of the Board reviewed and evaluated the performance of the CEO. The performance goals and objectives for the CEO were the same as the annual corporate objectives based on the strategic plan. Each of the executive officers was evaluated on the competencies of teamwork, results orientation, business ethics, accountability, business process improvement, leadership, personnel develop- ment, staff communication, and treatment of employees. In addition, with the exception of the CEO, whose incentive compensation is based entirely on achievement of the 2015 Objectives and the discretion of the Board, each NEO had additional individual goals to support the 2015 Objectives or to fur- ther the Company’s strategic plan. More specifically: • Mr. Phillips had individual goals for activities needed to achieve the corporate 2015 Objective of completing financings (e.g., evaluate financing options, prepare analyses, and seek to consummate transaction), and individual operational goals such as ensuring compliance with Sarbanes-Oxley procedures, implementing financial closing procedures, and ensuring audit compliance; • Dr. Glenn had individual goals for activities needed to achieve the corporate 2015 Objectives of advancing the seasonal and pandemic vaccine programs, developing the RSV vaccine franchise and initiating and completing clinical studies in support of the RSV vaccine candidates, and advancing the Company’s discovery and preclinical programs towards Phase 1 clinical trials; • Mr. Herrmann had individual goals for activities needed to support the achievement of all of the corporate 2015 Objectives, which included analyses and recommendations with respect to related legal issues, supporting contracting efforts, and seeking and enforcing appropriate intellectual property protection of the Company’s developing vaccine and adjuvant technology; and • Mr. Trizzino had individual goals for conducting pre-commercialization activities needed to achieve all of the corporate 2015 Objectives, with a focus on activities related to the advancement of the Company’s RSV vaccine development plan. Based on the performance evaluations, each executive officer, with the exception of the CEO, was given a performance rating. The performance rating determines the amount of any merit salary increase and adjustments to the incentive cash bonus awards and equity awards. The performance ratings used by the Company include Outstanding, Exceeds Expectations, Meets Expectations, and Improvement Needed. All of the NEOs received a performance rating of at least “Exceeds Expectations,” with the exception of the CEO, who was not given a performance rating. Elements of Compensation The Compensation Committee believes that the most effective compensation program is one that provides a competitive base salary, rewards the achievement of established annual and long-term goals and objectives, and provides an incentive for retention. For this reason, the compensation program is comprised of three primary elements: (i) base salary, (ii) a cash incen- tive bonus program, and (iii) equity awards. The Compensation Committee believes that these three elements are the most effective combination to motivate and retain executive officers. The Compensation Committee has not adopted any formal guidelines for allocating total compensation between equity com- pensation and cash compensation, but generally seeks to provide an overall executive compensation package designed to attract, motivate, and retain highly qualified executive officers, to reward them for performance over time, and to align the inter- ests of the executive officers with the interests of the stockholders. Although equity compensation is an important component of the compensation program, particularly with respect to creating long-term stockholder value, in 2015, with guidance from LCG based on analysis of the Survey data, the Compensation Committee focused on ensuring that executive officers’ base salaries and bonus opportunities were in line with the median average salaries and annual incentives for comparable positions within the Survey. Base Salary The Compensation Committee’s philosophy is to maintain base salaries at a competitive level sufficient to recruit and retain individuals possessing the skills and capabilities necessary to achieve the Company’s goals over the long term. The Company provides an annual salary to each executive officer designed to reflect that person’s level of responsibility, expertise, skills, knowledge, and experience. The Compensation Committee compares Novavax salaries to those at other 25 2015 Proxy comparable companies within the biotechnology and pharmaceutical industries and adjusts, as appropriate, to assist the Company in retaining this expertise, skill, and knowledge at Novavax. Merit increases are typically awarded effective April 1st of each year, reflecting performance for the previous year. The increases were determined by an annual performance review in light of the individual’s 2014 performance goals and achievement of Company objectives, as well as by reference to the Survey. Salary increases were provided April 1, 2015. The base salaries for the NEOs were: EXECUTIVE Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino BASE SALARY ($) PERCENTAGE INCREASE IN BASE SALARY FROM DECEMBER 31, 2014 (%) 600,000 355,000 415,000 320,000 340,000 20.0(1) 4.4(2) 5.1(2) 6.7(2) 6.3(2) (1) Mr. Erck’s leadership during 2014, the overall progress of the Company, and a review of the Survey data were factors used by the Compensation Committee in its decision to increase his base salary. (2) Each of Messrs. Phillips’, Herrmann’s, Trizzino’s and Dr. Glenn’s individual performances during 2014 and a review of the Survey data were factors used by the Compensation Committee in its decision to increase base salary. Incentive Cash Bonus The incentive cash bonus program is designed to motivate and reward executive officers for the achievement of specific corporate goals. The purpose of the incentive cash bonus program is to align company, departmental, and individual goals throughout the Company and to provide an incentive that further ties compensation to individual contribution and teamwork. At the time that the Board approved the 2015 Objectives, the Board also weighted each objective. The Board assigns a per- centage to each objective (where 100% of a weighted objective means the objective has been fully met by the Company) which reflects the Board’s determination as to whether the Company achieved an objective, failed to meet an objective, partially met an objective, or exceeded an objective. In some instances, the Board uses its discretion to make such determinations, and in doing so looks at other performance factors, mitigating circumstances, and other material successes or missed opportuni- ties. The Board then assesses the overall percentage achieved by the Company against all of its objectives in determining the cumulative percentage. 26 NOVAVAX, INC On December 3, 2015, the Compensation Committee reviewed the Company’s performance related to its 2015 Objectives. The following table summarizes its conclusions regarding these objectives: 2015 OBJECTIVE WEIGHT ACHIEVEMENT PERCENT EXPLANATION Execute on the seasonal influenza and pandemic influenza vaccine development plans 25% Partially met objective 12.5% Execute on the RSV vaccine clinical development plan 50% Exceeded objective 67.5% Execute on the Ebola vaccine development program 5% Met objective Advance preclinical vaccine candidate programs Support advancement of vaccine candidates at CPLB and meet commitments to Cadila Manage current partnerships and commercial activities 5% Met objective 5% Partially met objective 2.5% 5% Partially met objective 2.5% 5% 5% Complete financing to end 2015 with 18 months of cash 5% Met objective Total 100% 5% 100% Successful data from seasonal Phase 2 clinical trial, with ongoing Department of Health and Human Services, Biomedical Advanced Research and Development Authority support, although pandemic and combination clinical trials delayed Successful data from RSV Phase 2 clinical trials in older adults and maternal immunization, and Phase 1 clinical trial in pediatrics, and initiated two Phase 3 clinical trials and roll-over Phase 2 clinical trial Successful data from Phase 1 clinical trial and multiple NHP challenge studies Successfully demonstrated broad protection in preclinical candidate Eliminated remaining financial obligation to Cadila and supported seasonal influenza vaccine BLA Executed grant agreement with the Bill & Melinda Gates Foundation, assessed various new opportunities and managed multiple ongoing partnerships Company ended 2015 with approximately $230.7 million On December 4, 2015, upon recommendation of the Compensation Committee, the Board determined that incentive bonuses would be awarded for 2015 based on achievement of 100% of the 2015 Objectives. In doing so, the Board exercised discretion in ascribing additional value to the Company’s achievement of a number of critical tasks in 2015 related to the successful results of multiple Phase 2 clinical trials from its RSV vaccine program and the subsequent launches of two pivotal Phase 3 clinical trials from that program in older adults and newborns via maternal immunization. The target bonus is set at a percentage of the executive officer’s base salary, with such percentages being based on market data. However, the ultimate amount of any bonus is at the discretion of the Board. The 2015 NEO bonus targets were as follows: EXECUTIVE Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino PERCENTAGE OF BASE SALARY (%) 60% 35% 35% 35% 35% 27 2015 Proxy The Compensation Committee believes that the higher the individual’s position within Novavax, the more closely his or her bonus award should be tied to the Company’s success. The CEO’s bonus is based solely on the achievement of the 2015 Objectives and the discretion of the Board. For executive officers other than the CEO, 80% of the bonus is based on corporate achievement and 20% of the bonus is based on individual performance. To be eligible for a bonus, an executive officer must achieve at least a “Meets Expectations” on his or her annual performance review, which the Compensation Committee deter- mined was the case with each of the NEOs. Equity Awards Equity incentive awards are a fundamental element in the executive compensation program because they emphasize long- term performance, as measured by creation of stockholder value, and foster a commonality of interest between stockholders and key executives. In addition, they are crucial to a competitive compensation program for executive officers because they act as a powerful retention tool. The Compensation Committee views the Company as still facing significant risk, but with a potential for a high upside. In the case of stock options, the executive officers are motivated by the potential appreciation in the stock price above the exercise price. To encourage continued employment, stock option grants to executive officers typically include options that require the executive to remain an employee of the Company for four years before the options are fully vested, although certain options granted in 2010 have a three-year vesting period. Beginning with stock option awards made in 2016, such stock option grants vest as to 25% of the award on the first anniversary of the grant date and the remaining 75% vests monthly thereafter over the next three-year period. In addition, the Compensation Committee may award options that vest as the executive officer achieves certain milestones. The Compensation Committee believes it is important to tie the long- term benefit potentially realizable by the executive to a long-term commitment with Novavax. Traditionally, the Company grants stock options as the primary form of equity compensation, but the Company does, at times, grant restricted stock to attract and retain key employees. Restricted stock grants typically vest based on critical mile- stones to be achieved over a limited period of time or continued service over a similar four-year period as stock option grants. Annual stock option grants are awarded to executive officers at the discretion of the Board upon a recommendation by the Compensation Committee. In making its recommendations, the Compensation Committee considers Company performance, Survey data, and the individual’s scope of responsibility and continuing performance. To be eligible to receive an award of stock options, the executive officer must have an overall performance rating of at least “Meets Expectations.” With guidance from LCG upon its analysis of Survey data, stock options were awarded to the NEOs in 2015, and vest annually over four years. The executive officers also have the ability to participate in the Company’s ESPP. Perquisites and Other Personal Benefits We do not have any executive perquisite programs. From time to time, on a limited or exception basis, we may provide other benefits that we believe are related to a business purpose or are customary among our peer public companies that may otherwise be considered perquisites. All of the NEOs are eligible to participate in the Company’s benefit plans offered to all employees, including health, dental and vision insurance, a prescription drug plan, flexible spending accounts, short and long term disability, life insurance and a 401(k) plan. Employment Agreements and Severance Benefits As of December 31, 2015, the Company had employment agreements in place with all of the NEOs. The employment agree- ments provide for certain payments if the NEO is terminated by the Company without cause or leaves for good reason. The terms of these agreements are described in greater detail in the section titled “Overview of Employment and Change in Control Agreements.” All of the NEOs are “at will” employees. The Company has established a Change in Control Severance Benefit Plan, which provides for severance payments to partici- pating employees if the participant’s employment is terminated in connection with a change in control. This plan is described in greater detail in the section titled “Overview of Employment and Change in Control Agreements.” The Compensation Committee believes it is important to provide such employees with an incentive to remain with the Company amid the uncer- tainty that often accompanies efforts to consummate a corporate sale or similar transaction that may enhance stockholder value. All of the NEOs participate in the Change in Control Severance Benefit Plan. Tax and Accounting Implications Section 162(m) limits to $1 million the amount a company may deduct for compensation paid to its chief executive officer and any of its other three named executive officers (excluding the chief financial officer). This limitation, however, does not apply to compensation meeting the requirements for qualifying performance-based compensation within the meaning of Section 28 NOVAVAX, INC 162(m). The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) in designing our executive compensation program. The Compensation Committee, however, believes that a compen- sation program that attracts and retains highly qualified executives and rewards them for their achievements is necessary for our success and, therefore, is in the best interests of the Company and our stockholders. Accordingly, the Compensation Committee believes that in establishing the cash and equity incentive compensation program for the Company’s executive officers, the potential deductibility of the compensation payable under that program should only be one of a number of relevant factors taken into consideration. Consequently, the Compensation Committee may pay or provide compensation in excess of $1 million that is not exempt from the deduction limitations under Section 162(m). Anti-Hedging Policy Our insider trading policy prohibits all directors and officers from pledging or engaging in hedging or similar transactions in our Common Stock, such as prepaid variable forwards, equity swaps, collars, puts, calls, and short sales. Compensation Risk Assessment We do not believe that our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our business and operations. SUMMARY COMPENSATION TABLE The following table sets forth information concerning the compensation of our NEOs for the fiscal years ended December 31, 2015, 2014, and 2013. NAME AND PRINCIPAL POSITION Stanley C. Erck President and CEO Barclay A. Phillips(6) SVP, Chief Financial Officer and Treasurer Gregory M. Glenn, M.D. President, Research and Development John A. Herrmann III SVP, General Counsel and Corporate Secretary YEAR 2015 2014 2013 2015 2014 2013 2015 2014 2013 2015 2014 2013 575,000 487,750 448,250 351,250 330,000 156,346 410,000 389,783 371,850 315,000 280,458 229,269 SALARY(1) ($) BONUS(2) ($) STOCK AWARDS ($) NON-EQUITY INCENTIVE PLAN COM- PENSATION(4) ($) ALL OTHER COMPENSA- TION(5) ($) STOCK OPTION AWARDS(3) ($) 3,924,000 2,280,780 900,000 872,000 380,130 263,340 1,308,000 443,485 150,000 872,000 477,190 150,000 345,000 304,844 239,097 122,938 139,755 57,645 143,500 165,073 137,103 110,250 119,956 84,729 — — — — — — — — — — — — — — — — — — — — — — — — — — — — TOTAL ($) 4,851,800 3,081,024 1,595,314 1,352,675 855,392 481,646 1,872,014 1,008,261 665,897 1,304,061 884,925 468,570 1,332,317 1,101,265 7,800 7,650 7,967 6,487 5,507 4,315 10,514 9,920 6,944 6,811 7,321 4,572 8,067 4,000 John J. Trizzino(7) SVP, Commercial Operations 2015 2014 335,000 247,846 872,000 738,810 117,250 110,609 (1) Includes amounts earned, but deferred at the election of the NEO, such as salary deferrals under the Company’s 401(k) plan. (2) Performance-based bonuses are generally paid under the Company’s incentive cash bonus program and reported as Non-Equity Incentive Plan Compensation. (3) The grant date fair value was calculated in accordance with FASB ASC Topic 718 excluding the effect of estimated forfeitures. Assumptions used in the calculation of this amount are included in Note 12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016. (4) Represents performance-based bonuses awarded in 2015, 2014, and 2013 under the Company’s incentive cash bonus program. For a description of the incentive cash bonus program, see page 26 in the CD&A. (5) All Other Compensation consisted of (i) employer matching contributions to the Company’s 401(k) plan for Messrs. Erck, Phillips, Herrmann and Trizzino and Dr. Glenn and (ii) for 2015, certain travel reimbursements paid to Dr. Glenn. (6) Mr. Phillips commenced employment with the Company as Senior Vice President, Chief Financial Officer and Treasurer on June 24, 2013. (7) Mr. Trizzino commenced employment with the Company as Senior Vice President, Commercial Operations on March 10, 2014. 29 2015 Proxy GRANTS OF PLAN-BASED AWARDS TABLE The following table sets forth information with respect to option awards and other plan-based awards granted to our NEOs during the fiscal year ended December 31, 2015: ESTIMATED FUTURE PAYMENTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS(1) NAME THRESHOLD ($) TARGET ($) MAXIMUM ($) GRANT DATE ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK (#) ALL OTHER STOCK AND OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS (#) EXERCISE OR BASE PRICE OF OPTION AWARDS(2) ($/SH) GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS(3) ($) Stanley C. Erck 258,750 345,000 431,250 3/5/2015 Barclay A. Phillips 92,203 122,938 153,672 3/5/2015 Gregory M. Glenn, M.D. 107,625 143,500 179,375 3/5/2015 John A. Herrmann III 82,688 110,250 137,813 3/5/2015 John J. Trizzino 87,938 117,250 146,563 3/5/2015 — — — — — 900,000 200,000 300,000 200,000 200,000 8.94 8.94 8.94 8.94 8.94 3,924,000 872,000 1,308,000 872,000 872,000 (1) A cash bonus could not be paid under the incentive cash bonus program unless at least 75% of the 2015 Objectives were achieved. The bonus was capped at 125% achievement of the 2015 Objectives. The target amount of any bonus was, subject to Board discretion, prorated between the minimum 75% achievement of 2015 Objectives and the maximum 125% achievement. The target amount was based on the individual’s earned base salary for 2015 and represented 60% of Mr. Erck’s base salary, and 35% of the base salary of each of Mr. Phillips, Dr. Glenn, Mr. Herrmann, and Mr. Trizzino. (2) Options granted have an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant which, under the Company’s 2015 Stock Plan, is equal to the closing price of the Company’s Common Stock as reported on NASDAQ on the date of grant. (3) The grant date fair value was calculated in accordance with FASB ASC Topic 718 excluding the effect of estimated forfeitures. Assumptions used in the calculation of this amount are included in Note 12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016. 30 NOVAVAX, INC OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR END The following table sets forth certain information with respect to the value of all outstanding equity awards to the NEOs as of December 31, 2015: NAME Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino GRANT DATE 6/24/2009 2/15/2010 6/22/2011 3/1/2012 3/2/2013 3/6/2014 3/5/2015 6/24/2013 3/6/2014 3/5/2015 7/1/2010 3/10/2011 3/1/2012 3/2/2013 3/6/2014 3/5/2015 4/15/2010 3/10/2011 3/1/2012 3/2/2013 3/6/2014 6/12/2014 3/5/2015 3/10/2014 3/5/2015 OPTION AWARDS(1) NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTION EXERCISABLE (#) NUMBER OF SECURITIES UNDERLYING OPTIONS UNEXERCISABLE (#) OPTION EXERCISE PRICE ($/SH) 20,000 150,000 850,000 675,000 450,000 225,000 — 150,000 37,500 — 335,000 64,000 112,500 13,114 43,750 — 75,000 20,000 112,500 75,000 37,500 12,500 — 75,000 — — — — 225,000 450,000 675,000 900,000 150,000 112,500 200,000 — — 37,500 75,000 131,250 300,000 — — 37,500 75,000 112,500 37,500 200,000 225,000 200,000 2.44 2.40 1.99 1.28 1.83 6.05 8.94 2.03 6.05 8.94 2.11 2.50 1.28 1.83 6.05 8.94 2.66 2.50 1.28 1.83 6.05 4.55 8.94 5.86 8.94 OPTION EXPIRATION DATE 6/24/2019(2) 2/15/2020(3) 6/22/2021 3/1/2022 3/2/2023 3/6/2024 3/5/2025 6/24/2023 3/6/2024 3/5/2025 7/1/2020(4) 3/10/2021 3/1/2022 3/2/2023 3/6/2024 3/5/2025 4/15/2020 3/10/2021 3/1/2022 3/2/2023 3/6/2024 6/12/2024 3/5/2025 3/10/2024 3/5/2025 (1) All options were awarded under the 2005 Stock Plan or 2015 Stock Plan and, except as noted, vest in four equal increments on the first four anniversaries of the date of grant. (2) These options vested six months following the date of grant. (3) These options vested one year following the date of grant. (4) These options vested in three equal increments on the first three anniversaries of the date of grant. 31 2015 Proxy OPTIONS EXERCISED AND STOCK VESTED The following table sets forth certain information concerning the exercise of stock options held by the NEOs during the fiscal year ended December 31, 2015: NAME Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino OPTION AWARDS NUMBER OF SHARES ACQUIRED ON EXERCISE (#) VALUE REALIZED ON EXERCISE(1) ($) — — 76,886 — — — — 588,597 — — (1) This amount represents the difference between the market price of a share of our Common Stock at the time of exercise and the exercise price. EQUITY COMPENSATION PLAN INFORMATION The following table provides information about the Company’s Common Stock authorized for issuance under our equity com- pensation plans as of December 31, 2015. See also the information regarding stock options in Note 12 to the Company’s con- solidated financial statements for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2016. PLAN CATEGORY Equity compensation plans approved by security holders(1) Equity compensation plans not approved by security holders Total NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (A) WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (B) NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES IN COLUMN (A)) (C) 23,807,545 — 23,807,545 $5.29 — $5.29 17,733,007(2) — 17,733,007 (1) Consists of the 2015 Stock Plan, Amended and Restated 2005 Stock Incentive Plan (the “2005 Stock Plan”), and ESPP. The 2005 Stock Plan terminated pursuant to its terms on February 23, 2015 and no further awards will be made pursuant to that plan. (2) Does not include the shares proposed to be made available under the Amended 2015 Stock Plan (as defined in Proposal No. 2) and under the Amended ESPP (as defined in Proposal No. 3). 32 NOVAVAX, INC OVERVIEW OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS Employment Agreements On December 31, 2015, the Company had employment agreements in place with each of our NEOs. Each employment agree- ment provides for a base salary subject to review each year, an incentive bonus, and equity awards. Salary information and the target amount of the incentive bonus are described in greater detail on pages 22 through 29 in the CD&A. The amount of any incentive bonus and the form of payment (cash, shares of restricted stock, or some combination of the two) are at the discretion of the Board. The employment agreements also provide that additional equity may be awarded to the NEO based upon his or her perfor- mance and subject to the Board’s approval, for the reimbursement of reasonable expenses incurred by him or her in connec- tion with the performance of his or her duties, and for the NEO to participate in the Company’s Severance Plan (discussed below). Each NEO must devote his or her full business time to the performance of services to the Company. The employment agreements require each NEO to maintain the confidentiality of the Company’s proprietary information and provide that all work product discovered or developed by him or her in the course of his or her employment belongs to the Company. In addition, in the employment agreements, the NEOs have agreed not to compete with the Company, directly or indirectly, within the United States or interfere with or solicit the Company’s contractual relationships, in each case during the term of his or her employment and for the duration of the severance period described for the NEO following the termination of his or her employment. If an NEO is terminated without “cause” or leaves the Company for “good reason” (as such terms are defined in each employ- ment agreement), the NEO may receive a lump sum separation payment. The amount of these payments is more specifically described in the section “Potential Payments Upon Termination” beginning on page 36. To be entitled to such a payment, the NEO must execute and deliver to the Company a waiver and separation agreement, releasing the Company from any claims. Amended and Restated Change in Control Severance Benefit Plan In August 2005, the Board adopted a Change in Control Severance Benefit Plan, which has since been amended in July 2006 and December 2008 (the “Severance Plan”). The purpose of the Severance Plan is to provide severance pay and benefits to a select group of employees whose employment with the Company may be terminated following a change in control event, to provide such employees with an incentive to remain with the Company and help the Company consummate a strategic corporate sale or transaction that maximizes stockholder value. Participants in the Severance Plan are recommended by the CEO and approved by the Board. Selected participants with existing severance agreements will be deemed to elect coverage under the Severance Plan and are not eligible for any severance benefits under other agreements unless expressly provided otherwise by the Board. Each of the NEOs participates in the Severance Plan. The Severance Plan provides for the payment of benefits upon certain triggering events. A triggering event occurs if a partici- pant’s employment is terminated due to an “Involuntary Termination without Cause” for a reason other than death or disability or as a result of a “Constructive Termination” either (i) within a certain period (not to exceed 24 months) after the effective date of a “Change in Control” or (ii) before the Change in Control but after the first day on which the Board and/or senior manage- ment of the Company has entered into formal negotiations with a potential acquirer that results in the consummation of the Change in Control. The specific periods of time following the effective date of a Change in Control during which payment of benefits under the Severance Plan may be triggered by termination are as follows: EXECUTIVE Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino PROTECTED PERIOD 24 months 12 months 12 months 12 months 12 months 33 2015 Proxy If a triggering event occurs, the participant is entitled to a lump sum severance payment, a bonus equal to 100% of the target annual performance bonus for the year in which the termination date occurred multiplied by the length in years of the partici- pant’s severance benefit period and continuation of medical, dental, and vision benefits for the same number of months as the severance period, with the exception of Mr. Erck, whose benefits continue for 18 months. EXECUTIVE Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino SEVERANCE PAYMENT CONTINUATION OF BENEFITS PERIOD 24 months salary 12 months salary 12 months salary 12 months salary 12 months salary 18 months 12 months 12 months 12 months 12 months Under the Severance Plan, all current unvested awards become vested and exercisable in full only upon a termination of employment following a Change in Control (a double trigger acceleration). The Severance Plan provides that all vested and exercisable options may be exercised within one year from the participant’s termination date, provided, however, that no exer- cise may occur later than the expiration date of the option as set forth in the applicable option agreement. As used herein, the below terms shall have the following meanings: TERM DEFINITION INVOLUNTARY TERMINATION WITHOUT CAUSE CAUSE The termination of an eligible employee’s employment which is initiated by the Company for a reason other than Cause. • Conviction of, a guilty plea with respect to, or a plea of nolo contendere to a charge that the eligible employee has committed a felony under the laws of the United States or of any state or a crime involving moral turpitude, including, but not limited to, fraud, theft, embezzlement, or any crime that results in or is intended to result in personal enrichment at the expense of the Company; • Material breach of any agreement entered into between the eligible employee and the Company that impairs the Company’s interest therein; • Willful misconduct, significant failure to perform the eligible employee’s duties, or gross neglect by the eligible employee of the eligible employee’s duties; or • Engagement in any activity that constitutes a material conflict of interest with the Company. 34 NOVAVAX, INC TERM DEFINITION CONSTRUCTIVE TERMINATION A termination initiated by an eligible employee because any of the following events or conditions has occurred: • a change in the employee’s position or responsibilities (including reporting responsibilities) which rep- resents an adverse change from the employee’s position or responsibilities as in effect immediately pre- ceding the effective date of a Change in Control or at any time thereafter; the assignment to the employee of any duties or responsibilities which are inconsistent with the employee’s position or responsibilities as in effect immediately preceding the effective date of a Change in Control or at any time thereafter; except in connection with the termination of the employee’s employment for Cause or the termination of an employee’s employment because of an employee’s disability or death, or except resulting from a voluntary termination by the employee other than as a result of a Constructive Termination; • a reduction in the employee’s pay or any failure to pay the employee any compensation or benefits to which the employee is entitled within five (5) days of the date due; • the Company’s requiring the employee to relocate his principal worksite to any place outside a fifty (50) mile radius of the employee’s current worksite, except for reasonably required travel on the business of the Company or its affiliates which is not materially greater than such travel requirements prior to the Change in Control; • the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or employee benefit plan in which the employee was partici- pating immediately preceding the effective date of a Change in Control or at any time thereafter, unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the employee, or (B) provide the employee with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under the employee benefit plans, programs, and practices in which the employee was participating immediately preceding the date of a Change in Control or at any time thereafter; • the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; • any material breach by the Company of any provision of the Severance Plan; or • the failure of the Company to obtain an agreement, satisfactory to the employee, from any successors and assigns to assume and agree to perform the obligations created under the Severance Plan as a result of a Change in Control. CHANGE IN CONTROL • A sale, lease, license, or other disposition of all or substantially all of the assets of the Company; • 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 the stockholders of the Company immediately prior to such consolidation, merger, or reorganization, own less than fifty percent (50%) of the outstanding voting power of the surviving entity and its parent following the consolidation, merger, or reorganization; • Any transaction or series of related transactions involving a person or entity, or a group of affiliated per- sons or entities (but excluding any employee benefit plan or related trust sponsored or maintained by the Company or an affiliate) in which such persons or entities that were not stockholders of the Company immediately prior to their acquisition of the Company securities as part of such transaction become the owners, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation, or similar transaction and other than as part of a private financing transaction by the Company; or • A change in the Incumbent Board, which occurs if the existing members of the Board on the date the Severance Plan was initially adopted by the Board (the “Incumbent Board”) cease to constitute at least a majority of the members of the Board, provided, however, that any new Board member shall be considered a member of the Incumbent Board for this purpose if the appointment or election (or nomination for such election) of the new Board member is approved or recommended by a majority vote of the members of the Incumbent Board who are then still in office. 35 2015 Proxy Regular Termination Benefits In addition to the benefits described above, the NEOs are also entitled to certain payments and benefits upon termination of employment that are provided on a non-discriminatory basis to salaried employees generally upon termination of employ- ment. These include accrued salary and accrued, but unused vacation pay, and availability for distribution of plan balances under the Company’s 401(k) plan. POTENTIAL PAYMENTS UPON TERMINATION Termination Other Than for Cause On December 31, 2015, the Company had employment agreements with Dr. Glenn and Messrs. Erck, Phillips, Herrmann, and Trizzino, which provided for a lump sum cash severance payment if the executive is terminated without “cause” or leaves for “good reason.” All vested and exercisable stock options held by Dr. Glenn and Messrs. Phillips, Herrmann, and Trizzino must be exercised within three months following the termination date. Mr. Erck is entitled to the accelerated vesting of 50% of the unvested portion of each stock option or restricted stock grant made by the Company and may exercise all outstanding vested stock options held at termination (including any accelerated options or grants) during the twelve (12) month period following the date of termination. If such termination had occurred on December 31, 2015, the Company would have made the following payments: EXECUTIVE Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino SEVERANCE PAYMENT ($) 900,000 355,000 415,000 320,000 340,000 Termination for Cause In the event an NEO is terminated for cause, the Company has no further obligation to the executive other than the obligation to pay any unpaid base salary and unused vacation accrued through the termination date. Cause means (i) the executive’s willful failure or refusal to perform in all material respects the services required to be per- formed by him; (ii) the executive’s willful failure or refusal to carry out any proper and material direction by the President and Chief Executive Officer or Board (or, with respect to Mr. Erck’s agreement, the Board, and with respect to Mr. Herrmann’s agreement, the CMO, the CEO or the Board) with respect to the services to be rendered by him or the manner of rendering such services; (iii) the executive’s willful misconduct or gross negligence in the performance of his duties (or, with respect to Mr. Herrmann’s and Mr. Trizzino’s agreements, the executive’s misconduct in the performance of his duties); (iv) the executive’s commission of an act of fraud, embezzlement, or theft or felony involving moral turpitude; (v) the executive’s use of confidential information, other than for the benefit of the Company in the course of rendering services to the Company; or (vi) a breach of the executive’s non-competition obligations. Termination as a Result of Death or Disability In the event an NEO is terminated as a result of death or disability, the Company has no further obligation to the executive other than the obligation to pay any unpaid base salary and unused vacation accrued through the termination date. If the executive dies while in the employ of the Company (or within three months after the date on which the executive ceases to be an employee), vested and exercisable options may be exercised by the executive’s estate for one year following the executive’s death. If the executive becomes disabled while in the employ of the Company, vested and exercisable options may be exercised by the executive for a period of one year after the executive ceases to be an employee due to a disability. 36 NOVAVAX, INC Termination in Connection with a Change in Control Each of the NEOs participates in the Severance Plan. The following table sets forth the payments the Company would have made if eligible NEOs had been terminated in connection with a Change in Control that occurred on December 31, 2015 in accordance with the Severance Plan: NAME Stanley C. Erck Barclay A. Phillips Gregory M. Glenn, M.D. John A. Herrmann III John J. Trizzino BENEFIT Severance Payment Bonus(1) Equity Awards(2) Health Insurance Benefits(3) Total Severance Payment Bonus(1) Equity Awards(2) Health Insurance Benefits(3) Total Severance Payment Bonus(1) Equity Awards(2) Health Insurance Benefits(3) Total Severance Payment Bonus(1) Equity Awards(2) Health Insurance Benefits(3) Total Severance Payment Bonus(1) Equity Awards(2) Health Insurance Benefits(3) Total AMOUNT ($) 1,200,000 720,000 6,131,250 34,487 8,085,737 355,000 124,250 1,217,250 22,991 1,719,491 415,000 145,520 1,065,750 22,991 1,649,261 320,000 112,000 1,165,875 18,191 1,616,066 340,000 119,000 569,250 22,991 1,051,241 (1) Bonus equals 100% of the NEO’s target annual bonus award multiplied by the participant’s severance benefit period. (2) Represents the value of all unvested equity awards at the closing price on December 31, 2015, minus any applicable exercise price. (3) Reflects the premiums for health, dental, and vision coverage under the Company’s group health insurance program. Amounts are based on the premiums in effect at December 31, 2015. 37 2015 Proxy COMPENSATION COMMITTEE REPORT The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. COMPENSATION COMMITTEE James F. Young, Chair Gail K. Boudreaux Richard H. Douglas, Ph.D. Michael A. McManus, Jr., J.D. This Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934 except to the extent that Novavax specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act of 1933 and the Securities Exchange Act of 1934 and shall not be deemed soliciting material. AUDIT COMMITTEE REPORT The Audit Committee has reviewed and discussed the Company’s audited financial statements with management. The Audit Committee has discussed with Ernst & Young LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by PCAOB AU Section 380, “Communication with Audit Committees” (as currently in effect), which includes, among other items, matters related to the conduct of the audit of the Company’s financial statements. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examinations, its evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting. The Audit Committee has also received the written disclosures and the letter from Ernst & Young LLP required by the Public Company Accounting Oversight Board independence and ethics rule, Rule 3526, “Communication with Audit Committees Concerning Independence,” relating to the firm’s independence from the Company and its related entities, discussed with Ernst & Young LLP its independence from the Company and considered the compatibility of the firm’s provision of non-audit services with maintaining its independence. Based on the review and discussions referred to above, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for filing with the Securities and Exchange Commission. AUDIT COMMITTEE Michael A. McManus, Jr., J.D., Chair Richard H. Douglas, Ph.D. Gary C. Evans This Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by refer- ence this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934 except to the extent that Novavax specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act of 1933 and the Securities Exchange Act of 1934 and shall not be deemed soliciting material. 38 NOVAVAX, INC SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of April 13, 2016, unless otherwise indicated, with respect to the beneficial ownership of our Common Stock by (i) each person (including any group) known to the Company to beneficially own more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company or nominee for director, (iii) each of the NEOs of the Company as identified in the “Summary Compensation Table,” and (iv) all directors and NEOs of the Company as a group. SHARES OF COMMON STOCK BENEFICIALLY OWNED(2) PERCENTAGE OF CLASS OUTSTANDING(3) NAME OF BENEFICIAL OWNER(1) FMR LLC(4) T. Rowe Price Associates, Inc.(5) The Vanguard Group, Inc.(6) BlackRock, Inc.(7) First Trust Advisors L.P.(8) Directors, Nominees, and Executive Officers Gail K. Boudreaux(9) Richard H. Douglas, Ph.D.(10) Gary C. Evans(11) Michael A. McManus, Jr., J.D.(12) Rajiv I. Modi, Ph.D.(13) James F. Young, Ph.D.(14) Stanley C. Erck(15) Barclay A. Phillips(16) Gregory M. Glenn, M.D.(17) John A. Herrmann III(18) John J. Trizzino(19) 40,445,649 22,738,991 18,017,812 17,973,364 13,525,640 140,000 420,000 645,977 307,590 2,500,000 940,000 2,948,279 284,557 764,541 509,612 239,564 14.9 8.4 6.7 6.6 5.0 * * * * * * 1.1 * * * * 3.5 All directors and executive officers as a group (11 persons)(20) 9,700,120 Less than 1%. * (1) Each beneficial owner named in the table above (except as otherwise indicated in the footnotes below) has an address in c/o Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878. (2) Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares of the Company’s Common Stock. Unless otherwise indicated, each beneficial owner named in the table has sole voting and investment power over the shares beneficially owned. With respect to each person or group, percentages are calculated based on the number of shares of Common Stock beneficially owned, including shares that may be acquired by such person or group within 60 days of April 13, 2016 upon the exercise of stock options, warrants, or other purchase rights, but not the exercise of options, warrants, or other purchase rights held by any other person. (3) Percentages have been calculated based on 270,778,671 shares of the Company’s Common Stock outstanding as of April 13, 2016. (4) As reported by FMR LLC on Schedule 13G/A as filed on February 12, 2016. FMR LLC is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G). Beneficial ownership (and other information in this footnote) is as of December 31, 2015. FMR LLC has the sole voting power with respect to 291,987 shares of Common Stock. Edward C. Johnson 3d (Chairman of FMR LLC), Abigail P. Johnson (Vice Chairman of FMR LLC) and FMR LLC, through its wholly-owned subsidiaries and registered investment advisers, FMR Co., Inc. and Strategic Advisors, Inc., are the beneficial owners of 40,445,649 shares of Common Stock. Neither FMR LLC nor Edward C. Johnson 3d nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the investment companies (the “Funds”) registered under the Investment Company Act of 1940, which power resides with the Funds’ Boards of Trustees. FMR Co., Inc. carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. Select Biotechnology Portfolio has sole voting power and beneficial ownership over 16,470,821 shares of Common Stock. The principal office address of FMR LLC is 245 Summer Street, Boston, MA 02210. (5) As reported by T. Rowe Price Associates, Inc. (“Price Associates”) on Schedule 13G/A as filed on February 16, 2016. Price Associates is an investment adviser registered under the Investment Advisers Act of 1940. Beneficial ownership (and other information in this footnote) is as of December 31, 2015. Price Associates beneficially owns 22,738,991 shares of Common Stock, for which it has sole voting power with respect to 2,928,959 shares of Common Stock and sole dispositive power with respect to 22,738,991 shares of Common Stock. The principle office address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202. (6) As reported by The Vanguard Group (“Vanguard”), Vanguard Fiduciary Trust Company, and Vanguard Investments Australia, Ltd. on Schedule 13G as filed on February 11, 2016. Beneficial ownership (and other information in this footnote) is as of December 31, 2015. Vanguard beneficially owns 18,017,812 shares of Common Stock, for which it has sole voting power with respect to 590,707 shares of Common Stock and sole dispositive power with respect to 17,428,305 shares of Common Stock. The principal business address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. 39 2015 Proxy (7) As reported by BlackRock, Inc. (“BlackRock”) on Schedule 13G/A as filed on January 27, 2016. BlackRock is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G). Beneficial ownership (and other information in this footnote) is as of December 31, 2015. BlackRock beneficially owns 17,973,364 shares of Common Stock, for which it has sole voting power with respect to 17,358,768 shares of Common Stock and sole dispositive power with respect to 17,973,364 shares of Common Stock. The principle office address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. (8) As reported by First Trust Portfolios, L.P. (“First Trust”), First Trust Advisors, L.P., and The Charger Corporation on Schedule 13G as filed on February 5, 2016. Beneficial ownership (and other information in this footnote) is as of December 31, 2015. First Trust beneficially owns 13,525,640 shares of Common Stock, for which it has sole voting power with respect to 0 shares of Common Stock and sole dispositive power with respect to 0 shares of Common Stock. The principal business address of First Trust is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. (9) Includes 40,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (10) Includes 170,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (11) Includes 255,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. Also includes 4,000 shares owned of record by Gary Evans Custodian for Dustin Evans UTMA/TX and 4,000 shares owned by record by Gary Evans Custodian for Casey Evans UTMA/TX. (12) Includes 90,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (13) Consists of 2,500,000 shares owned by Satellite Overseas (Holdings) Limited, a wholly-owned subsidiary of Cadila Pharmaceuticals Ltd. Dr. Modi is a managing director of Cadila Pharmaceuticals Ltd. (14) Includes 565,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (15) Includes 2,870,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (16) Includes 275,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (17) Includes 762,114 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (18) Includes 507,500 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (19) Includes 200,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. (20) Includes 5,734,614 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 13, 2016. 40 NOVAVAX, INC Proposal No. 2 AMENDMENT OF 2015 STOCK PLAN At the Annual Meeting, stockholders will be asked to approve the adoption of the 2015 Stock Incentive Plan as amended and restated, adopted by our Board on March 15, 2016 (the “Amended 2015 Stock Plan”). The 2015 Stock Plan was originally adopted by our Board on March 5, 2015 and approved by Novavax stockholders on June 18, 2015. The number of shares orig- inally authorized for issuance under the 2015 Stock Plan was 25,000,000 shares of Common Stock, which included 4,620,369 shares of Common Stock that were available for issuance under our 2005 Stock Plan immediately prior to its expiration on February 23, 2015. As discussed further below, stockholders are being asked to approve the Amended 2015 Stock Plan to enable us to increase the number of shares of our Common Stock available for issuance pursuant to awards under the plan by 6,000,000 shares. The Amended 2015 Stock Plan also amends the 2015 Stock Plan by including a minimum vesting requirement applicable to certain full value awards and limiting the Compensation Committee’s discretion to accelerate the vesting of awards, other than in connection with a change in control or the death or disability of a participant, all as further described below. Equity grants are an essential element of the Company’s compensation program. Stockholder approval of the Amended 2015 Stock Plan would allow us to continue to attract and retain high quality and high performing directors, executives, and other employees with equity incentives. The Board approved the Amended 2015 Stock Plan and the additional shares of Common Stock authorized for issuance under it based upon its review and consideration of: • the Company’s historic rates of equity award issuances; • the dilutive impact to stockholders; • equity plan guidelines established by certain institutional investors and proxy advisory firms; and • advice provided by LCG, the Compensation Committee’s independent consultant. The Board believes that it is in the best interest of the Company’s stockholders for the Company’s employees (including its officers), directors, and consultants to have an ownership interest in the Company and that granting equity awards to such per- sons motivates them to contribute to the Company’s success. Given the emphasis placed on equity awards in the Company’s compensation philosophy and due to an increase in the Company’s employee population in 2015 and, in general, a decline in the Company’s stock price, more shares of our Common Stock were granted as awards under the 2015 Stock Plan (prior to its amendment) in 2015 than previously anticipated. As a result, we do not believe that the remaining shares of Common Stock available for issuance under the 2015 Stock Plan are sufficient to continue implementing the Company’s stock incentive program over the next two years taking into account our historic burn rate (discussed below) and certain other factors, includ- ing the Company’s recent growth and anticipated need to attract new employees with appropriate levels of experience and talent. Accordingly, on March 15, 2016, our Board approved the Amended 2015 Stock Plan, subject to stockholder approval, to increase the number of shares of Common Stock reserved for issuance under the Amended 2015 Stock Plan by 6,000,000 shares and to increase the number of shares of Common Stock that may be issued under the Amended 2015 Stock Plan upon the exercise of incentive stock options by 6,000,000 shares. The Amended 2015 Stock Plan is being submitted to the Company’s stockholders for approval. The Board believes that the Amended 2015 Stock Plan continues to promote the interests of our stockholders and continues to be consistent with principles of good corporate governance including: • Independent Committee. The Amended 2015 Stock Plan will continue to be administered by the Compensation Committee and its authorized delegates. The Compensation Committee is composed entirely of independent directors who meet the NASDAQ Global Select Market (“NASDAQ”) standards for independence and who meet the definitions of “outside directors” for purposes of Section 162(m) and “non-employee directors” under Rule 16b-3(b)(3) of the Exchange Act. • Stockholder Approval is Required for Additional Shares. The Amended 2015 Stock Plan does not contain an annual “ever- green” provision. The Amended 2015 Stock Plan authorizes a fixed number of shares and, as a result, stockholder approval is required to issue any additional shares under awards under the plan. This gives our stockholders the opportunity to provide direct input on our equity compensation programs. 41 2015 Proxy • Limits on Awards. The Amended 2015 Stock Plan limits the number of shares of Common Stock that may be awarded through stock options, stock appreciation rights (“SARs”), and other awards that may be granted to any person in any calen- dar year and contains a separate limit that applies to awards granted to our non-employee directors. • No Discounted Stock Options or SARs. All stock options and SARs under the Amended 2015 Stock Plan must have an exercise price or base value that is not less than the fair market value of a share of Common Stock on the date of grant. • Performance Awards. Under the Amended 2015 Stock Plan, the Compensation Committee may grant performance-based awards, including awards that are intended to satisfy the requirements of the exception for qualified performance-based compensation under Section 162(m). • No Repricing. Other than in connection with a corporate transaction affecting the Company, the Amended 2015 Stock Plan pro- hibits any repricing of stock options or SARs without obtaining stockholder approval in accordance with NASDAQ requirements. • Awards Subject to Recoupment. Awards under the Amended 2015 Stock Plan are subject to recoupment in accordance with any applicable Company clawback or recoupment policy that may be adopted by the Board or as otherwise required by law or applicable listing standards. • No Liberal Share Recycling. Shares retained or withheld by or delivered to the Company to satisfy the purchase or exercise price of (or withholding taxes applicable to) an award and the total number of shares subject to a SAR any portion of which is settled in shares reduce the number of shares available for issuance under the Amended 2015 Stock Plan. In addition, the number of shares available for delivery under the Amended 2015 Stock Plan will not be increased by any shares that have been delivered under the Amended 2015 Stock Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises. In addition, the Amended 2015 Stock Plan amends the 2015 Stock Plan by including two new provisions that further promote the interests of our stockholders and are consistent with principles of good corporate governance: • Minimum Vesting Provisions. The Amended 2015 Stock Plan requires a minimum vesting period of at least one year for restricted stock, restricted stock units, and other full-value awards granted under the plan, subject to a carve-out for awards not exceeding five percent of the total shares of our Common Stock reserved for issuance under the plan. • Limited Discretion to Accelerate Vesting. Under the Amended 2015 Stock Plan, the Compensation Committee does not have the discretion to accelerate the vesting of awards, except in connection with a change in control or the death or disabil- ity of a participant. Existing Equity Plan Information Since its adoption in 2015, we have granted equity awards exclusively under our 2015 Stock Plan. In fiscal 2015, the Company granted stock options covering a total of 8,525,441 shares and restricted stock covering a total of 25,000 shares. Our fiscal year 2015 burn rate was determined to be 3.3%. As of March 15, 2016, our 2015 Stock Plan had 6,995,248 shares of Common Stock available for grant as equity awards. If the Amended 2015 Stock Plan is approved, the total number of shares of Common Stock that will be available for future awards under the Amended 2015 Stock Plan will be 12,995,248, which is the sum of 6,000,000 shares plus the number of shares cur- rently available under the 2015 Stock Plan. If the stockholders do not approve the Amended 2015 Stock Plan, the Amended 2015 Stock Plan will not become effective and additional awards will only be granted from the shares currently available under the 2015 Stock Plan. 42 NOVAVAX, INC Potential Dilution The following table provides information regarding the number of shares subject to each type of outstanding award under the 2015 Stock Plan and the 2005 Stock Plan, the number of shares of our Common Stock available for future awards under the 2015 Stock Plan, the number of additional shares that would be available for future awards under the Amended 2015 Stock Plan, if approved by stockholders, and the dilutive impact of each to our stockholders as of March 15, 2016. NUMBER OF SHARES AS A PERCENTAGE OF STOCK OUTSTANDING ON A FULLY DILUTED BASIS Outstanding stock options Outstanding restricted stock Total shares subject to outstanding awards under the 2015 Stock Plan and the 2005 Stock Plan Total shares available for future awards under the 2015 Stock Plan Proposed additional shares available for future awards under the Amended 2015 Stock Plan Total potential dilution 33,202,269 45,000 33,247,269 6,995,248 6,000,000 46,242,517 10.9% 0.0% 11.0% 2.3% 1.9% 14.6% As indicated by the numbers in the table above, as of March 15, 2016, the date our Board adopted the Amended 2015 Stock Plan, the potential dilution under our 2015 Stock Plan and 2005 Stock Plan was 13.0%. If the Amended 2015 Stock Plan is approved by our stockholders, our potential dilution will be 14.6%. Reasons for Seeking Stockholder Approval Our Board believes that the ability to grant equity compensation has been, and will continue to be, essential to the Company’s ability to attract and retain the highest quality and highest performing employees and directors. Our Board also believes that equity compensation motivates our employees, including our executive officers, and our directors to contribute to the achieve- ment of our corporate objectives and encourages the alignment of their interests with the interests of our stockholders. After a review of its routine historical practice and an estimation of the Company’s future growth, the Company believes that the availability of 6,000,000 additional shares of Common Stock under the Amended 2015 Stock Plan would provide a sufficient number of shares to enable the Company to continue to make awards at historical average annual rates for the next two years. The Compensation Committee determined that reserving shares sufficient for approximately two years of new awards at his- torical grant rates is in line with the practice of our peer public companies. In addition, approval of the Amended 2015 Stock Plan by our stockholders would preserve our ability to grant stock options, stock appreciation rights, and performance-based stock awards that may qualify as “qualified performance-based compensa- tion” within the meaning of Section 162(m) for five years. Section 162(m) disallows a deduction to any publicly held corporation and its affiliates for certain compensation paid to “covered employees” in a taxable year to the extent that compensation to a covered employee exceeds $1 million. However, compensation that satisfies the requirements of an exception for “qualified performance-based compensation” is not subject to this deduction limitation. For compensation awarded under a plan to fit within this exception under Section 162(m), among other things, the following terms must be disclosed to and approved by the stockholders before the compensation is paid: (i) a description of the employees eligible to receive such awards; (ii) a per-person limit on the number of shares subject to stock options, stock appreciation rights and performance-based stock awards that may be granted to any employee under the plan in any year; and (iii) a description of the business criteria under- lying the performance goals on the basis of which performance-based awards may be granted (or become vested or exer- cisable). Although stockholder approval is one of the requirements of the exception to the deductibility limits under Section 162(m), even with stockholder approval, the Board and Compensation Committee cannot guarantee that awards under the Amended 2015 Stock Plan will be deductible as qualified performance-based compensation under Section 162(m). In addition, the Compensation Committee has and will continue to have authority to pay or provide compensation (including under the Amended 2015 Stock Plan) that is not deductible under Section 162(m) in order to maintain a competitive compensation pro- gram and provide compensation that will attract and retain highly qualified executives. 