<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No.
JUNE 30, 2000 0-26770
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NOVAVAX, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2816046
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8320 GUILFORD ROAD, COLUMBIA, MD 21046
-------------------------------- -----
(Address of principal executive offices) (Zip code)
(301) 854-3900
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Registrant's telephone number, including area code
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
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Common Shares Outstanding at August 8, 2000
19,396,718
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NOVAVAX, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements
Statements of Operations for the three-month and six-month
periods ended June 30, 2000 and 1999............................................3
Balance Sheets as of June 30, 2000 and December 31, 1999........................4
Statements of Cash Flows for the six-month periods
ended June 30, 2000 and 1999....................................................5
Notes to Financial Statements...................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 8
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders............................12
Item 6. Exhibits and Reports on Form 8-K...............................................13
Signatures.................................................................................14
</TABLE>
2
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NOVAVAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 588 $ 252 $ 1,298 $ 328
----------- ---------- ----------- -----------
Operating expenses:
General and administrative 1,302 531 1,943 999
Research and development 2,113 627 3,637 1,124
----------- ---------- ----------- -----------
Total operating expenses 3,415 1,158 5,580 2,123
----------- ---------- ----------- -----------
Loss from operations (2,827) (906) (4,282) (1,795)
Interest income, net 186 22 291 30
----------- ---------- ----------- -----------
Net loss
$ (2,641) $ (884) $ (3,991) $ (1,765)
----------- ---------- ----------- -----------
Per share information (basic and diluted):
Net loss $ (.14) $ (.06) $ (.22) $ (.13)
----------- ---------- ----------- -----------
Weighted average number of common
shares outstanding (basicand
diluted) 19,385,903 14,747,719 18,349,819 14,000,418
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
NOVAVAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------------- ---------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,285 $ 732
Accounts receivable 668 341
Prepaid expenses and other current assets 43 70
--------------- ---------------
Total current assets 12,996 1,143
Property and equipment, net 1,450 1,053
Patent costs, net 1,613 1,619
Other assets 579 648
--------------- ---------------
Total assets $ 16,638 $ 4,463
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligations, current maturities $ 37 $ 111
Accounts payable 1,311 637
Accrued payroll 116 125
Deferred revenue 250 750
--------------- ---------------
Total current liabilities 1,714 1,623
--------------- ---------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, $.01 par value, 50,000,000 and
30,000,000 shares authorized at June 30, 2000
and December 31, 1999, respectively; 19,868,651
issued and 19,396,718 outstanding at June 30,
2000 and 15,173,688 issued and 15,167,166
outstanding at December 31, 1999 199 152
Additional paid-in capital 66,448 45,622
Accumulated deficit (46,885) (42,894)
Deferred compensation on stock options granted (3) (5)
Treasury stock, 471,933 and 6,522 shares, cost
basis, at June 30, 2000 and December 31, 1999,
respectively (4,835) (35)
--------------- ---------------
Total stockholders' equity 14,924 2,840
--------------- ---------------
Total liabilities and stockholders' equity $ 16,638 $ 4,463
=============== ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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NOVAVAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net loss $(3,991) $(1,765)
Reconciliation of net loss to net cash used by
operating activities:
Non-cash compensation expense 2 5
Depreciation and amortization 206 139
Changes in operating assets and liabilities:
Accounts receivable (327) (19)
Prepaid expenses and other assets 27 (3)
Accounts payable and accrued expenses 665 (541)
Deferred revenue (500) --
--------- --------
Net cash used by operating activities (3,918) (2,184)
--------- --------
Cash flows from investing activities:
Capital expenditures (485) (21)
Deferred patent costs (43) (71)
--------- --------
Net cash used by investing activities (528) (92)
--------- --------
Cash flows from financing activities:
Payment of debt obligations (74) (18)
Issuance of common stock 11,255 4,128
Offering costs of common stock (757) (174)
Proceeds from the exercise of stock options and
warrants 5,575 85
--------- --------
Net cash provided by financing activities 15,999 4,021
--------- --------
Net change in cash and cash equivalents 11,553 1,745
Cash and cash equivalents at beginning of period 732 1,031
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Cash and cash equivalents at end of period $ 12,285 $ 2,776
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 6
NOVAVAX, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Novavax, Inc., a Delaware corporation, ("Novavax" or the "Company"), is a
biopharmaceutical company engaged in the research and development of
differentiated drug products primarily in the fields of women's health,
infectious diseases and cancer. The accompanying consolidated financial
statements include the accounts of Novavax and its wholly-owned subsidiaries,
Micro-Pak, Inc., Micro Vesicular Systems, Inc. and Lipovax, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation. These statements have been prepared by Novavax, Inc., without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments, which, in the opinion of management,
are necessary for a fair presentation of the results for the interim periods
presented. All such adjustments are of a normal recurring nature.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements
and the notes thereto in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
2. FINANCING REQUIREMENTS
Past spending levels are not necessarily indicative of future spending. The
Company will seek to establish one or more collaborations with industry
partners to defray the costs of clinical trials and other related activities.
