NOVAVAX, INC. Form 10-K (Dec. 31, 2019)

Summary

Annual report on Form 10-K of Novavax, Inc. for the fiscal year ended December 31, 2019. The cover reports 51,528,841 shares outstanding as of March 6, 2020 and non-affiliate market value of approximately $138,300,000 at June 30, 2019. The business section describes a biotechnology company incorporated in 1987 and developing recombinant nanoparticle vaccines, with NanoFlu and ResVax as lead candidates and a coronavirus program listed as preclinical. It reports enrollment of 2,652 older adults at 19 U.S. sites in October 2019 for a NanoFlu trial, a January 2020 Fast Track designation, and a ResVax trial that missed the primary endpoint, supported by a grant of up to $89.1 million from the Bill & Melinda Gates Foundation. Quarterly data show 2019 net losses of 43,218, 39,603, 18,043 and 31,830 thousand.

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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, 2019

OR

¨ | 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. 000-26770

NOVAVAX, INC.

(Exact name of Registrant as specified in
its charter)

Delaware (State
of incorporation) | 21
 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 | Trading Symbol | Name of each exchange on which registered
Common Stock, Par Value $0.01 per share | NVAX | The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of
the Act: Not Applicable

Indicate by
check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by
check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

Indicate by check
mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 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 ¨

Indicate by check
mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes x No ¨

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to 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, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer | ¨ | Accelerated filer | x
Non-accelerated filer | ¨ | Smaller reporting company | x
Emerging growth company | ¨

If an emerging growth company, indicate
by check mark if the registrant had elected not to use the extended transition period for complying with any new or revised financial
accounting standards provide pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market
value of the voting and non-voting common equity held by non-affiliates of the Registrant (based on the last reported sale price
of Registrants common stock on June 30, 2019 on the Nasdaq Global Select Market) was approximately $138,300,000.

As of March 6,
2020, there were 51,528,841 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, 2019 in connection with the Registrant’s 2020 Annual Meeting of Stockholders are incorporated
by reference into Part III of this Annual Report on Form 10-K to the extent indicated herein.

NOVAVAX, INC.

TABLE OF CONTENTS

Page
PART I
Item 1. | BUSINESS | 4
Item 1A. | RISK FACTORS | 13
Item 1B. | UNRESOLVED STAFF COMMENTS | 34
Item 2. | PROPERTIES | 34
Item 3. | LEGAL PROCEEDINGS | 34
Item 4. | MINE SAFETY DISCLOSURES | 34
PART II
Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 35
Item 6. | SELECTED FINANCIAL DATA | 36
Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 37
Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 47
Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 48
Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 48
Item 9A. | CONTROLS AND PROCEDURES | 48
Item 9B. | OTHER INFORMATION | 49
PART III
Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 49
Item 11. | EXECUTIVE COMPENSATION | 49
Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 49
Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 50
Item 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES | 50
PART IV
Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 50
Item 16. | FORM 10-K SUMMARY | 55
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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 wholly-owned subsidiary, Novavax AB (unless the context otherwise indicates).

NOTE REGARDING TRADEMARKS

Novavax™, NanoFlu™, Matrix-M™,
Matrix™, Prepare™, Resolve™, and ResVax™ 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. As a result of many factors, such as those set forth under “Risk
Factors” and elsewhere in this Annual Report on Form 10-K, our actual results may differ materially from those anticipated
in these forward-looking statements. Please also see the disclaimer under the section titled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”

3

PART I

Item 1. | BUSINESS

Overview

Novavax, Inc., together
with our wholly-owned Swedish subsidiary, Novavax AB, is a late-stage biotechnology company that promotes improved global health
through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases. Using innovative
proprietary recombinant nanoparticle vaccine 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 21 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,
including our lead candidates, NanoFlu™ and ResVax™, are genetically engineered, three-dimensional nanostructures of
recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious
than naturally occurring immunity or traditional vaccines. Our technology targets a variety of infectious diseases. We are also
developing proprietary immune stimulating saponin-based adjuvants at Novavax AB, our wholly owned Swedish subsidiary. Our lead
adjuvant, Matrix-M™, has been shown to enhance immune responses and has been well-tolerated in multiple clinical trials.