43 2015 Proxy Summary of the Amended 2015 Stock Plan The following summary describes the material terms of the Amended 2015 Stock Plan. This summary of the Amended 2015 Stock Plan is not a complete description of all provisions of the Amended 2015 Stock Plan and is qualified in its entirety by reference to the Amended 2015 Stock Plan, which is filed as Appendix A to this Proxy Statement. Purpose; Term. The purpose of the Amended 2015 Stock Plan is to secure for the Company and its stockholders the bene- fits arising from capital stock ownership by employees, officers, and directors of, as well as consultants and advisors to, the Company, its parents and its subsidiaries. Unless sooner terminated in accordance with its terms, the Amended 2015 Stock Plan will terminate upon the close of business on March 14, 2026. Administration. The Amended 2015 Stock Plan is administered by the Compensation Committee and its authorized delegates. Subject to the terms of the Amended 2015 Stock Plan, the Compensation Committee has the authority to determine the indi- viduals to whom, and the time or times at which, awards are made, the number of shares of Common Stock subject to each award, and the terms of all awards and all award agreements; to construe the plan and the award agreements under the plan; to prescribe the forms, rules and procedures relating to the plan; to determine the form of settlement of awards (whether in cash, shares of Common Stock, or other property); and to make all other determinations and take all other actions that are, in the Compensation Committee’s judgment, necessary or desirable for the administration of the Amended 2015 Stock Plan. Notwithstanding the foregoing, except in connection with a change in control of the Company or the death or disability of a participant after the time an award has been granted, the Compensation Committee may not accelerate the time or times at which an award vests or becomes exercisable. The Compensation Committee’s construction and interpretation of the terms and provisions of the Amended 2015 Stock Plan and any award agreement are final and conclusive. Shares Reserved. Subject to adjustment as described below, the number of shares of Common Stock that are reserved for issuance under the Amended 2015 Stock Plan is 31,000,000 shares (which includes 25,000,000 shares that were approved by stockholders at the Annual Meeting of Stockholders in 2015). Shares of Common Stock underlying any award made under the Amended 2015 Stock Plan to the extent the award expires, terminates or is forfeited, in whole or in part, without the issuance of shares become available for issuance again under the Amended 2015 Stock Plan. Shares of Common Stock that are retained or withheld by or delivered to the Company to satisfy any purchase or exercise price or tax withholding obligation, and the total number of shares of Common Stock subject to a SAR, any portion of which is settled in shares of Common Stock, are treated as issued under the Amended 2015 Stock Plan. The shares available for issuance under the Amended 2015 Stock Plan are not increased by any shares that have been delivered under the Amended 2015 Stock Plan that are subsequently repurchased using the proceeds directly attributable to stock option exercises. Maximum Number of Shares Available under ISOs. The maximum aggregate number of shares that may be issued under the Amended 2015 Stock Plan upon the exercise of ISOs is 31,000,000. Individual Limits. The maximum number of shares of Common Stock subject to stock options and the maximum number of shares of Common Stock subject to SARs that may be granted to any person in any calendar year is, in each case, 2,000,000 shares. The maximum number of shares subject to other awards that may be granted to any person in any calendar year is 1,000,000 shares. Non-Employee Director Limits. A participant in the Amended 2015 Stock Plan who is a non-employee member of our Board may not receive shares of Common Stock underlying awards under the Amended 2015 Stock Plan in any calendar year in excess of 750,000 shares. This limit does not apply to any award or shares of Common Stock granted pursuant to a director’s election to receive shares of Common Stock in lieu of cash fees. Eligible Participants. The Compensation Committee may select recipients of awards from among key employees, officers, or directors of, or consultants or advisors to the Company and its parents and subsidiaries who are expected to contribute to the Company’s future growth and success. Eligibility for stock options intended to be “incentive stock options” within the meaning of Section 422 of the Code is limited to employees of the Company or its parents and subsidiaries, in accordance with Section 422 of the Code. As of March 15, 2016, 458 employees, one consultant, and five directors are eligible to participate in the Amended 2015 Stock Plan. Awards. The Amended 2015 Stock Plan provides for grants of stock options, restricted stock, unrestricted stock, SARs, stock units, restricted stock units, and performance awards. Dividend equivalents may also be provided in connection with awards under the Amended 2015 Stock Plan. 44 NOVAVAX, INC • Restricted and Unrestricted Stock. A restricted stock award is an award of stock subject to forfeiture restrictions, while an unrestricted stock award is not subject to restrictions. • Stock Options and SARs. The Amended 2015 Stock Plan provides for the grant of incentive stock options, non-statutory stock options and SARs. Stock options entitle the holder to acquire shares of Common Stock upon payment of the exercise price. A SAR is a right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Common Stock of equivalent value) equal to the excess of the fair market value of the shares of Common Stock subject to the SAR over the base value from which appreciation under the SAR is to be measured. The exercise price of a stock option, and the base value against which a SAR is to be measured, may not be less than the fair market value (or, in the case of an incentive stock option granted to a ten percent stockholder, 110% of the fair market value) of a share of Common Stock on the date of grant. The Compensation Committee will determine when stock options or SARs become exercisable and the terms on which such awards remain exercisable. Stock options and SARs will generally have a maximum term of ten years (or, in the case of an incentive stock option granted to a ten percent stockholder, five years); however, in general, if (i) a participant holds an out- standing but unexercised stock option or SAR on the date that is ten years from the date of grant (or, in the case of a stock option or SAR with a maximum term of less than ten years, the last day of such maximum term) and has not exercised such stock option or SAR as of the regular closing time of the exchange on which shares of our Common Stock are traded on the last day of the applicable term of the stock option or SAR, (ii) on such date shares of our Common Stock is publicly traded, and (iii) at such time the fair market value of a share of our Common Stock is greater than the exercise price or base value applicable to such stock option or SAR, such stock option or SAR to the extent then vested and exercisable will be automat- ically exercised on the last day of the applicable term and the number of shares of Common Stock otherwise to be delivered upon exercise of the stock option or SAR will be reduced by, in the case of a stock option, a number of shares having a fair market value equal to the aggregate exercise price of the stock option being exercised and, in the case of a stock option or SAR, a number of shares having a fair market value equal to the amount necessary to satisfy any applicable tax withholding obligation (but not in excess of the minimum tax withholding required by law). • Stock Units. A stock unit award is denominated in shares of Common Stock and entitles the recipient to receive stock or cash measured by the value of the shares in the future. The delivery of Common Stock or cash under a stock unit may be subject to the satisfaction of performance or other vesting conditions. • Performance Awards. A performance award is an award of a stock option, SAR, restricted stock, or restricted stock unit the vesting, settlement or exercisability of which is subject to specified performance criteria. Vesting. The Compensation Committee will determine the time or times at which awards will vest or become exercisable. However, except as provided in the next sentence, no restricted stock, restricted stock unit, or other full-value award may vest prior to the first anniversary of the grant date, subject to the Compensation Committee’s discretion to accelerate the vesting of such an award upon a change in control of the Company or the death or disability of a participant. The foregoing minimum vesting period will not apply to grants of up to five percent of the number of shares of our Common Stock available for issuance under the Amended 2015 Stock Plan. Termination of Employment or Service. The Compensation Committee determines the effect of the termination of employ- ment or service on an award. Unless otherwise provided by the Compensation Committee, upon a termination of employment or service, all unvested stock options and SARs will terminate, all other unvested awards will be forfeited, and vested stock options and SARs then held by the participant will remain exercisable for a period of three months, or twelve months in the case of death or disability, following such termination of employment or, in each case, until the applicable expiration date, if earlier. All stock options and SARs held by a participant, whether vested or unvested, immediately prior to the participant’s termination of employment or service will terminate if such termination is for cause. Performance Criteria. The Amended 2015 Stock Plan provides that grants of performance awards may be made based upon and subject to achieving performance objectives over a specified performance period. Performance criteria for awards that are intended to qualify for the performance-based compensation exception under Section 162(m) are limited to an objectively determinable measure or measures of performance relating to any or any combination of the following (measured either abso- lutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divi- sional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenue; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization or equity expense, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital, capital employed or assets; one or more operating ratios; operating income or profit, including on an after-tax basis; net income; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of partic- ular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures, 45 2015 Proxy strategic alliances, licenses or collaborations; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; manufacturing or process development; or achievement of clinical trial or research objectives, regulatory or other filings or approvals or other product development milestones. A performance crite- rion and any targets with respect thereto determined by the Compensation Committee need not be based upon an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), the Compensation Committee may provide in the case of any award intended to qualify for such exception that one or more of the performance objectives applicable to the award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the performance period that affect the applicable perfor- mance objectives. Non-transferability of Awards. In general, awards under the Amended 2015 Stock Plan may not be transferred except by will or the laws of descent and distribution, unless, in the case of awards other than incentive stock options, expressly permitted in the agreement evidencing the award. Awards other than incentive stock options may be transferred pursuant to a domestic relations order (within the meaning of Rule 16a-12 of the Exchange Act). Recovery of Compensation. The Compensation Committee may cancel, rescind, withhold or otherwise limit or restrict any award at any time under the Amended 2015 Stock Plan if the participant is not in compliance with the provisions of the Amended 2015 Stock Plan or the award or if the participant breaches any agreement with the Company with respect to non-competition, non-solicitation or confidentiality. The Compensation Committee also may recover any award or payments or gain with respect to any award under the Amended 2015 Stock Plan in accordance with any applicable Company clawback or recoupment policy, as such policy may be in effect from time to time, or as otherwise required by applicable law or applicable stock exchange listing standards. Adjustment Provisions. If the outstanding shares of Common Stock are exchanged for a different number or kind of shares or other securities of the Company or increased or decreased as a result of any recapitalization, reclassification, stock dividend, stock split or reverse stock split, or 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 of Common Stock or other securities, an appropriate and propor- tionate adjustment will be made to (a) the maximum number and kind of shares reserved for issuance under the Amended 2015 Stock Plan, (b) the maximum number of shares that can be issued upon exercise of incentive stock options under the Amended 2015 Stock Plan, (c) the limitations on the number of shares of Common Stock that may be delivered through awards granted to any person in any calendar year and the limitations on awards granted to our non-employee directors, (d) the num- ber and kind of shares or other securities subject to any then outstanding awards under the Amended 2015 Stock Plan, and (e) the exercise or purchase prices (or base values) relating to awards and any other provision of awards affected by such change, without (in the case of stock options or SARs) changing the aggregate exercise price (or base values) for such awards. Change in Control. In the event of a corporate transaction (as defined in the Amended 2015 Stock Plan), the Compensation Committee may provide for any one or more of the following actions: the continuation, assumption or substitution of outstand- ing awards by the acquiring or succeeding corporation (or an affiliate thereof), the cash-out of outstanding awards, the acceler- ated vesting or delivery of shares under awards, or the termination of awards that are not exercised prior to the consummation of the transaction. Except as the Compensation Committee may otherwise provide in any case, all awards will terminate auto- matically or, in the case of restricted stock, will be forfeited automatically upon the consummation of a covered transaction other than awards that are assumed by the acquiring or succeeding corporation. In general, a corporate transaction under the Amended 2015 Stock Plan means a consolidation, merger, combination or reorganization of the Company, the sale, lease or other disposition of all or substantially all of the assets of the Company, a transaction or series of related transactions involving a person or entity, or a group of affiliated persons or entities in which such persons or entities become the owners, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction, or a dissolution or liquidation of the Company. The Compensation Committee may also provide for accelerated vesting or exercisability of awards upon the occurrence of a change in the incumbent board, which, in general, will be deemed to occur if the existing members of the Board on the date the Amended 2015 Stock Plan was adopted by the Board (or existing members of the Board on a later date whose appointment, election or nomination for election was endorsed by the incumbent board) cease to constitute at least a majority of the members of the Board. 46 NOVAVAX, INC Prohibition on Repricing. Except in connection with certain corporate transactions involving the Company, the Company may not, without obtaining stockholder approval, amend the terms of outstanding stock options or SARs to reduce the exercise price or base value of such awards, cancel outstanding stock options or SARs in exchange for stock options or SARs with an exercise price or base value that is less than the exercise price or base value applicable to the original award, or cancel outstanding stock options or SARs that have an exercise price or base value greater than the fair market value of a share of Common Stock on the date of such cancellation in exchange for cash or other consideration. Plan Amendments and Termination. The Board may at any time, and from time to time, modify or amend the Amended 2015 Stock Plan in any respect, except that any such modification or amendment will be subject to stockholder approval to the extent required by applicable tax or securities laws or stock exchange listing requirements, and no such modification or amendment may adversely affect the rights under an award previously granted to a participant without such participant’s consent. The Compensation Committee may amend outstanding award agreements only with the consent of the affected participant, except that the Administrator, without the consent of the affected participant, may amend or modify the terms and provisions of the Amended 2015 Stock Plan and of any outstanding incentive stock options granted under the Amended 2015 Stock Plan to the extent necessary to qualify any or all such stock options as incentive stock options or to the extent neces- sary to ensure the qualification of the Amended 2015 Stock Plan under Rule 16b-3 (if then applicable) or compliance with, or exemption from, Section 409A of the Code. The Board may at any time suspend or terminate the Amended 2015 Stock Plan except that any such suspension or termina- tion may not adversely affect the rights under an award previously granted to a participant while the Amended 2015 Stock Plan is in effect without the consent of the affected participant. Federal Income Tax Consequences The following is a summary of some of the material federal income tax consequences associated with the grant and exercise of awards under the Amended 2015 Stock Plan under current federal tax laws and certain other tax considerations associated with awards under the Amended 2015 Stock Plan. The summary does not address tax rates or non-U.S., state, or local tax consequences, nor does it address employment-tax or other federal tax consequences except as noted. Restricted Stock. A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. An 83(b) election must be made not later than thirty (30) days after the transfer of the shares to the participant and must satisfy certain other requirements. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the Company. Fair market value for this purpose is determined without regard to the forfeiture restrictions. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions. For purposes of determining capital gain or loss on a sale of shares awarded under the Amended 2015 Stock Plan, the holding period in the shares begins when the participant realizes taxable income with respect to the transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount realized (if any) in connection with the forfeiture. Incentive Stock Options. In general, a participant realizes no taxable income upon the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may result in an alternative minimum tax liability to the participant. With some exceptions, a disposition of shares purchased under an incentive stock option within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and generally a deduction to the Company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized on the disposition is treated as a capital gain, for which the Company is not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of these one- and two-year holding periods, any gain or loss recognized upon a subsequent sale is treated as a long-term capital gain or loss, for which the Company is not entitled to a deduction. 47 2015 Proxy Non-statutory Stock Options. In general, a participant has no taxable income upon the grant of a non-statutory stock option but realizes income in connection with exercise of the option in an amount equal to the excess (at time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is generally available to the Company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss is treated as a capital gain or loss for which the Company is not entitled to a deduction. An incentive stock option that is exercised more than three months after termination of employment (other than termination by reason of death) is generally treated as a non-statutory stock option. Incentive stock options are also treated as non-statutory stock options to the extent they first become exercisable by an indi- vidual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000. SARs. The grant of a SAR does not itself result in taxable income, nor does taxable income result merely because a SAR becomes exercisable. In general, a participant who exercises a SAR for shares of stock or receives payment in cancellation of a SAR will have ordinary income equal to the amount of any cash and the fair market value of any stock received. A correspond- ing deduction is generally available to the Company. Restricted Stock Units. The grant of a restricted stock unit does not itself result in taxable income. Instead, the participant is taxed upon delivery of the underlying shares (and a corresponding deduction is generally available to the Company). If the shares delivered are restricted for tax purposes, the participant will be subject to the rules described above for restricted stock. Section 162(m). As described above under “Reasons for Seeking Stockholder Approval,” Section 162(m) generally disallows a deduction to a publicly held corporation and its affiliates for certain compensation paid to a “covered employee” in a tax- able year in excess of $1 million, unless the compensation satisfies the requirements of the “performance-based compensa- tion” exception under Section 162(m). Stock options, SARs and certain performance awards under the Amended 2015 Stock Plan are generally intended to satisfy the requirements of this exception. However, as discussed above, the Compensation Committee will have discretionary authority to grant awards under the Amended 2015 Stock Plan that do not satisfy the requirements of this exception. Certain Change in Control Payments. Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and payment of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments contingent on the change in control in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards, may be subject to an additional 20% federal tax and may be non-deductible to the Company. New Plan Benefits Awards under the Amended 2015 Stock Plan are subject to the discretion of the Compensation Committee and, therefore, are not determinable at this time. The Compensation Committee has full discretion to determine the shares subject to awards to be granted to participants under the Amended 2015 Stock Plan, subject to the limits described above under Summary of the Amended 2015 Stock Plan—Individual Limits and—Non-employee Director Limits. The table below reflects all awards that have been granted under the 2015 Stock Plan. On March 15, 2016, the closing price of a share of our Common Stock as reflected on the NASDAQ was $4.99. NAME AND POSITION Stanley C. Erck, President and CEO Barclay A. Phillips, SVP, Chief Financial Officer and Treasurer Gregory M. Glenn, M.D., President, Research and Development John A. Herrmann III, SVP, General Counsel and Corporate Secretary John J. Trizzino, SVP, Commercial Operations Executive Officer Group Non-Executive Director Group Non-Executive Officer Employee Group NUMBER OF UNITS 900,000 200,000 300,000 200,000 200,000 1,800,000 260,000 6,397,941 48 NOVAVAX, INC Supplemental Equity Compensation Plan Information The following table provides supplemental information on the Company’s equity compensation plans as of March 15, 2016 in addition to the required information presented under “Equity Compensation Plan Information” included elsewhere in this Proxy Statement. Under the plans included in the table below, the Company’s Common Stock may be issued upon the exer- cise of options. NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (A) WEIGHTED- AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (B) WEIGHTED- AVERAGE REMAINING TERM OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (C) NUMBER OF RESTRICTED STOCK AWARDS OUTSTANDING (D) NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES IN COLUMN (A)) (E) PLAN CATEGORY Equity compensation plans approved by security holders(1) 33,202,269 $5.20 Equity compensation plans not approved by security holders(3) Total — 33,202,269 — $5.20 8.3 — 8.3 45,000 7,817,094(2) — 45,000 — 7,817,094 (1) Consists of the 2015 Stock Plan, the 2005 Stock Plan, and the ESPP. The 2005 Stock Plan terminated pursuant to its terms on February 23, 2015 and no further awards will be made pursuant to that plan. (2) Reflects shares of our Common Stock available under the 2015 Stock Plan and under the ESPP. (3) Excludes the Amended 2015 Stock Plan, which is subject to stockholder approval in accordance with this Proposal No. 2, and the Amended ESPP, which is subject to stockholder approval in accordance with Proposal No. 3. Required Vote Approval of the Amended 2015 Stock Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and voting on the matter. Abstentions and broker non-votes will not be counted as shares voting on this matter and accordingly will have no effect on the approval of this Proposal No. 2. FOR PROPOSAL NO. 2, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE AMENDED 2015 STOCK PLAN, INCLUDING AN AMENDMENT TO INCREASE THE NUMBER OF SHARES BY 6,000,000 UNDER THE AMENDED 2015 STOCK PLAN. 49 2015 Proxy Proposal No. 3 AMENDMENT OF ESPP At the Annual Meeting, stockholders will be asked to approve the ESPP, as amended and restated, adopted by our Board on March 15, 2016 (the “Amended ESPP”). The ESPP was originally adopted by our Board on April 11, 2013 and approved by Novavax stockholders on June 13, 2013. The purpose of the Amended ESPP is to enable eligible employees of the Company and certain of its subsidiaries to use payroll deductions to purchase shares of our Common Stock and thereby enhance the sense of participation in the affairs of the Company. Our Board believes that providing eligible employees with the opportunity to acquire an ownership interest in the Company has been, and will continue to be, essential to the Company’s ability to attract and retain the highest quality and highest performing employees. Our Board also believes that the ownership of shares of our Common Stock by our employees motivates our employees to contribute to the achievement of our corporate objectives and our success. We do not believe that the shares of our Common Stock currently available for purchase under the ESPP are sufficient to con- tinue offering shares for purchase under the ESPP until its expiration in 2023. The number of shares originally authorized for purchase under the ESPP was the lesser of (a) 2,000,000 shares increased on each anniversary of the adoption of the ESPP by five percent and (b) 3,000,000 shares. As of March 15, 2016, 821,846 shares of our Common Stock were available for pur- chase under the ESPP. Accordingly, on March 15, 2016, our Board adopted the Amended ESPP, subject to stockholder approval, which will increase the number of shares of our Common Stock reserved for purchase under the ESPP by 1,000,000 shares (the “Share Increase”). In establishing the Share Increase, our Board considered the potential dilutive impact to stockholders and the projected participation rate over the remaining term of the plan based on historic rates of participation in the ESPP. For information about options and restricted stock outstanding under our existing equity plans and the number of shares available for issuance under such plans, each as of December 31, 2015, please see “Equity Compensation Plan Information” elsewhere in this Proxy Statement. Summary of the Amended ESPP The following summary describes the material terms of the Amended ESPP. This summary of the Amended ESPP is not a complete description of all provisions of the Amended ESPP and is qualified in its entirety by reference to the Amended ESPP, which is filed as Appendix B to this Proxy Statement. Purpose. The purpose of the Amended ESPP is to enable our eligible employees and eligible employees of our subsidiaries to purchase shares of our Common Stock and thereby enhance their sense of participation in the affairs of the Company. The Amended ESPP will allow eligible employees to purchase, through payroll deductions, shares of our Common Stock at a discount from the market price of the stock at the time of purchase. The ESPP is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Code. Administration. The Compensation Committee of the Board will administer the Amended ESPP, but is authorized to delegate its duties and authority to officers and employees of the Company in its discretion and to the extent permitted by applica- ble law. The Compensation Committee has the authority to determine eligibility under the Amended ESPP, to interpret the Amended ESPP, to prescribe forms, rules, and procedures under the Amended ESPP, to adopt, amend, rescind, administer and interpret such forms, rules or procedures and otherwise to do all things necessary or advisable to carry out the terms of the Amended ESPP. All determinations and decisions by the Compensation Committee regarding the interpretation and applica- tion of the Amended ESPP are final and binding on all parties. Stock Subject to the Amended ESPP. Subject to adjustment, as described below, the maximum aggregate number of shares of our Common Stock available for purchase under the Amended ESPP is the lesser of (a) 3,000,000 shares increased on each anniversary of the adoption of the Plan by five percent, and (b) 4,000,000, which includes the Share Increase of 1,000,000, described above. If any right to purchase shares under the Amended ESPP expires or terminates for any reason without having been exercised in full or ceases for any reason to be exercisable in whole or in part, the unpurchased shares of our Common Stock subject to such right will again be available for purchase under the Amended ESPP. Eligibility. Our employees who (i) customarily work at least 20 hours per week, (ii) customarily work more than five months in a calendar year, and (iii) have been employed by the Company no less than five business days as of the first day of an 50 NOVAVAX, INC offering period are eligible to participate in the Amended ESPP. The Compensation Committee may establish additional eligi- bility requirements prior to the commencement of the applicable offering period. An employee who is an eligible employee on the first day of an offering period may elect to participate in the Amended ESPP for such offering period. Approximately 425 employees were eligible to participate in the Amended ESPP as of March 15, 2016. Offerings; Purchase Dates. Unless otherwise determined by the Board, offering periods under the Amended ESPP will be con- secutive and overlapping 24-month periods that commence every six months on August 1 and February 1 and end 24 months later on July 31 or January 31, with each offering period having four six-month purchase periods that commence on August 1 or February 1 and end on January 31 or July 31 each year during the offering period, unless the offering period is terminated earlier. Purchases under the Amended ESPP will be made on the last day of each purchase period (the “purchase date”). Our Compensation Committee may change the frequency and duration of offering periods, purchase periods and purchase dates with respect to offering periods that have not yet commenced, in accordance with Section 423 of the Code. On a purchase date, a participant’s accumulated payroll deductions withheld during the purchase period will be applied to purchase the maximum number of whole shares of our Common Stock that can be purchased with such funds, subject to the limitations described below under Limitations on Purchase and Participation. Participation. Eligible employees may become participants in the Amended ESPP by completing an enrollment agreement and filing it with us no later than five business days before the first day of an offering period (unless the Compensation Committee has set a later time for the filing of such subscription agreement). A participant may participate in only one offering period at any time. Employees electing to participate in the Amended ESPP will authorize us to deduct after-tax dollars from their compensation each payroll period during an offering period. Participants may authorize no more than 15% (in whole percentages) of their compensation to be withheld through payroll deductions. A participant’s accumulated payroll deductions will be applied to the purchase of the maximum number of whole shares that may be purchased on each semi-annual purchase date during the offering period in which the participant participates, subject to the limitations described below under Limitations on Purchase and Participation. Compensation for purposes of the Amended ESPP includes the following forms of cash compensation paid to or earned by an employee: base wages, salary, overtime, payments for paid time off and holidays, bereavement pay, jury/ witness duty pay, pay during a period of suspension, compensation deferred pursuant to Section 401(k) or Section 125 of the Code, distributions under any nonqualified deferred compensation plan and any other compensation or remuneration that the Compensation Committee or the Board approves as “compensation” in accordance with Section 423 of the Code. Limitations on Purchase and Participation. No employee may be offered the right to purchase shares under the Amended ESPP if, immediately after the election to participate, such employee would own stock (including stock such employee may purchase under outstanding rights under the Amended ESPP) representing 5% or more of the total combined voting power or value of all classes of our stock. In addition, no participant may be offered the right to purchase shares of our Common Stock under the Amended ESPP if the rights of the participant to purchase stock under the Amended ESPP and all employee stock purchase plans maintained by us or our subsidiaries would accrue at a rate that exceeds $25,000 (or such other maximum as may be prescribed from time to time by the Code) of the fair market value of such stock (determined at the time the right is granted) for each calendar year. A maximum of 25,000 shares may be purchased by any participant on any single purchase date. Purchase Price. For each purchase period, the purchase price per share of our Common Stock will be equal to 85% of the fair market value per share on the first day of the offering period or, if lower, 85% of the fair market value per share on purchase date. Under the Amended ESPP, the fair market value of a share of our Common Stock on any date will be the closing price of a share of our Common Stock on the NASDAQ Global Select Market on the date of determination (or, if such day is not a trading day, on the immediately preceding trading day). If the fair market value of a share of our Common Stock on a purchase date during an offering period is less than the fair market value of a share of our Common Stock on the first day of the offering period, a participant’s accumulated payroll deductions for the applicable purchase period within such offering period will be applied to purchase shares of our Common Stock on the purchase date and the offering period will then terminate. A participant in the terminated offering period will automatically be enrolled in the next offering period, with the participant’s payroll deductions determined by reference to the last payroll deduc- tion authorization properly submitted by the participant to the Company in accordance with the terms of the Amended ESPP. 51 2015 Proxy Termination of Participation. Employees may end their participation in an offering period by providing written notice of such termination to the Compensation Committee no later than 15 days before a purchase date. A participant’s participation in the Amended ESPP will automatically terminate upon a termination of the participant’s employment with us or one of our subsid- iaries or upon the participant’s failure to qualify as an eligible employee. Upon a termination of the employee’s participation in the Amended ESPP, such employee’s payroll deductions not already used to purchase shares of our Common Stock under the Amended ESPP will be returned to the employee. Adjustment Provisions. In the event of certain transactions with our stockholders not involving our receipt of consideration, such as a stock split, spin-off, stock dividend, or certain recapitalizations, or, if the Board or the Compensation Committee determines that adjustments would be appropriate to prevent dilution or enlargement of benefits under the Amended ESPP, in the event of the payment of a dividend or other distribution, reorganization, merger, or other changes in corporate structure, the Board or the Compensation Committee will equitably adjust (a) the class of shares of our Common Stock issuable and the maximum number of shares of our Common Stock available under the Amended ESPP, (b) the class and number of shares of our Common Stock and the purchase price per share of our Common Stock with respect to any outstanding right to purchase shares of our Common Stock under the Amended ESPP, and (c) the class and maximum number of shares of our Common Stock that may be issued to a participant during any purchase period. However, no such adjustment may be made unless the Board or the Compensation Committee, as applicable, is satisfied that it will not constitute a modification of the rights granted under the Amended ESPP or otherwise disqualify the Plan as an employee stock purchase plan under the provisions of Section 423 of the Code. In the event of (i) a merger or similar transaction in which we are not the surviving corporation or that results in our stockhold- ers ceasing to own shares of our Common Stock, (ii) a sale of all or substantially all of our assets, (iii) an acquisition resulting in ownership of more than 50% of the shares of our Common Stock by any one person (or more than one person acting as a group) that did not own more than 50% of the shares of our Common Stock immediately prior to the acquisition, or (iv) the replacement during any 12-month period of a majority of the directors of the Board by new directors whose appointment was not endorsed by a majority of the directors of the Board prior to the date of the appointment or election, each offering period then in progress will continue unless otherwise provided by the Board or the Compensation Committee, which may in its dis- cretion (a) if the Company is merged with or acquired by another corporation, provide that each outstanding offering will be assumed or exchanged for a substitute right granted by the acquiror or successor corporation, (b) cancel each offering period then in progress and return any unused payroll deductions to the participants, or (c) terminate any and all purchase periods on or before the date of the proposed transaction. In the event of our proposed dissolution or liquidation, each offering period then in progress will be cancelled immediately prior to the consummation of such dissolution or liquidation and accumulated payroll deductions will be returned to participants, unless our Compensation Committee or the Board provides otherwise in its sole discretion. Amendment and Termination of the ESPP. The Board may at any time and for any reason amend, suspend or terminate the Amended ESPP. In general, no amendment may affect an offering period in progress at the time of the amendment or may adversely affect the rights of any participant without such participant’s consent unless such amendment is required to satisfy the requirements of Section 423 of the Code, is made in connection with a transaction described above under “Adjustment Provisions,” or is determined by the Board to be advisable in the event of changes to the financial accounting treatment for the Amended ESPP (as described below). Additionally, no amendment may be made without approval of our stockholders within 12 months of its adoption by the Board if such amendment would increase the number of shares that may be issued under the Amended ESPP or change the designation of the corporations whose employees (or class of employees) are eligible to participate in the Amended ESPP or otherwise would be treated as the adoption of a new plan under Section 423 of the Code. Without stockholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” the Board is entitled to make such amendments to the Amended ESPP as it determines are advisable if the continu- ation of the Amended ESPP or any offering period would result in financial accounting treatment for the Amended ESPP that is different from the financial accounting treatment in effect on the date the Amended ESPP was initially adopted by the Board. No offers to purchase shares of our Common Stock may be granted under the Amended ESPP after July 21, 2023. 52 NOVAVAX, INC Federal Income Tax Information The following is a general summary under current law of the material federal income tax consequences to participants in the Amended ESPP. This summary deals with the general tax principles that apply and is provided only for general information. Certain types of taxes, such as state and local income taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of income taxation that may be relevant to a participant in light of his or her personal investment circumstances. This summa- rized tax information is not tax advice. The Amended ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. The Amended ESPP is not subject to any provisions of the Employee Retirement Income Security Act of 1974. Under the applicable Code provisions, no income will be taxable to a participant until the sale or other disposition of the shares of our Common Stock purchased under the Amended ESPP (the “ESPP shares”). Upon such sale or disposition, the partici- pant will generally be subject to tax in an amount that depends upon the participant’s holding period with respect to the ESPP shares. If the ESPP shares are sold or disposed of more than two years from the first day of the offering period and more than one year from the date of purchase, or upon the participant’s death while owning the ESPP shares, the participant will recognize ordinary income measured as the lesser of (1) the excess of the fair market value of the ESPP shares at the time of such sale or disposition over the purchase price or (2) an amount equal to 15% of the fair market value of the ESPP shares as of the first day of the offering period. Any additional gain will be treated as long-term capital gain. If the ESPP shares held for the periods described above are sold and the sale price is less than the purchase price, there is no ordinary income and the participant has a long-term capital loss equal to the difference between the sale price and the purchase price. If shares are sold or otherwise disposed of before the expiration of the holding periods described above, other than following the partici- pant’s death while owning the shares, the participant will recognize ordinary income generally measured as the excess of the fair market value of the ESPP shares on the date the ESPP shares are purchased over the purchase price. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on the participant’s holding period with respect to the ESPP shares. We are not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income recognized upon a sale or disposition of shares prior to the expiration of the holding periods described above. We will treat any transfer of record ownership of shares as a disposition, unless we are notified to the contrary. In order to enable us to learn of dispositions prior to the expiration of the holding periods described above and ascertain the amount of the deductions to which we are entitled, participating employees will be required to notify us in writing of the date and terms of any disposition of shares purchased under the Amended ESPP. New Plan Benefits The amounts of future stock purchases under the Amended ESPP are not determinable because, under the terms of the Amended ESPP, purchases are based upon elections made by participants. Future purchase prices are not determinable because they are based upon fair market value of shares of our Common Stock. Required Vote Approval of the Amended ESPP requires the affirmative vote of the holders of a majority of the shares of Common Stock pres- ent in person or represented by proxy and voting on the matter. Abstentions and broker non-votes will not be counted as shares voting on such matter and accordingly will have no effect on the approval of this Proposal No. 3. FOR PROPOSAL NO. 3, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE AMENDED ESPP, INCLUDING AN AMENDMENT TO INCREASE THE NUMBER OF SHARES BY 1,000,000 UNDER THE AMENDED ESPP. 53 2015 Proxy Proposal No. 4 RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016 The Audit Committee, comprised solely of independent directors, has appointed the firm Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016. The Board recommends that the stockholders of the Company ratify this appointment. Although ratification is not required by the Company’s By-laws or other- wise, the Company believes that it is advisable to give stockholders an opportunity to ratify this selection. On April 24, 2014, the Audit Committee selected Ernst & Young LLP as the Company’s independent registered public account- ing firm for the fiscal year ended December 31, 2014, and notified Grant Thornton LLP of its dismissal as the Company’s inde- pendent registered public accounting firm. The Company formally engaged Ernst & Young LLP on May 7, 2014. The report of Grant Thornton LLP on the Company’s consolidated financial statements as of and for the year ended December 31, 2013 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal year ended December 31, 2013 and subsequent interim period through May 7, 2014, there were no (a) disagree- ments (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K) with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton LLP, would have caused Grant Thornton LLP to make reference to the subject matter thereof in connection with its reports for such years nor (b) reportable events, as described under Item 304(a)(1)(v) of Regulation S-K. The affirmative vote of the majority of the shares present in person or represented by proxy at the 2016 Annual Meeting and voting on this proposal shall constitute ratification of the appointment of Ernst & Young LLP. If the appointment of Ernst & Young LLP as the Company’s independent auditor is ratified, the Audit Committee may, in its discretion, change the appoint- ment at any time during the year should it determine such a change would be in the best interest of the Company and its stockholders. If the stockholders, however, do not ratify the appointment, the Audit Committee will reconsider whether to retain Ernst & Young LLP, but may proceed with the retention of Ernst & Young LLP if it deems it to be in the best interest of the Company and its stockholders. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to address the Annual Meeting if they desire to do so. They will also be available to respond to appropriate questions from stockholders. Fees and Services The following table shows the fees billed by Ernst & Young LLP for professional services rendered as the Company’s indepen- dent registered public accounting firm during the 2015 and 2014 fiscal years. Ernst & Young LLP replaced Grant Thornton LLP as our independent registered public accounting firm effective May 7, 2014. FEE CATEGORY Audit Fees Audit-Related Fees Tax Fees All Other Fees Total Fees ERNST & YOUNG LLP 2015 ($) 547,610(1) — 72,320 — 619,930 2014 ($) 364,454 — — — 364,454 (1) Includes $55,165 for services related to the Company’s public offerings of Common Stock. 54 NOVAVAX, INC The following table shows the fees billed by Grant Thornton LLP for professional services rendered as the Company’s inde- pendent registered public accounting firm during the 2014 fiscal year. Ernst & Young LLP replaced Grant Thornton LLP as our independent registered public accounting firm effective May 7, 2014. FEE CATEGORY Audit Fees Audit-Related Fees Tax Fees All Other Fees Total Fees GRANT THORNTON LLP 2014 ($) 57,828(1) — 9,450 — 67,278 (1) Includes $45,828 for services related to the Company’s issuance of Quarterly Report on Form 10-Q for the three months ended March 31, 2015. Audit Fees. Consists of fees for professional services rendered in connection with the audit of the Company’s annual con- solidated financial statements for 2015 and 2014 and the reviews of the consolidated financial statements included in the Company’s quarterly reports on Forms 10-Q. These amounts included fees billed for annual financial statement and internal control audits, quarterly reviews, and registration statement filings and consents. Audit-Related Fees. Consists of fees for assurance and related services that were reasonably related to the performance of the independent registered public accounting firm’s audit or review of the Company’s financial statements. Tax Fees. Consists of fees for professional services rendered for tax compliance, tax advice, and tax planning for the Company. These amounts represent those billed for tax return preparation for the Company and its subsidiary. All material tax fees were pre-approved by the Audit Committee. All Other Fees. Consists of fees for products and services provided other than those otherwise described above. Audit Committee Pre-Approval Policies and Procedures As contemplated by applicable law and as provided by the Audit Committee’s charter, the Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work of the Company’s independent registered public accounting firm. In connection with such responsibilities, the Audit Committee is required, and it is the Audit Committee’s policy, to pre-approve the audit and permissible non-audit services (both the type and amount) performed by the Company’s independent registered public accounting firm in order to ensure that the provision of such services does not impair the firm’s independence, in appearance or fact. Under the policy, unless a type of service to be provided by the independent registered public accounting firm has received gen- eral pre-approval, it will require separate pre-approval by the Audit Committee. If fees for a proposed service of a type that has been pre-approved exceed the pre-approved amount, the Audit Committee and the independent registered public accounting firm must confer and the Audit Committee must grant its approval before further work may be performed. For audit services (including the annual financial statement audit, quarterly statement reviews, and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on the Company’s consolidated financial statements), the independent registered public accounting firm must provide to the Audit Committee in advance an engage- ment letter, outlining the scope of audit services proposed to be performed with respect to the audit for that fiscal year and associated fees. If, in advance of its meeting, the Audit Committee agrees to the engagement letter, the engagement will be formally accepted by the Audit Committee at its next regularly scheduled meeting. All permissible non-audit services not specifically approved in advance must be separately pre-approved by the Audit Committee, as noted above, with the exception of certain services of limited financial expense for which the Audit Committee has authorized the Chairman and the Chief Financial Officer to hire at their discretion. Generally, requests or applications to provide services must be in writing and include a description of the proposed services, the anticipated costs and fees, and the business reasons for engaging the independent registered public accounting firm to perform the services. The request must also include a statement as to whether the request or application is consistent with the SEC rules on registered public accounting firm independence. 55 2015 Proxy To ensure prompt handling of unexpected matters, the Audit Committee has delegated authority to pre-approve audit and permissible non-audit services between regularly scheduled meetings of the committee to its chair and, in certain limited instances, to its Chief Financial Officer, who are each responsible for reporting any pre-approval decisions to the Audit Committee at its next scheduled meeting. Except as noted above, the Audit Committee has not and will not delegate to man- agement of the Company the Audit Committee’s responsibilities to pre-approve services performed by the independent regis- tered public accounting firm. The Audit Committee pre-approved all audit services provided to the Company by each indepen- dent registered public accounting firm engaged during the fiscal years ended December 31, 2015 and 2014. FOR PROPOSAL 4, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING December 31, 2016 56 NOVAVAX, INC Additional Information Stockholder Proposals Stockholder proposals for inclusion in the Company’s proxy statement: Stockholders who wish to present proposals for inclu- sion in the Company’s proxy materials for the Company’s 2017 Annual Meeting of Stockholders should follow the procedures prescribed in Rule 14a-8 under the Exchange Act and the Company’s By-laws. Those procedures require that the Company receive a stockholder proposal in writing at the Company’s principal executive offices no later than December 28, 2016. If the date of next year’s annual meeting of stockholders is changed by more than 30 days from the anniversary date of this year’s Annual Meeting (June 9, 2016), then the deadline is the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first. Other stockholder proposals: Under the Company’s By-laws, stockholders who wish to include a proposal in the Company’s 2017 Annual Meeting of Stockholders (but do not wish to include such proposal in the Company’s proxy materials) must give the Company timely written notice. To be timely, the Company’s By-laws provide that such notice must be received by the Company at its principal executive offices not less than 60 days nor more than 90 days prior to the anniversary date of this year’s Annual Meeting (June 9, 2016); provided, however, in the event that the date of the meeting is more than 30 days before or after the anniversary date of the prior year’s annual meeting of stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first. In addition to being timely, any such notice must include the following information regarding each matter the stockholder pro- poses to bring before the Annual Meeting: • a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting; • the name and address, as they appear on the Company’s books, of the stockholder proposing such business; • the number of shares of capital stock and other securities of the Company which are beneficially owned by the stockholder and each Stockholder Associated Person; • any derivative positions held of record or beneficially by the stockholder and any Stockholder Associated Person and whether and the extent to which any hedging or other transactions or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement, or understanding has been made, the effect or intent of which is to increase or decrease the voting power or economic interest of, such stockholder or any Stockholder Associated Person with respect to the Company’s securities; and • any material interest of the stockholder or any Stockholder Associated Person in such proposal. For purposes of this Proxy Statement, a “Stockholder Associated Person” of any stockholder means (i) any “affiliate” or “asso- ciate” (as those terms are defined in Rule 12b-2 under the Exchange Act) of the stockholder who owns beneficially or of record any capital stock or other securities of the Company or, through one or more derivative positions, has an economic interest (whether positive or negative) in the price of securities of the Company and (ii) any person acting in concert with such stock- holder or any affiliate or associate of such stockholder with respect to the capital stock or other securities of the Company. Please note that if the stockholder proposes to nominate a director for election to the Company’s Board, the procedures described under the caption “Nomination Procedures” herein relating to director nominations must be followed. 