Novavax will also seek to obtain additional funds through public or private
equity or debt financings, collaborative arrangements with pharmaceutical
companies or from other sources. If adequate funds are not available, Novavax
may be required to significantly delay, reduce the scope of or eliminate one or
more of its research or development programs, or seek alternative measures. As
of August 8, 2000, Novavax estimates that its existing cash resources will be
sufficient to finance its operations at current and projected levels of
development activity for the next 15 to 21 months.
3. SUPPLEMENTAL CASH FLOW INFORMATION
During the six month period ended June 30, 2000, the Company received
$4,277,000 from the exercise of existing common stock warrants that had been
issued in connection with earlier private placements of Novavax's common stock.
Included in this amount was $3,600,000 received from Anaconda Opportunity Fund,
a principal of which is a director of Novavax. In connection with additional
warrants exercised by Anaconda, the Company issued 193,680 shares of its common
stock in a 'cashless' exercise where Novavax accepted 465,410 shares of its
common stock, valued at $4,800,000. These shares are included as treasury stock
in the accompanying consolidated balance sheets. Additionally, the Company
received approximately $1,298,000 from the exercise of previously issued common
stock options.
6
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NOVAVAX, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. FINANCING TRANSACTION
In January 2000, the Company closed a private placement of 2,813,850 shares of
its Common Stock to accredited investors (the "2000 Private Placement"). The
issuance price of the Common Stock was $4.00 per share. Each share was sold
together with a non-transferable warrant for the purchase of .25 additional
shares at an exercise price of $6.75 per warrant. The warrants have a
three-year term. Gross proceeds from the 2000 Private Placement were
$11,255,400. Placement agent fees were approximately $675,000, which was paid
in cash. Additionally, non-transferable warrants for the purchase of 281,385
shares of the Company's Common Stock, with an exercise price of $6.75 per share
and a three-year term, were issued to the placement agent. Other costs
connected with the 2000 Private Placement, including legal, stock exchange
listing and registration fees, were approximately $82,000. Net proceeds to the
Company from the 2000 Private Placement were approximately $10,500,000.
7
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ITEM 2.
NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion may contain statements that are not purely historical.
Certain statements contained herein or as may otherwise be incorporated by
reference herein constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include but are not limited to statements regarding future product
development and related clinical trials and statements regarding future
research and development. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Such factors include, among other things, the following: general economic and
business conditions; competition; unexpected changes in technologies and
technological advances; ability to obtain rights to technology; ability to
obtain and enforce patents; ability to commercialize and manufacture products;
statements regarding establishment of commercial-scale manufacturing
capabilities; statements regarding future collaboration with industry partners;
results of clinical studies; research and development activities; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or failure to comply with, governmental regulations; ability to
obtain adequate financing in the future; and other factors referenced herein.
All forward-looking statements contained in this document are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward-looking statements.
Accordingly, past results and trends should not be used to anticipate future
results or trends.
The following is a discussion of the historical consolidated financial
condition and results of operations of Novavax, Inc. and its subsidiaries and
should be read in conjunction with the consolidated financial statements and
notes thereto set forth in this Form 10-Q. Additional information concerning
factors that could cause actual results to differ materially from those in the
forward-looking statements is contained from time to time in the Company's SEC
filings, including, but not limited to, the Company's Annual Report on Form
10-K for the year ended December 31, 1999.