Product Pipeline

Program | Current Development Stage
Seasonal Influenza
· NanoFlu (Older Adults) (1) | Phase 3
Respiratory Syncytial Virus (“RSV”)
· ResVax (2) (Infants via Maternal Immunization) | Phase 3
· Older Adults (1 ) | Phase 2
· Pediatrics | Phase 1
Combination Seasonal Influenza/RSV (1) | Preclinical
Ebola Virus (“EBOV”) (1) | Phase 1
Coronavirus (“COVID-19”) (1) | Preclinical
(1) | Includes Matrix-M adjuvant
(2) | Supported by a grant of up to $89.1 million from the
Bill & Melinda Gates Foundation (“BMGF”)

A summary and status
of these vaccine programs follows:

Seasonal Influenza

NanoFlu Program (Older Adults)

Influenza is a world-wide
infectious disease with serious illness generally occurring in more susceptible populations such as children under 18 years old
and older adults, but also occurring in the general population. According to influenza vaccines forecasts by Datamonitor in 2013,
the market for seasonal influenza vaccines is expected to grow from approximately $3.2 billion in the 2015-16 flu season to approximately
$5.3 billion in the 2021-22 flu season (in the countries comprising the top seven markets). Recent flu seasons have shown an increase
in the influenza disease burden. For the 2017-18 flu season, the Centers for Disease Control and Prevention estimates that influenza
in the U.S. resulted in 48.8 million illnesses, 959,000 hospitalizations and 79,400 deaths, a dramatic increase across all categories
compared to previous years.

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In October 2019, we
initiated a pivotal Phase 3 clinical trial of NanoFlu in older adults (65 years and older). This randomized, observer-blinded,
active-controlled trial will evaluate the immunogenicity and safety of NanoFlu with its proprietary Matrix-M adjuvant, compared
to a U.S.-licensed quadrivalent vaccine, Fluzone ® Quadrivalent. The trial’s primary objective is to demonstrate
non-inferior immunogenicity as measured by hemagglutination inhibition (“HAI”) titers of vaccine homologous influenza
strains compared to a licensed seasonal vaccine, and to describe its safety profile. In October 2019, we completed enrollment of
2,652 healthy older adults across 19 clinical sites in the U.S. and we expect to report top-line clinical data by the end of the
first quarter of 2020. Positive data will support a subsequent U.S. biologics license application (“BLA”) and licensure
of NanoFlu using the U.S. Food and Drug Administration’s (“FDA”) accelerated approval pathway.

In
January 2020, we announced that the FDA granted NanoFlu Fast Track designation, which 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 approved products can reach the market expeditiously. Specifically, Fast Track designation facilitates meetings
to discuss all aspects of development to support licensure and provides the opportunity to submit sections of a BLA on a rolling
basis as data become available. This permits the FDA to review modules of the BLA as they are received instead of waiting for the
entire BLA submission. In addition, priority review (six-month review versus standard 10-month review) is an additional benefit
that may potentially be available for NanoFlu in the future.

In June 2019, we announced
that the FDA acknowledged that the accelerated approval pathway is available for NanoFlu. An accelerated approval may be granted
for certain biological products that have been studied for their safety and effectiveness in treating serious or life-threatening
illnesses and that provide meaningful therapeutic benefit over existing treatments. Such an approval will be based on adequate
and well-controlled clinical trials establishing that the biological product has an effect on a surrogate endpoint that is reasonably
likely to predict clinical benefit. For seasonal influenza vaccines, the HAI antibody response is considered an acceptable surrogate
marker of activity that is reasonably likely to predict clinical benefit. To be considered for accelerated approval, a BLA for
a new seasonal influenza vaccine should include results from one or more well-controlled studies designed to meet immunogenicity
endpoints along with a commitment to conduct confirmatory post-marketing studies of clinical effectiveness in preventing influenza.

Respiratory Syncytial Virus (RSV)

Currently, there is
no approved RSV vaccine available to combat the estimated 64 million RSV infections that occur globally each year. We have identified
three susceptible target populations that we believe could benefit from the development of our respiratory syncytial virus fusion
(F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) in different formulations: (1) infants via maternal immunization,
(2) older adults (60 years and older) and (3) children six months to five years old (“pediatrics”). With our current
estimates of the annual global cost burden of RSV in excess of $88 billion, we believe our RSV F Vaccine represents a multi-billion
dollar worldwide opportunity.

ResVax Program (Infants
via Maternal Immunization)

ResVax is our adjuvanted
RSV F Vaccine for infants via maternal immunization. RSV is the most common cause of lower respiratory tract infections (“LRTI”)
and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide. 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.