57 2015 Proxy Other Matters The Board knows of no other matters which will be presented for consideration at the Annual Meeting. If any other business should come before the Annual Meeting, however, it is the intention of the persons named in the enclosed proxy to vote, or otherwise act, in accordance with their best judgment on such matters. * * * THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, OR VOTE OVER THE INTERNET OR TELEPHONE AS DESCRIBED THEREIN. YOUR PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING, AND YOUR COOPERATION IS APPRECIATED. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN IF THEY HAVE SENT IN THEIR PROXIES. By the Order of the Board of Directors John A. Herrmann III Senior Vice President, General Counsel and Corporate Secretary April 20, 2016 58 NOVAVAX, INC Appendix A NOVAVAX, INC. 2015 STOCK INCENTIVE PLAN AMENDED AND RESTATED MARCH 15, 2016 Adopted by the Board of Directors as of March 15, 2016 1. Purpose. The purpose of the Plan is to secure for the Company and its stockholders the benefits arising from capital stock own- ership by employees, officers and directors of, and consultants or advisors to, the Company. Capitalized terms and operational rules related to such terms not otherwise defined in the Plan are defined on Exhibit A, which is incorporated herein by reference. 2. Type of Stock Awards and Administration. (a) Types of Stock Awards. The Plan provides for the grant of Options (including Incentive Stock Options and Non- Statutory Options), Restricted Stock, Unrestricted Stock, Stock Appreciation Rights (or SARs), Stock Units, Restricted Stock Units (or RSUs) and Performance Awards. (b) Administration. (i) The Plan will be administered by the Administrator, whose construction and interpretation of the terms and provisions of the Plan and any Award Agreement shall be final and conclusive. The Administrator may in its sole discretion grant Stock Awards with respect to shares of Common Stock and direct the Company to issue shares of Common Stock upon the grant, vesting or exercise of such Stock Awards as provided in the Plan. (ii) Subject to the express provisions of the Plan, the Administrator shall have authority: (1) To determine the individuals to whom, and the time or times at which, Stock Awards are made, the num- ber of shares subject to each Stock Award and the terms of all Stock Awards and Award Agreements, which need not be identical; (2) To construe the Plan and Award Agreements; (3) To prescribe forms, rules and procedures relating to the Plan; (4) To determine the form of settlement of Stock Awards (whether in cash, shares of Common Stock or other property); and (5) To make all other determinations and take all other actions that are, in the judgment of the Administrator, necessary or desirable for the administration of the Plan. (iii) The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement (or any inconsistency between the Plan and any Award Agreement) in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director or individual acting pursuant to authority delegated by the Administrator shall be liable for any action or determination under the Plan made in good faith. 3. Participant Eligibility. (a) General. The Administrator may select Participants from among key employees, officers or directors of, or consul- tants or advisors to, the Company who are expected to contribute to the Company’s future growth and success; provided, however, that the class of persons to whom Incentive Stock Options may be granted shall be limited to employees of the Company, and provided further, that persons to whom Non-Statutory Options or SARs may be A-1 2015 Proxy granted shall be limited to persons employed by or providing services to the Company and its “qualifying subsid- iaries.” For these purposes, a “qualifying subsidiary” means a subsidiary in which the Company owns a “controlling interest” as described in Treasury Regulations §1.409A-1(b)(5)(iii)(E)(1). (b) Grant of Stock Awards to Directors and Officers. In the discretion of the Administrator, the selection of a director or officer (as defined for purposes of Rule 16b 3) as a Participant, and the terms of any Stock Award granted to such Participant, including the grant date, the purchase or exercise price, the number of shares underlying the Stock Award and other terms and conditions, shall be determined either (i) by the Board, of which all members shall be “outside directors” and “non employee directors” (each as hereinafter defined) or (ii) by the Compensation Committee, consisting of two or more directors having full authority to act in the matter, each of whom shall be an “outside director” and a “non-employee director” (with any action of the Compensation Committee subject to approval or ratification by the Board, if required). For the purposes of the Plan, a director shall be deemed to be a “non-employee director” only if such director qualifies as a “non employee director” within the meaning of Rule 16b 3 and shall be deemed to be an “outside director” only if such director qualifies as an “outside director” within the meaning of Section 162(m). (4) Stock Subject to Plan. (a) Number of Shares. Subject to adjustment as provided in Section 10 below, the maximum number of shares of Common Stock that may be delivered in satisfaction of Stock Awards under the Plan shall be 31,000,000 shares. Subject to adjustment as provided in Section 10 below, the maximum aggregate number of shares that may be issued upon the exercise of Incentive Stock Options shall in no event exceed 31,000,000 shares. (b) Reversion of Shares to the Share Reserve. Shares of Common Stock underlying any Stock Award to the extent the Stock Award, for any reason, expires, terminates or is forfeited, in whole or in part, without the issuance of shares, shall revert to and again become available for issuance under the Plan. Shares of Common Stock that are retained or withheld by or delivered to the Company to satisfy any purchase or exercise price or tax withholding obligation, and the total number of shares of Common Stock subject to a SAR any portion of which is settled in shares of Common Stock will be treated as issued under the Plan. The shares of Common Stock available for issu- ance pursuant to Section 4(a) will not be increased by any shares that have been delivered under the Plan that are subsequently repurchased using the proceeds directly attributable to stock option exercises. (c) Individual Limits. The following additional limits will apply to Stock Awards of the specified type granted to any person in any calendar year: (i) Options: 2,000,000 shares of Common Stock. (ii) SARs: 2,000,000 shares of Common Stock. (iii) Stock Awards other than Options or SARs: 1,000,000 shares of Common Stock. In applying the foregoing limits, (A) all Stock Awards of the specified type granted to the same person in the same calendar year will be aggregated and made subject to one limit; (B) the limits applicable to Options and SARs refer to the number of shares of Common Stock subject to those Stock Awards; and (C) the share limit under clause (iii) refers to the maximum number of shares of Common Stock that may be delivered, or the value of which could be paid in cash or other property, under a Stock Award or Stock Awards of the type specified in clause (iii) assum- ing a maximum payout. The foregoing provisions will be construed in a manner consistent with Section 162(m), including, without limitation, where applicable, the rules under Section 162(m) pertaining to permissible deferrals of exempt awards. (d) Non-employee Director Limits. Notwithstanding any other provision of the Plan to the contrary, including sub- section (c) above, a Participant who is a non-employee director, in any calendar year, may not receive shares of Common Stock underlying Stock Awards in excess of 750,000 shares. The foregoing limit shall not apply to any Stock Award or shares of Common Stock granted pursuant to a director’s election to receive shares of Common Stock in lieu of cash fees. A-2 NOVAVAX, INC 5. Provisions Applicable to Options and Stock Appreciation Rights. (a) Forms of Award Agreements. As a condition to the grant of an Option or SAR under the Plan, each recipient of an Option or SAR shall execute an Award Agreement in such form not inconsistent with the Plan as may be approved by the Administrator. Such Award Agreements may differ among Participants and among Stock Awards. (b) Exercise Price and Base Value. Subject to Section 3(b), the exercise price, or base value from which appreciation is to be measured, per share of Common Stock subject to a Stock Option or SAR, as applicable, shall be determined by the Administrator; provided, however, that the exercise price of an Option or base value of a SAR shall not be less than 100% of the Fair Market Value of a share of Common Stock at the time of grant of such Option or SAR, or less than 110% of such Fair Market Value in the case of an Incentive Stock Option granted to a Participant described in Section 6(b). Except in connection with a corporate transaction involving the Company (which term shall include, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares) or as otherwise contemplated by Section 10 or Section 11 of the Plan, the Company may not, without obtaining stockholder approval in accordance with the applicable requirements of the NASDAQ Global Select Market, (A) amend the terms of outstanding Stock Options or SARs to reduce the exercise price or base value of such Stock Options or SARs, (B) cancel outstanding Stock Options or SARs in exchange for Stock Options or SARs with an exercise price or base value that is less than the exercise price or base value of the original Stock Options or SARs, or (C) cancel outstanding Stock Options or SARs that have an exercise price or base value greater than the fair market value of a share of Stock on the date of such cancellation in exchange for cash or other consideration. (c) Payment of Exercise Price. Payment of the exercise price of Options granted under the Plan shall be made by delivery of cash or a check to the order of the Company in an amount equal to the exercise price of such Options or through a broker-assisted exercise program acceptable to the Administrator, or, to the extent legally permissible and acceptable to the Administrator, (i) by delivery to the Company of shares of Common Stock of the Company already owned by the Participant having a Fair Market Value equal in amount to the exercise price of the Options being exercised, (ii) through the withholding of shares of Common Stock otherwise to be delivered upon exercise of the Option having a Fair Market Value equal to the aggregate exercise price of the Option being exercised, or (iii) by any other means approved by the Administrator. The Fair Market Value of any non-cash consideration which may be delivered upon exercise of an Option shall be determined by the Administrator. (d) Maximum Term. Except as otherwise provided in Section 6 regarding Incentive Stock Options, Options and SARs will have a maximum term of 10 years from the date of grant, subject to earlier termination as provided in the Plan or the applicable Award Agreement. (e) Exercise of Options and SARs. Unless the Administrator expressly provides otherwise, no Option or SAR will be deemed to have been exercised until the Administrator receives a notice of exercise (in form acceptable to the Administrator), which may be an electronic notice, signed (including electronic signature in form acceptable to the Administrator) by the appropriate person and, in the case of an Option, accompanied by any payment required under the Option. An Option or SAR exercised by any person other than the Participant will not be deemed to have been exercised until the Administrator has received such evidence as it may require that the person exercising the Stock Award has the right to do so. Notwithstanding the foregoing, unless otherwise provided by the Administrator in an Award Agreement, if (i) a Participant holds an outstanding but unexercised Option or SAR on the date that is ten (10) years from the date of grant (or, in the case of an Option or SAR with a maximum term of less than ten (10) years, the last day of such maximum term) and has not exercised such Option or SAR as of the regular closing time of the exchange on which the Common Stock is traded on the last day of the applicable term of the Option or SAR, (ii) on such date the Common Stock is publicly traded, and (iii) at such time the Fair Market Value of a share of Common Stock is greater than the exercise price or base value applicable to such Option or SAR, such Option or SAR, to the extent then vested and exercisable, shall be automatically exercised on the last day of the applicable term, and the number of shares of Common Stock otherwise to be delivered upon exercise of the Option or SAR shall be reduced by, in the case of an Option, a number of shares having a Fair Market Value equal to the aggregate exercise price of the Option being exercised and, in the case of an Option or SAR, a number of shares having a Fair Market Value equal to the amount necessary to satisfy any applicable tax withholding obligation (but not in excess of the minimum tax withholding required by law). A-3 2015 Proxy (f) Vesting and Effect of Termination of Employment or Other Service Relationship. Subject to Section 8(b) below, the Administrator will determine the time or times at which an Option or SAR will vest or become exercisable and the terms on which an Option or SAR will remain exercisable. Unless the Administrator expressly provides other- wise, however, the following rules will apply when a Participant’s employment or other service relationship with the Company ceases: (i) Immediately upon the cessation of the Participant’s employment or other service relationship and except as provided in (ii) and (iii) below, each Option or SAR that is then held by the Participant or by the Participant’s permitted transferees, if any, will cease to be exercisable and will terminate. (ii) Subject to (iii) and (iv) below, all Options and SARs held by the Participant or the Participant’s permitted trans- ferees, if any, immediately prior to the cessation of the Participant’s employment or other service relationship with the Company, to the extent then exercisable, will remain exercisable for the lesser of (i) a period of three months or (ii) the period ending on the latest date on which such Option or SAR could have been exercised without regard to this Section 5(f)(ii), and will thereupon immediately terminate. (iii) All Options and SARs held by a Participant or the Participant’s permitted transferees, if any, immediately prior to (A) the cessation of the Participant’s employment or other service relationship due to his or her death or disability (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) or (B) the Participant’s death within three months following the Participant’s termination of employment, to the extent then exercisable, will remain exercisable for the lesser of (i) a period of twelve (12) months or (ii) the period ending on the latest date on which such Option or SAR could have been exercised without regard to this Section 5(f)(iii), and will thereupon immediately terminate. (iv) All Options and SARs (whether or not exercisable) held by a Participant or the Participant’s permitted trans- ferees, if any, immediately prior to the cessation of the Participant’s employment or other service relationship with the Company will immediately terminate upon such cessation of employment or other service relation- ship if the termination is for Cause. 6. Special Provisions for Incentive Stock Options. Options granted under the Plan which are intended to be Incentive Stock Options shall be subject to the following addi- tional terms and conditions: (a) Express Designation. All Incentive Stock Options granted under the Plan shall, at the time of grant, be specifically designated as such in the Award Agreement evidencing the grant of Incentive Stock Options. (b) 10% Stockholder. If any employee to whom an Incentive Stock Option is to be granted under the Plan is, at the time of the grant of such Option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rules of Section 424(d) of the Code), then the following special provisions shall be applicable to the Incentive Stock Option granted to such employee: (i) the exercise price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the Fair Market Value of one share of Common Stock at the time of grant; and (ii) the Option may not be exercisable after the expiration of five years from the date of grant. (c) Dollar Limitation. For so long as the Code shall so provide, Options granted to any employee under the Plan (and any other incentive stock option plans of the Company) which are intended to be Incentive Stock Options shall not be Incentive Stock Options to the extent that such Options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate Fair Market Value (determined as of the respective date or dates of grant) of more than $100,000. (d) Continuous Employment. Except as provided in Section 5(f) above, no Incentive Stock Option may be exercised unless, at the time of such exercise, the Participant is, and has been continuously since the date of grant of the Option, employed by the Company. For all purposes of the Plan and any Incentive Stock Option granted hereunder, A-4 NOVAVAX, INC “employment” shall be defined in accordance with the provisions of Section 1.421-1(h) of the Income Tax Regulations (or any successor regulations). 7. Provisions of Full Value Awards. (a) Restricted Stock Awards. As a condition to the grant of an award of Restricted Stock under the Plan, each recipient of Restricted Stock shall execute an Award Agreement. The terms and conditions of such Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical; provided, however, that each Restricted Stock Award Agreement shall include (through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) the substance of each of the following provisions: (i) Purchase Price. At the time of the grant of an award of Restricted Stock, the Administrator will determine the price to be paid by the Participant for each share subject to the award, if any. (ii) Consideration. At the time of the grant of an award of Restricted Stock, the Administrator will determine the consideration permissible for the payment of the purchase price of the Restricted Stock. The purchase price of the shares of Common Stock acquired pursuant to an award of Restricted Stock shall be paid in one of the following ways: (i) in cash at the time of purchase; (ii) by services rendered or to be rendered to the Company; or (iii) in any other form of legal consideration that may be acceptable to the Administrator. (iii) Vesting. At the time of grant of an award of Restricted Stock, the Administrator will determine the con- ditions under which shares of Restricted Stock will vest or no longer be subject to a substantial risk of forfeiture or repurchase option in favor of the Company, which conditions will be set forth in the applicable Award Agreement. (iv) Termination of Participant’s Service. Except as otherwise provided in the applicable Award Agreement, shares of Restricted Stock that have not vested will be forfeited upon the termination of the Participant’s employment or other service relationship with the Company for any reason. (b) Restricted Stock Units. As a condition to the grant of RSUs under the Plan, each recipient of an RSU shall execute an RSU Award Agreement in such form not inconsistent with the Plan as may be approved by the Administrator. The terms and conditions of RSU Award Agreements may change from time to time, and the terms and conditions of separate RSU Award Agreements need not be identical; provided, however, that each RSU Award Agreement shall include (through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) the sub- stance of each of the following provisions: (i) Consideration. At the time of grant of an award of RSUs, the Administrator will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the award. (ii) Vesting. At the time of the grant of an award of RSUs, the Administrator may impose such restrictions or conditions to the vesting of the shares subject to the award as it deems appropriate. (iii) Payment. RSUs may be settled by the delivery of shares of Common Stock, their cash equivalent, or a combi- nation of the two, as the Administrator deems appropriate. Settlement of RSUs shall occur no later than two and one-half (2½) months following the year in which such RSUs vest, unless the applicable Award Agreement expressly provides that the award of RSUs is intended to comply with the rules applicable to non-qualified deferred compensation under Section 409A. (iv) Termination of Participant’s Service. Except as otherwise provided in the applicable Award Agreement, RSUs (and any related dividend equivalents) that have not vested will be forfeited upon the termination of the Participant’s employment or other service relationship with the Company for any reason and RSUs, whether vested or unvested, will be forfeited immediately upon the termination of the Participant’s employment or other service relationship with the Company if the termination is for Cause. (c) Vesting. Except as provided in Section 7(a)(iii), Section 7(b)(ii) or Section 11 hereof, or in connection with a Participant’s death or disability (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto), no Full Value Award shall vest prior to the first anniversary of the grant date. Notwithstanding the foregoing, A-5 2015 Proxy a number of shares of Common Stock not exceeding 5% of the number of shares of Common Stock that may be delivered in satisfaction of Stock Awards may be delivered in satisfaction of Full Value Awards that are not subject to the minimum vesting period specified in the preceding sentence. 8. Additional Terms Applicable to all Stock Awards. (a) Award Provisions. The Administrator will determine the terms of all Stock Awards, subject to the limitations pro- vided in the Plan. By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) a Stock Award, the Participant will be deemed to have agreed to the terms of the Stock Award and the Plan. Notwithstanding any provision of this Plan to the contrary, awards of an acquired company that are con- verted, replaced or adjusted in connection with the acquisition may contain terms and conditions that are inconsis- tent with the terms and conditions specified herein, as determined by the Administrator. (b) Vesting. Except in connection with the cessation of a Participant’s employment or other service relationship due to his or her death or disability (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto), or pursuant to Section 11 below, after the time a Stock Award has been granted, the Administrator may not accel- erate the time or times at which such Stock Award vests or becomes exercisable. (c) Nontransferability of Stock Awards. Except as provided in this Section 8(c), Stock Awards shall not be assignable or transferable by the person to whom they are granted, either voluntarily or by operation of law, other than by will or the laws of descent and distribution, and, in the case of Options and SARs, during the life of the Participant, shall be exercisable only by the Participant. Awards, other than Incentive Stock Options, may be transferred pursuant to a domestic relations order (within the meaning of Rule 16a 12 promulgated under the Exchange Act) or as otherwise expressly permitted by the Administrator in the applicable Award Agreement. (d) Investment Representations. The Company may require any person to whom a Stock Award is granted, as a condition of receiving or exercising such Stock Award, as applicable, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the Stock Award for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to com- ply with federal and applicable state securities laws, or with covenants or representations made by the Company in connection with any public offering of its Common Stock. (e) Compliance with Securities Laws. Each Stock Award shall be subject to the requirement that if, at any time, coun- sel to the Company shall determine that the listing, registration or qualification of the shares subject to such Stock Award upon any securities exchange or under any state or federal law, or the consent or approval of any govern- mental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such Stock Award may not be issued or exercised, as applicable in whole or in part, unless such listing, registration, qualifi- cation, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Administrator. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition. (f) Additional Restrictions. The Administrator may cancel, rescind, withhold or otherwise limit or restrict any Stock Award at any time if the Participant is not in compliance with all applicable provisions of the applicable Award Agreement and the Plan, or if the Participant breaches any agreement with the Company with respect to non-com- petition, non-solicitation or confidentiality. Without limiting the generality of the foregoing, the Administrator may recover Stock Awards made under the Plan and payments under or gain in respect of any Stock Award in accor- dance with any applicable Company clawback or recoupment policy, as such policy may be amended and in effect from time to time, or as otherwise required by applicable law or applicable stock exchange listing standards, includ- ing, without limitation, Section 10D of the Exchange Act. (g) Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts (on terms and subject to conditions established by the Administrator) in lieu of cash dividends or other cash distributions with respect to Common Stock subject to a Stock Award whether or not the holder of such Stock Award is otherwise entitled to share in the actual dividend or distribution in respect of such Stock Award. Any entitlement to dividend equiva- lents or similar entitlements will be established and administered either consistent with an exemption from, or in A-6 NOVAVAX, INC compliance with, the requirements of Section 409A. Dividends or dividend equivalent amounts payable in respect of Stock Awards that are subject to restrictions may be subject to such limits or restrictions as the Administrator may impose. (h) Section 162(m). In the case of any Performance Award (other than an Option or SAR) intended to qualify for the performance-based compensation exception under Section 162(m), the Administrator will establish the applicable Performance Criterion or Criteria in writing no later than ninety (90) days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Stock Award as performance-based compensation under Section 162(m)) and, prior to the event or occurrence (grant, vesting or payment, as the case may be) that is conditioned on the attainment of such Performance Criterion or Criteria, will certify in writing whether it or they have been attained. (i) Coordination with Other Plans. Stock Awards under the Plan may be granted in tandem with, or in satisfaction of or substitution for, other Stock Awards under the Plan or awards made under other compensatory plans or programs of the Company. For example, but without limiting the generality of the foregoing, awards under other compensatory plans or programs of the Company may be settled in Common Stock (including, without limita- tion, Unrestricted Stock) if the Administrator so determines, in which case the shares delivered will be treated as awarded under the Plan (and will reduce the number of shares thereafter available under the Plan in accordance with the rules set forth in Section 4). In any case where an award is made under another plan or program of the Company and such award is intended to qualify for the performance-based compensation exception under Section 162(m), and such award is settled by the delivery of Common Stock or another Stock Award under the Plan, the applicable Section 162(m) limitations under both the other plan or program and under the Plan will be applied to the Plan as necessary (as determined by the Administrator) to preserve the availability of the Section 162(m) perfor- mance-based compensation exception with respect thereto. (j) Section 409A. Each Award Agreement will contain such terms as the Administrator determines, and will be con- strued and administered, such that the Stock Award either qualifies for an exemption from the requirements of Section 409A or satisfies such requirements. 9. Rights as a Stockholder. Nothing in the Plan will be construed as giving any person the rights as a stockholder with respect to any shares of Common Stock underlying a Stock Award (including, without limitation, any rights to receive dividends or non-cash distributions with respect to such shares) except as to shares of Common Stock actually issued under the Plan. Except as otherwise provided in an Award Agreement, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such shares of Common Stock are issued. 10. Adjustment Provisions for Recapitalizations and Related Transactions. (a) If (i) the outstanding shares of Common Stock are (A) exchanged for a different number or kind of shares or other securities of the 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 of Common Stock or other securities, an appropriate and proportionate adjustment shall be made to (1) the maximum number and kind of shares reserved for issuance under the Plan, (2) the maximum number of shares that can be issued upon exercise of Incentive Stock Options under the Plan, (3) the limitations on Stock Awards pursuant to Section 4(c) and (d), (4) the number and kind of shares or other securities subject to any then outstanding Stock Awards under the Plan, and (5) the exercise or purchase prices (or base values) relating to Stock Awards and any other provision of Stock Awards affected by such change, without (in the case of Options or SARs) changing the aggregate exercise price or base values for such Stock Awards. Any adjustment made pursuant to this Section 10 shall be made by the Administrator having due regard, where applicable, for the qualification of Incentive Stock Options under Section 422, the requirements of Section 409A and the performance-based compensation rules of Section 162(m). (b) Any adjustments under this Section 10 will be made by the Administrator, whose determination as to what adjust- ments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issued under the Plan on account of any such adjustments. A-7 2015 Proxy 11. Merger, Consolidation, Asset Sale, Liquidation, etc. (a) General. In the event of (i) a consolidation, merger, combination or reorganization of the Company in which out- standing shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity, (ii) the sale, lease or other disposition of all or substantially all of the assets of the Company, (iii) a transaction or series of related transactions involving a person or entity, or a group of affiliated persons or entities (but excluding any employee benefit plan or related trust sponsored or maintained by the Company or an affiliate) in which such persons or entities become the owners, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding secu- rities (a “Securities Acquisition” ) other than by virtue of a merger, consolidation or similar transaction, or (iv) a dis- solution or liquidation of the Company (hereinafter, each of the events described in (i) through (iv) above shall be (a “Corporate Transaction” ), then the Administrator may, but need not, take any one or more of the following actions, as to outstanding Stock Awards: (1) provide that such Stock Awards shall continue in existence with appropriate adjustments or modifications, if applicable, or provide that such Stock Awards shall be assumed, or equivalent stock awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), provided that any such options substituted for Incentive Stock Options shall meet the requirements of Section 424(a) of the Code, (2) upon written notice to the Participants, provide that all Stock Awards that are outstanding, whether vested or unvested and whether exercisable or unexercisable, including Stock Awards that are “out-of-the-money” or “underwater,” will terminate immediately prior to the consummation of a Corporate Transaction, unless exercised by the Participant within a specified period following the date of such notice, if applicable, (3) in the event of a con- solidation, merger, combination, reorganization or Securities Acquisition under the terms of which holders of the Common Stock of the Company will receive upon consummation thereof a cash payment for each share surren- dered in the transaction (the “Sale Price” ), make or provide for a cash payment to the Participant equal to the differ- ence between (A) the Sale Price times the number of shares of Common Stock subject to such outstanding Stock Awards (to the extent then vested or exercisable at prices not in excess of the Sale Price), and (B) the aggregate exercise price of all such outstanding Stock Awards (to the extent then vested or exercisable at prices not in excess of the Sale Price) in exchange for the termination of such Stock Awards, or (4) provide that all or any outstanding Stock Awards shall become vested and exercisable in full or in part (or that any reacquisition or repurchase rights held by the Company shall lapse in full or part) at or immediately prior to such event. To the extent set forth in any Award Agreement, the Administrator may specifically provide, either at the time of grant or at any time thereafter, that any of the preceding actions shall or shall not occur or be taken with respect to an outstanding Stock Award. Except as the Administrator may otherwise determine in any case, each Stock Award will automatically terminate (and in the case of outstanding shares of Restricted Stock will be forfeited automatically) upon consummation of the Corporate Transaction, other than Stock Awards assumed pursuant to clause (1) of this Section 11(a). (b) Change in the Incumbent Board. The Administrator may provide for the accelerated vesting or exercisability of a Stock Award (including the lapse of any reacquisition or repurchase rights in favor of the Company) upon the occur- rence of a Change in the Incumbent Board (as defined below) in any Award Agreement at the time of grant of the Stock Award, or at any time thereafter. A “Change in the Incumbent Board” shall be deemed to occur if the existing directors on the Amendment Date (the “Incumbent Board” ) cease to constitute at least a majority of the members of the Board, provided, however, that any new director shall be considered a member of the Incumbent Board for this purpose if the appointment or election (or nomination for such election) of the new director was approved or recommended by a majority vote of the members of the Incumbent Board who are then still in office. (c) Substitute Options. The Company may grant Stock Awards under the Plan in substitution for Stock Awards held by employees of another corporation who become employees of the Company, or a subsidiary of the Company, as the result of a merger, consolidation, combination or reorganization of the employing corporation with the Company or a subsidiary of the Company, or as the result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The Company may direct that substitute Stock Awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. 12. No Employment Rights. Nothing contained in the Plan or in any Award Agreement shall confer upon any Participant any right with respect to the continuation of his or her employment or other service relationship with the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the compensation of the A-8 NOVAVAX, INC Participant. The loss of existing or potential profit in a Stock Award will not constitute an element of damages in the event of a termination of a Participant’s employment or other service relationship with the Company for any reason, even if the termination is in violation of an obligation of the Company to the Participant. 13. Other Employee Benefits. Except as to plans which by their terms include such amounts as compensation or as otherwise specifically determined by the Administrator, the amount of any compensation deemed to be received by an employee as a result of the issuance of a Stock Award, the lapse of any restrictions thereon, or the exercise of an Option or SAR, or the sale of shares received upon such exercise will not constitute compensation for purposes of determining any other employee benefits of such employee, including, without limitation, benefits under any bonus, pension, profit sharing, life insurance or salary contin- uation plan. 14. Amendment of the Plan and Stock Awards. (a) The Board may at any time, and from time to time, modify or amend the Plan in any respect, except that any such modification or amendment (i) shall be subject to stockholder approval if the approval of the stockholders of the Company is required under Section 422 or any successor provision with respect to Incentive Stock Options, Rule 16b 3 (if then applicable), Section 162(m), or any other applicable tax or securities law or stock exchange listing requirements, and (ii) shall not adversely affect the rights under any Stock Award previously granted to a Participant without the Participant’s consent. (b) With the consent of the affected Participant, the Administrator may amend outstanding Stock Award agreements in a manner not inconsistent with the Plan, provided, however, that, without the consent of the affected Participant, the Administrator shall have the right to amend or modify (i) the terms and provisions of the Plan and of any out- standing Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such Options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422, (ii) the terms and provisions of the Plan and of any outstanding Stock Award to the extent necessary to ensure (A) the qualification of the Plan under Rule 16b 3 (if then applicable) or (B) compliance with, or exemption from, Section 409A. 15. Withholding. (a) The delivery, vesting and retention of Common Stock, cash or other property under a Stock Award are conditioned upon full satisfaction by the Participant of all tax withholding requirements with respect thereto. The Administrator will prescribe such rules for the withholding of taxes as it deems appropriate. The Company shall have the right to deduct from payments of any kind otherwise due to a Participant any federal, state or local taxes of any kind required by law to be withheld with respect to any shares of Common Stock issued, or cash or other property deliv- ered, in settlement of a Stock Award, upon the exercise of Options or SARs, and upon the lapse of any restrictions with respect to a Stock Award. Subject to the prior approval of the Administrator, which may be withheld in its sole discretion, a Participant may elect (i) to cause the Company to hold back shares of Common Stock from a Stock Award or (ii) to deliver to the Company shares of Common Stock already owned by the Participant in satisfaction of tax withholding obligations but, in each case, not in excess of the minimum tax withholding required by law. The shares of Common Stock so delivered or held back shall have a Fair Market Value equal to such withholding obli- gation. The Fair Market Value of the shares used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. A Participant who has made an election pursuant to this Section 15(a) may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. (b) Notwithstanding the foregoing, in the case of a Reporting Person, no election to use shares for the payment of with- holding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b 3 (unless it is intended that the transaction not qualify for exemption under Rule 16b 3). 16. Effective Date and Duration of the Plan. (a) Effective Date. The Plan is effective as of the Amendment Date, subject to its approval by the Company’s stockhold- ers at the Company’s annual meeting in 2016. If such stockholder approval is not obtained within twelve months after the Amendment Date, Options and SARs granted under the Plan shall not vest and shall terminate and neither A-9 2015 Proxy Options nor SARs shall be granted thereafter under the Plan. Amendments to the Plan not requiring stockholder approval shall become effective when adopted by the Board; amendments requiring stockholder approval (as pro- vided in Section 14) shall become effective when adopted by the Board, but no Options or SARs granted after the date of such amendment shall become exercisable (to the extent that such amendment to the Plan was required to enable the Company to grant such Options or SARs) and no other Stock Award shall be granted, unless and until such amendment shall have been approved by the Company’s stockholders. If such stockholder approval is not obtained within twelve months of the Board’s adoption of such amendment, any Options or SARs granted on or after the date of such amendment shall terminate to the extent that such amendment was required to enable the Company to grant such Options or SARs. Subject to this limitation, Stock Awards may be granted under the Plan at any time after the Amendment Date and before the termination of the Plan as provided in Section 16(b) below. (b) Termination. The Board may suspend or terminate the Plan at any time, except that such suspension or termi- nation of the Plan shall not adversely affect a Participant’s rights under a Stock Award previously granted to the Participant while the Plan is in effect without the consent of the Participant. Unless sooner terminated in accor- dance with this Section or Section 11, the Plan shall terminate upon the close of business on the day immediately preceding the (10th) tenth anniversary of the Adoption Date. Stock Awards outstanding on such date shall remain in force and effect in accordance with their terms. 17. Provision for Foreign Participants; Sub Plans. (a) The Administrator may, without amending the Plan, modify Stock Awards granted to Participants who are foreign nationals or employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters. (b) The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying appli- cable blue sky, securities or tax laws of various jurisdictions. The Board will establish such sub-plans by adopting supplements to the Plan setting forth (i) such limitations on the Board’s discretion under the Plan as it deems necessary or desirable and (ii) such additional terms and conditions not otherwise inconsistent with the Plan as it deems necessary or desirable. All supplements so established will be deemed to be part of the Plan, but each supplement will apply only to Participants within the affected jurisdiction (as determined by the Administrator). 18. Miscellaneous. (a) Waiver of Jury Trial. By accepting a Stock Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Stock Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting a Stock Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Stock Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to binding arbitration as a condition of receiving a Stock Award hereunder. (b) Limitation of Liability. Notwithstanding anything to the contrary in the Plan, neither the Company nor the Administrator, nor any person acting on behalf of the Company or the Administrator, will be liable to any Participant or to the estate or beneficiary of any Participant or to any other holder of a Stock Award by reason of any accelera- tion of income, or any additional tax (including any interest and penalties), by reason of the failure of a Stock Award to satisfy the requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code, or otherwise asserted with respect to the Stock Award. 19. Governing Law. (a) Certain Requirements of Corporate Law. Stock Awards will be granted and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received A-10 NOVAVAX, INC therefor, and with the applicable requirements of the stock exchanges or other trading systems on which the Common Stock is listed or entered for trading, in each case as determined by the Administrator. (b) Other Matters. Except as otherwise provided by the express terms of an Award Agreement, under a sub-plan described in Section 17(b) or as provided in Section 19(a) above, the provisions of the Plan and of Stock Awards under the Plan and all claims or disputes arising out of or based upon the Plan or any Stock Award under the Plan or relating to the subject matter hereof or thereof will be governed by and construed in accordance with the domestic substantive laws of the State of Maryland without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction. (c) Jurisdiction. By accepting a Stock Award, each Participant will be deemed (a) to have submitted irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Maryland for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Stock Award; (b) to agree not to commence any suit, action or other proceeding arising out of or based upon the Plan or a Stock Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Maryland; and (c) to have waived and agreed not to assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or a Stock Award or the subject matter thereof may not be enforced in or by such court. A-11 2015 Proxy Exhibit A “Administrator”: The Compensation Committee, except that the Compensation Committee may delegate (i) to one or more of its members (or one or more other members of the Board (including the full Board)) such of its duties, powers and respon- sibilities as it may determine; (ii) to one or more officers of the Company the power to grant Awards to the extent permitted by Section 157(c) of the Delaware General Corporation Law; and (iii) to such employees or other persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in the preceding sentence, the term “Administrator” will include the person or persons so delegated to the extent of such delegation. “Adoption Date”: March 5, 2015 “Amendment Date”: March 15, 2016 “Award Agreement”: An agreement evidencing the grant of a Stock Award under the Plan. “Board”: The Board of Directors of the Company. “Cause”: In the case of any Participant who is party to an employment or severance-benefit agreement that contains a defi- nition of “Cause,” the definition set forth in such agreement will apply with respect to such Participant under the Plan for so long as such agreement is in effect. In the case of any other Participant, “Cause” will mean willful misconduct in connection with the Participant’s employment or service on behalf of the Company, or the willful failure of the Participant to perform his or her responsibilities in the best interests of the Company (including, without limitation, breach, whether willful or not, by the Participant of any provision of any employment or services agreement, nondisclosure, non-competition, non-solicitation or other similar agreement between the Participant and the Company), as determined by the Board, which determination is con- clusive. The Participant shall be considered to have been discharged “for cause” if the Administrator determines, within 30 days after the termination of the Participant’s employment or other service relationship with the Company for any other purported reason, that discharge for cause was warranted (and the Company may rescind the delivery of shares pursuant to any Stock Award in those circumstances). “Change in the Incumbent Board”: The meaning set forth in Section 11(b). “Code”: Internal Revenue Code of 1986, as amended or replaced from time to time. “Compensation Committee”: The Compensation Committee of the Board. “Common Stock”: The Company’s common stock, $.01 par value. “Company”: Novavax, Inc. and the parent and all present and future subsidiaries of Novavax, Inc. as defined in Sections 424(e) and 424(f) of the Code; provided, however, that status as a “parent” or “subsidiary” corporation depends on satisfaction of the criteria in Sections 424(e) and (f) of the Code as of the date on which such determination is being made and does not neces- sarily continue to exist merely because it existed as of the date of grant of an Option or other Stock Award. “Corporate Transaction”: The meaning set forth in Section 11(a). “Exchange Act”: The Securities Exchange Act of 1934, as amended. “Fair Market Value”: As of any date, the value of the Common Stock determined as follows: (1) If the Common Stock is listed on any established stock exchange, including but not limited to the NASDAQ Global Select Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange (or in the case of multiple exchanges, the exchange with the greatest volume of trading in the Common Stock) on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable. If the day of determination is not a market trading day, then the trading day immediately preceding the day of determination shall be used. (2) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator consistent with the requirements of Section 409A. A-12 NOVAVAX, INC “Full Value Awards”: Any Stock Awards other than Options or SARs. “Incentive Stock Options”: An Option intended to be an “incentive stock option” within the meaning of Section 422. “Incumbent Board”: The meaning set forth in Section 11(b). “Non-Statutory Options”: An Option that is not intended to be an Incentive Stock Option. “Option”: An option entitling the holder to acquire shares of Common Stock upon payment of the exercise price. “Participant”: An individual who is granted or receives a Stock Award under the Plan. “Performance Award”: A Stock Award subject to Performance Criteria. The Administrator in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) as well as Performance Awards that are not intended so to qualify. “Performance Criteria”: Specified criteria, other than the mere continuation of employment or the mere passage of time, the sat- isfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of a Stock Award. For purposes of Stock Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure or measures of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization or equity expense, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital, capital employed or assets; one or more operating ratios; operating income or profit, including on an after- tax basis; net income; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divesti- tures (in whole or in part); joint ventures, strategic alliances, licenses or collaborations; spin-offs, split-ups and the like; reorga- nizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; manufacturing or process development; or achievement of clinical trial or research objectives, regulatory or other filings or approvals or other product development milestones. A Performance Criterion and any targets with respect thereto determined by the Administrator need not be based upon an increase, a positive or improved result or avoidance of loss. To the extent consistent with the require- ments for satisfying the performance-based compensation exception under Section 162(m), the Administrator may provide in the case of any Stock Award intended to qualify for such exception that one or more of the Performance Criteria applicable to such Stock Award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting princi- ples) occurring during the performance period that affect the applicable Performance Criterion or Criteria. “Plan”: The Novavax, Inc. 2015 Stock Incentive Plan, as amended and restated on March 15, 2016. “Reporting Person”: Individuals who are required to file reports under Section 16(a) of the Exchange Act. “Restricted Stock”: Common Stock subject to forfeiture or restrictions requiring that it be redelivered or offered for sale to the Company if specified conditions are not satisfied. “Restricted Stock Unit” or “RSU”: A Stock Unit that is, or as to which the delivery of Common Stock or cash in lieu of Common Stock is, subject to the satisfaction of specified performance or other vesting conditions. “Rule 16b-3”: Rule 16b-3 promulgated under the Exchange Act, or any successor rule. “Sale Price”: The meaning set forth in Section 11(a). “Section 162(m)”: Section 162(m) of the Code. “Section 422”: Section 422 of the Code. “Securities Acquisition”: The meaning set forth in Section 11(a). A-13 2015 Proxy “Stock Appreciation Right” or “SAR”: A right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Common Stock of equivalent value) equal to the excess of the Fair Market Value of the shares of Common Stock subject to the right over the base value from which appreciation under the SAR is to be measured. “Stock Awards”: Any or a combination of the following: (a) Options (including Incentive Stock Options and Non-Statutory Options), (b) Stock Appreciation Rights, (c) Restricted Stock, (d) Unrestricted Stock, (e) Stock Units, (f) Restricted Stock Units, and (g) Performance Awards. “Stock Unit”: An unfunded and unsecured promise, denominated in shares of Common Stock, to deliver Common Stock or cash measured by the value of Common Stock in the future. “Unrestricted Stock”: Common Stock not subject to any restrictions under the terms of the Stock Award. A-14 NOVAVAX, INC Appendix B NOVAVAX, INC. 2013 EMPLOYEE STOCK PURCHASE PLAN AMENDED AND RESTATED MARCH 15, 2016 Section 1. Purpose of Plan The Novavax, Inc. 2013 Employee Stock Purchase Plan, as amended and restated March 15, 2016 (the “Plan”), is intended to enable eligible employees of Novavax, Inc. (the “Company”) and such of its Subsidiaries (including any corporation that becomes a Subsidiary of the Company after the adoption and approval of the Plan) as the Board of Directors of the Company (the “Board”) may from time to time designate (the Company and such Subsidiaries being hereinafter referred to as the “Company”) to purchase shares of common stock, $0.01 par value, of the Company (such common stock being hereafter referred to as “Stock”), and thereby enhance the sense of participation in the affairs of the Company. For purposes of the Plan, a “Subsidiary” is any corporation that would be treated as a subsidiary of the Company under Section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”). The Plan is intended to qualify under Code Section 423 and to be exempt from the application and requirements of Code Section 409A, and is to be construed accordingly. Section 2. Administration of Plan The Plan shall be administered by the Compensation Committee of the Board (the “Committee”), which shall have the author- ity to determine eligibility under the Plan, to interpret the Plan, to prescribe forms, rules and procedures under the Plan, to adopt, amend, rescind, administer, and interpret such forms, rules and procedures and otherwise to do all things necessary or advisable to carry out the terms of the Plan. To the extent permitted by applicable law, the Committee in its discretion may delegate any or all of its powers under the Plan to one or more officers or employees of the Company. All references in the Plan to the “Administrator” shall mean the Committee and the person or persons so delegated to the extent of such delegation, as applicable. All determinations and decisions by the Administrator regarding the interpretation or application of the Plan shall be final and binding on all parties. Section 3. Options to Purchase Stock Subject to adjustment as provided in Section 15, the maximum aggregate number of shares of Stock available for purchase pur- suant to the exercise of options (“Options”) granted under the Plan to employees of the Company or its designated Subsidiaries (“Employees”) who meet the eligibility requirements set forth in Section 4 (“Eligible Employees”) shall be the lesser of (a) 3,000,000 shares increased on each anniversary of the adoption of the Plan by 5%, and (b) 4,000,000. The Stock to be delivered upon exercise of Options under the Plan may be either shares of authorized but unissued Stock or shares of reacquired Stock, as the Board