RESULTS OF OPERATIONS
The Company has incurred net losses since its inception from the development of
its technologies for human pharmaceuticals, vaccines and vaccine adjuvants.
Novavax expects the losses to increase in the near-term as it conducts
additional human clinical trials and seeks regulatory approval for its product
candidates. The Company also expects to continue to incur substantial operating
losses over the extensive time period required to develop the Company's
products, or until such time as revenues, to offset the costs, are sufficient
to fund its operations.
8
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NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO 1999
The net loss was $2,641,000, compared to $884,000 for 1999, an increase of
$1,757,000 or 199%. Revenues of $588,000 were recognized during the three
months ended June 30, 2000, compared to $252,000 for the same period in the
prior year. Revenues included $250,000 from a license agreement entered into in
October 1999 with Parkedale Pharmaceuticals, a wholly-owned subsidiary of King
Pharmaceuticals, Inc. The license agreement included a non-refundable license
payment of $1,000,000. Novavax recognized $250,000 under this agreement in the
fourth quarter of 1999 as well as the first quarter of 2000. The remaining
$250,000 has been recorded in the accompanying balance sheet as Deferred
Revenue and will be recognized as revenue during the third quarter of 2000.
Additional revenues were recognized under contracts with the National Institute
of Health and other government agencies. Quarterly fluctuations in revenues
result from numerous factors including the timing of contracts with industry
partners and completion of research and products due under these contracts.
General and administrative expenses were $1,302,000 for the three months ended
June 30, 2000, compared to $531,000 incurred for the same period in 1999. The
$771,000 or 145% increase in these expenses related to increased salary expense
due to an increase in the number of employees, as well as fees related to
financing, bid and proposal costs related to government contracts and other
transactions. The Company expects to further increase the number of
administrative employees during the remainder of 2000.
Research and development expenses were $2,113,000 and $627,000 for the three
months ended June 30, 2000 and 1999, respectively. This $1,486,000 or 237%
increase in these expenses relates principally to $589,000 incurred by the
Biomedical Services Division, which was acquired in August 1999. The remaining
increase of $897,000 relates primarily to cost associated with the Company's
Phase III clinical trial for its ESTRASORB product as well as manufacturing
process validation costs for this product. Novavax expects cost related to its
clinical trials and manufacturing process costs to continue to increase during
the remainder of 2000.
Net interest income was $186,000 and $22,000 for the three months ended June
30, 2000 and 1999, respectively. The increase in the interest income relates to
higher average cash balances during the second quarter of 2000 compared to the
same period in the prior year.
9
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NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO 1999
The net loss for the six month period ended June 30, 2000 was $3,991,000,
compared to $1,765,000 for similar period in 1999, an increase of $2,226,000 or
126%. Revenues of $1,298,000 were recognized during the six months ended June
30, 2000, compared to $328,000 for the same period in the prior year. Revenues
included $500,000 from a license agreement entered into in October 1999 with
Parkedale Pharmaceuticals, a wholly-owned subsidiary of King Pharmaceuticals,
Inc. The license agreement included a non-refundable license payment of
$1,000,000. Novavax recognized $250,000 under this agreement in the fourth
quarter of 1999. The remaining $250,000 has been recorded in the accompanying
balance sheet as Deferred Revenue and will be recognized as revenue during the
third quarter of 2000. Additional revenues were recognized under contracts with
the National Institute of Health and other government agencies.
General and administrative expenses were $1,943,000 for the six months ended
June 30, 2000, compared to $999,000 incurred for the same period in 1999. The
$944,000 or 95% increase in these expenses related to increased salaries
expense due to an increase in the number of employees, as well as fees related
to financing and other transactions. The Company expects to further increase
the number of administrative employees during the remainder of 2000.