Data from our Prepare
trial, which was initiated in December 2015, was announced in February 2019. The Prepare trial was conducted to determine whether
ResVax reduced incidence of medically significant RSV-positive LRTI in infants through a minimum of the first 90 days of life and
up through the first six months of life. While these data did not meet the trial’s primary efficacy endpoint, it did demonstrate
efficacy against a secondary objective by reducing RSV LRTI hospitalizations in treated infants. ResVax is thus the first RSV vaccine
to show efficacy in a Phase 3 clinical trial, and in addition, showed important effects against a variety of pre-specified exploratory
endpoints and post-hoc analyses. This included a ~60% reduction in RSV-related severe hypoxemia and a ~74% reduction in RSV-related,
radiographically-confirmed pneumonia through day 90. As in previous clinical trials, ResVax also showed favorable safety and tolerability
results. In light of the fact that the trial failed to meet the primary endpoints, the FDA and European Medicines Agency (“EMA”)
recommended that we conduct an additional Phase 3 clinical trial to confirm efficacy. BMGF has supported the Prepare trial for
ResVax through a grant of up to $89.1 million; BMGF continues to financially support our efforts to conduct certain follow-on analyses
of the Phase 3 data. We are currently in discussions with multiple potential commercial partners about the opportunity to bring
ResVax to market globally, including assisting us with the regulatory licensure pathways in the U.S., the European Union and other
geographies.

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RSV Older Adults
Program

Older adults (60 years
and older) are at increased risk for RSV disease due in part to immunosenescence, the age-related decline in the human immune system.
RSV infection can also lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma
and congestive heart failure. In the U.S. alone, a reported RSV incidence rate of 5.5% in older adults would account for approximately
2.5 million infections per year. We estimate that approximately 900,000 medical interventions are caused by RSV disease in this
U.S. population each year. We followed up the 2016 Phase 3 clinical trial of our RSV F Vaccine, which failed to meet its pre-specified
primary or secondary efficacy objectives, with a 2017 Phase 2 clinical trial in older adults, to assess safety and immunogenicity
of one and two dose regimens of our RSV F Vaccine, with and without aluminum phosphate or our proprietary Matrix-M adjuvant. Immunogenicity
results from the 2017 trial indicate that both adjuvants increase the magnitude, duration and quality of the immune response versus
the non-adjuvanted RSV F Vaccine. We continue to assess the development opportunities for our RSV F Vaccine in older adults.

RSV Pediatrics
Program

By the age of five,
essentially all children will have been exposed to RSV and will likely develop natural immunity against the virus; however, children
under five remain vulnerable to RSV disease, offering a strong rationale for a pediatric vaccine that could offer enhanced protection.
In 2015, we announced positive results in our Phase 1 clinical trial evaluating the safety and immunogenicity of our RSV F Vaccine
in healthy children between two and six years of age. We continue to assess the development opportunities for our RSV F Vaccine
for pediatrics.

Combination Seasonal Influenza/RSV F
Vaccine

With the ongoing development
of our NanoFlu and RSV F Vaccine, a strong rationale exists for developing a combination respiratory vaccine that is designed to
protect susceptible populations against both diseases. Although testing is at an early stage, we believe that a combination vaccine
against both influenza and RSV may be achievable.

Ebola Virus

Ebola virus (“EBOV”)
is a filovirus that produces severe, often fatal illness in humans. Within the last decade, it has produced two large outbreaks
in Sub-Saharan Africa with high mortality. There are currently no licensed treatments proven to prevent EBOV, although a range
of blood, immunological and drug therapies are under development.

We have developed an
EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) expressed in insect cells, using our core recombinant baculovirus
technology. In five separate studies, carried out in collaboration with the National Institute of Allergy and Infectious Disease,
active immunization with Ebola GP Vaccine was shown to be highly immunogenic and efficacious in preventing lethal disease in non-human
primates challenged with EBOV. Our 2015 Phase 1 clinical trial demonstrated that our Ebola GP Vaccine is highly immunogenic in
humans, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant, demonstrated marked antigen dose-sparing and
induced significant increases in neutralizing antibody titers. While we intend to advance our Ebola GP Vaccine, doing so will be
dependent upon funding or a partner.

Coronavirus

Coronaviruses (“CoV”),
so named for their “crown-like” appearance, are a large family of viruses that spread from animals to humans and include
diseases such as Middle East Respiratory Syndrome (“MERS”) and Severe Acute Respiratory Syndrome (“SARS”).
Historically, we developed a vaccine candidate against MERS, a novel coronavirus first identified in 2012, as well as a vaccine
candidate against SARS in 2005. In 2012, within weeks of obtaining the sequence of the circulating MERS strain, we successfully
produced a vaccine candidate designed to provide protection. Our MERS candidate was based on the major surface spike protein, which
we had previously identified as the antigen of choice in our work with our SARS vaccine candidate. In 2014, in collaboration with
the University of Maryland, School of Medicine, we published results that showed our MERS and SARS vaccine candidates both blocked
infection in laboratory studies.