may determine. If any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unpurchased Stock subject to such Option shall again be available for purchase pursuant to the exercise of Options under the Plan. Section 4. Eligibility Subject to the limitations set forth in Section 5, each Employee whose customary employment is at least 20 hours per week, whose customary employment is for more than five months during the calendar year and who has been employed by the Company for not less than five business days as of the first day of an Option Period (as defined in Section 5) shall be eligible to participate in the Plan for such Option Period. The Administrator may, for Option Periods that have not yet commenced, establish additional eligibility requirements not inconsistent with Code Section 423. Section 5. Option Periods Unless otherwise determined by the Board (and except as otherwise provided in Section 8), the “Option Periods” shall be con- secutive and overlapping 24-month periods that shall commence every six months on August 1 and February 1 and end 24 months later on July 31 or January 31, with each Option Period having four six-month “Purchase Periods” that shall commence on August 1 or February 1 and end on January 31 or July 31 each year during the Option Period. Each January 31 and July 31 B-1 2015 Proxy during an Option Period shall be a “Purchase Date”. The Administrator may change the frequency and duration of the Option Periods, Purchase Periods and Purchase Dates with respect to Option Periods that have not yet commenced, except as pro- vided in Section 15, in accordance with Code Section 423. Section 6. Participation and Option Grant Each person who is an Eligible Employee on the first day of any Option Period may elect to participate in the Plan for such Option Period in accordance with this Section 6, Section 7 and any other procedures established by the Administrator. Except as otherwise provided in Section 8, to become a Participant and enroll in an Option Period, an Eligible Employee must com- plete an enrollment and payroll deduction authorization form in a form prescribed by the Administrator and submit it to the Company no later than five business days before the first day of each Option Period, or such later time as determined by the Administrator, and shall thereby become a participant (“Participant”) on the first day of such Option Period. A Participant may participate in only one Option Period at any time. Each person who is a Participant on the first day of an Option Period shall automatically be granted on that day an Option for such Option Period entitling the Participant to purchase shares of Stock on each Purchase Date within the Option Period on which the Participant is an Eligible Employee. No more than 25,000 shares may be purchased by a Participant on any Purchase Date, and no more than 15% of a Participant’s Compensation at any time may be used to purchase shares of Stock under an Option. A Participant’s “Compensation” for any period shall be the sum of the following forms of compensation paid to or earned by a Participant: base wages, salary, overtime, payments for paid time off and holidays, bereavement pay, jury/witness duty pay, pay during a period of suspension, compensation deferred pursuant to Code Sections 401(k) or 125, distributions under any nonqualified deferred compensation plan and any other compensation or remuneration that the Committee or the Board approves as “compensation” in accordance with Code Section 423. Notwithstanding the foregoing: (a) No Participant shall be granted an Option under the Plan who, immediately after the Option is granted, would own (or pursuant to Code Section 424(d) would be deemed to own) stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of its Subsidiaries; and (b) No Participant shall be granted an Option under the Plan that would permit the Participant to accrue rights to purchase shares of stock under all employee stock purchase plans of the Company and its Subsidiaries at a rate that exceeds $25,000 (or such other maximum as may be prescribed from time to time by the Code) for any cal- endar year, determined using the closing stock price on the grant date, all as determined in accordance with Code Section 423(b)(8). The Administrator shall reduce, on a substantially proportionate basis, the number of shares of Stock that may be purchased by each Participant for an Option Period or for one or more Purchase Periods in the event that the number of shares then available under the Plan is insufficient. Section 7. Method of Payment Payment for Stock purchased upon the exercise of an Option shall be made with funds withheld through regular payroll deduc- tions. Each payroll deduction authorization shall request withholding for each payroll period at a whole percentage of the Participant’s Compensation not exceeding 15% of Participant’s Compensation for the payroll period. Withholding shall be accomplished by means of deductions made on payroll dates occurring in the Option Period. A Participant may decrease his or her payroll deduction rate two times during a Purchase Period within an Option Period; provided, however, that the second decrease during any such Purchase Period will reduce the payroll deduction rate to 0%. The payroll deduction rate as decreased by a Participant during a Purchase Period will automatically be applied to the next Purchase Period within the applicable Option Period unless the Participant elects to increase the payroll deduction rate for such next Purchase Period by notifying the Administrator not less than five business days prior to the first day of such Purchase Period. The Administrator may, in its discretion, further limit the number of payroll deduction changes during any Option Period. A change in the payroll deduction rate shall be effective with the first full payroll period following 10 business days after the Company’s receipt of the new payroll deduction authorization unless the Company elects to process a given change in payroll deductions more quickly. All amounts withheld pursuant to this Section 7 (whether by payroll deductions or otherwise) shall be credited to a withholding account maintained in the Participant’s name on the books of the Company (each, an “Account”). Amounts credited to the Account shall not be required to be set aside in trust or otherwise segregated from the Company’s general assets. B-2 NOVAVAX, INC Section 8. Purchase Price The purchase price of Stock issued pursuant to the exercise of an Option on each Purchase Date shall be the lower of 85% of the fair market value of the Stock on the date on which the Option was granted pursuant to Section 5 (i.e., the first day of an Option Period) and 85% of the fair market value of the Stock on the last day of the Purchase Period (i.e., the Purchase Date). For purposes of this Section 8, the fair market value of the Stock for any day shall be the reported closing price of the Stock for such day on the national exchange or trading system on which such shares of Stock are traded; provided, that if such day is not a trading day, the fair market value of the Stock on such national exchange or trading system shall be the reported closing price of the Stock for the immediately preceding day that is a trading day. If the fair market value of the Stock on any Purchase Date during an Option Period is less than the fair market value of the Stock on the first day of the Option Period, the balance in a Participant’s Account shall be applied to purchase Stock on that Purchase Date in accordance with Section 9 and that Option Period shall then terminate. A Participant in the terminated Option Period shall automatically be enrolled in the next Option Period with the Participant’s payroll deductions determined by reference to the last payroll deduction authorization properly submitted to the Company in accordance with the Plan. Section 9. Exercise of Options Subject to the limitations set forth below in this Section 9, each Employee who is a Participant in the Plan on the last day of a Purchase Period shall be deemed to have exercised on such date the Option granted to him or her for the Option Period that includes that Purchase Period. Upon such exercise, the Company shall apply the balance of the Participant’s Account to the purchase of the maximum number of whole shares of Stock that can be purchased under the Option with the Account balance at the purchase price determined under Section 8, and as soon as practicable thereafter shall evidence the transfer of shares or shall deliver the shares to the Participant and shall return to the Participant’s Account the balance, if any, of his or her Account in excess of the total purchase price of the shares so issued within a reasonable time thereafter. No fractional shares shall be purchased; any payroll deductions accumulated in a Participant’s Account that are not sufficient to purchase a full share shall be retained in the Participant’s Account for the subsequent Purchase Period, subject to earlier withdrawal by the Participant as provided in Section 12 hereof. Any amounts contributed by a Participant or withheld from a Participant’s Compensation that are not to be used for the purchase of Stock, whether because of such Participant’s withdrawal from participation in an Option Period or for any other reason, shall be repaid to the Participant or his or her designated beneficiary or legal representative, as applicable, within a reasonable time thereafter. Notwithstanding anything herein to the contrary, no Option may be exercised after twenty-seven (27) months from its grant date. Section 10. Interest No interest shall be payable on any amount held in the Account of any Participant. Section 11. Taxes Payroll deductions shall be made on an after-tax basis. The Company shall have the right, as a condition of exercise, to make such provision as it deems necessary to satisfy its obligations to withhold federal, state and local income or other taxes incurred by reason of the purchase or disposition of Stock under the Plan. The Company in its discretion may, to the extent permitted by law, satisfy its withholding obligations by deduction from any payment of any kind due to the Participant or by withholding shares of Stock purchased under the Plan, which shares shall be valued at fair market value (defined as the closing stock price on the date of withholding). Section 12. Cancellation and Withdrawal Subject to Section 7, a Participant who holds an Option under the Plan may cancel all of his or her Option and thereby terminate his or her participation in the Plan by written notice delivered to the Administrator. To be effective with respect to the Purchase Period then in progress, written notification of such termination must be submitted to the Administrator no later than 15 days before the last day of the Purchase Period. Upon such cancellation, the balance in the Participant’s Account shall be returned to the Participant as soon as administratively practicable. B-3 2015 Proxy A Participant who makes a hardship withdrawal from a retirement savings plan qualifying under Code Section 401(k) (a “401(k) Plan”) maintained by the Company or a Subsidiary shall be deemed to have terminated his or her payroll deduction authori- zation as of the date of such hardship withdrawal, shall cease to be a Participant as of such date, shall be deemed to have canceled any outstanding Options, and shall not be permitted to participate in the Plan until the first Option Period that begins at least six (6) months after the date of the hardship withdrawal. Section 13. Termination of Employment; Death of Participant Upon the termination of a Participant’s employment with the Company for any reason or the death of a Participant during an Option Period, or in the event the Participant ceases to qualify as an Eligible Employee, the Participant shall cease to be a Participant, any Option held by the Participant under the Plan shall be deemed canceled, the balance of his or her Account shall be returned to the Participant (or to the Participant’s estate or designated beneficiary in the event of the Participant’s death) as soon as reasonably practicable, and the Participant shall have no further rights under the Plan. Section 14. Equal Rights; Participant’s Rights Not Transferable All Participants granted Options under the Plan shall have the same rights and privileges. Any Option granted under the Plan shall be exercisable during the Participant’s lifetime only by the Participant and may not be sold, pledged, assigned, or trans- ferred in any manner. In the event a Participant violates or attempts to violate the terms of this Section, any Options held by the Participant shall be deemed terminated and, upon return to the Participant of the balance of his or her Account, all of the Participant’s rights under the Plan shall terminate. Section 15. Change in Capitalization, Merger The Board or the Committee may make adjustments in accordance with and as described in this Section 15 in the event of (i) a transaction with the holders of Stock of the Company not involving the receipt by the Company of consideration, including a stock split, spin-off, stock dividend, and certain recapitalizations (such transactions, “Equity Restructurings”), or (ii) the pay- ment of a dividend or other distribution, reorganization, merger, or other changes in corporate structure (such transactions, “Corporate Transactions”). In the event of an Equity Restructuring or, to the extent the Board or the Committee determines that adjustments would be appropriate to prevent dilution or enlargement of benefits under the Plan, a Corporate Transaction, the Board or the Committee shall equitably adjust (a) the class of Stock issuable and the maximum number of shares of Stock available under the Plan, (b) the class and number of shares of Stock and the purchase price per share of Stock with respect to any outstanding Option, and (c) the class and maximum number of shares of Stock that may be issued to a participant during any Purchase Period, provided, that no such adjustment may be made unless the Board or the Committee, as applicable, is satisfied that it will not constitute a modification of the rights granted under the Plan or otherwise disqualify the Plan as an employee stock purchase plan under the provisions of Section 423 of the Code. In the event of (i) a merger or similar transaction in which the Company is not the surviving corporation or that results in the Company’s shareholders ceasing to own shares of Stock, (ii) a sale of all or substantially all of the assets of the Company, (iii) an acquisition resulting in ownership of more than 50% of the Stock by any one person (or more than one person acting as a group) that did not own more than 50% of the Stock immediately prior to the acquisition, or (iv) the replacement during any 12-month period of a majority of the directors of the Board by new directors whose appointment was not endorsed by a majority of the directors of the Board prior to the date of the appointment or election, each Option Period then in progress will continue unless otherwise provided by Board or the Committee, which may in its discretion (a) if the Company is merged with or acquired by another corporation, provide that each outstanding Option will be assumed or exchanged for a substitute Option granted by the acquiror or successor corporation, (b) cancel each outstanding Option and return the balances in Participant Accounts to the Participants, or (c) terminate any and all Purchase Periods on or before the date of the proposed transaction. In the event of our proposed dissolution or liquidation, each Option Period then in progress will be cancelled immediately prior to the consummation of such dissolution or liquidation and the balances in Participant’s Accounts will be returned to Participants unless Board or the Committee provides otherwise in its sole discretion. Section 16. Amendment and Termination of Plan The Board reserves the right at any time or times and for any reason to amend the Plan to any extent and in any manner it may deem advisable, by vote of the Board; except that (a) no amendment may affect an Option Period in progress at the time of the amendment or may adversely affect the rights of any Participant without such Participant’s consent unless (i) such amendment is required to satisfy the requirements of Code Section 423, (ii) such amendment is made in connection with a B-4 NOVAVAX, INC transaction described in Section 15, or (iii) the Board in its discretion determines that the continuation of the Plan on its cur- rent terms or any Option Period would result in financial accounting treatment for the Plan that is different from the financial accounting treatment in effect on the date the Plan was initially adopted by the Board, and (b) any amendment that would be treated as the adoption of a new plan for purposes of Code Section 423 and the regulations thereunder shall not take effect unless approved by the shareholders of the Company within twelve months before or after its adoption. The Plan may be suspended or terminated at any time by the Board. In connection therewith, the Board may provide that out- standing Options shall be exercisable either at the end of the applicable Purchase Period or at such earlier date as the Board may specify (in which case such earlier date shall be treated as the last day of the applicable Purchase Period). Section 17. Approvals The Plan was approved by the shareholders of the Company on [●], 2016, which date was within twelve months after the date the Plan was adopted by the Board. Notwithstanding anything herein to the contrary, the Company’s obligation to issue and deliver shares of Stock under the Plan shall be subject to any required approval of any governmental authority in connection with the authorization, issuance, sale or transfer of said shares, to any requirements of any national securities exchange applicable thereto, and to compliance by the Company with other applicable legal requirements in effect from time to time. Section 18. Information Regarding Disqualifying Dispositions By electing to participate in the Plan, each Participant agrees to provide such information about any transfer of Stock acquired under the Plan as may be requested by the Company or any Subsidiary in order to assist it in complying with appli- cable tax laws. Section 19. Participants’ Rights as Shareholders and Employees A Participant shall have no rights or privileges as a shareholder of the Company and shall not receive any dividends in respect of any Stock covered by an Option granted hereunder until the Option has been exercised, full payment has been made for the Stock, and the Stock has been issued to the Participant. Nothing contained in the provisions of the Plan shall be construed as giving to any Employee the right to be retained in the employ of the Company or as interfering with the right of the Company to discharge, promote, demote or otherwise re-assign any Employee from one position to another within the Company at any time. Section 20. Governing Law The Plan shall be governed by and interpreted in accordance with the laws of the State of Delaware, except as may be neces- sary to comply with applicable requirements of federal law. Section 21. Effective Date and Term The Board adopted this Plan on March 15, 2016, subject to approval of the Plan by the Company’s shareholders at the Company’s annual meeting in 2016. Subject to such approval, this Plan will become effective on August 1, 2016. The Plan shall terminate and no rights shall be granted hereunder after August 1, 2023. B-5 2015 Proxy This page intentionally left blank. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File No. 0-26770 NOVAVAX, 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 Common Stock, Par Value $0.01 per share Name of each exchange on which registered 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 [X] Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [X] 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 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [X] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chap- ter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [X] 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 the best 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 to this 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X] Accelerated filer [X] Non-accelerated filer [X] (Do not check if a smaller reporting company) Smaller reporting company [X] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] 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 of Registrants common stock on June 30, 2015 on the NASDAQ Global Select Market) was approxi- mately $2,949,700,000. As of February 24, 2016, there were 270,305,396 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 ended December 31, 2015 in connection with the Registrant’s 2015 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent indicated herein. 1 Form 10-K 2 NOVAVAX, INC. 2015 Annual Report Table of Contents PART I PAGE Item 1. Business _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5 Item 1A. Risk Factors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17 Item 1B. Unresolved Staff Comments _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ se35 Item 2. Properties _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 35 Item 3. Legal Proceedings _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 35 Item 4. Mine Safety Disclosures _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 35 PART II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _36 Item 6. Selected Financial Data _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations _ _ _ _ _ _ _ _ _ _ _ _ _ _ _38 Item 7A. Quantitative and Qualitative Disclosures about Market Risk _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _54 Item 8. Financial Statements and Supplementary Data _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 54 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure _ _ _ _ _ _ _ _ _ _ _ _ _ _55 Item 9A. Controls and Procedures _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _55 Item 9B. Other Information _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 56 PART III Item 10. Directors, Executive Officers and Corporate Governance _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _57 Item 11. Executive Compensation _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _57 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters _ _ _ _ _ _57 Item 13. Certain Relationships and Related Transactions, and Director Independence _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _57 Item 14. Principal Accounting Fees and Services _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 57 PART IV Item 15. Exhibits and Financial Statement Schedules _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 58 3 Form 10-K 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 consolidated subsidiary, Novavax AB (unless the context otherwise indicates). NOTE REGARDING TRADEMARKS Novavax™, Resolve™, Prepare™, 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 such companies, or any relationship with any of these companies. FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. In some cases, forward-looking statements are identified by words such as “believe,” “anticipate,” “intend,” “plan,” “will,” “may,” “expect” and similar expressions. All forward-looking statements are based on information available to us at this time and speak only as of the date of this Annual Report on Form 10-K. We assume no obligation to update any of these statements. Actual results could differ materially from those projected in these forward-looking statements as a result of many factors, including those identified in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We urge you to review and consider the various disclosures made by us in this report, and those detailed from time to time in our other filings with the Securities and Exchange Commission (“SEC”), that identify risks and factors that may affect our future results. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. 4 NOVAVAX, INC. 2015 Annual Report Part I Item 1. BUSINESS Recent Events In February 2016, Novavax completed the issuance of $325 million of 3.75% Convertible Senior Notes due in 2023, resulting in net proceeds of approximately $315 million, after deducting initial purchasers’ discounts and commissions, and approximately $314 million after deducting offering expenses. We used approximately $38 million of the net proceeds to pay the costs of a capped call transaction, which will function to reduce dilution from issuance of additional shares upon conversion of the notes between the note conversion price of $6.81 and the cap price of $9.73 per share. The resulting final net proceeds to the com- pany were approximately $276 million. Our cash, cash equivalents and marketable securities on December 31, 2015 of approximately $231 million, as adjusted to give effect to the final net proceeds of the Convertible Senior Note offering of approximately $276 million, before giving effect to the anticipated use of the final net proceeds, would result in an as-adjusted cash, cash equivalents and marketable securities balance of approximately $507 million. Overview Novavax, Inc., together with its wholly owned Swedish subsidiary, Novavax AB, is a clinical-stage vaccine company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. Using innovative pro- prietary recombinant nanoparticle vaccine platform technology, we produce vaccine candidates to efficiently and effectively respond to both known and emerging disease threats. 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 listed on the Nasdaq Global Select Market under the symbol “NVAX.” Our vaccine candidates are genetically engineered three-dimensional nanostructures that incorporate recombinant proteins critical to disease pathogenesis. Our product pipeline targets a variety of infectious diseases with vaccine candidates cur- rently in clinical development for respiratory syncytial virus (“RSV”), seasonal influenza, pandemic influenza and Ebola virus (“EBOV”). We have additional preclinical stage programs for a variety of infectious diseases. We are also developing proprietary technology for the production of immune-stimulating saponin-based adjuvants, through Novavax AB. Our lead adjuvant, Matrix-M™, has been successfully tested in a Phase 1/2 clinical trial for our pandemic influ- enza H7N9 vaccine candidate and in a Phase 1 clinical trial for our EBOV vaccine candidate. Genocea Biosciences, Inc. has licensed rights to our Matrix technology and is now conducting Phase 2 clinical trials with its herpes simplex 2 vaccine can- didate using Matrix-M. Clinical Product Pipeline Our clinical product pipeline includes vaccine candidates engineered to elicit differentiated immune responses with poten- tial to provide increased protection. Our nanoparticle technology platform targets antigens with conserved epitopes essen- tial for viral function. Unlike traditional vaccines that “mimic” viruses and elicit the naturally occurring immune responses to them, our nanoparticles are engineered to elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity. We believe our vaccine technology can be applied broadly to a wide variety of human infectious diseases. 5 Form 10-K A current summary of our significant research and development programs and status of related products in develop- ment follows: PROGRAM DEVELOPMENT STAGE FUNDING COLLABORATOR Respiratory Syncytial Virus (RSV) Older Adults Infants via Maternal Immunization Pediatric Influenza Seasonal Quadrivalent Pandemic H7N9 Combination (Influenza/RSV) Ebola Virus (EBOV) Phase 3 Phase 3 Phase 1 Phase 2 Phase 2 Preclinical Phase 1 BMGF* HHS BARDA HHS BARDA * As detailed herein, our funding and development arrangement with PATH expired in April 2015; we entered into a grant agreement with the Bill and Melinda Gates Foundation (BMGF) in September 2015. Respiratory Syncytial Virus (RSV) We are developing our respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) for three susceptible target populations: older adults (60 years of age and older), infants via maternal immunization and children six months to five years of age (“pediatrics”). We estimate RSV F Vaccine peak revenue potential of six to eight billion dollars worldwide. Currently, there is no approved RSV vaccine available. Repeat infections and lifelong susceptibility to RSV are common; we estimate the current global cost burden of RSV in excess of $88 billion. Despite decades of effort to develop an RSV vaccine, there are currently no licensed vaccines. Although the monoclonal antibody palivizumab (Synagis®) is effective in pre-term infants, it is not indicated for use in other populations. Novavax made a breakthrough in developing a vaccine that targets the fusion protein, or F-protein, of the RSV virus. The F-protein contains a highly conserved amino acid sequence called antigenic site II, which we believe is an ideal vaccine target. Palivizumab, which also targets antigenic site II, has demonstrated protection in five randomized clinical trials. We genetically engineered a novel F-protein antigen and enhanced its immunogenicity by exposing antigenic site II. Novavax’ RSV F Vaccine assembles into a recombinant protein nanoparticle optimized for F-protein antigen presentation. The RSV F Vaccine elicits palivizumab-competing antibodies at levels that we expect to confer protection. The Novavax RSV F Vaccine is the first RSV vaccine to demonstrate efficacy in a clinical trial, and Novavax is positioned to bring the first RSV vaccine to market to combat the 64 million RSV infections that occur each year.1,2 RSV Older Adults Program Burden of Disease Adults 60 years of age and older are at increased risk for RSV disease due to age-related declines in their immune systems. In this population, RSV is an important respiratory virus, distinct from influenza viruses, that is responsible for serious lower respiratory tract disease and may lead to hospitalization or even death. Additionally, RSV infection can lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma and congestive heart failure. RSV infection occurs as a recurrent and predictable annual epidemic throughout the world. In the U.S. alone, the incidence rate is 2.5 million infections per year, and RSV is increasingly recognized as a significant cause of morbidity and mortality in the population of 64 million older adults.3,4 Based on our analysis of published literature applied to 2014 population estimates in the U.S., the disease causes 207,000 hospitalizations and 16,000 deaths among adults older than 65. Annually, we estimate that there are approximately 900,000 medical interventions directly caused by RSV disease across all populations in the U.S. 1. Nair, H. et al., (2010) Lancet. 375:1545–1555. 2. WHO Acute Respiratory Infections September 2009 Update: http://apps.who.int/vaccine_research/diseases/ari/en/index2.html. 3. Falsey, A.R. et al., (2005) NEJM. 352:1749–59 extrapolated to 2015 census population. 4. Falsey, A.R. et al., (1995) JID. 172:389–94. 6 NOVAVAX, INC. 2015 Annual Report Clinical Trial Update In August 2015, we announced positive top-line data from a Phase 2 clinical trial of our RSV F Vaccine in 1,600 older adults. The clinical trial was designed to prospectively examine the incidence of all symptomatic respiratory illnesses associated with RSV infection, in community-living older adults who were treated with placebo. The trial also evaluated safety and immunogenicity of our RSV F Vaccine compared to placebo. Finally, the trial estimated the efficacy of our RSV F Vaccine in reducing the incidence of respiratory illness due to RSV. The trial was the first to demonstrate efficacy of an active RSV immunization in any clinical trial population. In the per-protocol population, the clinical trial showed statistically significant vaccine efficacy in prevention of all symptomatic RSV disease (41%) and, in an ad hoc analysis, showed a decrease in RSV disease with symptoms of lower respiratory tract infection (45%) in older adults. The clinical trial established an attack rate for symptomatic RSV disease of 4.9% in older adults, 95% of which included lower respiratory track symptoms. Efficacy against more severe RSV illness, defined by the presence of multiple lower respiratory tract symptoms associated with difficulty breathing, was 64% in ad hoc analyses. We initiated a pivotal Phase 3 clinical trial, known as Resolve™, of our RSV F Vaccine in older adults in November 2015, and in December 2015 we completed enrollment of 11,850 older adult subjects at 60 sites in the U.S. The primary objective of the clinical trial is the prevention of moderate-severe RSV-associated lower respiratory tract disease, as defined by the presence of multiple lower respiratory tract symptoms. We expect to provide top-line data from this clinical trial in the third quarter of 2016. In October 2015, we completed enrollment of 1,330 older adults in our Phase 2 rollover clinical trial of our RSV F Vaccine in the older adults who had participated in the recently concluded prior Phase 2 clinical trial. This trial is designed to evaluate safety and immunogenicity in response to immunization with the RSV F Vaccine during a second RSV season, and we expect to pro- vide top-line data from this trial in the second half of 2016. RSV Infants via Maternal Immunization Program Burden of Disease RSV is the most common cause of lower respiratory tract infections and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide.5 In the U.S., RSV is the leading cause of hospitalization of infants, and globally, is second only to malaria as a cause of death in children under one year of age.6,7 Despite the induction of post-infec- tion immunity, repeat infection and lifelong susceptibility to RSV is common.8,9 Clinical Trial Update In September 2015, we announced positive top-line data from a Phase 2 clinical trial of our RSV F Vaccine in 50 healthy preg- nant women and their infants. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine in pregnant women in their third trimester, and assessed the transplacental transfer of maternal antibodies induced by the vaccine. The trial also examined the impact of maternal immunization on infant safety during the first year of life and RSV-specific antibody levels through the infants’ first six months of life. Immunized women demonstrated a geometric mean 14-fold rise in anti-F IgG, 29-fold rise in palivizumab-competing antibodies and a 2.7 and 2.1-fold rise in microneutralization titers against RSV/A and RSV/B, respectively. In contrast, women who received placebo demonstrated no significant change in antibody levels. The infants’ antibody levels at delivery averaged 90%–100% of the mothers’ levels, indicating efficient transplacental transfer of antibodies from mother to infant. The estimated half-lives of infant PCA, anti-F IgG, RSV/A and RSV/B microneutralizing anti- bodies, based on data through day 60, were 41, 30, 36 and 34 days, respectively. We announced the initiation of a global pivotal Phase 3 clinical trial, known as Prepare™, of the RSV F Vaccine in 5,000 to 8,255 healthy pregnant women in December 2015. The primary objective of the Prepare trial is to determine the efficacy of maternal immunization with the RSV F Vaccine against symptomatic RSV lower respiratory tract infection with hypoxemia in infants through the first 90 days of life. This Phase 3 trial utilizes a group sequential design and is expected to take between two and four years to complete. This trial is supported by a grant (the “Grant”) of up to $89.1 million from the Bill & Melinda Gates Foundation (“BMGF”). The Grant will support development activities, product licensing efforts and WHO prequalification of our RSV F Vaccine. We concurrently entered into a Global Access Commitments Agreement (“GACA”) with BMGF as a part of the grant agreement (the “Grant Agreement”). Under the terms of the GACA, we agreed to make the RSV F Vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries. 5. Nair, H., et al., (2010) Lancet. 375:1545–1555. 6. Hall, C.B. et al., (2013) Pediatrics. 132(2):E341–348. 7. Oxford Vaccine Group. http://www.ovg.ox.ac.uk/rsv. 8. Glezen, W.P. et al., (1986) Am J Dis Child. 140:543–546. 9. Glenn, G.M. et al., (2016) JID. 213(3):411–12. 7 Form 10-K In November 2014, the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (“FDA”) granted Fast Track designation to our RSV F Vaccine for protection of infants via maternal immunization. Fast Track designation is intended for products that treat serious or life-threatening diseases or conditions, and that demonstrate the potential to address unmet medical needs for such diseases or conditions. The program is designed to facilitate development and expedite review of drugs to treat serious and life-threatening conditions so that an approved product can reach the market expeditiously. RSV Pediatric Program Burden of Disease There are currently approximately 18 million children in the U.S. between six months and five years of age.10 Based on our anal- ysis of published literature applied to 2014 population estimates, we estimate nearly 9.8 million RSV infections annually. In the U.S., RSV is responsible for approximately 57,000 hospitalizations of children under five years of age annually, the vast majority of which occur in infants less than one year old, and especially those under six months of age.11,12,13,14,15 Clinical Trial Update In September 2015, we announced positive top-line data from a Phase 1 clinical trial of our RSV F Vaccine in healthy children between two and six years of age. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine, with one or two doses, with or without aluminum phosphate adjuvant. Trial enrollment was concluded with a smaller than planned cohort so that dosing could be completed ahead of the 2014–15 RSV season. The vaccine was well-tolerated and serum samples collected from a subset of 18 immunized children in the per-protocol population demonstrated that the RSV F Vaccine was highly immunogenic at all formulations and regimens. There were greater than 10-fold increases in both anti-F IgG and PCA antibody titers in the adjuvanted group and greater than 6-fold increases in anti-F IgG and PCA antibody titers in the unadju- vanted group. We are assessing the data from this clinical trial and evaluating the next steps in the development of our RSV F Vaccine for pediatrics. Influenza Influenza is a worldwide infectious disease that causes illness in humans with symptoms ranging from mild to life-threatening or even death. Serious illness occurs not only in susceptible populations such as pediatrics and older adults, but also in the general population when unique strains of influenza arise, for which most humans have not developed protective antibodies. We are developing vaccine candidates for both seasonal and pandemic influenza. Current estimates for seasonal 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.16 Traditional vaccine manufacturing methods utilize live influenza virus to infect eggs in order to produce trivalent seasonal influenza vaccine candidates. Our recombinant nanoparticle technology does not utilize either a live influenza virus or eggs, but rather a recombinant baculovirus and insect cells, which allows for the product to be potentially rapidly manufactured and quickly adapted to changing influenza strains. We are developing a quadrivalent seasonal influenza vaccine candidate, which we expect to elicit broader protection from circulating influenza strains; we are also exploring the development of novel influ- enza nanoparticle vaccine candidates. There are currently four quadrivalent seasonal influenza vaccines licensed in the U.S., although additional quadrivalent seasonal influenza vaccines are expected to be licensed over the next several years. Quadrivalent Seasonal Influenza Vaccine Burden of Disease The Advisory Committee for Immunization Practices of the CDC recommends that all persons aged six months and older be vaccinated annually against seasonal influenza. Influenza is a major burden on public health worldwide; an estimated one mil- lion deaths each year are attributed to influenza.17 It is further estimated that, each year, influenza attacks 5%–10% of adults and 20%–30% of children, causing significant levels of illness, hospitalization and death.18 Recombinant seasonal influenza 10. U.S. Census. www.census.go/population/international/data/idb/informationGateway.php. 11. Stockman, L.J. et al., (2012) Pediatr Infect Dis J. 31:5–9. 12. CDC update May 5, 2015. http://www.cdc.gov/rsv/research/us-surveillance.html. 13. Boyce, T.G. et al., (2000) J Pediatr. 137:865–870. 14. Hall, C.B. et al., (2009) NEJM. 360(6):588–98. 15. Hall, C.B. et al., (2013) Pediatrics. 132(2):E341–8. 16. Influenza Vaccines Forecasts. Datamonitor (2013). 17. Resolution of the World Health Assembly. (2003) WHA56.19. 18. WHO position paper. (2012) Weekly Epidemiol Record. 87(47):461–76. 8 NOVAVAX, INC. 2015 Annual Report vaccines, like the candidate we are developing, have important advantages: once licensed for commercial sale, large quantities of vaccines can be potentially manufactured quickly and in a cost-effective manner, without the use of either the live influenza virus or eggs. Clinical Trial Update In July 2015, we reported positive data from our Phase 2 clinical trial of our quadrivalent seasonal influenza virus-like particle (“VLP”) vaccine candidate in 400 healthy adults that we initiated in November 2014. These data show that our quadrivalent seasonal influenza VLP vaccine candidate is well-tolerated, and can induce influenza antibody responses that met the immu- nogenicity targets. These results demonstrate the potential for our seasonal quadrivalent influenza VLP vaccine candidate to meet the FDA criteria for accelerated approval. We were awarded a contract by the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“HHS BARDA”) in 2011 to fund the development of both our quadrivalent seasonal influenza and pan- demic influenza vaccine candidates. This is a cost-plus-fixed-fee contract, which reimburses us for allowable direct contract costs incurred, allowable indirect costs, plus a fixed fee, earned in the ongoing clinical development and product scale-up of our vaccine candidates. We announced that HHS BARDA had exercised and initiated a two-year option to our contract in September 2014. The option not only extended the contract until September 2016, but also added scope to support our development activities leading up to planned Phase 3 clinical studies and $70 million of funding on top of the remainder of the $97 million base period funding. In June 2015, the contract was amended to increase the funding by $7.7 million to allow for the recovery of additional costs under the contract relating to the settlement of indirect rates for fiscal years 2011 and 2012. This additional amount was received and recorded as revenue in the second quarter of 2015. During 2015, we recognized rev- enue of $33.3 million and have recognized approximately $112 million in revenue since the inception of the contract. In recent meetings with HHS BARDA, we have been discussing the next steps in both our seasonal influenza VLP vaccine program and our pandemic influenza VLP vaccine program, as well as some of the delays associated with our development of both vaccine candidates. We expect to continue discussions with HHS BARDA during 2016 and to present plans for continued clinical and product development, although there can be no guarantee that the HHS BARDA contract will not be terminated early or will be extended beyond September 2016. Pandemic H7N9 Influenza Vaccine Burden of Disease Prevention of the potential devastation of a human influenza pandemic remains a key priority with both governmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1 influenza pandemic led to the production of approximately 126 million doses of monovalent (single strain) vaccine. Public health awareness and government prepared- ness for the next potential influenza pandemic are driving development of vaccines that can be manufactured quickly against a potentially threatening influenza strain. Industry and health experts have focused attention on developing a monovalent influenza vaccine against either the H5N1 strain or the H7N9 strain as potential key defenses against future pandemic dis- ease threats. Clinical Trial Update We have developed and delivered compelling safety and immunogenicity data on two pandemic vaccine candidates, H5N1 and H7N9. In September 2014, we announced positive results from a Phase 1/2 clinical trial of our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M in 610 healthy adults. The Phase 1/2 clinical trial was designed as a dose- ranging, randomized, observer-blinded, placebo-controlled clinical trial, to determine the contribution of Matrix-M to potential antigen dose-sparing regimens. Our H7N9 influenza vaccine candidate, with and without Matrix-M, was highly immunogenic and well-tolerated. Matrix-M adjuvanted formulations demonstrated immunogenicity and dose-sparing benefits relative to unadjuvanted antigen. Hemagglutination-inhibiting antibody titers were comparable to those reported in prior studies and the vaccine elicited significant anti-neuraminidase antibodies. In October 2014, the FDA granted Fast Track designation to our pandemic H7N9 influenza vaccine candidate with Matrix-M. Our pandemic influenza vaccine program is supported by our HHS BARDA contract. Like our seasonal influenza vaccine pro- gram, we expect to continue discussions with HHS BARDA during 2016 and to present plans for continued clinical and product development of our pandemic influenza vaccine candidate, although there can be no guarantee that the HHS BARDA contract will not be terminated early or will be extended beyond September 2016. 9 Form 10-K Combination Respiratory (Influenza and RSV) Given the ongoing development of our seasonal influenza vaccine candidate and our RSV F Vaccine, we see an important opportunity to develop a combination respiratory vaccine candidate. Early preclinical development efforts have given us con- fidence that such a combination vaccine is viable, and in animal models, provides acceptable immunogenicity. We expect to initiate a Phase 1 clinical trial of a combination respiratory vaccine in the first half of 2017. Ebola Virus (EBOV) EBOV, formerly known as Ebola hemorrhagic fever, is a severe, often fatal illness in humans. Multiple strains of EBOV have been identified, the most recent of which, the Makona EBOV strain, is associated with a case fatality rate of between 50% and 90%.19 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 the virus or were initially developed to be delivered by genetic vectors. In contrast, our EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) was developed using the Makona EBOV strain. In July 2015, we announced data from our Phase 1 clinical trial of our Ebola GP Vaccine in ascending doses, with and without our Matrix-M adjuvant, in 230 healthy adults. Participants received either one or two intramuscular injections ranging from 6.5µg to 50µg of antigen, with or without adjuvant, or placebo. Immunogenicity was assessed at multiple time points, includ- ing days 28 and 35. These Phase 1 data demonstrated that our Ebola GP Vaccine is highly immunogenic, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant, resulted in significant antigen dose-sparing. Although the adjuvanted Ebola GP Vaccine was highly immunogenic at all dose levels, the adjuvanted two-dose regimens induced Ebola anti-GP anti- body geometric mean responses between 45,000 and 70,000 ELISA units, representing a 500- to 750-fold rise over baseline at day 35. In 2015, we also announced successful data from two separate non-human primate challenge studies of our Ebola GP Vaccine in which, in both cases, the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected. CPLB Programs (India) Our joint venture with Cadila Pharmaceuticals Limited (“Cadila”), CPL Biologics Private Limited (“CPLB”), is actively developing and manufacturing vaccine candidates in India that were genetically engineered by Novavax. CPLB is owned 20% by us and 80% by Cadila. Seasonal Influenza CPLB received marketing authorization, the Indian equivalent of approval of a Biologics License Application (“BLA”), for its recombinant trivalent seasonal VLP influenza vaccine in 2015. Because the market for seasonal influenza vaccines in India is limited and highly competitive, CPLB is currently evaluating its marketing strategy for this vaccine. Rabies CPLB successfully completed Stage II of its 2-stage Phase 1/2 clinical trial in India of a rabies G protein vaccine candidate that we genetically engineered. The objective was to select a dose and regimen for a recombinant vaccine that can be adminis- tered both as a pre-exposure prophylaxis for residents of certain higher-risk geographies and travelers to such locations, and as a post-exposure prophylaxis using fewer doses than the current standard of care. In October 2014, CPLB presented clinical results from Stage I of the Phase 1/2 clinical trial, demonstrating that vaccine recipients, at various doses levels and schedules, showed seroprotective antibody levels at day 14 that were sustained through day 180. The vaccine candidate, which was found to be well-tolerated, also induced seroprotective levels with two-dose and three-dose regimens. CPLB has received permission to conduct a Phase 3 clinical trial and is considering the optimal schedule for its conduct. Discovery Programs Our vaccine platform technology provides an efficient system that has the potential to rapidly develop antigens to selected targets, refine manufacturing processes and optimize development across multiple vaccine candidates. In conjunction with global health authorities and government agencies, we believe we can address emerging disease threats with pandemic potential. In addition to our response to the H7N9 influenza strain, we have developed a vaccine candidate to Middle East respiratory syndrome (“MERS”), caused by a novel coronavirus first identified in 2012. MERS emerged as a disease threat in 19. WHO. http://www.who.int/mediacentre/factsheets/fs103/en/. 10 NOVAVAX, INC. 2015 Annual Report 2013, and is currently being monitored by global health agencies, with WHO reporting significant confirmed cases of infection and deaths. The MERS virus is a part of the coronavirus family that includes the severe acute respiratory syndrome corona- virus (“SARS”). Within weeks of obtaining the sequence of the circulating MERS strain, we successfully produced a vaccine candidate designed to provide protection. This vaccine candidate is based on the major surface spike protein, which we had previously identified as the antigen of choice in our work with a SARS vaccine candidate. In 2014, in collaboration with the University of Maryland, School of Medicine, 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 cur- rently remains a preclinical program, we believe that our MERS vaccine candidate offers a viable option to interested global public health authorities. Vaccine Platform Technology Our recombinant protein nanoparticle vaccine technology is based on self-assembly of surface protein antigens from patho- genic organisms including viruses, bacteria or parasites. The conformations of these nanoparticles are similar but not identical to the natural structure of surface antigens of disease organisms, and lack the genetic material required for replication and therefore are not infectious. One advantage of this technology is that the assembly of nanoparticles is done in vitro during the purification of these proteins. Potential immunological advantages of protein nanoparticles may be associated with the nanoparticle conformation and the presentation of key functional epitopes that are often immunologically hidden in the native pathogen. This leads to efficient recognition by the immune system’s antigen presenting cells (“APCs”) that trigger robust immune responses. Recognition of the nanoparticle vaccine’s repeating protein patterns by the APCs’ toll-like receptors to stimulate innate immunity and the high purity and lack of synthetic material adds to the potential safety of recombinant nanoparticle vaccines. Protein nanoparticle vaccine technology has expanded our early-stage vaccines in development to include both virus and non-virus disease targets. Our most advanced protein nanoparticle vaccine candidate is our RSV F Vaccine, which self-assembles from our highly purified F-protein antigen. Matrix Adjuvants Adjuvants are predominantly used to enable a vaccine to induce a strong immune response including a greater production of antibodies and longer lasting protection against viral and bacterial infections. Adjuvants may increase the amplitude of the immune response and qualitatively change it, broaden its specificity to provide protection against related microorganisms and allow for effective immunization with much lower doses of antigen. Novavax AB has developed a number of adjuvant formu- lations, 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. While adjuvants based on novel, poorly characterized substances have been hampered by safety concerns and limited effi- cacy, Matrix adjuvants stimulate strong antibody and cell-mediated immune responses. Matrix adjuvants may allow for lower antigen doses and longer-duration immune responses and carry a lower risk for allergic reactions or other adverse events. Our Matrix technology typically induces strong cellular activation of both Th1 and Th2 types, thereby generating all classes and subclasses of antibodies, as well as potent cellular responses, including cytotoxic T lymphocytes. Our Matrix-M adjuvant pro- vides a potent adjuvant effect that has been well-tolerated in clinical trials. We also believe that the strong immune response and opportunity to reduce the quantity of antigen dose can significantly reduce the production cost of our vaccines. This means that our Matrix-M adjuvant has the potential to be of immense value when there is inadequate vaccine manufacturing capacity during an emerging disease threat such as an influenza pandemic. Competition in RSV, Influenza, EBOV and Other Vaccines The vaccine market is intensely competitive, characterized by rapid technological progress. Our technology is based upon utilizing the baculovirus expression system in insect cells to make recombinant vaccines. We believe this system offers many advantages when compared to other technologies and is uniquely well-suited for developing an RSV vaccine, seasonal and pandemic influenza vaccines, 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 other organizations currently have, or have had, programs to develop such a vaccine. In addition, many other companies are developing products to prevent disease caused by RSV using a variety of technology platforms, including various viral vector technologies and competitive recombinant technologies. We believe that our RSV vaccine candidate, uti- lizing a recombinant F-protein antigen, is more effective than RSV vaccine candidates in development by our competitors; however, such efficaciousness cannot be guaranteed. Although we are not aware of all our competitors’ efforts, we believe 11 Form 10-K that MedImmune LLC, a subsidiary of AstraZeneca PLC, may have the second most advanced RSV vaccine program after Novavax, as it has reported testing in Phase 1 and Phase 1/2 clinical trials of an intranasal, recombinant, live attenuated, RSV vaccine for the prevention of lower respiratory tract disease caused by RSV, as well as a combination intranasal vaccine for the prevention of several infant respiratory illnesses, including RSV. Additional entities have also entered into early clinical trials including GlaxoSmithKline and the National Institute of Allergy and Infectious Diseases (“NIAID”), an institute under the U.S. National Institutes of Health. Unlike the comparatively low number of competitors developing RSV vaccines, there are a number of companies developing and selling vaccines for seasonal and pandemic influenza employing both historic and new vaccine technologies. There are many seasonal influenza vaccines currently approved and marketed, and most of these are marketed by major pharmaceutical companies that have significantly greater financial and technical resources, experience and expertise. Competition in the sale of these seasonal influenza vaccines is intense. Therefore, newly developed and approved products must be differentiated from existing vaccines in order to have commercial success. In order to show differentiation in the seasonal influenza market, a product may need to 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 the immunogenicity of that product, each of which is intended to be more efficacious than currently marketed products. Another differentiating factor is recombinant manufacturing, which we believe can be quicker and less expensive than traditional egg- based manufacturing. Despite the significant competition and advancing technologies, some of which are similar to our own, we believe that our seasonal influenza product will be as efficacious as, or more so than, current products or products being developed by our competitors, and that our manufacturing system provides savings in both time and money; however, there can be no guarantee that our seasonal influenza vaccine will prove to be efficacious or that our manufacturing 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, focus on viable vaccine candidates has intensified. In addition to the Phase 1 clinical trial that we initiated in February 2015, WHO reports two other vaccine candidates that are currently being tested in humans: one by GlaxoSmithKline in collaboration with NIAID, and the other by a collaboration of NewLink Genetics, Merck Vaccines USA and the Public Health Agency of Canada. While these other vaccine candidates offer promise, we believe there are accompanying challenges, including: high dose level requirements; utilization of glycoprotein from older strains that have a significant number of amino acid changes when compared to the 2014 Makona strain; difficult storage requirements at temperatures below -60°C; and challenges associated with immunity to the viral vectors which could limit their multi-dose vaccine potential. In contrast, we have developed a Phase 1 vaccine candidate that has performed well with low doses utilizing our Matrix-M adjuvant, was derived from the 2014 Makona 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 patent position. An important factor is the relative timing of the market introduction of our products and our competitors’ products. Accordingly, the speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market is an important competitive factor. Our competitive position also may depend upon our ability to show differentiation with a product that is more efficacious, particularly in the relevant target populations and/or less expensive and quicker to manufacture. Other factors affecting our competitive position include our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or pro- cesses and secure sufficient capital resources for the lengthy 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 biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. Our success will depend, in part, on whether we can: • obtain patents to protect our own technologies and product candidates; • obtain licenses to use the technologies of third parties, which may be protected by patents; • protect our trade secrets and know-how; and • operate without infringing the intellectual property and proprietary rights of others. 