Research and development expenses were $3,637,000 and $1,124,000 for the six
months ended June 30, 2000 and 1999, respectively. This $2,513,000 or 224%
increase in these expenses relates principally to $1,179,000 incurred by the
Biomedical Services Division, which was acquired in August 1999. The remaining
increase of $1,334,000 relates primarily to cost associated with the Company's
Phase III clinical trial for its ESTRASORB product as well as manufacturing
process validation costs associated with this product. Novavax expects cost
related to its clinical trials and manufacturing processes to continue to
increase during the remainder of 2000.
Net interest income was $291,000 and $30,000 for the six months ended June 30,
2000 and 1999, respectively. The increase in the interest income relates to
higher average cash balances during 2000 compared to the same period in the
prior year.
LIQUIDITY AND CAPITAL RESOURCES
Novavax's capital requirements depend on numerous factors, including but not
limited to the progress of its research and development programs, the progress
of pre-clinical and clinical testing, the time and costs involved in obtaining
regulatory approvals, the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights, competing
technological and market developments, and changes in Novavax's development and
commercialization activities and arrangements. The Company has two products in
clinical trials. Future activities including clinical development and the
establishment of commercial-scale manufacturing capabilities are subject to the
Company's ability to raise funds through equity financing or collaborative
arrangements with industry partners.
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NOVAVAX, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The Company used $4,446,000 during the six month period ended June 30, 2000 to
fund the activities of its research and development programs and costs
associated with obtaining regulatory approvals, and pre-clinical and clinical
testing. Cash balances available to the Company, including the financing
described in Notes 3 and 4 of the accompanying financial statements, funded
these expenditures.
Cash and cash equivalents on June 30, 2000 totaled $12,285,000. Novavax
estimates that based on historical levels of spending and revenues, existing
cash resources will be sufficient to finance its operations for approximately
15 to 21 months from August 8, 2000. Past spending levels are not necessarily
indicative of future spending. Future expenditures for product development,
including these related to outside testing and human clinical trials, are
discretionary and, accordingly, can be adjusted to available cash. As the
Company continues to progress in its clinical development activities and
commercial scale-up of product manufacturing, it anticipates future increases
in spending associated with these activities. Moreover, the Company will
continue to seek to establish one or more collaborations with industry partners
to defray the costs of clinical trials and other related activities. Novavax
will also consider sources of additional funds through public or private equity
or debt financing, collaborative arrangements with pharmaceutical companies or
from other sources. There can be no assurance that additional funding or bank
financing will be available at all or on acceptable terms to permit successful
commercialization of Novavax's technologies and products. If adequate funds are
not available, Novavax may be required to significantly delay, reduce the scope
of or eliminate one or more of its research or development programs, or seek
alternative measures including arrangements with collaborative partners or
others that may require Novavax to relinquish rights to certain of its
technologies, product candidates or products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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NOVAVAX, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is not a party to any material pending legal proceedings.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
At the Company's Annual Meeting of Stockholders held on May 9, 2000, the
following proposals were adopted by the vote specified below:
1. To elect the following nominees as Class II Directors to server on the
Board of Directors for a three year term expiring at the Annual Meeting of
Stockholders in 2003.
<TABLE>
<CAPTION>
FOR ABSTAIN
<S> <C> <C>
J. Michael Lazarus, M.D. 14,223,831 1,166,753
John O. Marsh, Jr. 11,918,328 3,472,256
Gary C. Evans 11,861,378 3,529,206
</TABLE>
2. To approve an amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Common Stock ($.01 par
value) by 20,000,000 from 30,000,000 to 50,000,000.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
13,485,542 1,831,505 73,537
</TABLE>
3. To approve an amendment to the 1995 Novavax, Inc. Stock Option Plan
increasing the number of shares of Common Stock authorized for issuance
thereunder by 1,600,000 from 4,400,000 to 6,000,000.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN DEL NON-VOTE
<S> <C> <C> <C> <C>
6,861,723 2,097,815 74,392 6,356,654
</TABLE>
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the current fiscal year ending December 31,
2000.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
14,713,746 577,747 99,091
</TABLE>
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NOVAVAX, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
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NOVAVAX, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
NOVAVAX, INC.
(Registrant)
Date: August 14, 2000 By: /s/ John A. Spears
------------------------
John A. Spears
President and Chief Executive Officer
(Principal Financial and Accounting
Officer)
14