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Recently, a new strain
of coronavirus (“COVID-19”) causing pneumonia-like symptoms has emerged in China, marking the beginning of a spread
of the virus across the globe. Researchers have now confirmed that the virus can spread via human-to-human transmission. There
are currently no licensed treatments proven to prevent COVID-19, although a range of vaccine candidates are under development.
We have successfully produced a vaccine candidate designed to provide protection against COVID-19. Using our recombinant nanoparticle
technology, we have generated antigen for our initial vaccine candidate derived from the coronavirus spike (S) protein. This vaccine
candidate has been engineered from the genetic sequence of COVID-19 virus and binds efficiently with the same human receptors targeted
by the virus, a critical aspect for effective vaccine protection. We intend to combine our proprietary Matrix-M adjuvant into our
experimental vaccine candidate to potentially provide an additional immune response. We were recently awarded initial funding from
the Coalition for Epidemic Preparedness Innovations (“CEPI”) to facilitate our development of a COVID-19 vaccine in
preparation for potential future clinical trials. A subsequent CEPI award may be available to cover our program expenditures through
Phase 1 clinical trial results.

CPLB Joint Venture

CPL Biologicals Private
Limited (“CPLB”), our joint venture between Novavax and Cadila Pharmaceuticals Limited (“Cadila”), is actively
developing a number of vaccine candidates in India. CPLB is owned 20% by Novavax and 80% by Cadila.

Vaccine Technology

Our recombinant protein
nanoparticle vaccine technology is based on self-assembly of surface protein antigens from pathogenic 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. 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 that trigger robust immune responses. Recognition of the nanoparticle vaccine’s
repeating protein patterns by the antigen presenting cells’ 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 increase the amplitude of the immune response and qualitatively change it, broadening the immune system’s
attack against microorganisms and allowing for effective immunization with much lower doses of antigen. Novavax AB has developed
a number of adjuvant formulations, all based on our proprietary Matrix technology. These adjuvant formulations possess excellent
immunostimulatory features with the ability to increase and prolong the protective benefits of vaccines.

While adjuvants based
on novel, poorly characterized substances have been hampered by safety concerns and limited efficacy, Matrix adjuvants stimulate
strong antibody and cell-mediated immune responses. Matrix adjuvants may allow for lower antigen doses, 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 provides 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 significant
value when there is inadequate vaccine manufacturing capacity during an emerging disease threat such as an influenza pandemic.

Competition in RSV and Influenza

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 RSV and influenza vaccines, as well as vaccines against a number
of other infectious diseases.

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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. These groups are developing products to prevent disease caused
by RSV using a variety of technology platforms, including viral vectors, nucleic acid (RNA/DNA), live attenuated chimeric, antigens
or monoclonal antibodies (“Mab”) and competitive recombinant technologies. Despite the announcement of results from
the Prepare trial of ResVax, we continue to believe that our RSV F vaccine candidate, which is a recombinant prefusogenic F-protein
nanoparticle, is likely to be as effective as other RSV vaccine candidates or other products in development by our competitors,
and may prove effective. We further believe that ResVax, our RSV vaccine program for infants via maternal immunization, is the
only RSV vaccine to have ever demonstrated some degree of efficacy in a Phase 3 clinical trial. At this time, there are a number
of companies and other organizations with vaccine candidates in Phase 1 and 2 trials, including Pfizer, GlaxoSmithKline, Sanofi,
Bavarian Nordic, Janssen, Moderna, Ablynx, Immunovaccine, Intravaac, Vaxart and the NIAID. Presently, the two lead Mab programs
seeking to develop product candidates to prevent RSV in infants are being conducted by AstraZeneca PLC (“AstraZeneca”),
and Merck. The AstraZeneca Mab, Nirsevimab (previously known as MEDI-8897), which is partnered with Sanofi Pasteur and Swedish
Orphan Biovitrum AB, completed Phase 2 trials for preterm infants and is in Phase 3 trial for full-term infants. Additionally,
it has obtained Breakthrough designation from the FDA. The Merck Mab MK-1654 is currently in Phase 2 trials in preterm and full-term
infants.