12 NOVAVAX, INC. 2015 Annual Report Patent Rights; Licenses We have intellectual property (patents, licenses, know-how) related to our vaccines, manufacturing processes and other tech- nologies. Currently, we have or have rights to over 200 U.S. patents and corresponding foreign patents and patent applications relating to vaccines and biologics. Our core vaccine-related intellectual property extends beyond the year 2025. Since 2007, we have maintained a non-exclusive license arrangement with Wyeth Holdings LLC (formerly Wyeth Holdings Corporation), a subsidiary of Pfizer Inc. (“Wyeth”), to a family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. In July 2010, U.S. Patent No. 7,763,450 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent & Trademark Office. The patent covers, in part, the use of influenza gene sequences for high-yield production of consistent influenza VLP vaccines to protect against current and future seasonal and pandemic strains of influenza viruses. In December 2011, European Patent No. 1644037 was issued by the European Patent Office covering this technology. 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. The patent covers, in part, methods of inducing substantial immunity to an influenza virus infection in a human and administering to the human a VLP comprising 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 patent covers, 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. The patent covers, in part, methods of inducing substantial immunity to an influenza virus infection in a human and administering to the human a VLP comprising 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 HA protein and the influenza NA protein. In October 2013, U.S. Patent No. 8,551,756 for Avian influenza chimeric Virus-Like Particles was issued by the U.S. Patent & Trademark Office. The patent covers, in part, methods of increasing the efficiency of VLP production using M1 proteins derived from strain A/Indonesia/5/05. In November 2013, U.S. Patent No. 8,592,197 for Functional Influenza Virus-Like Particles was issued by the U.S. Patent & Trademark Office. The patent covers, in part, influenza VLP vaccines containing M1, HA and NA proteins where the M1 protein is from a different stain than the HA and NA proteins. 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 the U.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 or core 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. Between February 2015 and December 31, 2015, U.S. Patent Nos. 8,951,537, 8,992,939, 9,144,607, 9,050,290, and 9,180,180 were issued by the U.S. Patent & Trademark Office. These patents all relate to aspects of our influenza VLP program. In addi- tion, 9,205,147, directed to our Matrix Adjuvant program, was issued in January 2015. The Federal Technology Transfer Act of 1986 and related statutory guidance encourage the dissemination of science and tech- nology 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 that contract, with respect to certain other collaborative research efforts with the U.S. government, certain developments and results that may have commercial potential are to be freely published, not treated as confidential, and we may be required to negotiate a license to developments and results in order to commercialize products. There can be no assurance that we will be able to successfully obtain any such license at a reasonable cost, or that such devel- opment and results will not be made available to our competitors on an exclusive or non-exclusive basis. 13 Form 10-K Trade Secrets We also rely significantly on trade secret protection and confidentiality agreements to protect our interests. It is our policy to require employees, consultants, contractors, manufacturers, collaborators and other advisors to execute confidentiality agree- ments upon the commencement of employment, consulting or collaborative relationships with us. We also require confiden- tiality agreements from any entity that is to receive confidential information from us. With respect to employees, consultants and contractors, the agreements generally provide that all inventions made by the individual while 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 our collaborators, are subject to regulation for safety, efficacy and quality by numerous governmental author- ities in the U.S. and other countries. As a U.S.-based company, we focus on the U.S. regulatory process and the standards imposed by the FDA, International Conference on Harmonisation (“ICH”) and other agencies 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 intend to 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 to address such differences. In the U.S., the development, manufacturing and marketing of human pharmaceuticals and vaccines are subject to extensive regulation under the Federal Food, Drug, and Cosmetic Act, and biological products are subject to regulation under provisions of that Act and the Public Health 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 to market any new vaccine candidate, we must first submit an investigational new drug application (“IND”) that explains to the FDA, among other things, the results of preclinical toxicology testing conducted in laboratory animals, the method of manufacture, quality control tests for release, the stability of the investigational product and what we propose to do for human testing. At this stage, the FDA decides whether it is reasonably safe to move forward with testing the vaccine can- didate in humans. We must then conduct Phase 1 clinical trials and larger-scale Phase 2 and 3 clinical trials that demonstrate the safety, immunogenicity and efficacy of our vaccine candidate to the satisfaction of the FDA. Once these trials are complete, a Biologics License Application (“BLA”) can be submitted to the FDA requesting licensure of the vaccine for marketing based on the vaccine’s safety and efficacy. During the FDA’s review of a BLA, the proposed manufacturing facility undergoes a pre-approval inspection during which the FDA examines in detail the production of the vaccine, the manufacturing facility and the quality documentation related to the vaccine. Vaccine licensure also requires the provision of adequate product labeling to allow healthcare providers to understand the vaccine’s proper use, including its potential benefits and risks, to communicate with patients and parents, and to safely deliver the vaccine to the public. Until a vaccine is given to the general population, all potential adverse events cannot be antic- ipated. Thus, the FDA typically requires Phase 4 post-marketing clinical trials for vaccines after licensure to continue gathering safety, and sometimes effectiveness/efficacy, data in the indicated and additional populations. In order to ensure continuing safety, the FDA continues to oversee the production of vaccines even after the vaccine and manufacturing processes are approved. For example, monitoring of the vaccine and of production activities, including periodic facility inspections, must continue as long as the manufacturer 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 and purity 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. In addition to obtaining FDA licensure for each product, each domestic manufacturing establishment must be registered with the FDA, is subject to FDA inspection and must comply with cGMP regulations. To supply products for use either in the U.S. or outside the U.S., including clinical trials, U.S. and foreign manufacturing establishments, including third-party facilities, must comply with GMP regulations and are subject to periodic inspection by the FDA or by corresponding regulatory agencies in their home country. In 1992, the FDA instituted regulations that allow approval of certain products that treat serious or life-threatening illnesses and provide meaningful therapeutic 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 considerably shorten the development time leading up to FDA 14 NOVAVAX, INC. 2015 Annual Report licensure. The FDA bases its decision on whether to accept a proposed surrogate endpoint on the scientific support for that endpoint. The company developing the product is required to conduct further studies to confirm the clinical benefit in Phase 4 confirmatory efficacy trials. We plan to seek traditional approval for our quadrivalent seasonal influenza vaccine, but have not ruled out the potential use of accelerated 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 other countries in which it is intended to be marketed. No such product can be marketed in a country until the regu- latory authorities of that country have approved an appropriate marketing application. FDA licensure does not assure approval by other regulatory authorities. In addition, in many countries, the government is 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 Control Act, the Resource Conservation and Recovery Act and other present and potential federal, state or local regulations, including national and local regulations that govern our facility in Sweden. These and other laws govern our use, handling and disposal of various biological and chemical substances used in, and waste generated by, our operations. Our research and development involves the controlled use of hazardous materials, chemicals and viruses. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources. Additionally, for formulations containing controlled substances, we are subject to Drug Enforcement Act regulations. There have been numerous federal and state legislative changes made over the last few years regarding the pricing of pharma- ceutical and biological products, the exertion of government control and other changes to the healthcare system of the U.S. It is uncertain how such legislative changes will be adopted or what actions federal, state or private payers for medical goods and services may take in response to such legislation. We cannot predict the effect such healthcare 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 has 53,000 square feet of combined GMP manufacturing, laboratory and office space. Our Rockville, Maryland facil- ity houses our 10,000-square-foot GMP pilot manufacturing facility that produces early-stage clinical trial material. Novavax AB, located in Uppsala, Sweden, produces our Matrix adjuvants in an approximately 16,000-square-foot facility comprised of GMP manufacturing, laboratory and office space. Sources of Supply Most of the raw materials and other supplies required in our business are generally available from established vendors in quantities adequate to meet our needs. In some cases, we have only qualified one vendor for certain of our manufacturing components. Prior to the initiation of commercial production, we plan, where feasible, to qualify multiple vendors of critical raw materials. One key vendor is GE Healthcare Company (“GEHC”), which supplies disposable components, resins, media and buffers used in our manufacturing process. GEHC and other vendors that supply our key manufacturing materials have been or will be audited 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 in Chile, and we have been able to acquire high-quality quillaja extract as needed from our current suppliers. Business Development We believe our proprietary vaccine technology affords us a range of traditional and non-traditional commercialization options that are broader than those of existing vaccine companies. We strive to create sustainable value by working to obtain non-di- lutive funding, similar to our agreements with HHS BARDA and BMGF, to fund future trials in our seasonal and pandemic influ- enza programs and our RSV program, to continue development of our vaccine candidates until such vaccines can be licensed, to retain commercial rights in one or more major markets and generate product sales revenue and, in certain markets, to commercialize our products through partners and other strategic relationships. In addition to our aforementioned contracts with HHS BARDA and BMGF, another example of our strategic relationships is our joint venture we established with Cadila. CPLB is owned 20% by us and 80% by Cadila. It was established in 2009 to develop 15 Form 10-K and manufacture certain vaccine candidates, biogeneric products and diagnostic products for the territory of India. CPLB oper- ates a manufacturing facility in India for the production of vaccines and is actively developing a number of vaccine candidates that were genetically engineered by us. Employees As of February 24, 2016, we have 443 full-time employees, of whom 95 hold M.D. or Ph.D. degrees and 109 of whom hold other advanced degrees. Of our total workforce, 390 are engaged primarily in research, development and manufacturing activities and 53 are engaged primarily in executive, business development, finance and accounting, legal and administra- tive functions. None of our U.S. employees are represented by labor unions or covered by collective bargaining agreements; 32 of our 33 Swedish employees are covered by typical collective bargaining agreements. We consider our relations with our employees to be good. 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, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our other filings with the SEC, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities 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 Report on 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 Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, 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 obligations under 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 por- tions of our website (www.novavax.com), in addition to following our press releases, SEC filings and public conference calls and webcasts. Also available on our website is information relating to corporate governance at Novavax and our Board of Directors, including our Code of Business Conduct and Ethics. We intend to disclose on our website any future amendments to and waivers from this code that apply to our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and Controller, and persons performing similar functions, as promptly as practicable, as may be required under applicable SEC and NASDAQ rules. We webcast our earnings calls and certain events we participate in or host with members of the investment community on the investor relations section of our website. Additionally, we provide notifications of news or announcements regarding press and earnings releases as part of the investor relations section 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. 16 NOVAVAX, INC. 2015 Annual Report 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 actual results to differ materially from those that are indicated by forward-looking statements. Some of the risks described relate principally to our business and the industry in which we operate. Others relate principally to the securities market and ownership of our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. 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, 2015 was $650 million. Our revenue for the last three fiscal years was $36.3 million in 2015, $30.7 million in 2014 and $20.9 million in 2013. Prior to 2011, we recorded limited revenue from research contracts, licenses and agreements to provide vaccine candidates, services and technologies. We cannot be certain that we will be successful in entering into strategic alliances or collaborative arrangements with other companies and government agencies that will result in significant revenue to offset our expenses. Our net losses for the last three fiscal years were $156.9 million in 2015, $82.9 million in 2014 and $52.0 million in 2013. Our recent historical losses have predominantly resulted from research and development expenses for our vaccine candi- dates, manufacturing-related expenses, costs related to protection of our intellectual property and for other general operating expenses. Our expenses have exceeded our revenue since inception and we believe our expenses will continue to increase, as a result of higher research and development efforts to support the development of our vaccine candidates. For example, we have experienced a significant increase in research and development expenses in the fourth quarter of 2015 over prior years primarily due to additional RSV F Vaccine clinical trials in the primary indications of older adult immunization and infants via maternal immunization, as well as higher employee-related costs to support product development of our RSV F Vaccine and other potential vaccine candidates. Although certain specified costs associated with the development of our influenza vaccines may be reimbursed under our contract with HHS BARDA, and to a more limited extent, certain specified costs associated with the development of our RSV maternal vaccine may be reimbursed under our contract with BMGF, nevertheless we expect to continue to incur significant operating expenses and anticipate that our losses will increase in the foreseeable future as we seek to: • conduct clinical trials for RSV and RSV-influenza combination respiratory vaccine candidates; • conduct preclinical studies for other vaccine candidates; • comply with the FDA’s manufacturing facility and compliance requirements in anticipation of commercialization; • 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 pre- dict when, if ever, we might achieve profitability and cannot be certain that we will be able to sustain profitability, if achieved. We have limited financial resources and we are not certain that we will be able to maintain our current level of operations or be able to fund the further development of our vaccine candidates. We do not expect to generate revenue from product sales, licensing fees, royalties, milestones, contract research or other sources in an amount sufficient to fully fund our operations for the foreseeable future, and we will therefore use our cash resources and expect to require additional funds to maintain our operations, continue our research and development pro- grams, commence future preclinical studies and clinical trials, seek regulatory approvals and manufacture and market our products. We will seek such additional funds through public or private equity or debt financings, collaborative licensing and development arrangements, non-dilutive government contracts and grants and other sources. While we continue to apply for 17 Form 10-K contracts or grants from academic institutions, non-profits and governmental entities, there are no assurances that we would be successful. We cannot be certain that adequate additional 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 may be required to delay significantly, reduce the scope of or eliminate one or more of our research or development programs, downsize our general and administrative infra- structure, or seek alternative measures to avoid insolvency, including arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies or vaccine candidates. If we raise additional funds through future offerings of shares of our common stock or other securities, such offerings would cause dilution of current stockhold- ers’ 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 and uncertainties in these markets in the past have severely restricted raising new capital and have affected companies’ ability to continue to expand or fund existing research and development efforts. We require signif- icant capital for research and development for our vaccine candidates and clinical trials. The general economic and capital market conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access 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 on favorable 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 a result 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 parties are unable to adequately satisfy their contractual commitments to us in a timely manner, our business could be adversely affected. Even with the Grant Agreement with BMGF, we may not be able to fully fund our RSV F Vaccine for infants via maternal immunization. The Grant Agreement reimburses a portion of specified expenses associated with the development of our RSV F Vaccine for infants via maternal immunization and there is no guarantee that additional activities will not be needed and, if so, that BMGF will partially reimburse us for these activities. The Grant Agreement with BMGF does not guarantee that we will be successful in future clinical trials associated with our RSV F Vaccine for infants via maternal immunization or that the vaccine candidate will be licensed by the FDA. The Grant Agreement reimburses a portion of specified expenses associated with the development of our RSV F Vaccine for infants via maternal immunization, but we remain fully responsible for conducting these development activities. The Grant Agreement does not guarantee that any of these activities will be successful. Our inability to be successful with certain key clinical or development activities could jeopardize our ability to obtain FDA licensure to sell this vaccine. Even with the HHS BARDA contract award, we may not be able to fully fund our influenza programs. The HHS BARDA contract is a cost-plus-fixed-fee contract that only reimburses certain specified activities that have been previously authorized by HHS BARDA. There is no guarantee that additional activities will not be needed and, if so, that HHS BARDA will reimburse us for these activities. Performance under the HHS BARDA contract requires that we comply with appro- priate regulations and operational mandates, which require us to engage internal and external expertise for compliance. Our ability to be regularly and fully reimbursed for our activities will depend on our ability to comply and demonstrate compliance with such requirements. 18 NOVAVAX, INC. 2015 Annual Report The HHS BARDA contract award does not guarantee that we will be successful in future clinical trials or that the vaccine candidates will be licensed by the FDA. The HHS BARDA contract provides a cost-plus-fixed-fee reimbursement opportunity for certain specified clinical and develop- ment activities, but we remain fully responsible for conducting these approved activities. The award of the HHS BARDA con- tract does not guarantee that any of these activities will be successful. Our inability to be successful with certain key clinical or development activities could jeopardize our ability to obtain FDA licensure to sell our vaccines. HHS BARDA could decide to potentially delay certain of our activities, and we may elect to move forward with certain activities at our own risk and without HHS BARDA reimbursement. Under the HHS BARDA contract, HHS BARDA regularly reviews our development efforts and clinical activities. Under certain circumstances, HHS BARDA may advise us to delay certain activities and invest additional time and resources before proceed- ing. If we follow such HHS BARDA advice, overall program delays and costs associated with additional resources for which we had not planned may result. Also, the costs associated with following such advice may or may not be reimbursed by HHS BARDA under our contract. Finally, we may decide not to follow the advice provided by HHS BARDA and instead pursue activ- ities 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 exercised option period or may decide to terminate our contract. The HHS BARDA contract was extended by an additional two years through the option period for a total performance period of approximately five and a half years. Depending on how we perform during the option period, HHS BARDA may decide whether or not to extend the contract to include additional periods of time to complete the contract deliverables or may decide to termi- nate the contract. For example, the HHS BARDA contract anticipates that we file BLAs for licensure of both our seasonal influ- enza vaccine and our pandemic influenza vaccine; however, there is no guarantee that we will successfully complete all of the tasks required to file BLAs during this period. There can be no guarantee that the HHS BARDA contract will not be terminated early or will be extended beyond September 2016. Because of changes to the influenza vaccine industry and regulatory environment, we do not expect to seek accelerated approval by the FDA of our seasonal influenza vaccine candidate. FDA regulations allow for the accelerated approval of a seasonal influenza vaccine based on a surrogate endpoint (i.e., HAI data) when there is a shortage of vaccine, because influenza is a serious and sometimes life-threatening disease. This may allow developers to obtain licensure well ahead of the timeline for demonstrating clinical efficacy, which is necessary for tra- ditional approval. However, the seasonal influenza vaccine industry has made significant steps to provide sufficient supply to the recommended population in the U.S., and thus, we no longer expect to seek accelerated approval from the FDA for our seasonal influenza vaccine. Because we do not expect such approval, it is likely that we would need to conduct larger and more expensive efficacy clinical trials and that licensure of our seasonal vaccine will be materially delayed for a year or more, assuming such licensure occurs at all, 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 and BMGF, as well as contracts with international providers, expose us to additional risks associated with doing business outside the U.S., and any adverse event could have a material negative 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, a clinical development agreement with BMGF and have entered into other agreements and arrangements with compa- nies in other countries. We plan to continue to enter into collaborations or partnerships with companies, non-profit organiza- tions and local governments in other parts of the world. Risks of conducting business outside the U.S. include: • multiple regulatory requirements could affect our ability to develop, manufacture and sell products in such local markets; • compliance with anti-bribery laws such as the United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions; 19 Form 10-K • 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 and cash flows. Current or future regional relationships may hinder our ability to engage in larger transactions. We have entered into regional collaborations to develop our vaccine candidates in certain parts of the world, and we may enter into additional regional collaborations. Our relationships with Cadila and BMGF are examples of these regional relationships. These relationships are likely to involve the licensing of our technology to our partner or entering into a distribution agreement, frequently on an exclusive basis. Generally, these exclusive agreements are restricted to certain territories. Because we have entered into exclusive license and distribution agreements, larger companies may not be interested, or able, to enter into collab- orations with us on a worldwide scale. Also, these regional relationships may make us an unattractive target for an acquisition. 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 appears promising. The outcome of any research and development program is highly uncertain. Only a small fraction of biopharmaceutical development programs ultimately result in commercial products or even product candidates and a number of events could delay our development efforts and negatively impact our ability to obtain regulatory approval for, and to manu- facture, market and sell, a vaccine. Vaccine candidates that initially appear promising often fail to yield successful products. In many cases, preclinical studies or clinical trials will show that a product candidate is not efficacious or that it raises safety con- cerns or has other side effects that outweigh its intended benefit. Success in preclinical or early clinical trials may not translate into success in large-scale clinical trials. Further, success in clinical trials will likely lead to increased investment, accelerating cumulative losses to bring such products to market. Even if clinical 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 face challenges when scaling up the production process to commercial levels. Even after a product is approved and launched, general usage or post-marketing clin- ical trials may identify safety or other previously unknown problems with the product, which may result in regulatory approv- als being suspended, limited to narrow indications or revoked, which may otherwise prevent successful commercialization. Intense competition in the vaccine industry could also limit the successful commercialization of our products. Many of our competitors have significantly greater resources and experience, which may negatively impact our commercial opportunities and those of our current and future licensees. The biotechnology and pharmaceutical industries are subject to intense competition and rapid and significant technological change. We have many potential competitors, including major pharmaceutical companies, specialized biotechnology firms, academic institutions, government agencies and private and public research institutions. Many of our competitors have sig- nificantly greater financial and technical resources, experience and expertise in: • research and development; • preclinical testing; • designing and implementing clinical trials; 20 NOVAVAX, INC. 2015 Annual Report • 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 (a subsidiary of AstraZeneca PLC), among others, compete in the vaccine market. In particular, these companies have greater experience and expertise in securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products. There are many seasonal influenza vaccines currently approved and marketed. Competition in the sale of these seasonal influ- enza vaccines is intense. Therefore, newly developed and approved products must be differentiated from existing vaccines in order to have commercial success. In order to show differentiation in the seasonal influenza market, a product may need to be more efficacious, particularly in older adults, and/or be less expensive and quicker to manufacture. Many of our competitors are working on new products and new generations of current products, each of which is intended to be more efficacious than products currently being marketed. Our seasonal influenza vaccine candidate may not prove to be more efficacious than cur- rent products or products under development by our competitors. Further, our manufacturing system may not provide enough savings of time or money to provide the required differentiation for 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 no RSV vaccine currently on the market, there is likely to be significant and consistent competition as these active programs mature. Different RSV vaccines may work better for different segments of the population, so it may be difficult for a single RSV vaccine manufacturer to provide vaccines that are marketable to multiple population segments. Geographic markets are also likely to vary significantly, which may make it difficult to market a single RSV vaccine worldwide. 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 more efficacious and/or less expensive. Our RSV vaccine candidate may not be as far along in development as other active RSV vaccine programs about which we are 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 late-stage clinical trials: one by GlaxoSmithKline in collaboration with the United States National Institute of Allergy and Infectious Diseases, and the other by a collaboration of NewLink Genetics, Merck Vaccines USA and the Public Health Agency of Canada. Additional vaccine candi- dates are also being tested, although in earlier-stage clinical trials. Vaccine candidates against EBOV have been in development for more than a decade by large pharmaceutical companies, 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. Regardless of the disease, smaller or early-stage companies and research institutions may also prove to be significant compet- itors, particularly through collaborative arrangements with large and established pharmaceutical companies. As these compa- nies develop their technologies, they may develop proprietary positions, which may prevent or limit our product development and commercialization efforts. We will also face competition from these parties in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and subject registration for clinical trials and in acquiring and in-li- censing technologies and products complementary to our programs or potentially advantageous to our business. If any of our competitors succeed 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 less costly than ours, our commercial opportunity could be significantly reduced. 21 Form 10-K In order to effectively compete, we will have to make substantial investments in development, testing, manufacturing and sales and marketing or partner with one or more established companies. There is no assurance that we will be successful in gaining significant market share for any vaccine. Our technologies and vaccines also may be rendered obsolete or non-competitive as a result of products introduced by our competitors to the marketplace more rapidly 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 be materially 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 and significantly delay or prevent the achievement of research, development or business objectives. We have had turnover situations in key executive positions and the lack of management continuity and resulting lack of long-term history with our Company along with the learning curve that executives experience when they join our management team could result in operational and administrative inefficiencies and added costs. If we were to experience additional turnover 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. Competition for qualified employees is intense among pharmaceutical and biotechnology companies, and the loss of qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the expansion of our activities, could hinder our ability to complete clinical trials successfully and develop marketable products. We also rely from time to time on outside advisors who assist us in formulating our research and development and clinical strategy. We may not be able to attract and retain these individuals on acceptable terms, which could have a material adverse effect on our business, financial condition and results of operations. We may have product liability exposure. The administration of drugs or vaccines to humans, whether in clinical trials or after marketing clearances are obtained, can result in product liability claims. We maintain product liability insurance coverage in the total amount of $20 million aggregate for all claims arising from the use of products in clinical trials prior to FDA approval. Coverage is relatively expensive, and the market pricing can significantly fluctuate. Therefore, we may not be able to maintain 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 the use of our other products in the future. This insurance coverage and our resources may not be sufficient to satisfy all liabilities resulting from product liability claims. A successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable items, if at all. Even if a claim is not successful, defending such a claim would be time-consuming and expensive, may damage our reputation in the marketplace and would likely divert 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; • 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 or grants can be highly attractive because they provide capital to fund the ongoing development of our technologies and vaccine candidates without diluting our stockholders. However, there is often significant competition for these contracts or grants. Entities offering contracts or grants may have requirements to apply 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 entities may make arbitrary decisions as to whether to offer contracts or make grants, to whom the contracts or grants will be awarded and 22 NOVAVAX, INC. 2015 Annual Report the size of the contracts or grants 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 not be 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 stockholders or require us to relinquish rights to our technologies or vaccine candidates. If we are unable to partner with a third party to advance the development of one or more of our vaccine candidates, we will need to raise money through additional debt or equity financings. To the extent that we raise additional capital by issuing equity securities, our stockholders will experience immediate dilution, which may be significant. There is also a risk that such equity issuances may cause an ownership change under the Internal Revenue Code of 1986, as amended, and similar state provi- sions, thus limiting our ability to use our net operating loss carryforwards and credits. To the extent that we raise additional capital through licensing arrangements or arrangements with collaborative partners, we may be required to relinquish, on terms that may not be 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 have to 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 acqui- sition, partnering and in-licensing of products, technologies and companies or the entry into strategic alliances and collabo- rations. The availability of high-quality opportunities is limited, and we may fail to identify candidates that we and our stock- holders consider suitable or complete transactions on terms that prove advantageous. In order to pursue such opportunities, we may require significant additional financing, which may not be available to us on favorable terms, if at all. Even if we are able to successfully identify and complete acquisitions, like our business combination with Novavax AB, we may not be able to integrate the assets or take full advantage of the opportunities and, consequently, may not realize the benefits that we expect. To effectively manage our current and future potential growth, we will need to continue to enhance our operational, financial and management processes and to effectively expand, train and manage our employee base. Supporting our growth initiatives will require significant expenditures and management resources, including investments in research and development, manu- facturing and other areas of our business. If we do not successfully manage our growth and do not successfully execute our growth initiatives, then our business and financial results may be adversely impacted, and we may incur asset impairment or restructuring charges. 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 that may be brought against us, litigation could result in a diversion of management’s attention and resources and we may be required to incur significant expenses defending against these claims. If we are unable to prevail in litigation, we could incur substantial liabilities. Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of our esti- mates could be wrong. Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary busi- ness information and data about our clinical subjects, suppliers, and business partners, and personally identifiable informa- tion. The secure maintenance of this information is critical to our operations and business strategy. Some of this information could be an attractive target of criminal attack by malicious third parties with a wide range of motives and expertise, including organized criminal groups, “hactivists,” patient groups, disgruntled current or former employees, and others. Hacker attacks are of ever-increasing levels of sophistication, and despite our security measures, our information technology and infrastruc- ture may be vulnerable to such attacks or may be breached due to employee error or malfeasance. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Furthermore, 23 Form 10-K if our systems become compromised, we may not promptly discover the intrusion. Like other companies in our industry, we have experienced attacks to our data and systems, including malware and computer viruses. Attacks could have a material impact on our business, operations or financial results. Any access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business. PRODUCT DEVELOPMENT RISKS Because our vaccine product development efforts depend on new and rapidly evolving technologies, we cannot be certain that our efforts will be successful. Our vaccine development efforts depend on new, rapidly evolving technologies and on the marketability and profitability of our products. Our development 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 manufacturing process will be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances or com- mercial 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 such vaccine products. The development, manufacture and marketing of our pharmaceutical and biological products are subject to government reg- ulation in the U.S. and other countries, including the European Medicines Agency and the Swedish Medical Products Agency with respect to our adjuvant product being developed in Sweden. In the U.S. and most foreign countries, we must complete rigorous preclinical testing and extensive clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product. None of our vaccine candidates have yet gained regulatory approval in the U.S. or elsewhere. We also have vaccine candidates in clinical trials and preclinical 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 preclinical (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 intended target population; • performance of a consistent and reproducible manufacturing process intended for commercial use, including appropriate manufacturing data and regulatory inspections; • submission to the FDA of a BLA or an NDA; and • FDA approval of the BLA or NDA before any commercial sale or shipment of the product. The processes are expensive and can take many years to complete, and we may not be able to demonstrate the safety and efficacy of our vaccine candidates 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 be conducted. Promising results in early clinical trials may not be replicated in subsequent clinical trials. Regulatory authorities may also require additional testing, and we may be required to demonstrate that our proposed products represent an improved form of treatment over existing therapies, 24 NOVAVAX, INC. 2015 Annual Report which we may be unable to do without conducting further clinical trials. Moreover, if the FDA or a foreign regulatory body grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect to its distri- bution. Expanded or additional indications for approved products may not be 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 preclinical and clinical data are sufficient to support regulatory approval for our vaccine candidates, the FDA and foreign reg- ulatory authorities may not ultimately grant approval for commercial sale in any jurisdiction. If our vaccine candidates are not approved, our ability to generate revenue 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 a manufacturing facility for our vaccines, we may experience delays in product development, clinical trials, regulatory approval and commercial distribution. Completion of our clinical trials and commercialization of our vaccine candidates require access to, or development of, facili- ties to manufacture our vaccine candidates at sufficient yields and at commercial scale. We have limited experience manufac- turing any of our vaccine candidates in the volumes that will be necessary to support large-scale clinical trials or commercial sales. Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency or quality. Manufacturing our vaccine candidates involves a complicated process with which we have limited experience. If we are unable to manufacture our vaccine 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 competition with 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 not be able to enter into any necessary third-party manufacturing arrangements on acceptable terms, or on a timely basis. In addition, we have to enter into technical transfer agreements and share our know-how with the third-party manufacturers, which can be time-consuming and may result in delays. Influenza vaccines are seasonal in nature. If a vaccine is not available early enough in the influenza season, we would likely have difficulty selling the vaccine. Further, pandemic outbreaks present only short-term opportunities for us. There is no way to predict when there will be a pandemic outbreak, the strain 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 sales volumes, lower sale prices, or no sales. Because the strain of the seasonal influenza changes annually, inventory of seasonal vaccine cannot be sold during a subsequent 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 to manufacture our bulk vaccines on a commercial scale, replacement of a man- ufacturer may be expensive and time-consuming and may cause interruptions in the 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. As a result, any delay or interruption could have a material adverse effect on our business, financial condition, results of oper- ations and cash flows. 25 Form 10-K 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 collaborations with pharmaceutical and biotechnology companies, non-profit organizations and government agencies. Establishing strategic collaborations and obtaining government 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 their assessment of public need, the public interest, our products’ ability to address these areas, or other reasons beyond our expectations or control. If we fail to establish a sufficient number of collaborations or government relationships on accept- able terms, we may not be able to commercialize our vaccine candidates or 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 or commercialization of any vaccine candidates for several reasons, including the fact that: • we may not have the ability to control the activities of our 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 commercialization of 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 would be time-consuming and expensive, and may delay or terminate research and development efforts, regulatory approvals and commercialization activities. Our collaborators will be subject to the same regulatory approval of their manufacturing facility and process as Novavax. Before we could begin commercial manufacturing of any of our vaccine candidates, we and our collaborators must pass a pre-approval inspection before FDA approval and comply with the FDA’s GMP regulations. If our collaborators fail to comply with these requirements, our vaccine candidates would not be approved. If our collaborators fail to comply with these require- ments after approval, we could be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell our products. If we or our collaborators fail to maintain our existing agreements or in the event we fail to establish agreements as necessary, we could be required to undertake research, development, manufacturing and commercialization activities solely at our own expense. These activities would significantly increase our capital requirements and, given our lack of sales, marketing and distribution capabilities, significantly delay the commercialization of our vaccine candidates. Because we depend on third parties to conduct some of our laboratory testing, clinical trials, and manufacturing, we may encounter delays in or lose some control over our efforts to develop products. We are dependent on third-party research organizations to conduct some of our laboratory testing, clinical trials and manu- facturing activities. If we are unable to obtain any necessary services on acceptable terms, we may not complete our product development efforts in a timely manner. We may lose some control over these activities and become too dependent upon these parties. These third parties may not complete testing or manufacturing activities on schedule, 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 identify additional 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, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the clinical trial participants are adequately protected. The FDA and foreign regulatory agencies also require us to comply with good manufacturing practices. Our reliance on third par- ties does not relieve us of these responsibilities and requirements. These third parties may not successfully carry out their 26 NOVAVAX, INC. 2015 Annual Report contractual duties or regulatory obligations or meet expected deadlines. In addition, these third parties may need to be replaced or the quality or accuracy of the data they obtain may be compromised or the product 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 preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval of, or commercially manufacture, our vaccine candidates. Even if licensed to market, our vaccine products may not be initially or ever profitable. Whether Novavax makes a profit from the sale of its vaccine products is dependent on a number of variables, including the costs we incur manufacturing, testing and releasing, packaging and shipping such vaccine product. The Grant Agreement with BMGF necessitates that we commit to a specific amount of sales in certain specified middle- and lower-income countries, which may impact our ability to make profits. In addition, we have not yet determined pricing for our vaccine products, which is a complicated undertaking that necessitates both regulatory agency and payor support. We cannot predict when, if at all, our approved vaccine products will be profitable to the Company. Our collaborations may not be profitable. We formed CPLB with Cadila in India and, in connection with it, entered into a master services agreement pursuant to which we may request certain services from Cadila in the areas of biologics research, preclinical development, clinical development, pro- cess development, manufacturing scale-up and general manufacturing related services in India. We cannot predict when, if at all, this relationship will lead to approved products or sales, or otherwise provide revenue to the Company or become profitable. We have limited marketing capabilities, and if we are unable to enter into collaborations with marketing partners or develop our own sales and marketing 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 dedicated sales, marketing or distribution capabilities. As a result, we will depend on collaborations with third parties that have established distribution systems and sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenue will depend upon the efforts of third parties, over which we may have little or no control. If we are unable to reach and maintain agreements with one or more pharmaceutical companies or collaborators, we may 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 will depend on, among other things, their acceptance by physicians, patients, third-party payers, such as health insurance companies, and other members of the medical community, as a vaccine and cost-effective alternative to competing products. If our vaccine candidates fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business. Market acceptance of, and demand for, any product that we may develop and commercialize will depend on many factors, including: • our ability to provide acceptable evidence of safety and efficacy; • the prevalence and severity of adverse side effects; • whether our vaccines are differentiated from other vaccines based on immunogenicity; • availability, relative cost and relative efficacy of alternative and competing treatments; • the effectiveness of our marketing and distribution strategy; • publicity concerning our products or competing products and treatments; and • our ability to obtain sufficient third-party insurance coverage or reimbursement. In particular, there are significant challenges to market acceptance for seasonal influenza vaccines. For our seasonal vaccine to be accepted in the market, we must demonstrate differentiation from other seasonal vaccines that are currently approved 27 Form 10-K and marketed. This can mean that the vaccine is more effective in certain populations, such as in older adults, or cheaper and quicker to produce. There are no assurances that our vaccine will be more efficacious than 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, we need long-term access to quillaja extract of 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 healthcare industry make reimbursement for our potential products less likely, the market for our potential products will be reduced, and we could lose potential sources of revenue. Our success may depend, in part, on the extent to which reimbursement for the costs of vaccines will be available from third- party payers, such as government health administration authorities, private health insurers, managed care programs and other organizations. Over the past decade, the cost of healthcare has risen significantly, and there have been numerous proposals by legislators, regulators and third-party healthcare payers to curb these costs. Some of these proposals have involved limitations on the amount of reimbursement for certain products. Similar federal or state healthcare legislation may be adopted in the future and any products that we or our collaborators seek to commercialize may not be considered cost-effective. Adequate third-party insurance coverage may not be available for us to establish and maintain price levels that are sufficient for reali- zation of an appropriate return on our investment in product development. Moreover, the existence or threat of cost control measures could cause our corporate collaborators to be less willing or able to pursue research and development programs related to our vaccine candidates. REGULATORY RISKS We may fail to obtain regulatory approval for our products on a timely basis or comply with our continuing regulatory obligations after approval is obtained. Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities, loss of any potential marketing advantage of being early to market and increased clinical trial costs. The speed with which we begin and complete our preclinical studies necessary to begin clinical trials, clinical trials and 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 preclinical 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 patient population, 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 preclinical and clinical activities, which are susceptible to varying interpretations and which interpretations could delay, limit or prevent further studies or regulatory approval; • the availability of skilled and experienced staff to conduct and monitor clinical trials and to prepare the appropriate regula- tory 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 preclinical studies and clinical trials necessary to obtain regula- tory marketing approvals. 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 be inconsistent with the results obtained in preclinical studies or clinical trials of similar products or that the results obtained in later phases of clinical trials may be inconsistent with those obtained in earlier phases. 28 NOVAVAX, INC. 2015 Annual Report A number of companies in the biopharmaceutical and product development industry have suffered significant 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 that the subjects or patients are being exposed to an unacceptable health risk. In addition, we or our collabo- rators may be unable to submit applications to regulatory agencies within the time frame we currently expect. Once submitted, applications must be approved by various regulatory agencies before we or our collaborators can commercialize the product described in the application. All statutes and regulations governing the conduct of clinical trials are subject to 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 to generate revenue and harm our financial condition and results of operations. 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 Cadila in India. In order to market our products in the European Union, India, Asia and many other non-U.S. jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can 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 regulatory approvals on a timely basis, if at all. Approval by a regulatory agency, such as the FDA, does not ensure approval by any other regulatory agencies, for example in other foreign countries. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions, including approval by the FDA. The failure to obtain regulatory approval in foreign jurisdictions could harm 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 the manufacturer of the product will be subject to continuing regulatory review, including adverse event report- ing requirements and the FDA’s general prohibition against promoting products for unapproved uses. Failure to comply with any post-approval requirements can, among other things, result in warning letters, product seizures, recalls, substantial fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecutions. Any of these enforcement actions, any unanticipated changes in existing regulatory requirements or the adoption of new requirements, or any safety issues that arise with any approved products, could adversely affect our ability to market products and generate revenue and thus adversely affect our ability to continue our business. We also may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknown problems with the product or its manufacture are subsequently discovered and we cannot provide assur- ance that newly discovered or developed safety issues will not arise following any regulatory approval. With the use of any vaccine by a wide patient population, serious adverse events may occur from time to time 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 the vaccine become suspect as having a causal relationship to the adverse event. Any safety issues could cause us to suspend or cease marketing of our approved products, 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 of animals, emissions and wastewater discharges, and the use and disposal of hazardous or potentially hazardous substances used in connection with our research, including infectious disease agents. We also cannot accurately predict the extent of regulations that might result from any future legislative or administrative action. Any of these laws or regulations could cause us to incur additional expense or restrict our operations. 29 Form 10-K Our facilities in Maryland are subject to various local, state and federal laws and regulations relating to safe working condi- tions, laboratory and manufacturing 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 connec- tion with our research and development activities. In the U.S., these laws include the Occupational Safety and Health Act, the Toxic Test Substances Control Act and the Resource Conservation and Recovery Act. Similar national and local regulations 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 the event of an improper or unauthorized release of, or exposure of individ- uals to, these hazardous materials. In addition, claimants may sue us for injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts. Although we have general liability insurance, these policies contain exclusions from insurance against claims arising from pollution from chemicals or pollution from conditions arising from our operations. Our collaborators are working with these types of hazardous materials in connection with our collaborations. 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 by exposure to, or release of, any hazardous materials. However, we believe that we are currently in compliance with all applicable environmental and occupational health and safety regulations. Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face 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 future collaboration partners or customers, to obtain adequate levels of coverage and reimbursement for such prod- ucts 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 inad- equate levels of reimbursement if they determine that a prescribed product has not received appropriate clearances from the FDA, or foreign equivalent, or other government regulators; is not used in accordance with cost-effective treatment methods as determined by the third-party payer; or is experimental, unnecessary or inappropriate. 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 health care system in ways that could affect our ability to sell vaccines. Some of these proposed and imple- mented reforms could result in reduced reimbursement rates for medical products, and while we have no current vaccines available for commercial sale, the impact of such reform could nevertheless adversely affect our 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 (the “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, including changes made in order to extend medical benefits to those who currently lack insurance coverage. The long-term ramifications of PPACA remain unclear and many details regarding implementation of PPACA are yet to be determined, however, the cost-containment measures that healthcare providers are instituting and the results of healthcare reforms may negatively impact the commercial prospects of one or more of our vac- cine candidates currently in development. 30 NOVAVAX, INC. 2015 Annual Report 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 must prosecute and maintain existing patents, obtain new patents and pursue trade secret and other intellectual property protection. We also must operate without infringing the proprietary rights of third parties or allowing third-parties to infringe our rights. We currently have or have rights to over 200 U.S. patents and corresponding foreign patents and patent applications covering our technologies. However, patent issues relating to pharmaceuticals and biologics involve complex legal, scientific and factual questions. To date, no consistent policy has emerged regarding the breadth of biotechnology pat- ent claims that are granted 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 in the 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 develop additional proprietary products that are patentable. Furthermore, there is a risk that others will independently develop or duplicate similar technology or products or circumvent the patents issued to us. There is a risk that third parties may challenge our existing patents or claim that we are infringing their patents or proprietary rights. We could incur substantial costs in defending patent infringement suits or in filing suits against others to have their patents declared invalid or claim infringement. It is also possible that we may be required to obtain licenses from third parties to avoid infringing third-party patents or other proprietary rights. We cannot be sure that 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 be delayed 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 and use, our patents do not provide us with complete protection against the development of competing products. Some of our know-how and technology is not patentable. To protect our proprietary rights in unpat- entable intellectual property and trade secrets, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary 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 be claimed 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, including applications that have been filed, but not published that, when issued, could be asserted against us. These third parties could bring claims against us, and that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or biologic drug candidate that is the subject of the suit. As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from 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 license fees 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 intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. All of the issues described above could also impact our collaborators, which would also impact the success of the collaboration and therefore us. There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. 31 Form 10-K We may become involved in litigation to protect or enforce our patents or the patents of our collaborators or licensors, which could be expensive and time-consuming. Competitors may infringe our patents or the patents of our collaborators or licensors. As a result, we may be required to file infringement claims to counter infringement for unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. In addition, in an infringement 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 the technology at issue on the grounds that our patents do not cover its technology. An adverse determination of any litigation or defense proceeding could put one 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. Interference proceedings brought by the U.S. Patent and Trademark Office may be necessary to determine the priority of inven- tions with respect to our patent applications or those of our collaborators or licensors. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distraction to our management. We may not be able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary 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 of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed. We may need to license intellectual property from third parties and, if our right to use the intellectual property we license is affected, our ability to develop and commercialize our vaccine candidates may be harmed. We expect that we will need to license intellectual property from third parties in the future and that these licenses will be mate- rial 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 our licensors to properly prosecute and file those patent applications and prevent infringement of those patents. Our license agreement with Wyeth, which gives us rights to a family of patents and patent applications that are expected to expire in early 2022, covering VLP technology for use in human vaccines in certain fields of use, is non-exclusive. These appli- cations are very significant to our business. If each milestone is achieved for any particular vaccine candidate, we would likely be obligated to pay an aggregate of $15 million to Wyeth for each vaccine candidate developed and commercialized under the agreement. Achievement of each milestone is subject to many risks, including those described in these risk factors. Annual license fees under the Wyeth agreement aggregate to $0.3 million per year. In September 2015, the Company entered into an amendment to the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment owed as a result of CPLB’s initiation of a Phase 3 clinical trial for its recombinant trivalent seasonal VLP influenza vac- cine candidate in 2014. Under the amendment, the milestone payment, which may increase slightly over time, shall be due in connection with the initiation of a Phase 3 clinical trial for the initial seasonal influenza VLP vaccine candidate being developed outside India, but in any case no later than December 31, 2017. 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 other licenses may be subject to dispute by our licensors or third parties. In addition, our rights to use these technol- ogies and practice the inventions claimed in the licensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Any of our licenses may be 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. The cumulative license fees and royalties for these components may make the commercialization of these vaccine candidates uneconomical. 32 NOVAVAX, INC. 2015 Annual Report 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 processes in 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 patent protection as provided under the U.S. patent system. Litigation or administrative proceedings may be necessary to determine the validity and scope of certain of 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 to do one or more of the following: cease selling or using any of our products that incorporate the challenged intellectual property, which would adversely affect our revenue; obtain a license from the holder of the intellectual property right alleged to have been infringed, which license may not be available on reasonable terms, if at all; and redesign our products to avoid infringing the intellectual property rights of third parties, which may be time-consuming or impossible to do. In addition, changes in, or different interpretations of, patent laws in the U.S. and other countries may result in patent laws that allow others to use our discoveries or develop and commercialize our products. We cannot provide assurance that the patents we obtain or the unpat- ented technology we hold will afford us significant commercial protection. RISKS RELATED TO OUR CONVERTIBLE SENIOR NOTES Servicing our 3.75% convertible senior unsecured notes due 2023 (the “Notes”) requires a significant amount of cash, and we may not have sufficient cash flow to pay our debt. In 2016, we issued $325 million aggregate principal amount of Notes. Our ability to make scheduled payments of the princi- pal of, to pay interest on, or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. We do not expect our business to be able to generate cash flow from operations, in the foreseeable future, sufficient to service our debt and make necessary capital expen- ditures and may therefore be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness, which is non-callable and matures in 2023, will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, and limit our flexibility in planning for and reacting to changes in our business. We may not have the ability to raise the funds necessary to repurchase the Notes as required upon a fundamental change, and our future debt may contain limitations on our ability to repurchase the Notes. Holders of the Notes will have the right to require us to repurchase their Notes for cash upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. A fundamental change may also constitute an event of default or prepayment under, and result in the acceleration of the maturity of, our then-existing indebtedness. We cannot assure you that we will have sufficient financial resources, or will be able to arrange financing, to pay the fundamental change repurchase price in cash with respect to any Notes surrendered by holders for repurchase upon a fundamental change. In addition, restrictions in our then-existing credit facilities or other indebtedness, if any, may not allow us to repurchase the Notes upon a fundamental change. Our failure to repurchase the Notes upon a fundamental change when required would result in an event of default with respect to the Notes which could, in turn, constitute a default under the terms of our other indebtedness, if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes. Capped call transactions entered into in connection with our Notes may affect the value of our common stock. In connection with our Notes, we entered into capped call transactions (the “capped call transactions”) with certain financial institutions. The capped call transactions are expected to generally reduce the potential dilution upon conversion of the Notes into shares of our common stock. In connection with establishing their initial hedges of the capped call transactions, these financial institutions or their respec- tive affiliates entered into various derivative transactions with respect to our common stock and/or to purchase our common 33 Form 10-K stock. The financial institutions, or their respective affiliates, may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes. This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect the value of our common stock. 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 more volatile than expected. Our stock price has been highly volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. From January 1, 2015 through December 31, 2015, the closing sale price of our common stock has been as low as $5.74 per share and as high as $14.14 per share. The market price of our common stock may be influenced by many factors, including: • future announcements about us or our collaborators or competitors, including the results of testing, technological innova- tions or new commercial products; • clinical trial results; • depletion of our cash reserves; • sale of equity securities or issuance of additional debt; • announcement by us of significant strategic partnerships, collaborations, joint ventures, capital commitments or acquisitions; • changes in government regulations; • impact of competitor successes and in particular development success of vaccine candidates that compete with our own vaccine candidates; • developments in our relationships with our collaboration partners; • announcements relating to healthcare 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 setbacks 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 extreme price and volume fluctuations that have particularly affected the market price for many of those com- panies. These fluctuations have often been unrelated to the operating performance of these companies. These broad market fluctuations may cause the market price of our common stock to be lower or more volatile than expected. Provisions of our Certificate of Incorporation and By-laws and Delaware law could delay or prevent the acquisition of the Company, even if such acquisition 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 acquire control of, the Company. Stockholders who wish to participate in these transactions may not have the opportunity to do so. Our organizational documents also 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 any one year. Certain provisions include the 34 NOVAVAX, INC. 2015 Annual Report right of the existence of a staggered board with three classes of directors serving staggered three-year terms and advance notice requirements for stockholders to nominate directors and make proposals. As a Delaware corporation, we are also afforded the protections of Section 203 of the Delaware General Corporation Law, which will prevent us from engaging 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 person acquired such common stock, unless advance board or stockholder approval was obtained. Any delay or prevention of a change of control transaction or changes in our board or management could deter potential acquirers or prevent the completion 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 development of our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capi- tal appreciation, if any, of our common stock would be 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, we acquired a facility lease in Uppsala, Sweden. A summary of our current facilities is set forth below. Although we believe that our facilities are suitable and adequate for our present needs, the Company’s management con- tinues to review and assess real property expansion opportunities that may be necessary to address our expectations for future growth. BRIEF PROPERTY DESCRIPTION Vaccine research and development and manufacturing facility Corporate headquarters, vaccine research and development and manufacturing facility Research and development laboratory facility and offices Executive, administrative, clinical and regulatory offices Adjuvant manufacturing facility and research and development and administrative offices PROPERTY LOCATION Rockville, MD 20FF Gaithersburg, MD 21FF Gaithersburg, MD 22FF Gaithersburg, MD Uppsala, Sweden Total square footage APPROXIMATE SQUARE FOOTAGE 51,000 53,000 40,000 40,000 16,000 200,000 Item 3. LEGAL PROCEEDINGS We currently have no material pending legal proceedings. Item 4. MINE SAFETY DISCLOSURES Not applicable. 35 Form 10-K 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 and low 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 December 31, 2015 September 30, 2015 June 30, 2015 March 31, 2015 December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 HIGH $8.77 $14.14 $11.19 $9.71 $5.98 $5.01 $5.13 $6.65 LOW $6.59 $6.41 $7.66 $5.74 $4.05 $4.08 $3.69 $4.13 On February 24, 2016, the last sale price reported on The NASDAQ Global Select Market for our common stock was $4.79. Our common stock was held by approximately 391 stockholders of record as of February 24, 2016, 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 into participant accounts at DTC, and are therefore considered to be held of record by Cede & Co. as one stockholder. We have not paid any cash dividends on our common stock since our inception. We do not anticipate declaring 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 included in Item 12 of this Annual Report on Form 10-K. 36 NOVAVAX, INC. 2015 Annual Report Performance Graph The graph below compares the cumulative total stockholders return on our common stock for the last five fiscal years with the cumulative total return on the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index (which includes Novavax) over the same period, assuming the investment of $100 in our common stock, the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index on December 31, 2010, and reinvestments of all dividends. Comparison of Five-Year Cumulative Total Return* AMONG NOVAVAX, INC., THE NASDAQ COMPOSITE INDEX AND THE RUSSELL 2000 GROWTH BIOTECHNOLOGY INDEX $400 $300 $200 $100 $0 Novavax, Inc. NASDAQ Composite Russell 2000 Growth Biotechnology * $100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2016 Russell Investment Group. All rights reserved. Value of $100 invested on December 31, 2010 in stock or index, including reinvestment of dividends, for fiscal years ended December 31: Novavax, Inc. NASDAQ Composite Index RUSSELL 2000 Growth Biotechnology Index 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 $100.00 $100.00 $ 51.85 $100.53 $ 77.78 $116.92 $210.70 $166.19 $244.03 $188.78 $345.27 $199.95 $100.00 $ 96.86 $111.24 $173.74 $215.91 $240.03 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 Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 37 Form 10-K 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, 2015, which has been derived from 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 historical results are not necessarily indicative of results that may be expected for future periods. (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2015(1) 2014(2) 2013(3) 2012 2011 FOR THE YEARS ENDED DECEMBER 31, Statements of Operations Data: Revenue Net loss $ 36,250 $ 30,659 $ 20,915 $ 22,076 $ 14,688 (156,937) (82,947) (51,983) (28,507) (19,364) Basic and diluted net loss per share (0.60) (0.37) (0.31) (0.22) (0.17) Weighted average shares used in computing basic and diluted net loss per share 262,248 225,848 169,658 131,726 113,610 (IN THOUSANDS) Balance Sheet Data: 2015(1) 2014(2) 2013(3) 2012 2011 AS OF DECEMBER 31, Cash and marketable securities(4) $ 230,656 $ 168,056 $ 133,068 $ 50,344 $ 18,309 Total current assets Working capital(5) Total assets Long-term debt, less current portion(6) Accumulated deficit Total stockholders’ equity 287,257 210,763 386,038 37 188,158 154,042 276,002 503 145,001 126,879 235,125 1,199 50,408 38,733 102,345 990 26,109 18,530 66,576 300 (650,030) (493,093) (410,146) (358,163) (329,656) 292,669 229,618 203,234 80,240 53,849 1. 2. 3. In 2015, we had sales of 29,163,620 shares of common stock resulting in net proceeds of approximately $204 million. In 2014, we had sales of 28,750,000 shares of common stock resulting in net proceeds of approximately $108 million. In 2013, we completed the acquisition of Novavax AB (see Note 4 to consolidated financial statements in Item 8) and had sales of 44,452,343 shares of common stock resulting in net proceeds of approximately $129 million. Includes non-current marketable securities of $6,233 at December 31, 2012. 4. 5. Working capital is computed as the excess of current assets over current liabilities. 6. Includes non-current portion of capital leases. Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Any statements in the discussion below and elsewhere in this Annual Report, about expectations, beliefs, plans, objectives, assumptions or future events or performance of Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiary Novavax AB, the “Company,” “we” or “us”) are not historical facts and are forward-looking statements. Such forward-looking statements include, without limitation, statements with respect to our capabilities, goals, expectations regarding future reve- nue and expense levels; potential market sizes and demand for our product candidates; the efficacy, safety and intended utili- zation of our product candidates; the development of our clinical-stage product candidates and our recombinant vaccine and adjuvant technologies; the development of our preclinical product candidates; the conduct, timing and potential results from clinical trials and other preclinical studies; plans for and potential timing of regulatory filings; the expected timing and content of regulatory actions; reimbursement by the Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“HHS BARDA”); payments under our license with Wyeth Holdings LLC (formerly known as Wyeth Holdings Corporation), a subsidiary of Pfizer Inc. (“Wyeth”); payments by the Bill & Melinda Gates Foundation (“BMGF”); our available cash resources and the availability of financing generally, plans regarding partnering activities, business develop- ment initiatives and the adoption of stock incentive plans, and other factors referenced herein. You generally can identify 38 NOVAVAX, INC. 2015 Annual Report these forward-looking statements by the use of words 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 not all forward-looking statements con- tain these words. Because the risk factors discussed in this Annual Report, and other risk factors of which we are not aware or currently deem immaterial, could cause actual results or outcomes to differ materially from those expressed in any forward-looking state- ments, you should not place undue reliance on any such forward-looking statements. These statements are subject to risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements. We have included important factors in the cautionary statements included in this Annual Report, particularly those identified in Part I, Item 1A, “Risk Factors” of this Annual Report, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. These and other risks may also be detailed and modified or updated in our reports and other documents filed with the Securities and Exchange Commission (“SEC”) from time to time. You are encouraged to read these filings as they are made. We cannot guarantee future results, events, levels of activity, performance or achievement. Further, any forward-looking state- ment speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. New factors 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 our business 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. Recent Events In February 2016, Novavax completed the issuance of $325 million of 3.75% Convertible Senior Notes due in 2023, resulting in net proceeds of approximately $315 million, after deducting initial purchasers’ discounts and commissions, and approximately $314 million after deducting offering expenses. We used approximately $38 million of the net proceeds to pay the costs of a capped call transaction, which will function to reduce dilution from issuance of additional shares upon conversion of the notes between the note conversion price of $6.81 and the cap price of $9.73 per share. The resulting final net proceeds to the com- pany were approximately $276 million. Our cash, cash equivalents and marketable securities on December 31, 2015 of approximately $231 million, as adjusted to give effect to the final net proceeds of the Convertible Senior Note offering of approximately $276 million, before giving effect to the anticipated use of the final net proceeds, would result in an as-adjusted cash, cash equivalents and marketable securities balance of approximately $507 million. Overview We are a clinical-stage vaccine company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. Using innovative proprietary recombinant nanoparticle vaccine platform technology, we produce vaccine candidates to efficiently and effectively respond to both known and emerging disease threats. Our vaccine candidates are genetically engineered three-dimensional nanostructures that incorporate recombinant proteins critical to dis- ease pathogenesis. Our product pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical development for respiratory syncytial virus (“RSV”), seasonal influenza, pandemic influenza and Ebola virus (“EBOV”). We have additional preclinical-stage programs for a variety of infectious diseases. We are also developing proprietary technology for the production of immune-stimulating saponin-based adjuvants through our wholly owned Swedish subsidiary, Novavax AB. Our lead adjuvant, Matrix-M™, has been successfully tested in a Phase 1/2 clinical trial for our pandemic H7N9 influenza virus-like particle vaccine candidate, and in a Phase 1 clinical trial for our EBOV vaccine candidate. Genocea Biosciences, Inc. (“Genocea”) has licensed rights to our Matrix technology and is now conducting Phase 2 clinical trials with its herpes simplex 2 vaccine candidate using Matrix-M. Clinical Product Pipeline Our clinical product pipeline includes vaccine candidates engineered to elicit differentiated immune responses with potential to provide increased protection. Our nanoparticle technology platform targets antigens with conserved epi- topes essential for viral function. Unlike traditional vaccines that “mimic” viruses and elicit naturally occurring immune responses to them, our nanoparticles are engineered to elicit differentiated immune responses, which may be more 39 Form 10-K efficacious than naturally occurring immunity. Our vaccine technology has the potential to be applied broadly to a wide variety of human infectious diseases. A current summary of our significant research and development programs, along with the programs of our joint venture, CPLB, and status of the related products in development follows: PROGRAM DEVELOPMENT STAGE FUNDING COLLABORATOR Respiratory Syncytial Virus (RSV) Older Adults Infants via Maternal Immunization Pediatric Influenza Seasonal Quadrivalent Pandemic H7N9 Combination (Influenza/RSV) Ebola Virus (EBOV) Phase 3 Phase 3 Phase 1 Phase 2 Phase 2 Preclinical Phase 1 BMGF* HHS BARDA HHS BARDA * As detailed herein, our funding and development arrangement with PATH expired in April 2015; we entered into a grant agreement with BMGF in September 2015. Respiratory Syncytial Virus (RSV) We are developing our respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) for three susceptible target populations: older adults (60 years of age and older), infants via maternal immunization and children six months to five years of age (“pediatrics”). We estimate RSV F Vaccine peak revenue potential of six to eight billion dollars worldwide. Currently there is no approved RSV vaccine available. Repeat infection and lifelong susceptibility to RSV are common and we currently estimate the global cost burden of RSV in excess of $88 billion. Despite decades of effort to develop an RSV vaccine, there are currently no licensed vaccines. Although the monoclonal antibody palivizumab (Synagis®) is effective in pre-term infants, it is not indicated for use in other populations. Novavax made a breakthrough in developing a vaccine that targets the fusion protein, or F-protein, of the virus. The F-protein has a highly conserved amino acid sequence called antigenic site II, which we believe is an ideal vaccine target. Palivizumab, which also targets antigenic site II, has demonstrated protection in five randomized clinical trials. We genetically engineered a novel F-protein antigen and enhanced its immunogenicity by exposing antigenic site II. Novavax’ RSV F Vaccine assembles into a recombinant protein nanoparticle optimized for F-protein antigen presentation. The RSV F Vaccine elicits palivizum- ab-competing antibodies at levels that we expect to confer protection. The Novavax RSV F Vaccine is the first RSV vaccine to demonstrate efficacy in a clinical trial and Novavax is positioned to bring the first RSV vaccine to market to combat the 64 mil- lion RSV infections that occur globally each year.20,21 RSV Older Adults Program Burden of Disease Adults 60 years of age and older are at increased risk for RSV disease due to age-related declines in their immune systems. In this population, RSV is an important respiratory virus, distinct from influenza viruses, that is responsible for serious lower respiratory tract disease and may lead to hospitalization or even death. Additionally, RSV infection can lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma and congestive heart failure. RSV infection occurs as a recurrent and predictable annual epidemic throughout the world. In the U.S., the incidence rate is 2.5 million infec- tions per year, and RSV is increasingly recognized as a significant cause of morbidity and mortality in the population of 64 mil- lion older adults.22,23 Based on our analysis of published literature applied to 2014 population estimates, the disease causes 207,000 hospitalizations and 16,000 deaths among adults older than 65. Annually, we estimate that there are approximately 900,000 medical interventions directly caused by RSV disease across all populations. 20. Nair, H., et al., (2010) Lancet. 375:1545–1555. 21. WHO Acute Respiratory Infections September 2009 Update: http://apps.who.int/vaccine_research/diseases/ari/en/index2.html. 22. Falsey, A.R. et al., (2005) NEJM. 352:1749–59 extrapolated to 2015 census population. 23. Falsey, A.R. et al., (1995) JID. 172:389–94. 40 NOVAVAX, INC. 2015 Annual Report Clinical Trial Update In August 2015, we announced positive top-line data from a Phase 2 clinical trial of our RSV F Vaccine in 1,600 older adults. The clinical trial was designed to prospectively examine the incidence of all symptomatic respiratory illnesses associated with RSV infection, in community-living older adults who were treated with placebo. The trial also evaluated safety and immuno- genicity of our RSV F Vaccine compared to placebo. Finally, the trial estimated the efficacy of our RSV F Vaccine in reducing the incidence of respiratory illness due to RSV. The trial was the first to demonstrate efficacy of an active RSV immunization in any clinical trial population. In the per-protocol population, the clinical trial showed statistically significant vaccine efficacy in prevention of all symptomatic RSV disease (41%) and, in an ad hoc analysis, showed a decrease in RSV disease with any symptoms of lower respiratory tract infection (45%) in older adults. The clinical trial established an attack rate for symptomatic RSV disease of 4.9% in older adults, 95% of which included lower respiratory track symptoms. Efficacy against more severe RSV illness, defined by the presence of multiple lower respiratory tract symptoms or signs associated with difficulty breathing, was 64% in ad hoc analyses. We initiated a pivotal Phase 3 clinical trial, known as Resolve™, of our RSV F Vaccine in older adults in November 2015, and in December 2015, we completed enrollment of 11,850 older adult subjects at 60 sites in the U.S. The primary objective of the clinical trial is the prevention of moderate-severe RSV-associated lower respiratory tract disease, as defined by the presence of multiple lower respiratory tract symptoms. We expect to provide top-line data from this clinical trial in the third quarter of 2016. In October 2015, we completed enrollment of 1,330 older adults in our Phase 2 rollover clinical trial of our RSV F Vaccine in the older adults who had participated in the recently concluded prior Phase 2 clinical trial. This trial is designed to evaluate safety and immunogenicity in response to immunization with the RSV F Vaccine during a second RSV season. We expect to provide top-line data from this trial in the second half of 2016. RSV Infants via Maternal Immunization Program Burden of Disease RSV is the most common cause of lower respiratory tract infections and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide.24 In the U.S., RSV is the leading cause of hospitalization of infants, and globally, is second only to malaria as a cause of death in children under one year of age.25,26 Despite the induction of post- infection immunity, repeat infection and lifelong susceptibility to RSV is common.27,28 Clinical Trial Update In September 2015, we announced positive top-line data from a Phase 2 clinical trial of our RSV F Vaccine in 50 healthy preg- nant women and their infants. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine in pregnant women in their third trimester, and assessed the transplacental transfer of maternal antibodies induced by the vaccine. The trial also examined the impact of maternal immunization on infant safety during the first year of life and RSV-specific antibody levels through the infants’ first six months of life. Immunized women demonstrated a geometric mean 14-fold rise in anti-F IgG, 29-fold rise in palivizumab-competing antibodies and a 2.7 and 2.1-fold rise in microneutralization titers against RSV/A and RSV/B, respectively. In contrast, women who received placebo demonstrated no significant change in antibody levels. The infants’ antibody levels at delivery averaged 90%–100% of the mothers’ levels, indicating efficient transplacental transfer of antibodies from mother to infant. The estimated half-lives of infant PCA, anti-F IgG, RSV/A and RSV/B microneutralizing anti- bodies, based on data through day 60, were 41, 30, 36 and 34 days, respectively. We announced the initiation of a global pivotal Phase 3 clinical trial, known as Prepare™, of the RSV F Vaccine in 5,000 to 8,255 healthy pregnant women in December 2015. The primary objective of the Prepare trial is to determine the efficacy of maternal immunization with the RSV F Vaccine against symptomatic RSV lower respiratory tract infection with hypoxemia in infants through the first 90 days of life. This Phase 3 trial utilizes a group sequential design and is expected to take between two and four years to complete. This trial is supported by a grant (the “Grant”) of up to $89.1 million from the Bill & Melinda Gates Foundation. The Grant will support development activities, product licensing efforts and WHO prequalification of our RSV F Vaccine. We concurrently entered into a Global Access Commitments Agreement (“GACA”) with BMGF as a part of the 24. Nair, H., et al., (2010) Lancet. 375:1545–1555. 25. Hall, C.B. et al., (2013) Pediatrics. 132(2):E341–348. 26. Oxford Vaccine Group. http://www.ovg.ox.ac.uk/rsv. 27. Glezen, W.P. et al., (1986) Am J Dis Child. 140:543–546. 28. Glenn, G.M. et al., (2016) JID. 213(3):411–12. 41 Form 10-K grant agreement (the “Grant Agreement”). Under the terms of the GACA, we agreed to make the RSV F Vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries. In November 2014, the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (“FDA”) granted Fast Track designation to our RSV F Vaccine for protection of infants via maternal immunization. Fast Track designation is intended for products that treat serious or life-threatening diseases or conditions, and that demonstrate the potential to address unmet medical needs for such diseases or conditions. The program is designed to facilitate development and expedite review of drugs to treat serious and life-threatening conditions so that an approved product can reach the market expeditiously. RSV Pediatrics Program Burden of Disease There are currently approximately 18 million children in the U.S. between six months and five years of age.29 In the U.S., RSV is responsible for approximately 57,000 hospitalizations of children under five years of age annually, the vast majority of which occur in infants less than one year old, and especially those under six months of age.30,31,32,33,34 Clinical Trial Update In September 2015, we announced positive top-line data from a Phase 1 clinical trial of our RSV F Vaccine in healthy children between two and six years of age. This clinical trial evaluated the safety and immunogenicity of our RSV F Vaccine, with one or two doses, with or without aluminum phosphate adjuvant. Trial enrollment was concluded with a smaller than planned cohort so that dosing could be completed ahead of the 2014–15 RSV season. The vaccine was well-tolerated and serum samples collected from a subset of 18 immunized children in the per-protocol population demonstrated that the RSV F Vaccine was highly immunogenic at all formulations and regimens. There were greater than 10-fold increases in both anti-F IgG and PCA antibody titers in the adjuvanted group and greater than 6-fold increases in anti-F IgG and PCA antibody titers in the unadju- vanted group. We are assessing the data from this clinical trial and evaluating the next steps in the development of our RSV F Vaccine for pediatrics. Influenza Influenza is a worldwide infectious disease that causes illness in humans with symptoms ranging from mild to life-threatening or even death. Serious illness occurs not only in susceptible populations such as pediatrics and older adults, but also in the general population because of unique strains of influenza for which most humans have not developed protective antibodies. We are developing vaccine candidates for both seasonal and pandemic influenza. Current estimates for seasonal influenza vaccine growth in the top seven markets (U.S., Japan, France, Germany, Italy, Spain and UK) show a potential increase from approximately $3.2 billion in the 2012/13 season to $5.3 billion by the 2021/2022 season.35 Traditional vaccine manufacturing methods utilize live influenza virus to infect eggs in order to produce trivalent seasonal influenza vaccine candidates. Our egg-free recombinant nanoparticle technology does not utilize either a live influenza virus or eggs, but rather a recombinant baculovirus and insect cells, which allows for the product to potentially be rapidly manufac- tured and quickly adapted to changing influenza strains. Further, we are developing a quadrivalent seasonal vaccine candidate, which we expect to elicit broader protection from circulating influenza strains. We are also exploring the development of novel influenza nanoparticle vaccine candidates. There are currently four quadrivalent seasonal influenza vaccines licensed in the U.S., although additional quadrivalent seasonal influenza vaccines are expected to be licensed over the next several years. Quadrivalent Seasonal Influenza Vaccine Burden of Disease The Advisory Committee for Immunization Practices of the Center for Disease Control and Prevention (“CDC”) recommends that all persons aged six months and older be vaccinated annually against seasonal influenza. Influenza is a major burden on public health worldwide: an estimated one million deaths each year are attributed to influenza.36 It is further estimated that, 29. U.S. Census. www.census.go/population/international/data/idb/informationGateway.php. 30. Stockman, L.J. et al., (2012) Pediatr Infect Dis J. 31: 5–9. 31. CDC update May 5, 2015. http://www.cdc.gov/rsv/research/us-surveillance.html. 32. Boyce, T.G. et al., (2000) Pediatrics; 137: 865–870. 33. Hall, C.B. et al., (2009) NEJM; 360(6): 588–98. 34. Hall, C.B. et al., (2013) Pediatrics; 132(2): E341–8. 35. Influenza Vaccines Forecasts. Datamonitor (2013). 36. Resolution of the World Health Assembly. (2003) WHA56.19.28. 42 NOVAVAX, INC. 2015 Annual Report each year, influenza attacks between 5% and 10% of adults and 20% to 30% of children, causing significant levels of illness, hospitalization and death.37 Recombinant seasonal influenza vaccines, like the candidate we are developing, have an important advantage: once licensed for commercial sale, large quantities of vaccines can potentially be manufactured quickly and in a cost-effective manner, without the use of either the live influenza virus or eggs. Clinical Trial Update In July 2015, we reported positive data from our Phase 2 clinical trial of our quadrivalent seasonal influenza virus-like particle (“VLP”) vaccine candidate in 400 healthy adults that we initiated in November 2014. These data show that our quadrivalent seasonal influenza VLP vaccine candidate is well-tolerated, and can induce influenza antibody responses that met the immu- nogenicity targets. These results demonstrate the potential for our quadrivalent seasonal influenza VLP vaccine candidate to meet the FDA criteria for accelerated approval. We were awarded a contract by HHS BARDA in 2011 to fund the development of both our quadrivalent seasonal influenza and pandemic influenza VLP vaccine candidates. This is a cost-plus-fixed-fee contract, which reimburses us for allowable direct contract costs incurred plus allowable indirect costs and a fixed fee earned in the ongoing clinical development and product scale-up of our vaccine candidates. We announced that HHS BARDA had exercised and initiated a two-year option to our contract in September 2014, which not only extended the expected term of the contract until September 2016, but also added scope to support our development activities leading up to planned Phase 3 clinical trials and $70 million of funding on top of the remainder of the $97 million base period funding. In June 2015, the contract was amended to increase the funding by $7.7 million to allow for the recovery of additional costs under the contract relating to the settlement of indirect rates for fiscal years 2011 and 2012. This additional amount was received and recorded as revenue in the second quarter of 2015. During 2015, we recognized revenue of $33.3 million and have recognized approximately $112 million in revenue since the inception of the contract. In recent meetings with HHS BARDA, we have been discussing the next steps in both our seasonal influenza VLP vaccine program and our pandemic influenza VLP vaccine program, as well as some of the delays associated with our development of both vaccine candidates. We expect to continue discussions with HHS BARDA during 2016 and to present plans for continued clinical and product development, although there can be no guarantee that the HHS BARDA contract will not be terminated early or will be extended beyond September 2016. Pandemic H7N9 Influenza Vaccine Burden of Disease Prevention of the potential devastation of a human influenza pandemic remains a key priority with both governmental health authorities and influenza vaccine manufacturers. In the U.S. alone, the 2009 H1N1 influenza pandemic led to the production of approximately 126 million doses of monovalent (single strain) vaccine. Public health awareness and government prepared- ness for the next potential influenza pandemic are driving development of vaccines that can be manufactured quickly against a potentially threatening influenza strain. Industry and health experts have focused attention on developing a monovalent influenza vaccine against either the H5N1 strain or the H7N9 strain as potential key defenses against future pandemic dis- ease threats. Clinical Trial Update We have developed and delivered compelling safety and immunogenicity data on two pandemic vaccine candidates, H5N1 and H7N9. In September 2014, we announced positive results from a Phase 1/2 clinical trial of our H7N9 influenza VLP vac- cine candidate adjuvanted with Matrix-M in 610 healthy adults. The Phase 1/2 clinical trial was designed as a dose-ranging, randomized, observer-blinded, placebo-controlled clinical trial, to determine the contribution of Matrix-M to potential antigen dose-sparing regimens. Our H7N9 influenza vaccine candidate, with and without Matrix-M, was highly immunogenic and well-tolerated. Matrix-M adjuvanted formulations demonstrated immunogenicity and dose-sparing benefits relative to unad- juvanted antigen. Hemagglutination-inhibiting antibody titers were comparable to those reported in prior clinical trials, and the vaccine elicited significant anti-neuraminidase antibodies. In October 2014, the FDA granted Fast Track designation to our H7N9 influenza vaccine candidate with Matrix-M. Our pandemic influenza vaccine program is supported by our HHS BARDA contract. Like our seasonal influenza vaccine pro- gram, we expect to continue discussions with HHS BARDA during 2016 and to present plans for continued clinical and product development of our pandemic influenza vaccine candidate, although there can be no guarantee that the HHS BARDA contract will not be terminated early or will be extended beyond September 2016. 37. WHO position paper. (2012) Weekly Epidemiol Record. 87(47):461–76. 43 Form 10-K Combination Respiratory (Influenza and RSV) Given the ongoing development of our seasonal influenza vaccine candidate and our RSV F Vaccine, we see an important opportunity to develop a combination respiratory vaccine candidate. Early preclinical development efforts have given us con- fidence that such a combination vaccine is viable, and in animal models, provides acceptable immunogenicity. We expect to initiate a Phase 1 clinical trial of a combination respiratory vaccine in the first half of 2017. Ebola Virus (EBOV) EBOV, formerly known as Ebola hemorrhagic fever, is a severe, often fatal illness in humans. Multiple strains of EBOV have been identified, the most recent of which, the Makona EBOV strain, is associated with a case fatality rate of 50% to 90%.38 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 delivered by genetic vectors. In contrast, our EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) was developed using the Makona EBOV strain. In July 2015, we announced data from our Phase 1 clinical trial of our Ebola GP Vaccine in ascending doses, with and without our Matrix-M adjuvant, in 230 healthy adults. Participants received either one or two intramuscular injections ranging from 6.5µg to 50µg of antigen, with or without adjuvant, or placebo. Immunogenicity was assessed at multiple time points, includ- ing days 28 and 35. These Phase 1 data demonstrated that our Ebola GP Vaccine is highly immunogenic, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant, resulted in significant antigen dose-sparing. Although the adjuvanted Ebola GP Vaccine was highly immunogenic at all dose levels, the adjuvanted two-dose regimens induced Ebola anti-GP anti- body geometric mean responses between 45,000 and 70,000 ELISA units, representing a 500- to 750-fold rise over baseline at day 35. In 2015, we also announced successful data from two separate non-human primate challenge studies of our Ebola GP Vaccine in which, in both cases, the challenge was lethal for the control animal, whereas 100% of the immunized animals were protected. CPLB Programs (India) CPL Biologicals Private Limited (“CPLB”), our joint venture company with Cadila Pharmaceuticals Limited (“Cadila”) in India, is actively developing a number of vaccine candidates that were genetically engineered by us. CPLB is owned 20% by us and 80% by Cadila. CPLB operates a manufacturing facility in India for the production of vaccines. Seasonal Influenza CPLB received marketing authorization, the Indian equivalent of approval of a Biologics License Application (“BLA”), for its recombinant trivalent seasonal VLP influenza vaccine in 2015. Because the market for seasonal influenza in India is limited and highly competitive, CPLB is currently evaluating its marketing strategy for this vaccine. Rabies CPLB successfully completed Stage II of its 2-stage Phase 1/2 clinical trial in India of a rabies G protein vaccine candidate that we genetically engineered. The objective was to select a dose and regimen for a recombinant vaccine that can be adminis- tered both as a pre-exposure prophylaxis for residents of certain higher-risk geographies and travelers to such locations, and as a post-exposure prophylaxis using fewer doses than the current standard of care. In October 2014, CPLB presented clinical results from Stage I of the Phase 1/2 clinical trial, demonstrating that vaccine recipients, at various doses levels and schedules, showed seroprotective antibody levels at day 14 that were sustained through day 180. The vaccine candidate, which was found to be well-tolerated, also induced seroprotective levels with two-dose and three-dose regimens. CPLB has received permission to conduct a Phase 3 clinical trial and is considering the optimal schedule for its conduct. Discovery Programs Our vaccine platform technology provides an efficient system that has the potential to rapidly develop antigens to selected targets, refine manufacturing processes and optimize development across multiple vaccine candidates. In conjunction with government and/or global health authorities, we believe we can address emerging disease threats with pandemic potential. In addition to our response to the H7N9 influenza strain, we have developed a vaccine candidate to Middle East respiratory syndrome (“MERS”), caused by a novel coronavirus first identified in 2012. MERS emerged as a disease threat in 2013, and 38. WHO. http://www.who.int/mediacentre/factsheets/fs103/en/. 44 NOVAVAX, INC. 2015 Annual Report is currently being monitored by global health agencies, with WHO reporting significant confirmed cases of infection and deaths. The MERS virus is a part of the coronavirus family that includes the severe acute respiratory syndrome coronavi- rus (“SARS”). Within weeks of obtaining the sequence of the circulating MERS strain, we successfully produced a vaccine candidate designed to provide protection. This vaccine candidate is based on the major surface spike protein, which we had previously identified as the antigen of choice in our work with a SARS vaccine candidate. In 2014, in collaboration with the University of Maryland, School of Medicine, 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 cur- rently remains a preclinical program, we believe that our MERS vaccine candidate offers a viable option to interested global public health authorities. Sales of Common Stock In March 2015, we completed a public offering of 27,758,620 shares of our common stock, including 3,620,689 shares of com- mon stock that were issued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $7.25 per share resulting in net proceeds of approximately $190 million. In 2012, we entered into an At Market Issuance Sales Agreement (“Sales Agreement”), under which we sold an aggregate of $50 million in gross proceeds of our common stock. During 2015, we sold 1.4 million shares at an average sales price of $10.63 per share, resulting in approximately $15 million in net proceeds. The Sales Agreement was fully utilized at that time. Convertible Senior Notes In 2016, we issued $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”). The Notes will bear cash interest at a rate of 3.75%, payable on February 1 and August 1 of each year, beginning on August 1, 2016. The Notes are not redeemable prior to maturity and are convertible into shares of Novavax common stock. The initial conversion rate for the Notes is 146.8213 shares of Novavax’ common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $6.81 per share of Novavax’ common stock, representing an approximate 22.5% conversion premium based on the last reported sale price of Novavax’ common stock of $5.56 per share on January 25, 2016. In connection with the issuance of the Notes, we paid approximately $38 million to enter into privately negotiated capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions are expected gen- erally to reduce the potential dilution upon conversion of the Notes in the event that the market price per share of our common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call trans- actions, which initially corresponds to the conversion price of the Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the Notes. The cap price of the capped call transactions will initially be $9.73 per share, which represents a premium of approximately 75% based on the last reported sale price of our common stock of $5.56 per share on January 25, 2016, and is subject to certain adjustments under the terms of the capped call transactions. If, however, the market price per share of Novavax’ common stock, as measured under the terms of the capped call transac- tions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution upon conversion of the Notes to the extent that such market price exceeds the cap price of the capped call transactions. 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 have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and equity and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates, par- ticularly estimates relating to accounting for revenue, the valuation of our marketable securities, stock-based compensation, long-lived assets and goodwill have a material impact on our consolidated 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 of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from these estimates and assumptions. 45 Form 10-K Revenue We recognize revenue under research contracts when a contract has been executed, the contract price is fixed or determin- able, 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 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. We consider fixed fees under cost reimbursable contracts to be earned in pro- portion to the allowable costs incurred in performance of the work as compared to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. Under our HHS BARDA contract, certain activities must be pre-approved by HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursable contracts are recorded as research and development expenses. Our HHS BARDA contract provides the U.S. government the ability 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 such termination and any settlement costs resulting from such termination would be allowable costs. Payments to us under cost reimbursable contracts, such as the HHS BARDA contract, are provisional payments subject to adjustment upon annual audit by the govern- ment. An audit by the U.S government of fiscal years 2011 and 2012 was completed in the first quarter of 2014, which resulted in $7.7 million revenue recognized in 2015 relating to the recovery of additional costs for the settlement of indirect rates for such fiscal years as collection of the amount became reasonably assured. An audit of fiscal years 2013 and 2014 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 the adjustment is known. Under our Grant Agreement with BMGF, we are reimbursed for certain costs that support development activities, including our global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and WHO prequalification of our RSV F Vaccine. Payments received under the Grant Agreement are recognized as revenue in the period in which such research and development activities are performed. Our collaborative research and development agreements may include an upfront payment, payments for research and devel- opment services, milestone payments and royalties. Agreements with multiple deliverables are evaluated to determine if the deliverables can be divided into more than 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 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 or performance of the undelivered item(s) is considered probable and substantially in our control. Deliverables that cannot be divided into separate units are combined and treated as one unit of accounting. Consideration received is allocated among the separate units of accounting based on the relative selling price method. Deliverables under these arrangements typically include rights to intel- lectual property, research and development services and involvement by the parties in steering committees. Historically, deliv- erables under our collaborative research and development agreements have been deemed to have no stand-alone value and as a result have been treated as a single unit of accounting. In addition, we analyze our contracts and collaborative agreements to determine whether the payments received should be recorded as revenue or as a reduction to research and development expenses. In reaching this determination, management considers a number of factors, including whether we are the principal under the arrangement, and whether the arrangement is significant to, and part of, our core operations. Historically, payments received under its contracts and collaborative agreements have been recognized as revenue 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 recog- nized under the proportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared to total estimated contract costs. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of the work. Direct costs incurred under collaborative research and development agreements are recorded as research and development expenses. If the performance under a fixed price contract cannot be reasonably estimated, we recognize the revenue on a straight-line basis over the contract term. 46 NOVAVAX, INC. 2015 Annual Report Revenue associated with upfront payments under arrangements is recognized over the contract term or when all obligations associated with the upfront payment have been satisfied. Revenue from the achievement of research and development milestones, if deemed substantive, is recognized as revenue when the milestones are achieved and the milestone payments are due and collectible. If not deemed substantive, we would recognize such milestone as revenue upon its achievement on a straight-line basis over the remaining expected term of the research and development period. Milestones are considered substantive if all of the following conditions are met: (1) the mile- stone is non-refundable; (2) there is substantive uncertainty of achievement of the milestone at the inception of the arrange- ment; (3) substantive effort is involved to achieve the milestone and such achievement relates to past performance; and (4) the amount of the milestone 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, if determined not to be “other-than-temporary,” are included in accumulated other comprehensive income (loss) in stockholders’ equity. Investments are evaluated periodically to determine whether a decline in value is other-than-tem- porary. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company’s ability to hold the securities until market recovery, to 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 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”) Topic 820, Fair Value Measurements and Disclosures. We evaluate the types of securities in our investment portfolio to determine the proper classification in the fair value hierarchy based on trading activ- ity and market inputs. We generally obtain information from an independent third party to help us determine the fair value of securities in Level 2 of the fair value hierarchy. Investment income is recorded when earned and included in investment income. Stock-Based Compensation We account for our stock-based compensation under our equity compensation plans in accordance with ASC Topic 718, Compensation—Stock Compensation. This standard requires us to measure the cost of employee services received in exchange for equity awards based on the grant-date fair value of 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-pricing model 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 our common stock and the expected term of the award. Our estimate of the expected volatility is based on historical volatility over the look-back period corresponding to the expected term. The expected term represents the period during which our stock-based awards are expected to be outstanding. We estimate this amount based on historical experi- ence of similar awards, giving consideration to the contractual terms of the awards, vesting requirements and expectation 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 change from 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 the carrying value of a long-lived asset (group) whenever events or changes in circumstances indicate that the carrying value of the asset (group) may not be recoverable. Examples of events or changes in circumstances that indicate that the recoverability of the carrying value of an asset (group) should be assessed include, but are not limited 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, a significant 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, an adverse action or assessment by a regulator, an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset, 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 demonstrates continuing losses associated with an asset used for the purpose of producing revenue. We consider historical performance and anticipated future results in our evaluation of potential impairment. Accordingly, when indicators of impairment are present, we evaluate the carrying value of these assets (groups) in relation to the operating performance of the business and future undiscounted cash flows expected 47 Form 10-K to result from the use of these assets (groups). Impairment losses are recognized when the sum of expected future cash flows is less than the assets’ (group’s) carrying value. Goodwill Goodwill was generated from two business acquisitions. Our goodwill is not amortized, but is subject to impairment tests annually, or more frequently should indicators of impairment arise. Because the Company’s only business is the development of recombinant vaccines, the Company operates as a single operating segment and has one reporting unit. We utilize the market approach and, if considered necessary, the income approach to determine if we have an impairment of our goodwill. The market approach serves as the primary approach and is based on market value of invested capital. To ensure that our capital stock is the appropriate measurement of fair value, we have considered factors such as our trading volume, diversity of investors and analyst coverage. The concluded fair value of our reporting unit significantly exceeded the carrying value at December 31, 2015 and 2014. The income approach is used as a confirming look to the market approach, if considered nec- essary. Goodwill impairment may exist if the carrying value of a reporting unit exceeds its estimated 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 impairment analysis 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 over its 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 and assumptions made for purposes of our goodwill impairment testing will prove to be accurate predictions of the future, or that any change in the assumptions or the current economic conditions will not trigger more frequently than on an annual basis. If our assumptions are not achieved or economic conditions deteriorate further, we may be required to record goodwill impairment charges in future periods. Recent Accounting Guidance Not Yet Adopted We have considered the applicability and impact of all Financial Accounting Standards Board’s (“FASB”) Accounting Standards Updates (ASUs). In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which super- sedes nearly all existing revenue recognition guidance under Topic 605, Revenue Recognition. The new standard requires a company to recognize revenue when it transfers goods and services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. ASU 2014-09 defines a five-step process that includes iden- tifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard to 2018 for public companies, with an option that would permit companies to adopt the new standard as early as the original effective date of 2017. Early adoption prior to the original effective date is not permitted. We are evaluating the potential impact that ASU 2014-09 will have on our consolidated financial position and results of operations. In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for the Company beginning January 1, 2016. The adoption of ASU 2015-03 will not have a material effect of the Company’s financial statements. 48 NOVAVAX, INC. 2015 Annual Report Results of Operations for Fiscal Years 2015, 2014 and 2013 (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, including Novavax AB’s operations since the acquisition date of July 31, 2013, and should be read in conjunction with the consolidated financial state- ments and notes thereto set forth in this Annual Report. Additional information concerning factors that could cause actual results to differ materially from those in our forward-looking statements is described under Part I, Item 1A, “Risk Factors” of this Annual Report. REVENUE: Revenue: Total revenue 2015 2014 2013 CHANGE 2014 TO 2015 CHANGE 2013 TO 2014 $36,250 $30,659 $20,915 $5,591 $9,744 Revenue for 2015 was $36.3 million as compared to $30.7 million for 2014, an increase of $5.6 million, or 18%. Revenue for 2015 and 2014 was primarily comprised of services performed under the HHS BARDA contract, and to a much lesser extent, the Grant Agreement, PATH clinical development agreement and revenue from Novavax AB. The increase in revenue is primar- ily due to $7.7 million from the recovery of additional costs for the settlement of indirect rates for fiscal years 2011 and 2012 under the HHS BARDA contract and $3.1 million relating to our Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccine candidate in Australia (“205 Trial”) as collection of the amount became reasonably assured in 2015. These increases in revenue were partially offset by a lower level of activity in 2015 associated with our Phase 2 quadrivalent seasonal influenza VLP vaccine candidate clinical trial as compared to our Phase 1/2 clinical trial of our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M in 2014 under the HHS BARDA contract and a decrease in revenue under the prior PATH clinical development agreement. 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 was primarily comprised of services performed under the HHS BARDA contract, and to a much lesser extent, the PATH clinical development agreement and revenue 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 our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M and manufacturing work for our Phase 2 quadrivalent seasonal influenza VLP vaccine candidate clinical trial under the HHS BARDA contract, as compared to 2013. We also had increased revenue in 2014 associated with Novavax AB resulting from 12 months of activity in 2014 as compared to only five months in 2013. For 2016, we expect our revenue, relative to 2015, to be driven by the outcome of our ongoing discussions with HHS BARDA relating to the next steps in the development of our quadrivalent seasonal and pandemic influenza vaccine candidates. We also expect revenue in 2016 under the Grant Agreement to be significantly higher than in 2015. EXPENSES: Expenses: Research and development General and administrative Total expenses 2015 2014 2013 CHANGE 2014 TO 2015 CHANGE 2013 TO 2014 $162,644 30,842 $193,486 $ 94,422 19,928 $114,350 $58,530 14,819 $73,349 $68,222 10,914 $79,136 $35,892 5,109 $41,001 Research and Development Expenses Research and development expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associated with our process development, manufacturing, clinical, regulatory and quality assurance activities for our 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 $162.6 million for 2015 from $94.4 million for 2014, an increase of $68.2 million, or 72%. The increase in research and development expenses was primarily due to increased costs 49 Form 10-K associated with our RSV F Vaccine clinical trials and higher employee-related costs, including non-cash stock-based compen- sation. This increase was partially offset by a lower level of activity in 2015 associated with our Phase 2 quadrivalent seasonal influenza VLP vaccine candidate clinical trial as compared to our Phase 1/2 clinical trial of our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M in 2014. At December 31, 2015, we had 369 employees dedicated to our research and development programs versus 261 employees as of December 31, 2014. For 2016, we expect a significant increase in research and development expenses primarily due to our ongoing RSV F Vaccine candidate clinical trials and 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 $94.4 million for 2014 from $58.5 million for 2013, an increase of $35.9 mil- lion, or 61%. Excluding the increase in research and development expenses of $3.6 million from Novavax AB resulting from 12 months of activity in 2014 as compared to only five months in 2013, the increase in research and development expenses was primarily due to higher employee-related costs, the preparation and initiation of three RSV F Vaccine candidate clinical trials in 2014, the initiation of our EBOV GP Vaccine candidate program and a $3.0 million milestone payment accrued under the Wyeth agreement. The increase also resulted from the costs of our Phase 1/2 clinical trial of our pandemic H7N9 influenza VLP vaccine candidate adjuvanted with Matrix-M and manufacturing work for our Phase 2 quadrivalent seasonal influenza VLP vaccine candidate clinical trial. Expenses by Functional Area We track our 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. Historically, we did not account for internal research and development expenses by project, since our employees’ work time is spread across multiple programs and our internal manufacturing clean-room facility produces multiple vaccine candidates. The following summarizes our research and development expenses by functional area for the years ended December 31, 2015, 2014 and 2013 (in millions). Manufacturing Vaccine Discovery Clinical and Regulatory Total research and development expenses 2015 $ 81.2 6.2 75.2 $162.6 2014 $53.5 6.2 34.7 $94.4 2013 $31.0 5.6 21.9 $58.5 We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncer- tainties associated with vaccine development. As we obtain data from preclinical studies and clinical trials, we may elect to discontinue or delay clinical trials in order to focus our resources on more promising vaccine candidates. Completion of clinical trials may take several years or more, but the length of time can vary substantially depending upon the phase, size of clinical trial, primary and secondary endpoints and the intended use of the vaccine candidate. The cost of clinical trials may vary sig- nificantly 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 com- pletion costs of our research and development projects or when, and to what extent, we will generate future cash flows from our research projects. 50 NOVAVAX, INC. 2015 Annual Report General and Administrative Expenses General and administrative expenses increased to $30.8 million for 2015 from $19.9 million for 2014, an increase of $10.9 mil- lion, or 55%. The increase was primarily due to higher employee-related costs, including non-cash stock-based compensation, driven by the administrative requirements needed to support our expanding research and development activities, and profes- sional fees for pre-commercialization activities. At December 31, 2015, we had 49 employees dedicated to general and admin- istrative functions versus 35 employees as of December 31, 2014. For 2016, we expect general and administrative expenses to continue to increase primarily due to increased employee costs and activities related to the anticipated commercialization of our RSV F Vaccine. General and administrative expenses increased to $19.9 million for 2014 from $14.8 million for 2013, an increase of $5.1 mil- lion, or 34%. Excluding the increase in general and administrative expenses of approximately $0.7 million from Novavax AB resulting from 12 months of activity in 2014 as compared to only five months in 2013, the increase was primarily due to higher employee-related costs. OTHER INCOME (EXPENSE): Other Income (Expense): Investment income Interest expense Other income (expense), net Realized gains on marketable securities Change in fair value of warrant liability Total other income, net 2015 2014 2013 CHANGE 2014 TO 2015 CHANGE 2013 TO 2014 $ 660 (241) (120) — — $ 299 $ 286 (157) — 615 — $ 744 $ 187 (160) 182 — 267 $ 476 $ 374 (84) (120) (615) — $(445) $ 99 3 (182) 615 (267) $ 268 We had total other income, net of $0.3 million for 2015 compared to total other income, net of $0.7 million for 2014, a decrease of $0.4 million. Our investment income increased in 2015 as compared to 2014 due to higher cash, cash equivalents and mar- ketable securities balances. 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 $0.7 million for 2014 compared to total other income, net of $0.5 million for the same period in 2013. For 2014, we sold our auction rate security and received proceeds of $1.8 million resulting in a realized gain of $0.6 mil- lion. The change in fair value of our warrant liability resulted in a $0.3 million decrease in total other income, net for 2014, as compared to the same period in 2013. The warrants expired unexercised on July 31, 2013. NET LOSS: Net Loss: Net loss Net loss per share Weighted average shares outstanding 2015 2014 2013 CHANGE 2014 TO 2015 CHANGE 2013 TO 2014 $(156,937) $ (0.60) $ (82,947) $ (0.37) $ (51,983) $ (0.31) $(73,990) $ (0.23) $(30,964) $ (0.06) 262,248 225,848 169,658 36,400 56,190 Net loss for 2015 was $156.9 million, or $0.60 per share, as compared to $82.9 million, or $0.37 per share, for 2014, an increased net loss of $74.0 million. The increased net loss was primarily due to higher research and development spending, including increased costs relating to clinical trials of our RSV F Vaccine and higher employee-related costs, as compared to 2014. 51 Form 10-K 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 $31.0 million. The increased net loss was primarily due to higher research and development spending, including increased costs relating to our RSV F Vaccine candidate and higher employee-related costs, as compared to 2013. The increase in weighted average shares outstanding for 2015 and 2014 is primarily a result of sales of our common stock in 2015 and 2014. 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 and development programs, the progress of preclinical 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 multiple vaccines and products in various stages of development, and we believe our operating expenses and capital requirements will fluctuate depending upon the timing of certain events, such as the scope, initiation, rate and progress of our preclinical studies and clinical trials and other research and development activities. As of December 31, 2015, we had $230.7 million in cash and cash equivalents and marketable securities as compared to $168.1 million as of December 31, 2014. These amounts consisted of $93.1 million in cash and cash equivalents and $137.5 mil- lion in marketable securities as of December 31, 2015 as compared to $32.3 million in cash and cash equivalents and $135.7 mil- lion in marketable securities as of December 31, 2014. The following table summarizes cash flows for 2015 and 2014 (in thousands): Summary of Cash Flows: Net cash (used in) provided by: Operating activities Investing activities Financing activities Effect on exchange rate on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 2015 2014 CHANGE 2014 TO 2015 $(126,090) $ (67,014) $ (59,076) (21,270) 208,283 (150) 60,773 32,335 (129,833) 109,717 (6) (87,136) 119,471 108,563 98,566 (144) 147,909 (87,136) Cash and cash equivalents at end of year $ 93,108 $ 32,335 $ 60,773 Net cash used in operating activities increased to $126.1 million for 2015, as compared to $67.0 million for 2014. The increase in cash usage was primarily due to increased research and development expenses relating to our RSV F Vaccine, higher employee-related costs and timing of customer and vendor payments. During 2015 and 2014, our investing activities consisted primarily of purchases and maturities of marketable securities and capital expenditures. Capital expenditures for 2015 and 2014 were $18.3 million and $7.3 million, respectively. The increase in capital expenditures was primarily due to the purchase of laboratory equipment for process development, analytical develop- ment and manufacturing scale-up required to support our maturing product portfolio. In 2016, we expect our level of capital expenditures to be significantly higher than our 2015 spending as we continue to invest in our core operational infrastructure. If we receive positive data from our ongoing RSV F Vaccine Phase 3 clinical trial in older adults (Resolve), expected in the third quarter of 2016, this may result in a significant increase in capital expenditures as we prepare for initial commercialization and plan ahead for the additional manufacturing capacity necessary to meet expected demand in the upcoming years. Our financing activities consisted primarily of sales of our common stock, our issuance of the Notes, which occurred in 2016, subsequent to our year-end, and to a lesser extent, stock option exercises and purchases under our employee stock purchase plan. In 2015, we received net proceeds of approximately $190 million through our public offering at $7.25 per share and approximately $15 million through our Sales Agreement at an average sales price of $10.63 per share. In 2014, we received net proceeds of approximately $108 million through our public offering at $4.00 per share. We sold the remaining common stock 52 NOVAVAX, INC. 2015 Annual Report under the Sales Agreement in July 2015. The Sales Agreement has now been fully utilized. In 2016, we received net proceeds of approximately $315 million, before deducting offering expenses, through the issuance of the Notes, and used approximately $38 million of such proceeds in connection with our entry into the capped call transactions. In August 2015, we amended the lease for our new facility located in Gaithersburg, Maryland to increase the amount of space leased by us to now include the entire facility. Under the terms of the amended lease, the landlord shall provide us with a tenant improvement allowance of approximately $3.9 million. In 2015, we were funded $1.4 million under this tenant improvement allowance. Under the terms of another facility lease, we were reimbursed $1.4 million in the fourth quarter of 2015 for facility improvements made at the facility, and such reimbursement will be repaid back to the landlord during the remaining term of the lease through additional rent payments. 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 of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. The Wyeth license provides for us to make an upfront payment (previously made), ongoing annual license fees, sublicense payments, milestone payments on certain development and commercialization activ- ities and royalties on any product sales. Except in certain circumstances in which we continuously market multiple products in a country within the same vaccine program, the milestone payments are one-time-only payments applicable to each related vaccine program. At present, our seasonal influenza VLP vaccine program (including CPLB’s seasonal influenza program) and our pandemic influenza VLP vaccine program 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 us only after we have provided ninety (90) days’ notice that we have 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. In September 2015, we amended the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment (“milestone”) owed as a result of CPLB’s initiation of a Phase 3 clinical trial for its recombinant trivalent seasonal VLP influenza vaccine candidate in 2014. Under the amendment, the milestone payment, which may increase slightly over time, shall be due in connection with the ini- tiation of a Phase 3 clinical trial for the initial seasonal influenza VLP vaccine candidate being developed outside India, but in any case no later than December 31, 2017. The amendment also restructured the final milestone payment to apply to the initial seasonal influenza VLP vaccine candidate being developed outside India. Thus, the aggregate milestone payments for a sea- sonal influenza VLP vaccine candidate developed and commercialized was increased from $14 million to up to $15 million. In connection with the execution of the amendment, we agreed to pay a one-time-only payment to Wyeth. The amendment also increased annual license maintenance fees associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments under the agreement to Wyeth as of December 31, 2015 aggregated $7.3 million. The milestone was accrued for on the consolidated balance sheet in other current liabilities at December 31, 2014. As a result of the September 2015 amendment discussed above, the milestone payment is not expected to occur within the next 12 months. Therefore, the milestone has been accrued for, on a discounted basis calculated based on the probable future payment date, in other non-current liabilities at December 31, 2015. The milestone was recorded as a research and development expense in the third quarter of 2014. Based on our December 31, 2015 cash and cash equivalents and marketable securities balances, the proceeds from our Notes, along with anticipated revenue under the contract with HHS BARDA and Grant Agreement and other resources, we believe we have adequate capital to fund our operating plans for a minimum of 12 months. Additional capital may be required in the future to develop our vaccine candidates through clinical development, manufacturing and commercialization. Our ability to obtain such additional capital will likely be subject to various factors, including our ability to perform and thus generate revenue under the HHS BARDA contract and Grant Agreement, our overall business performance and market conditions. Any capital raised by an equity offering or convertible securities has the potential to be substantially dilutive to the existing stockholders and any licensing or development arrangement 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 new financing will be available on commercially acceptable terms, if at all. If we are unable to perform under the HHS BARDA contract and Grant Agreement or obtain addi- tional capital, 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 and development programs, and/or downsize our organization, including our general and adminis- trative infrastructure. 53 Form 10-K Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2015 (in thousands): Contractual Obligations: Operating leases Capital lease Notes payable Research funding payment Accrued milestone payment Total contractual obligations $46,729 TOTAL LESS THAN ONE YEAR 1—3 YEARS 3—5 YEARS MORE THAN 5 YEARS $40,699 $6,159 $ 9,641 $9,428 $15,471 108 395 1,527 4,000 71 395 1,527 — $8,152 37 — — 4,000 $13,678 — — — — — — — — $9,428 $15,471 Our research funding payment includes the research funding received under the Genocea agreement (see Note 4 to consoli- dated financial statements in Item 8) and accrued milestone payment includes the milestone payment incurred in 2014 under the Wyeth agreement (see above for further discussion). 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 financial condition, 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 December 31, 2015, we had cash and cash equivalents of $93.1 million, marketable securities of $137.5 million, all of which are short-term, and working capital of $210.8 million. Our exposure to market risk is primarily confined to our investment portfolio. As of December 31, 2015, 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 new marketable 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 securities are amortized or accreted to maturity and included in investment income. The specific identification method is used in computing realized gains and losses on 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 consol- idated 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 of stockholders’ equity of approximately $2.8 million at December 31, 2015. At December 31, 2015, we did 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–F-35. 54 NOVAVAX, INC. 2015 Annual Report 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 are designed 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 Exchange Commission. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s manage- ment, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the chief executive officer and the chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report (the “Evaluation Date”). Based on that evaluation, the Company’s chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, such controls and procedures were effective at the reasonable assurance level. 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 financial reporting 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, the Company’s principal executive officer and principal financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reli- ability of financial reporting and the preparation of financial statements for external purposes in accordance with 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 the Company; • 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 autho- rizations of management and directors of the Company; and • provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, our management used the criteria set forth in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, our man- agement has determined that, as of December 31, 2015, our internal controls over financial reporting 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 of Independent Registered Public Accounting Firm in Item 15. 55 Form 10-K 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 financial reporting that occurred during the quarterly period ended December 31, 2015, and has concluded that there was no change that occurred during the quarterly period ended December 31, 2015 that materially affected, or is reason- ably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION None. 56 NOVAVAX, INC. 2015 Annual Report 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 2016 Annual Meeting of Stockholders scheduled to be held in June 2016 (the “2016 Proxy Statement”). We expect to file the 2016 Proxy Statement within 120 days after the close of the fiscal year ended December 31, 2015. Item 11. EXECUTIVE COMPENSATION We incorporate herein by reference the information required by this item concerning executive compensation to be contained in the 2016 Proxy Statement. 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 and management and related stockholder matters to be contained in the 2016 Proxy Statement. The following table provides our equity compensation plan information as of December 31, 2015. Under these plans, our com- mon stock may be issued upon the exercise of options and purchases under our Employee Stock Purchase Plan (“ESPP”). See also the information regarding our stock options and ESPP in Note 12 to the financial statements included herewith. EQUITY COMPENSATION PLAN INFORMATION NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (A) WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (B) NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A)) (C) 23,807,545 N/A $5.29 N/A 17,733,007 N/A PLAN CATEGORY Equity compensation plans approved by security holders(1) Equity compensation plans not approved by security holders 1. Includes our 2015 Stock Incentive Plan, 2005 Stock Incentive 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 16 to our financial statements included herewith. We incorporate herein by reference other information required by this item concerning certain other relationships and related transactions and director independence to be contained in the 2016 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 the 2016 Proxy Statement. 57 Form 10-K 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 Firms Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 Notes to Consolidated Financial Statements (2) Financial Statement Schedules F-2 F-5 F-6 F-7 F-9 F-10 Financial statement schedules are omitted because they are not applicable, not required under the instructions or all the information required is set forth 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 NOVAVAX, INC. 2015 Annual Report EXHIBIT NUMBER DESCRIPTION 3.1 3.2 4.1 4.2 4.3 Second Amended and Restated Certificate of Incorporation of the Registrant dated June 18, 2015 (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015) Amended and Restated By-Laws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013) Specimen stock certificate for shares of common stock of the Registrant, par value $.01 per share (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form 10, File No. 0-26770, filed on September 14, 1995) 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) Indenture (including form of Notes) with respect to Novavax’ 3.75% Convertible Senior Notes due 2023, dated as of January 29, 2016, between Novavax and The Bank of New York Mellon Trust Company, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on January 29, 2016) 10.1†† Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013) 10.2†† 10.3†† 10.4†† Amendment to Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Appendix 1 of the Registrant’s Definitive Proxy Statement filed April 30, 2014 in connection with the Annual Meeting held on June 12, 2014) Form of Non-Statutory Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015) Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015) 10.5†† 2013 Employee Stock Purchase Plan (Incorporated by reference to Appendix C to the Registrant’s Definitive Proxy Statement filed on April 30, 2013 in connection with the Annual Meeting held on June 13, 2013) 10.6†† Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Appendix B of the Company’s Definitive Proxy Statement filed April 30, 2015 in connection with the Annual Meeting held on June 18, 2015) 10.7†† 10.8†† 10.9†† Form of Non-Statutory Stock Option Award Agreement granted under the Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015) Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015) Form of Restricted Stock Award Agreement granted under the Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report for the quarter ended June 30, 2015, filed on August 10, 2015) 10.10††* Form of Director Deferred Fee Agreement 59 Form 10-K EXHIBIT NUMBER 10.11†† 10.12†† DESCRIPTION Employment Agreement between Novavax, Inc. and Stanley C. Erck, dated as of February 15, 2010 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on June 1, 2010) Employment Agreement between Novavax, Inc. and Stanley C. Erck, dated as of June 22, 2011 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011) 10.13†† Employment Agreement between Novavax, Inc. and Gregory M. Glenn dated July 1, 2010 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on July 6, 2010) 10.14†† Employment Agreement between Novavax, Inc. and Russell P. Wilson dated November 7, 2011 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on November 14, 2011) 10.15†† Employment Agreement between Novavax, Inc. and Timothy J. Hahn dated June 22, 2011 (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 14, 2012) 10.16†† Employment Agreement between Novavax, Inc. and Barclay A. Phillips dated June 24, 2013 (Incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed on June 28, 2013) 10.17†† Novavax, Inc. Amended and Restated Change in Control Severance Benefit Plan, (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on January 5, 2009) 10.18†† Form of Indemnification Agreement entered into between the Registrant and its directors and officers (Incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010) 10.19 10.20 10.21 10.22 10.23 10.24 10.25 Lease Agreement between GP Rock One, LLC and Novavax, Inc., dated as of May 7, 2007 (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed on August 11, 2008) First Amendment to Lease Agreement between GP Rock One, LLC and Novavax, Inc., dated as of May 30, 2008 (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed on August 11, 2008) 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 on Form 10-Q for the quarter ended June 30, 2008, filed on August 11, 2008) Lease Agreement for space at 20 Firstfield between ARE-20/22/1300 Firstfield Quince Orchard, LLC and Novavax, Inc., dated as of November 18, 2011 (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 14, 2012) Lease Agreement for space at 22 Firstfield between ARE-20/22/1300 Firstfield Quince Orchard, LLC and Novavax, Inc., dated as of November 18, 2011 (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 14, 2012) Lease Agreement for space at 21 Firstfield Road between Firstfield Holdco, LLC and Novavax, Inc., dated as of February 4, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 21, 2015) First Amendment to Lease Agreement for space at 21 Firstfield Road between Firstfield Holdco, LLC and Novavax, Inc., dated as of August 17, 2015 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 21, 2015) 60 NOVAVAX, INC. 2015 Annual Report EXHIBIT NUMBER 10.26** 10.27** 10.28** 10.29** 10.30** 10.31** 10.32** 10.33** 10.34 10.35** 10.36** 10.37 10.38 10.39 DESCRIPTION Contract, effective as of February 24, 2011, between Novavax, Inc. and HHS/OS/ASPR/BARDA (Incorporated by reference to Exhibit 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 on November 4, 2011) 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) 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) Contract Amendment/Modification No. 8 between Novavax, Inc. and HHS/OS/ASPR/BARDA, dated June 5, 2015 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015) 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 the quarter ended March 31, 2011, filed on November 4, 2011) License Agreement, dated July 5, 2007, between Novavax, Inc. and Wyeth Holdings Corporation (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 9, 2007) 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) Second Amendment to License Agreement between Wyeth Holdings LLC and Novavax, Inc., dated as of September 1, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 8, 2015) Stock Purchase Agreement between Novavax, Inc. and Satellite Overseas (Holdings) Limited, dated March 31, 2009 (Incorporated by reference 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) 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) 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) 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) 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) 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, filed on October 30, 2013) 61 Form 10-K EXHIBIT NUMBER 10.40 10.41 10.42** 10.43** 10.44** 10.45** 10.46** 10.47** 10.48** 10.49 10.50 10.51* 10.52* 14 DESCRIPTION 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, filed on March 12, 2014) Amendment No. 5 to Master Services Agreement between Novavax, Inc. and Cadila Pharmaceuticals Ltd. dated February 25, 2015 (Incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015) 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) 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) Amended and Restated Seasonal / Other License Agreement between Novavax, Inc. and CPL Biologicals Limited, dated as of June 29, 2009 (Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, filed on August 10, 2009) 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) H1N1 License to Agreement between Novavax, Inc. and CPL Biologicals Private Limited, dated October 6, 2009 (Incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010) Grant Agreement between Bill and Melinda Gates Foundation and Novavax, Inc., dated as of September 25, 2015 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed on November 9, 2015) Global Access Commitments Agreement between Bill and Melinda Gates Foundation and Novavax, Inc., dated as of September 25, 2015 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed on November 9, 2015) Base Call Option Transaction Confirmation, dated as of January 25, 2016, between Novavax and JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 29, 2016) Base Call Option Transaction Confirmation, dated as of January 25, 2016, between Novavax and Morgan Stanley & Co. LLC (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed January 29, 2016) Additional Base Call Option Transaction Confirmation, dated as of February 2, 2016, between Novavax and JPMorgan Chase Bank, National Association, London Branch Additional Base Call Option Transaction Confirmation, dated as of February 2, 2016, between Novavax and Morgan Stanley & Co. LLC Code of Business Conduct and Ethics (Incorporated by reference to Exhibit 14 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011) 21* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 62 NOVAVAX, INC. 2015 Annual Report EXHIBIT NUMBER DESCRIPTION 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* 32.2* 101* 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 Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 2015 and 2014, (ii) the Consolidated Statements of Operations for the three years in the period ended December 31, 2015, (iii) the Consolidated Statements of Comprehensive Loss for the three years in the period ended December 31, 2015, (iv) the Consolidated Statements of Changes in Stockholders’ Equity for the three years in the period ended December 31, 2015, (v) the Consolidated Statements of Cash Flows for the three years in the period ended December 31, 2015, and (vi) the Notes to Consolidated Financial Statements. 63 Form 10-K 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 on its behalf by the undersigned, thereunto duly authorized. NOVAVAX, INC. By: /s/ Stanley C. Erck President and Chief Executive Officer and Director Date: February 29, 2016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the Registrant and in the capacities and on the dates indicated: NAME /s/ Stanley C. Erck Stanley C. Erck /s/ Barclay A. Phillips Barclay A. Phillips /s/ James F. Young James F. Young /s/ Gail K. Boudreaux Gail K. Boudreaux TITLE President and Chief Executive Officer and Director (Principal Executive Officer) DATE February 29, 2016 Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Principal Accounting Officer) February 29, 2016 Chairman of the Board of Directors February 29, 2016 Director February 29, 2016 /s/ Richard H. Douglas Director February 29, 2016 Richard H. Douglas /s/ Gary C. Evans Gary C. Evans Director February 29, 2016 /s/ Michael A. McManus Director February 29, 2016 Michael A. McManus /s/ Rajiv I. Modi Rajiv I. Modi Director February 29, 2016 64 NOVAVAX, INC. 2015 Annual Report INDEX TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 Contents Reports of Independent Registered Public Accounting Firms Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 Notes to Consolidated Financial Statements F-2 F-5 F-6 F-7 F-9 F-10 F-1 Form 10-K REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, ON THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS THE BOARD OF DIRECTORS AND STOCKHOLDERS OF NOVAVAX, INC. We have audited the accompanying consolidated balance sheets of Novavax, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to 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 standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial state- ments are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2015 in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Novavax Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Baltimore, MD February 29, 2016 F-2 NOVAVAX, INC. 2015 Annual Report REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, REGARDING INTERNAL CONTROL OVER FINANCIAL REPORTING THE BOARD OF DIRECTORS AND STOCKHOLDERS OF NOVAVAX, INC. We have audited Novavax, Inc.’s internal control over financial reporting as of December 31, 2015, 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). Novavax, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion 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 standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of inter- nal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we consid- ered 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 financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal 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 dispo- sitions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expen- ditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of 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, 2015, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Novavax, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2015 of Novavax, Inc. and our report dated February 29, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Baltimore, MD February 29, 2016 F-3 Form 10-K REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM BOARD OF DIRECTORS AND STOCKHOLDERS OF NOVAVAX, INC. We have audited the accompanying consolidated statements of operations, comprehensive loss, changes in stockhold- ers’ equity, and cash flows of Novavax, Inc. (a Delaware corporation) and subsidiary (the “Company”) for the year ended December 31, 2013. These financial statements are the responsibility of the Company’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 standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial state- ments are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by man- agement, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of Novavax, Inc. and its subsidiary’s operations and their cash flows for the year ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. /s/ Grant Thornton LLP McLean, Virginia March 12, 2014 F-4 NOVAVAX, INC. 2015 Annual Report CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION) ASSETS Current assets: Cash and cash equivalents Marketable securities Restricted cash Accounts receivable—billed Accounts receivable—unbilled Prepaid expenses and other current assets Total current assets Restricted cash Property and equipment, net Intangible assets, net Goodwill Other non-current assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Accrued expenses Deferred revenue Current portion of notes payable Deferred rent Other current liabilities Total current liabilities Deferred revenue Non-current portion of notes payable Deferred rent Other non-current liabilities Total liabilities Commitments and contingencies Stockholders’ equity: Preferred stock, $0.01 par value, 2,000,000 shares authorized; no shares issued and outstanding at December 31, 2015 and 2014 Common stock, $0.01 par value, 600,000,000 shares authorized at December 31, 2015 and 300,000,000 shares authorized at December 31, 2014; and 270,426,662 shares issued and 269,971,232 shares outstanding at December 31, 2015 and 239,287,294 shares issued and 238,831,864 shares outstanding at December 31, 2014 Additional paid-in capital Accumulated deficit Treasury stock, 455,430 shares, cost basis at both December 31, 2015 and 2014 Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity The accompanying notes are an integral part of these financial statements. DECEMBER 31, 2015 2014 $ 93,108 137,548 34,964 1,449 871 19,317 287,257 1,537 32,342 10,793 53,065 1,044 $ 32,335 135,721 297 7,510 3,100 9,195 188,158 — 19,737 12,577 54,612 918 $ 386,038 $ 276,002 $ 11,889 26,734 34,469 395 1,409 1,598 76,494 4,171 — 9,534 3,170 93,369 — — 2,704 951,569 (650,030) (2,450) (9,124) 292,669 $ 386,038 $ 12,908 19,397 — 603 1,138 70 34,116 2,500 395 7,734 1,639 46,384 — — 2,393 729,373 (493,093) (2,450) (6,605) 229,618 $ 276,002 F-5 Form 10-K CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) 2015 2014 2013 FOR THE YEARS ENDED DECEMBER 31, Revenue: Government contracts Research and development collaborations Total revenue Expenses: Research and development General and administrative Total expenses Loss from operations Other income (expense): Investment income Interest expense Other income (expense), net Realized gains on marketable securities Change in fair value of warrant liability $ 33,344 $ 26,213 $ 17,708 2,906 36,250 4,446 30,659 162,644 30,842 193,486 (157,236) 660 (241) (120) — — 94,422 19,928 114,350 (83,691) 286 (157) — 615 — 3,207 20,915 58,530 14,819 73,349 (52,434) 187 (160) 182 — 267 Loss from operations before income tax expense (156,937) (82,947) (51,958) Income tax expense Net loss — — 25 $(156,937) $ (82,947) $ (51,983) Basic and diluted net loss per share $ (0.60) $ (0.37) $ (0.31) Basic and diluted weighted average number of common shares outstanding 262,248 225,848 169,658 F-6 NOVAVAX, INC. 2015 Annual Report CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (IN THOUSANDS) Net loss Other comprehensive income (loss): Net unrealized gains (losses) on marketable securities available-for-sale Reclassification adjustment for gains included in net loss Foreign currency translation adjustment Other comprehensive income (loss) Comprehensive loss The accompanying notes are an integral part of these financial statements. FOR THE YEARS ENDED DECEMBER 31, 2015 2014 2013 $(156,937) $(82,947) $(51,983) 42 — (2,561) (2,519) (65) (615) (6,764) (7,444) 186 — 223 409 $(159,456) $(90,391) $(51,574) F-7 Form 10-K CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 COMMON STOCK SHARES AMOUNT ADDITIONAL PAID-IN CAPITAL ACCU- MULATED DEFICIT TREASURY STOCK ACCU- MULATED OTHER COMPRE- HENSIVE INCOME (LOSS) TOTAL STOCK- HOLDERS’ EQUITY Balance at December 31, 2012 148,398,747 $1,484 $438,939 $(358,163) $(2,450) $430 $ 80,240 Non-cash compensation cost for stock options, ESPP and restricted stock Exercise of stock options Issuance of common stock, net of issuance costs of $6,067 Unrealized gain on marketable securities Foreign currency translation adjustment Net loss — 667,867 — 7 2,480 1,491 60,044,130 600 169,990 — — — — — — — — — — — — — — (51,983) — — — — — — Balance at December 31, 2013 209,110,744 2,091 612,900 (410,146) (2,450) Non-cash compensation cost for stock options, ESPP and restricted stock Exercise of stock options/ Purchase under ESPP Restricted stock issued as compensation — 1,411,550 15,000 — 14 — 6,090 2,776 — Issuance of common stock, net of issuance costs of $7,105 Unrealized loss on marketable securities Foreign currency translation adjustment Net loss 28,750,000 288 107,607 — — — — — — — — — — — — — — — (82,947) — — — — — — — — — — 186 223 — 839 — — — — 2,480 1,498 170,590 186 223 (51,983) 203,234 6,090 2,790 — 107,895 (680) (680) (6,764) (6,764) — (82,947) Balance at December 31, 2014 239,287,294 2,393 729,373 (493,093) (2,450) (6,605) 229,618 Non-cash compensation cost for stock options, ESPP and restricted stock Exercise of stock options/ Purchase under ESPP Restricted stock issued as compensation — 1,950,748 25,000 — 19 — 13,431 4,782 — Issuance of common stock, net of issuance costs of $11,912 29,163,620 292 203,983 Unrealized gain on marketable securities Foreign currency translation adjustment Net loss — — — — — — — — — (156,937) — — — — — — — — — — — — — — — — — 42 13,431 4,801 — 204,275 42 (2,561) (2,561) — (156,937) Balance at December 31, 2015 270,426,662 $2,704 $951,569 $(650,030) $(2,450) $(9,124) $ 292,669 The accompanying notes are an integral part of these financial statements. F-8 NOVAVAX, INC. 2015 Annual Report CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Operating Activities: FOR THE YEARS ENDED DECEMBER 31, 2015 2014 2013 Net loss Reconciliation of net loss to net cash used in operating activities: $(156,937) $ (82,947) $ (51,983) Change in fair value of warrant liability Depreciation and amortization Loss (Gain) on disposal of property and equipment Amortization of net premiums on marketable securities Deferred rent Non-cash stock-based compensation Realized gains on marketable securities Other Changes in operating assets and liabilities: Restricted cash Accounts receivable—billed Accounts receivable—unbilled Prepaid expenses and other assets Accounts payable and accrued expenses Deferred revenue Lease incentives received Net cash used in operating activities Investing Activities: Capital expenditures Proceeds from disposal of property and equipment Net cash received from acquisition Purchases of marketable securities Proceeds from sales, maturities and redemptions of marketable securities Net cash provided by (used in) investing activities Financing Activities: Principal payments of capital leases Principal payments of notes payable Proceeds from notes payable Changes in restricted cash Cash paid with acquisition Net proceeds from sales of common stock, net of offering costs ― 5,983 681 1,217 (721) 13,431 ― 243 (36,204) 6,250 2,229 (10,269) 9,075 36,140 2,792 (126,090) (18,286) 18 ― (228,521) 225,519 (21,270) (67) (600) ― (126) ― ― 4,424 534 415 (552) 6,090 (615) 60 1,120 (5,705) 1,888 (5,904) 13,979 (253) 452 (67,014) (7,268) 39 ― (176,469) 53,865 (129,833) (124) (671) ― (2) (171) (267) 2,591 (32) 507 897 2,480 ― (200) (431) (451) (3,418) 402 4,184 (341) 703 (45,359) (5,785) 116 3,034 (14,754) 33,781 16,392 (87) (473) 1,450 (1) ― of $11.9 million, $7.1 million and $6.1 million, respectively 204,275 107,896 128,648 Proceeds from the exercise of stock options and employee stock purchases Net cash provided by financing activities Effect of exchange rate on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosure of non-cash activities: Common stock issued in connection with acquisition Capital expenditures included in accounts payable and accrued expenses Supplemental disclosure of cash flow information: Cash interest payments The accompanying notes are an integral part of these financial statements. 4,801 208,283 (150) 60,773 32,335 $ 93,108 2,789 109,717 (6) (87,136) 119,471 $ 32,335 1,498 131,035 4 102,072 17,399 $119,471 $ ― $ ― $ 41,942 $ 2,797 $ 2,615 $ 379 $ 96 $ 179 $ 177 F-9 Form 10-K NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2015, 2014 AND 2013 Note 1—ORGANIZATION Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiary, “Novavax AB,” the “Company”) is a clinical-stage vaccine company focused on the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. Using innovative proprietary recombinant nanoparticle vaccine platform technology, the Company produces vac- cine candidates to efficiently and effectively respond to both known and emerging disease threats. The Company’s vaccine candidates are genetically engineered three-dimensional nanostructures that incorporate recombinant protein antigens criti- cal to disease pathogenesis. The Company’s product pipeline targets a variety of infectious diseases with vaccine candidates currently in clinical development for respiratory syncytial virus (“RSV”), seasonal influenza, pandemic influenza and Ebola virus (“EBOV”). Note 2—OPERATIONS The Company’s vaccine candidates currently under development, some of which include adjuvants, will require significant additional research and development efforts that include extensive preclinical studies 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 equity offerings, convertible debt issuance (in 2016) 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 prior contract with PATH Vaccine Solutions (“PATH”) and the grant agreement with the Bill & Melinda Gates Foundation (“BMGF”). Management regularly reviews the Company’s cash and cash equivalents and marketable secu- rities relative to 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 support its product development activities. Note 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiary, Novavax AB, since July 31, 2013. 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, requires management to make estimates and assumptions that affect the reported amounts of assets and lia- bilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of pur- chase. Cash and cash equivalents consist of the following at (in thousands): Cash Money market funds Government-backed security Asset-backed securities Corporate debt securities Cash and cash equivalents 2015 $29,569 14,950 20,000 8,185 20,404 $93,108 2014 $ 4,481 20,354 7,500 ― ― $32,335 Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature. F-10 NOVAVAX, INC. 2015 Annual Report Marketable Securities Marketable securities consist of commercial paper, asset-backed securities and corporate notes. Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consid- eration the Company’s ability and intent to hold the investment to maturity. Interest and dividend income is recorded when earned and included in investment income in the consolidated statements of operations. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations. 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 are classified as available-for-sale are measured at fair market value in the consolidated balance sheets, and unrealized holding gains and losses on marketable securities are reported as a separate component of stockholders’ equity until realized. Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-tempo- rary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the pros- pects 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 hold the 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 (expense), 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 and marketable securities. The Company’s investment policy limits investments; to certain types of instruments, including auction rate securities, high-grade corporate debt securities and money market instruments, places restrictions on maturities and concentrations in certain industries; and requires the Company to 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 cash equivalents. Fair Value Measurements The Company applies Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, for finan- cial 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 future income 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 hierarchy that prioritizes the inputs to valuation techniques used to mea- sure fair value into three broad levels. The following is a brief description of those three levels: • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar 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 current and noncurrent restricted cash includes payments received under the BMGF grant agreement (see Note 8). The Company will utilize these funds as it incurs expenses for services performed under the agreement. In addition, the Company’s non-current restricted cash with respect to its manufacturing, laboratory and office space functions as col- lateral for letters of credit, which serve as security deposits for the duration of the leases. At December 31, 2015 and 2014, non-current restricted cash is $0.9 million and $0.8 million, respectively, and is recorded as other non-current assets on the consolidated balance sheets. F-11 Form 10-K 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 in future 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 invoic- ing has not yet occurred. 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, generally three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of the improvements 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 or asset group may not be recoverable based on the criteria for accounting for the impairment or disposal of long- lived assets under ASC Topic 360, Property, Plant and Equipment. 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 and has one reporting unit. The Company utilizes primarily the market approach and, if considered neces- sary, the income approach to determine if it has an impairment of its goodwill. The market approach is based on market value of invested capital. To ensure that the Company’s capital stock is the appropriate measurement of fair value, the Company considers factors such as its trading volume, diversity of investors and analyst coverage. When utilized, the income approach is used as a confirming look to the market approach, if considered necessary. Goodwill impairment may exist if the carrying value of the reporting unit exceeds its estimated 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 the analysis, 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 a circumstance arise. At December 31, 2015 and 2014, the Company used the market approach to determine if the Company had an impairment of its goodwill. Step one of 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 of the Company’s reporting unit was substantially higher than the carrying value, resulting in no impairment to goodwill at December 31, 2015 and 2014. Equity Method Investment The Company has an equity investment in CPL Biologicals Private Limited (“CPLB”). The Company accounts for this invest- ment using the equity method (see Note 8). Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distribu- tions 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 reim- bursable and fixed price contracts, including license, grant and clinical development agreements. The Company recognizes revenue under research contracts when a contract has been executed, 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 they become known. Under cost reimbursable contracts with U.S. government agencies, the Company is reimbursed and recognizes revenue as allowable costs are incurred plus a portion of the fixed fee earned. The Company considers fixed fees under cost reimbursable F-12 NOVAVAX, INC. 2015 Annual Report contracts to be earned in proportion to the allowable costs incurred in performance of the work as compared to total esti- mated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed. Under its HHS BARDA contract, certain activities must be pre-approved by HHS BARDA in order for their costs to be deemed allowable direct costs. Direct costs incurred under cost reimbursable contracts are recorded as research and development expenses. The Company’s HHS BARDA contract provides the U.S. government the ability 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. 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. Payments to the Company under cost reimbursable contracts with agencies of the U.S. government, such as the HHS BARDA contract, are provisional payments subject to adjustment upon annual audit by the government. An audit of fiscal years 2013 and 2014 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 set- tlement. 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 the adjustments are known and collection is probable. Under its grant agreement with BMGF, the Company is reimbursed for certain costs that support development activities, including the Company’s global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and WHO prequalification of the RSV F Vaccine. Payments received under the grant agreement are recognized as revenue in the period in which such research and development activities are performed. The Company’s 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 deter- mine if the deliverables can be divided into more than 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 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 or performance of the undelivered item(s) is considered probable and substantially in control of the Company. Deliverables that cannot be divided into separate units are combined and treated as one unit of accounting. Consideration received is allocated among the separate units of accounting based on the relative selling price method. Deliverables under these arrangements typically include rights to intellectual property, research and development services and involvement by the parties in steering committees. Historically, deliverables under the Company’s collaborative research and development agreements have been 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 contracts and collaborative agreements to determine whether the payments received should be recorded as revenue or as a reduction to research and development expenses. In reaching this determination, management considers a number of factors, including whether the Company is principal under the arrangement, and whether the arrangement is sig- nificant to, and part of, the Company’s core operations. Historically, payments received under its contracts and collaborative agreements have been recognized as revenue since the Company acts as a principal in the arrangement and the activities are core to its operations. When the performance under a fixed price contract can be reasonably estimated, revenue for fixed price contracts is recog- nized under the proportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared to total estimated contract costs. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of the work. Direct costs incurred under collaborative research and development agreements are recorded as research and development expenses. If the performance under a fixed price contract cannot 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 the upfront payment have been satisfied. Revenue from the achievement of research and development milestones, if deemed substantive, is recognized as revenue when the milestones are achieved and the milestone payments are due and collectible. If not deemed substantive, the Company would recognize such milestone as revenue upon its achievement on a straight-line basis over the remaining expected term of the research and development period. Milestones are considered substantive if all of the following conditions are met: (1) the milestone is non-refundable; (2) there is substantive uncertainty of achievement of the milestone at the inception of the arrangement; (3) substantive effort is involved to achieve the milestone and such achievement relates to past performance; and (4) the amount of the milestone appears reasonable in relation to the effort expended and all of the deliverables and pay- ment terms in the arrangement. F-13 Form 10-K Stock-Based Compensation The Company accounts for stock-based compensation related to grants of stock options, restricted stock awards and pur- chases under its Employee Stock Purchase Plan (the “ESPP”) at fair value. The Company recognizes compensation expense related to such awards on a straight-line basis over the requisite service period (generally the vesting period) of the equity awards that are expected to vest, which typically occurs ratably over periods ranging from six months to four years. See Note 12 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 forfeiture experience using the historical expected term from the vesting date, whereas the expected term for pur- chases under the ESPP was based on the purchase periods included in the offering. The expected volatility was determined using historical volatilities based on stock prices over a look-back period corresponding to the expected term. The risk-free interest rate was determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected term. The forfeiture rate was determined using historical pre-vesting forfeiture rates since the inception of the plans. The Company 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 and the number of shares ultimately expected to vest using the straight-line method of amortization. The Company accounts for share-based awards issued to non-employees by determining the fair value of equity awards given as consideration for services rendered to be recognized as compensation expense over the shorter of the vesting or service periods. In cases where an equity award is not fully vested, such equity award is revalued on each subsequent reporting date until vesting is complete with a cumulative catch-up adjustment recognized for any changes in its estimated fair value. Research and Development Expenses Research and development expenses include salaries, laboratory supplies, consultants and subcontractors and other expenses associated with the Company’s process development, manufacturing, clinical, regulatory and quality assurance activities for its programs. In addition, indirect costs, such as fringe benefits and overhead expenses, are also included in research and development expenses. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable 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 tax assets and liabilities is recognized in income in the period such changes are enacted. A valuation allowance is established when necessary to reduce net deferred 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 more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax ben- efits associated with an uncertain tax position are reversed in the period in which the more likely than not recognition threshold is no longer satisfied. Interest and penalties related to income tax matters are recorded as income tax expense. At December 31, 2015 and 2014, the Company had no accruals 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 stock options and unvested restricted stock awards totaling 23,832,545, 16,978,098 and 11,992,918 shares at December 31, 2015, 2014 and 2013, respectively, are excluded from the computation for 2015, 2014 and 2013, as their effect is anti-dilutive. F-14 NOVAVAX, INC. 2015 Annual Report Foreign Currency The accompanying consolidated financial statements are presented in U.S. dollars. The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona). The translation of assets and liabilities of Novavax AB to U.S. dollars is made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of the statement of 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 exchange rate 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 loss in the accompanying consolidated balance sheets. The foreign currency translation adjustment balance included in accumulated other comprehensive loss was $9.1 million and $6.5 million at December 31, 2015 and 2014, respectively. Segment Information The Company manages its business as one operating segment: developing recombinant vaccines. The Company does not operate separate lines of business with respect to its vaccine candidates. Accordingly, the Company does not have separately reportable segments as defined by ASC Topic 280, Segment Reporting. Recent Accounting Pronouncements Recently Adopted In November 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-07”). ASU 2015-17 simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities, as well as any related valuation allowance, be classified as noncurrent in a classified statement of financial position. The Company adopted ASU 2015-17 during the fourth quarter of 2015 and applied it retrospectively to all periods pre- sented, which had no impact to the prior period amounts. For additional information, please see Note 14, Income Taxes. Not Yet Adopted In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which super- sedes nearly all existing revenue recognition guidance under Topic 605, Revenue Recognition. The new standard requires a company to recognize revenue when it transfers goods and services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. ASU 2014-09 defines a five-step process that includes iden- tifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard to 2018 for public companies, with an option that would permit companies to adopt the new standard as early as the original effective date of 2017. Early adoption prior to the original effective date is not permitted. The Company is evaluating the potential impact that ASU 2014-09 will have on its consolidated financial position and results of operations. In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for the Company beginning January 1, 2016. The adoption of ASU 2015-03 will not have a material effect of the Company’s financial statements. Reclassifications Cost of government contracts revenue of $15.0 million and 8.2 million for 2014 and 2013, respectively, have been reclassified to research and development expenses. This reclassification has been made to conform to the current year presentation. Note 4—ACQUISITION On July 31, 2013 (the “Acquisition Date”), Novavax acquired 99.5% of all of the outstanding shares, warrants and stock options of Isconova AB through the issuance of approximately 15.6 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 cash of approximately $22,000. Upon the acqui- sition, Isconova AB was renamed Novavax AB. During the second quarter of 2014, the Company completed its purchase of the remaining 0.5% shares outstanding from the holders of such securities of Novavax AB. This transaction has been accounted F-15 Form 10-K for using the purchase method of accounting, with Novavax as the acquirer. The results of Novavax AB’s operations have been included in the consolidated financial statements since the Acquisition Date. A substantial portion of the assets acquired consisted of intangible assets relating to its proprietary adjuvant technology and collaboration agreements. 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, market participant assumptions, cost and development assumptions, expected synergies and other cost savings that a market participant would be expected to realize as a result of the combination and certain other high-level assumptions. Amortization expense for intangible assets is being recorded on a straight-line basis over the expected useful lives of the assets, ranging from seven to 20 years. The weighted average useful lives for the proprietary adjuvant technology and collaboration agreements are 20 years and 12 years, respectively. The weighted average useful life for all acquired intangible assets is 17 years. Novavax AB entered into a license and collaboration agreement and received research funding prior to the acquisition that is required to be repaid upon notice in the first quarter of 2016. At December 31, 2015, such research funding liability is $1.5 mil- lion and is included in other current liabilities in the consolidated balance sheet, which was paid in February 2016. 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: ASSETS LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 FAIR VALUE AT DECEMBER 31, 2015 FAIR VALUE AT DECEMBER 31, 2014 Money market funds $14,950 $ ― Government-backed security Asset-backed securities(1) Corporate debt securities(2) Total cash equivalents and marketable securities ― ― ― 20,000 28,924 137,213 $14,950 $186,137 1. 2. Includes $8,185 classified as cash and cash equivalents (see Note 3). Includes $20,404 classified as cash and cash equivalents (see Note 3). $― ― ― ― $― $20,354 $ ― ― ― ― 7,500 46,624 89,097 $20,354 $143,221 $― ― ― ― $― During the years ended December 31, 2015 and 2014, 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 payable approximate fair value due to their short-term nature. Based on borrowing rates available to the Company, the fair value of capital lease and notes payable approximates their carrying value. The Company’s milestone payment due to Wyeth (see Note 15) approximates its fair value at December 31, 2015, as the liability has been calculated based on an antici- pated future payment date discounted at borrowing rates available to the Company. Note 6—MARKETABLE SECURITIES Marketable securities classified as available-for-sale as of December 31, 2015 and 2014 were comprised of (in thousands): DECEMBER 31, 2015 DECEMBER 31, 2014 AMORTIZED COST GROSS UNREALIZED GAINS GROSS UNREALIZED LOSSES FAIR VALUE AMORTIZED COST GROSS UNREALIZED GAINS GROSS UNREALIZED LOSSES Asset-backed securities $ 20,748 Corporate debt securities 116,821 Total $137,569 $ ― 29 $29 $ (9) (41) $(50) $ 20,739 $ 46,660 116,809 89,126 $137,548 $135,786 $— 8 $8 $(36) (37) $(73) FAIR VALUE $ 46,624 89,097 $135,721 F-16 NOVAVAX, INC. 2015 Annual Report 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, all of which resulted from reclassification adjustments out of accumulated other comprehensive income (loss) in 2014. Marketable Securities—Unrealized Losses The Company owned 47 available-for-sale securities as of December 31, 2015. Of these 47 securities, 35 had combined unreal- ized losses of less than $0.1 million as of December 31, 2015. The Company did not have any investments in a loss position for greater than 12 months as of December 31, 2015. The Company has evaluated its marketable securities and has determined that none of these investments has an other-than-temporary impairment, as it has no intent 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 years ended December 31, 2015 and 2014 were as follows (in thousands): Beginning balance Currency translation Ending balance YEAR ENDED DECEMBER 31, 2015 $54,612 (1,547) $53,065 2014 $58,707 (4,095) $54,612 Intangible Assets Purchased intangible assets consisted of the following as of December 31, 2015 and 2014 (in thousands): DECEMBER 31, 2015 DECEMBER 31, 2014 GROSS CARRYING AMOUNT ACCUMULATED AMORTIZATION INTANGIBLE ASSETS, NET GROSS CARRYING AMOUNT ACCUMULATED AMORTIZATION INTANGIBLE ASSETS, NET Finite-lived intangible assets: Proprietary adjuvant technology Collaboration agreements $ 8,858 3,999 Total identifiable intangible assets $12,857 $(1,070) (994) $(2,064) $ 7,788 3,005 $10,793 $ 9,565 4,319 $13,884 $ (678) (629) $(1,307) $ 8,887 3,690 $12,577 Amortization expense for the years ended December 2015, 2014 and 2013 was $0.9 million, $1.1 million and $0.5 million, respectively. Estimated amortization expense for existing intangible assets for each of the five succeeding years ending December 31, is as follows (in thousands): YEAR 2016 2017 2018 2019 2020 AMOUNT $854 854 854 854 730 F-17 Form 10-K 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 quad- rivalent seasonal and pandemic influenza virus-like particle (“VLP”) vaccine candidates. The contract with HHS BARDA is a cost-plus-fixed-fee contract, which reimburses the Company for allowable direct contract costs incurred plus allowable indirect costs and a fixed fee earned in the ongoing clinical development and product scale-up of its multivalent seasonal and monovalent pandemic H7N9 influenza VLP vaccine candidates. In September 2014, HHS BARDA exercised and initiated a two-year option to the contract, which included scope to support development activities leading up to planned Phase 3 clinical studies, added $70 million of funding on top of the remainder of the $97 million base period funding, and extended the contract until September 2016. In June 2015, the contract was amended to increase the funding by $7.7 million to allow for the recovery of additional costs under the contract relating to the settlement of indirect rates for fiscal years 2011 and 2012. This additional amount was received and recorded as revenue in the three months ended June 30, 2015. During 2015, the Company recognized revenue of $33.3 million, and has recognized approximately $112 million in revenue since the inception of the contract. Billings under the contract are based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. These indirect rates are subject to audit by HHS BARDA on an annual basis. An audit of fiscal years 2013 and 2014 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 the adjustments are known and collection is probable. In 2012, HHS BARDA withheld payment on the outside costs of the Company’s Phase 2 clinical trial of its seasonal quadrivalent influenza VLP vaccine candidate in Australia (“205 Trial”). Such outside costs were recorded as expenses in the period incurred and the Company did not record revenue relating to such outside costs prior to the first quarter of 2015 because collection of the amount was not reasonably assured. In late 2014, the U.S. Food and Drug Administration, Center for Biologics Evaluation and Research (“FDA”) accepted the data from the 205 Trial as part of the Company’s investigational new drug (“IND”) appli- cation for its seasonal quadrivalent influenza VLP vaccine candidate. In the first quarter of 2015, HHS BARDA approved the reimbursement of the 205 Trial costs, and the Company recorded revenue of $3.1 million as collection of the amount became reasonably assured during the period. The Company also collected this amount in 2015. CPLB Joint Venture In 2009, the Company formed a joint venture with Cadila Pharmaceuticals Limited (“Cadila”) named CPL Biologicals Private Limited (“CPLB”) to develop and manufacture vaccines, biological therapeutics and diagnostics in India. CPLB is owned 20% by the Company and 80% by Cadila. The Company accounts for its investment in CPLB using the equity method. Because CPLB’s activities and operations are controlled and funded by Cadila, the Company accounts for its investment using the equity method. Since the carrying value of the Company’s initial investment was nominal and there is no guarantee or commitment to provide future funding, the Company has not recorded nor does it expect 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 and commercially sell influenza vaccines exclusively in South Korea and non-exclusively in certain other specified countries. At its own cost, LGLS is responsible 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 ongoing project man- agement 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 in the high single digits from LGLS’s future commercial sales of influenza VLP vaccines. The upfront payment has been deferred and recorded in deferred revenue in the consolidated balance sheets and will be recognized when the previously mentioned obligations in the agreement are satisfied, which may not occur 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 remaining term of the research and development period upon achievement of such milestones. Any royalties under the agreement will be recognized as earned. F-18 NOVAVAX, INC. 2015 Annual Report Bill & Melinda Gates Foundation Grant Agreement In support of the Company’s development of its respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) for infants via maternal immunization, in September 2015, the Company entered into an agreement (“Grant Agreement”) with BMGF, under which it was awarded a grant totaling up to $89.1 million (the “Grant”). The Grant will support development activities, including the Company’s global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts and WHO prequalification of the RSV F Vaccine. The Company concurrently entered into a Global Access Commitments Agreement (“GACA”) with BMGF as a part of the Grant Agreement. Under the terms of the GACA, among other things, the Company agreed to make the RSV F Vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries. Unless earlier terminated by BMGF, the GACA will continue in effect until the latter of 15 years from its effective date, or 10 years after the first sale of a product under defined circumstances. The term of the GACA may be extended in certain circumstances, by a period of up to five additional years. Payments received under the Grant Agreement are being recognized in the period in which the research and development activities are performed. Payments received in advance that are related to future performance are deferred and recognized as revenue when the research and development activities are performed. Cash payments received under the Grant are restricted as to their use until expenditures contem- plated in the Grant are incurred. The Company recognized revenue from the Grant of $1.6 million in 2015. At December 31, 2015, the Company’s current restricted cash and deferred revenue balances on the consolidated balance sheet represent its estimate of costs to be reimbursed and incurred, respectively, in 2016 under the Grant Agreement. PATH Vaccine Solutions Clinical Development Agreement In 2012, the Company entered into a clinical development agreement with PATH to develop its RSV F Vaccine for infants via maternal immunization in certain low-resource countries. Under the terms of the PATH agreement, which expired in April 2015, the Company was awarded $6.8 million by PATH to partially support Phase 2 clinical trials in women of childbearing age, reproductive toxicology studies and the development of a Phase 3 clinical trial strategy. The Company recognized revenue of $0.5 million in 2015 and has recognized $6.8 million in revenue since the inception of the agreement. Revenue under this arrangement was being recognized under the proportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared to total estimated contract costs. Costs incurred under this agreement represented a reasonable measurement of proportional performance of the services being performed. 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): Laboratory supplies Other prepaid expenses and other current assets Prepaid expenses and other current assets Property and Equipment, net Property and equipment is comprised of the following at December 31 (in thousands): Machinery and equipment Leasehold improvements Computer software and hardware Construction in progress Less—accumulated depreciation and amortization Property and equipment, net 2015 $12,968 6,349 $19,317 2014 $7,564 1,631 $9,195 2015 $ 26,461 12,440 3,091 6,167 48,159 (15,817) 2014 $ 16,712 8,843 1,733 3,719 31,007 (11,270) $ 32,342 $ 19,737 F-19 Form 10-K Depreciation and amortization expense was approximately $6.0 million, $4.4 million and $2.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. Machinery and equipment included $0.4 million of equipment acquired under a capital lease with accumulated depreciation of $0.3 million and $0.2 million as of December 31, 2015 and 2014, respectively. Accrued Expenses Accrued expenses consist of the following at December 31 (in thousands): Employee benefits and compensation Research and development accruals Other accrued expenses Accrued expenses Note 10—LONG-TERM DEBT Notes Payable Notes payable consist of the following at December 31 (in thousands): Equipment loan; 12.1%, principal payments due in monthly installments totaling $48 through December 2016 Bank loans; repaid in 2015 Total Less—current portion Long-term portion 2015 $11,255 13,814 1,665 $26,734 2014 $ 8,597 9,826 974 $19,397 2015 2014 $ 395 ― 395 (395) $ ― $ 967 31 998 (603) $ 395 Equipment Loan In September 2012, the Company entered into a master security agreement with General Electric Capital Corporation (“GE”), whereby the Company could borrow up to $2.0 million to finance the purchases of equipment (each, an “Equipment Loan”). Each Equipment Loan bears interest at the three-year U.S. government treasury rate plus 11.68%, provided that the rate shall not be less than 12.1%, and is to be repaid over forty-two (42) months. GE will maintain a security interest in all equipment financed under the Equipment Loan. Interest accrues on the outstanding balance until paid in full. As of December 31, 2013, the Company financed $2.0 million in total under the Equipment Loans. Aggregate future minimum principal payments on long-term debt at December 31, 2015 are as follows (in thousands): YEAR 2016 Total minimum principal payments AMOUNT $395 $395 Note 11—STOCKHOLDERS’ EQUITY On June 18, 2015, the Company’s stockholders of record as of April 20, 2015 approved the amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to increase the total number of shares of com- mon stock that the Company is authorized to issue from 300,000,000 shares to 600,000,000 shares. In March 2015, the Company completed a public offering of 27,758,620 shares of its common stock, including 3,620,689 shares of common stock that were issued upon the exercise in full of the option to purchase additional shares granted to the under- writers, at a price of $7.25 per share resulting in proceeds, net of offering costs of $11.6 million, of approximately $190 million. F-20 NOVAVAX, INC. 2015 Annual Report 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 that were issued upon the exercise in full of an option to purchase additional shares granted to the under- writers, at a price of $4.00 per share resulting in net proceeds of approximately $108 million. In September 2013, the Company completed a public offering of 31,846,950 shares of its common stock, including 4,153,950 shares of common stock that were issued upon the exercise in full of the over-allotment granted to the underwriters, at a price of $3.14 per share resulting in net proceeds of approximately $95 million. In 2012, the Company entered into an At Market Issuance Sales Agreement (“Sales Agreement”), under which the Company sold an aggregate of $50 million in gross proceeds of its common stock. During 2013, the Company sold 12.6 million shares at sales prices ranging from $2.06 to $3.38 per share, resulting in $34.0 million in net proceeds. During 2015, the Company sold 1.4 million shares at an average sales price of $10.63 per share, resulting in $14.6 million in net proceeds. The Sales Agreement was fully utilized at that time. Note 12—STOCK-BASED COMPENSATION Stock Options The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms. The Board adopted the 2015 Stock Incentive Plan (“2015 Plan”) in March 2015 and, consistent with historical practice, granted annual and new equity awards prior to the Company’s annual meeting of stockholders in June 2015 under the 2015 Plan; however, these awards were contingent upon stockholder approval of both the 2015 Plan and the Company’s Charter Amendment (see Note 11), both of which were approved at the Company’s annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary. The 2015 Plan authorizes the issuance of up to 25,000,000 shares of common stock under equity awards granted under the plan. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025. The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company’s common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from six months to four years. Stock Options Awards The following is a summary of option activity under the 2015 Plan, 2005 Plan and the 1995 Stock Option Plan (“1995 Plan”) for the year ended December 31, 2015: 2015 PLAN 2005 PLAN 1995 PLAN Outstanding at January 1, 2015 — $ — 16,928,098 WEIGHTED- AVERAGE EXERCISE PRICE STOCK OPTIONS STOCK OPTIONS WEIGHTED- AVERAGE EXERCISE PRICE $3.24 $6.70 WEIGHTED- AVERAGE EXERCISE PRICE $2.21 $ — STOCK OPTIONS 35,000 — 8,502,941 — $8.97 $ — 22,500 (1,286,556) $2.36 (35,000) $2.21 (145,938) $9.03 (213,500) $3.79 Granted Exercised Canceled Outstanding at December 31, 2015 8,357,003 $8.97 15,450,542 Vested and expected to vest at December 31, 2015 6,812,836 $8.97 14,948,571 Shares exercisable at December 31, 2015 280,000 $8.97 8,423,167 $3.31 $3.25 $2.56 Shares available for grant at December 31, 2015 16,642,997 — — — — $ — $ — $ — $ — F-21 Form 10-K As discussed in the “Stock Options” section above, prior to the Company’s annual meeting of stockholders in June 2015, the Company granted 7,014,441 stock options with a weighted-average exercise price of $8.94 under the 2015 Plan. Since the 2015 Plan and the Charter Amendment were approved at the Company’s annual meeting of stockholders in June 2015, the Company began to record stock-based compensation expense for these awards at that time. The fair value of stock options granted under the 2015 Plan and 2005 Plan was estimated at the date of grant or the date upon which the 2015 Plan was approved by the Company’s stockholders for stock options granted prior to that time using the Black- Scholes option-pricing model with the following assumptions: Weighted average fair value of options granted Risk-free interest rate Dividend yield Volatility Expected term (in years) Expected forfeiture rate 2015 $4.38 2014 $2.39 2013 $1.07 1.19%–2.13% 1.24%–2.22% 0.54%–1.36% 0% 0% 0% 53.58%–68.39% 52.47%–67.93% 51.55%–73.72% 3.98–7.34 4.04–6.96 3.91–7.05 0%–16.33% 0%–23.15% 0%–23.15% The total aggregate intrinsic value and weighted-average remaining contractual term of stock options exercisable under the 2015 Plan and 2005 Plan as of December 31, 2015 was approximately $49 million and 6.3 years, respectively. The total aggre- gate intrinsic value and weighted-average remaining contractual term of stock options vested and expected to vest under the 2015 Plan and 2005 Plan as of December 31, 2015 was approximately $77 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 the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2015. This amount is subject to change based on changes to the closing price of the Company’s common stock. The aggregate intrinsic value of options exercised and vesting of restricted stock awards for 2015, 2014 and 2013 was $9.7 million, $3.4 million and $0.6 million, 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 stock to 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 purchase shares 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 the lesser 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 the option period when the employee was first eligible to participate). At December 31, 2015, there were 1,090,010 shares available for issuance under the ESPP. The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: Range of Black-Scholes fair values of ESPP shares granted $1.06–$3.38 $0.78–$2.08 2015 2014 2013 $0.78 0.04% 0% 0.05%–0.35% 0.04%–0.24% 0% 0% 40.79%–64.24% 50.80%–67.57% 50.80% 0.5–2.0 5% 0.5–1.5 5% 0.5 5% Risk-free interest rate Dividend yield Volatility Expected term (in years) Expected forfeiture rate F-22 NOVAVAX, INC. 2015 Annual Report Restricted Stock Awards The following is a summary of restricted stock awards activity for the year ended December 31, 2015: Outstanding and Unvested at January 1, 2015 Restricted stock granted Restricted stock vested Restricted stock forfeited Outstanding and Unvested at December 31, 2015 NUMBER OF SHARES PER SHARE WEIGHTED- AVERAGE GRANT- DATE FAIR VALUE 15,000 25,000 (15,000) — 25,000 $4.48 $8.72 $4.48 $ — $8.72 The Company recorded stock-based compensation expense for awards issued under the above mentioned plans in the state- ments of operations as follows (in thousands): Research and development General and administrative Total stock-based compensation expense YEARS ENDED DECEMBER 31, 2015 $ 6,771 6,660 $13,431 2014 $2,843 3,247 $6,090 2013 $1,262 1,218 $2,480 As of December 31, 2015, there was approximately $33.5 million of total unrecognized compensation expense (net of esti- mated forfeitures) related to unvested stock options, ESPP and restricted stock awards. This unrecognized non-cash com- pensation expense is expected to be recognized over a weighted-average period of 1.3 years, and will be allocated between research and development and general and administrative expenses accordingly. This estimate does not include the impact of other possible stock-based awards that may be made during future periods. Note 13—EMPLOYEE BENEFITS The Company maintains a defined contribution 401(k) retirement plan, pursuant to which employees who have completed 90 days of service may elect 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, as amended. The Company matches 50% of the first 6% of the participant’s deferral. Contributions to the 401(k) plan vest equally over a three-year period. The Company has recorded expense, net of forfeitures, of approximately $0.8 million, $0.5 million and $0.4 million in 2015, 2014 and 2013, respectively. 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 $0.5 million, $0.4 million and $0.2 million in 2015, 2014 and 2013, respectively. Note 14—INCOME TAXES The Company’s loss from operations before income tax expense by jurisdiction are as follows (in thousands): Domestic Foreign Total net loss 2015 $(150,227) (6,710) $(156,937) 2014 $(76,742) (6,205) $(82,947) 2013 $(48,691) (3,292) $(51,983) F-23 Form 10-K The components of the income tax provision are as follows (in thousands): Current U.S. Current foreign Deferred Net provision 2015 2014 $— — — $— $— — — $— 2013 $— 25 — $25 Deferred tax assets (liabilities) consist of the following at December 31 (in thousands): Net operating losses U.S. Net operating losses foreign Research tax credits Other Total deferred tax assets Intangibles Other Total deferred tax liabilities Net deferred tax assets Less valuation allowance Deferred tax assets, net 2015 2014 $ 203,284 $ 148,451 8,360 16,491 12,903 6,535 11,068 9,963 241,038 176,017 (2,415) (1,767) (4,182) 236,856 (236,856) (2,773) (321) (3,094) 172,923 (172,923) $ — $ — The valuation allowance increased by $63.9 million, $30.4 million and $7.1 million for the years ended December 31, 2015, 2014 and 2013, 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: Statutory federal tax rate State income taxes, net of federal benefit Research and development and other tax credits Expiration of net operating losses Release of FIN 48 liability Other Change in valuation allowance 2015 (34)% (3)% (3)% 0% (2)% 1% 41% 0% 2014 (34)% (3)% (2)% 0% 0% 2% 37% 0% 2013 (34)% (3)% (7)% 0% 0% 3% 41% 0% Realization of net deferred tax assets is dependent on the Company’s ability to generate future taxable income, which is uncertain. Accordingly, a full valuation allowance was recorded against these assets as of December 31, 2015 and 2014, as management believes it is more likely than not that the assets will not be realizable. The increase in the valuation allowance was due to increased continued losses and credits in the current year. F-24 NOVAVAX, INC. 2015 Annual Report As of December 31, 2015, the Company had tax return reported federal net operating losses and tax credits available as follows (in thousands): Federal net operating losses expiring through the year 2035 Foreign net operating losses (no expiration) Research tax credits expiring through the year 2035 Alternative-minimum tax credit (no expiration) AMOUNT $551,433 38,001 16,397 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 management determines more likely than not that such amounts will be utilized. As of December 31, 2015 and 2014, the Company had $13.9 million and $5.0 million of windfall stock compensation deductions, respectively. When realized, the tax benefit associated with these deductions will be credited to additional paid-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): Unrecognized tax benefits as of January 1, 2014 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 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, 2015 AMOUNT $4,801 ― ― — — $4,801 — 4,587 — — $ 214 To the extent these unrecognized tax benefits are ultimately recognized, it would affect the annual effective income tax rate unless otherwise offset by a corresponding change in the valuation allowance. The Company does not expect that the amounts of unrecognized tax benefits will change significantly within the next 12 months. The Company files income tax returns in the U.S. federal jurisdiction and in various states, as well as in Sweden. The Company had tax net operating losses and credit carryforwards that are subject to examination from 1998 through 2015. The statute extends for a number of years beyond the year in which the losses were generated for tax purposes. Since a portion of these carryforwards may be utilized in the future, many of these attribute carryforwards remain subject to examination. The returns in Sweden are subject to examination from 2010 through 2015. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2015 and 2014, the Company had no accruals for interest or penalties related to income tax matters. F-25 Form 10-K Note 15—COMMITMENTS AND CONTINGENCIES Operating Leases The Company conducts its operations from leased facilities, under operating leases with terms expiring from 2017 to 2026, unless terminated early at the Company’s discretion in 2023. The leases contain provisions for future rent increases and peri- ods in which rent payments are reduced (abated). Also, the leases obligate the Company to pay building operating costs. Under the terms of one lease agreement, the landlord provided the Company with a tenant improvement allowance of $3.9 million (the “Improvement Allowance”). The Company has been funded $1.4 million in 2015 under the Improvement Allowance. The Company records a deferred rent liability to account for the funding under the Improvement Allowance and to record rent expense on a straight-line basis for these operating leases. Future minimum rental commitments under non-cancelable leases as of December 31, 2015 are as follows (in thousands): YEAR 2016 2017 2018 2019 2020 Thereafter Total minimum lease payments OPERATING LEASES $ 6,159 4,923 4,718 4,741 4,687 15,471 $40,699 Total rent expenses approximated $4.2 million, $3.6 million and $3.4 million for the years ended December 31, 2015, 2014 and 2013, 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 of biologics research, preclinical development, clinical development, process development, manufac- turing scale-up and general manufacturing related services in India. Under the terms of the agreement, the Company was obli- gated to purchase $7.5 million of such services, which included services provided, since the beginning of 2013, by CPLB to the Company on behalf of Cadila pursuant to an October 2013 amendment authorizing such CPLB services as provided by Cadila. The Company fulfilled its financial obligation under the agreement in the fourth quarter of 2015 and has no further financial obligations under the agreement or any other agreements related to CPLB. During 2015, the Company purchased $2.2 million in services from Cadila pursuant to this agreement, all of which were provided by CPLB on behalf of Cadila. The Company has recognized as an expense the entire amount of purchases to date related to CPLB as the Company has not recorded any equity income (loss) of CPLB (see Note 8). Contingencies In 2007, the Company entered into an agreement to license certain rights from Wyeth Holdings 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 vaccines in 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 and commercialization activities and royalties on any product sales. Except in certain circumstances in which the Company continuously markets multiple products in a country within the same vaccine program, the milestone payments are one-time-only payments applicable to each related vaccine program. At pres- ent, 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 license applies. 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’ notice that the Company has absolutely and finally ceased activity, including through any affiliate or sublicense, related to the manufactur- ing, development, marketing or sale of products covered by the license. In September 2015, the Company entered into an amendment to the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment (“milestone”) owed as a result of CPLB’s initiation of a Phase 3 clinical trial for its recombinant trivalent seasonal VLP F-26 NOVAVAX, INC. 2015 Annual Report influenza vaccine candidate in 2014. Under the amendment, the milestone payment, which may increase slightly over time, would be due in connection with the initiation of a Phase 3 clinical trial for the initial seasonal influenza VLP vaccine candidate being developed outside India, but in any case no later than December 31, 2017. The amendment also restructured the final milestone payment to apply to the initial seasonal influenza VLP vaccine candidate being developed outside India. Thus, the aggregate milestone payments for a seasonal influenza VLP vaccine candidate developed and commercialized was increased from $14 million to up to $15 million. In connection with the execution of the amendment, the Company agreed to pay a one- time-only payment to Wyeth. The amendment also increased annual license maintenance fees associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments under the agreement to Wyeth as of December 31, 2015 aggre- gated $7.3 million. The milestone was accrued for on the consolidated balance sheet in other current liabilities at December 31, 2014. As a result of the September 2015 amendment discussed above, the milestone payment is not expected to occur within the next 12 months. Therefore, the milestone has been accrued for, on a discounted basis calculated based on the probable future payment date, in other non-current liabilities at December 31, 2015. The milestone was recorded as a research and development expense in the third quarter of 2014. Note 16—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 (see Note 8). The Company and Cadila also have entered into a master services agreement, pursuant to which Cadila may perform certain research, development and manufacturing services for the Company up to $7.5 million. A subsidiary of Cadila owns 2.5 million shares of the Company’s outstanding common stock as of December 31, 2015. Since entering into the master services agreement and through December 31, 2015, the Company has incurred $7.9 million under the agreement (see Note 15). The amount due and unpaid for services performed under the master services agreement at both December 31, 2015 and 2014 was $0.7 million and $0.4 million, respectively. Note 17—CONVERTIBLE SENIOR NOTES In 2016, the Company issued $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”). The Notes will bear cash interest at a rate of 3.75%, payable on February 1 and August 1 of each year, beginning on August 1, 2016. The Notes are not redeemable prior to maturity and are convertible into shares of Novavax common stock. The initial conversion rate for the Notes is 146.8213 shares of Novavax’ common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $6.81 per share of Novavax’ common stock, representing an approximately 22.5% conversion premium based on the last reported sale price of Novavax’ common stock of $5.56 per share on January 25, 2016. In connection with the issuance of the Notes, the Company also paid approximately $38 million to enter into privately negoti- ated capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions are expected generally to reduce the potential dilution upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the Notes. The cap price of the capped call transactions will initially be $9.73 per share, which represents a premium of approximately 75% based on the last reported sale price of the Company’s common stock of $5.56 per share on January 25, 2016, and is subject to certain adjustments under the terms of the capped call transactions. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution upon conversion of the Notes to the extent that such market price exceeds the cap price of the capped call transactions. F-27 Form 10-K Note 18—QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The Company’s unaudited quarterly information for the years ended December 31, 2015 and 2014 is as follows: (IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 QUARTER ENDED 2015: Revenue Net loss Net loss per share 2014: Revenue Net loss Net loss per share $ 9,877 $(24,370) $ (0.10) $ 7,462 $(13,810) $ (0.07) $ 13,996 $(20,641) $ (0.08) $ 8,259 $(17,864) $ (0.08) $ 6,525 $(33,120) $ (0.12) $ 8,214 $(19,727) $ (0.08) $ 5,853 $(78,806) $ (0.29) $ 6,724 $(31,546) $ (0.13) 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 four quarters may not equal the net loss per share for the respective 12-month period. F-28 NOVAVAX, INC. 2015 Annual Report LIST OF SUBSIDIARIES The following is a list of subsidiaries of the Company as of December 31, 2015. NAME OF SUBSIDIARY Novavax AB JURISDICTION OF INCORPORATION OR ORGANIZATION Sweden EXHIBIT 21 F-29 Form 10-K 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-8 No. 333-206354) pertaining to the Novavax, Inc. stock incentive plan, (2) Registration Statement (Form S-8 No. 333-198121) pertaining to the Novavax, Inc. stock incentive plan, (3) Registration Statement (Form S-3 No. 333-193549) pertaining to Novavax, Inc. common stock, (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-3 No. 333-187267) pertaining to Novavax, Inc. common stock, (7) Registration Statement (Form S-8 No. 333-183113) pertaining to the Novavax, Inc. stock incentive plan, (8) Registration Statement (Form S-8 No. 333-145298) pertaining to the Novavax, Inc. stock incentive plan, (9) Registration Statement (Form S-8 No. 333-130990) pertaining to the Novavax, Inc. stock incentive plan, (10) Registration Statement (Form S-8 No. 333-110401) pertaining to the Novavax, Inc. stock incentive plan, (11) Registration Statement (Form S-8 No. 333-97931) pertaining to the Novavax, Inc. stock incentive plan, (12) Registration Statement (Form S-8 No. 333-46000) pertaining to the Novavax, Inc. stock incentive plan, (13) Registration Statement (Form S-8 No. 333-77611) pertaining to the Novavax, Inc. stock incentive plan, (14) Registration Statement (Form S-8 No. 33-80279) pertaining to the Novavax, Inc. stock incentive plan, and (15) Registration Statement (Form S-8 No. 33-80277) pertaining to Novavax, Inc. stock incentive plan of our reports dated February 29, 2016, with respect to the consolidated financial statements of Novavax, Inc., and the effec- tiveness of internal control over financial reporting of Novavax, Inc., included in this Annual Report (Form 10-K) of Novavax, Inc. for the year ended December 31, 2015. /s/ Ernst & Young LLP Baltimore, MD February 29, 2016 F-30 NOVAVAX, INC. 2015 Annual Report CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our report dated March 12, 2014 with respect to the consolidated financial statements for the year ended December 31, 2013 included in the Annual Report of Novavax, Inc. on Form 10-K for the year ended December 31, 2015. We hereby consent to the incorporation by reference of said report in the Registration Statements of Novavax, Inc. on Forms S-3 (No. 333-193549 and No. 333-187267) and on Forms S-8 (No. 333-206354, No. 333-198121, No. 333-190600, No. 333-190599, No. 333-183113, No. 333-145298, No. 333-130990, No. 333-110401, No. 333-97931, No. 333-46000, No. 333-77611, No. 33-80279 and No. 33-80277). EXHIBIT 23.2 /s/ Grant Thornton LLP McLean, Virginia February 29, 2016 F-31 Form 10-K 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 the statements 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 financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and pro- cedures (as defined in Exchange Act 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 registrant and 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 consoli- dated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness 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 recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to 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 the registrant’s auditors and the audit committee of registrant’s board of directors (or persons per- forming the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial report- ing which are reasonably likely 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 control over financial reporting. Date: February 29, 2016 By: /s/ Stanley C. Erck President and Chief Executive Officer F-32 NOVAVAX, INC. 2015 Annual Report 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 the statements 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 financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and pro- cedures (as defined in Exchange Act 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 registrant and 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 consoli- dated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness 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 recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to 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 the registrant’s auditors and the audit committee of registrant’s board of directors (or persons per- forming the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial report- ing which are reasonably likely 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 control over financial reporting. Date: February 29, 2016 By: /s/ Barclay A. Phillips Senior Vice President, Chief Financial Officer and Treasurer F-33 Form 10-K EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE 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, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley C. Erck, President and Chief Executive Officer of the Company, 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 oper- ations of the Company for the dates and periods covered by this Report. Date: February 29, 2016 By: /s/ Stanley C. Erck President and Chief Executive Officer F-34 NOVAVAX, INC. 2015 Annual Report 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, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barclay A. Phillips, Senior Vice President, Chief Financial Officer and Treasurer, 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 oper- ations of the Company for the dates and periods covered by this Report. Date: February 29, 2016 By: /s/ Barclay A. Phillips Senior Vice President, Chief Financial Officer and Treasurer F-35 Form 10-K This page intentionally left blank. CORPORATE INFORMATION Board of Directors James F. Young, Ph.D. Chairman of the Board of Directors Stanley C. Erck President and Chief Executive Officer Gail K. Boudreaux Director Richard Douglas, Ph.D. Director Gary C. Evans Director Michael A. McManus, Jr. Director Rajiv I. Modi, Ph.D. Director John O. Marsh, Jr. Director Emeritus Management Team Stanley C. Erck President and Chief Executive Officer Sven Andréasson Senior Vice President, Corporate Development Bob Darius Senior Vice President, Quality Operations Amy B. Fix, M.S., M.B.A., R.A.C. Senior Vice President, Regulatory Affairs Louis F. Fries III, M.D. Senior Vice President, Chief Medical Officer Gregory M. Glenn, M.D. President, Research and Development Timothy J. Hahn, Ph.D. Senior Vice President, Global Manufacturing Operations John A. Herrmann III, J.D. Senior Vice President, General Counsel and Corporate Secretary Cynthia N. Oliver, Ph.D. Senior Vice President, Process Development Operations Barclay A. "Buck" Phillips Senior Vice President, Chief Financial Officer and Treasurer John J. Trizzino Senior Vice President, Commercial Operations Russell P. "Rip" Wilson Senior Vice President, Business Development Annual Meeting The Annual Meeting of Stockholders will be held on June 9, 2016 at 8:30 am at 9920 Belward Campus Drive, Rockville, MD 20850. Transfer Agent Computershare, Inc. 250 Royall Street Canton, MA 02021 Independent Registered Public Accounting Firm Ernst & Young LLP 621 East Pratt Street Baltimore, MD 21202 Market Information Novavax is traded on the NASDAQ Global Select Market under the symbol "NVAX." Corporate Headquarters Novavax, Inc. 20 Firstfield Road Gaithersburg, MD 20878 USA Performance Graph The graph below compares the cumulative total stockholders return on our common stock for the last five fiscal years with the cumulative total return on the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index (which includes Novavax) over the same period, assuming the investment of $100 in our common stock, the NASDAQ Composite Index and the Russell 2000 Growth Biotechnology Index on December 31, 2009, and reinvestments of all dividends. $350 $300 $250 $200 $150 $100 $50 12/10 12/11 12/12 12/13 12/14 12/15 • Novavax • NASDAQ Composite • Russell 2000 Growth Biotechnology 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 Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. m o c e v . i t a e r c c f . i w w w D M , a d s e h t e B e v i t a e r C I C F : i n g s e D . c n I , x a v a v o N 6 1 0 2 © 20 Firstfield Road | Gaithersburg, MD 20878 | (240) 268-2000 | novavax.com Annual Report 002CSN68CO