There are a number
of companies developing and selling vaccines for seasonal influenza employing both traditional (egg-based) and new vaccine technologies
(cell-based). Many seasonal influenza vaccines are 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 seasonal influenza vaccines is intense. For the older adult segment, Sanofi currently supplies Fluzone-HD® and Flublok®
to the majority (>60%) of U.S. older adults. 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. Despite the significant competition and advancing
technologies, some of which are similar to our own, based on our completed Phase 2 trial results, we believe that NanoFlu, our
adjuvanted nanoparticle seasonal influenza product could be as efficacious as, or more so than, current products or products being
developed by our competitors. However, our seasonal influenza vaccine may not prove to be efficacious or our manufacturing system
may not prove to be sufficiently effective and differentiated to ensure commercial success.

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 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 processes 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 biotechnology and pharmaceutical
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.

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Patent Rights;
Licenses.

We have intellectual
property (patents, licenses, know-how) related to our vaccines, manufacturing processes and other technologies. Currently, we have
or have rights to over 400 U.S. patents and corresponding foreign patents and patent applications relating to vaccines and vaccine-related
technologies.

Patents related to
our VLP program include U.S. Patent No. 7,763,450, which 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.
Corresponding European patent, European Patent No. 1644037 also covers this technology. U.S. Patent Nos. 8,080,255, 8,551,756,
8,506,967 and 8,592,197 are directed to methods of producing VLPs and inducing substantial immunity to an influenza virus infection
by administering VLPs comprising HA and NA proteins, and our M1 protein derived from the avian influenza strain, A/Indonesia/5/05.
Certain claims also encompass similar methods and compositions where the M1 protein is from a different strain of influenza virus
than the influenza HA protein and the influenza NA protein. Related patent protection in Europe is provided by European Patent
No. 2343084, which covers, in part, vaccine compositions containing VLPs that contain M1, HA, and NA proteins. Our VLP patent portfolio
contains many other patents, including U.S. Patent Nos. 8,951,537, 8,992,939, 9,144,607, 9,050,290, 9,180,180, 9,381,239, 9,464,276,
9,474,799, and other patents in multiple ex-U.S. jurisdictions.

We also have issued
patents directed to other core programs, including our RSV and influenza programs. Issued patents directed to various aspects of
the RSV program include U.S. Patent Nos. 8,715,692, 9,675,685, 9,731,000, 9,717,786, 10,022,437, and 10,426,829. Additional patents
in the family include EP237009 in Europe, as well as others throughout the world. Patents related to our rabies program include
9,724,405 and 10,086,065 in the U.S. and EP2635257 in Europe. Related patents have been issued in other world markets. In addition
to our focus on vaccine programs, we also pursue patent protection for our Matrix Adjuvant program. Issued U.S. Patent Nos. 7,838,019,
9,205,147, 9,901,634 and 8,821,881 provide examples of patents related to our Matrix Adjuvant program.

We continue to prepare,
file, and prosecute patent applications to provide broad and strong protection of our proprietary rights, including next generation
applications focused on our RSV Program, our influenza nanoparticle program, and our adjuvant program.

The Federal Technology
Transfer Act of 1986 and related statutory guidance encourages the dissemination of science and technology innovation. While our
expired contract with the Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“HHS
BARDA”) provided us with the right to retain ownership in our inventions that may have arisen 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 development and results will not be made available to our competitors
on an exclusive or non-exclusive basis.

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 agreements upon the commencement of employment,
consulting or collaborative relationships with us. We also require confidentiality 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 include the vaccine candidates being developed by Novavax or our collaborators, are
subject to regulation for safety, efficacy and quality by numerous governmental authorities in the U.S. and other countries. Although
we focus on the U.S. regulatory process and the standards imposed by the FDA, the International Conference on Harmonisation (“ICH”)
and other agencies because we believe meeting U.S. and ICH standards generally allows us to satisfy regulatory agencies in other
countries where we intend to do business; however, we are mindful that expectations in some venues, notably in the European Union,
differ to some degree and we take proactive steps to address such differences by maintaining regular filings and correspondence
and attending regular meetings with many other non-U.S. regulatory agencies. 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.

9

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 expect to 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 candidate 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. Following successful completion of all three phases of clinical development,
a BLA can be submitted to the FDA requesting licensure of the vaccine for marketing based on the vaccine’s safety and efficacy.
Similar pathways exist in Europe and other geographies.

The FDA will only approve
a BLA if the vaccine is demonstrated to be safe, pure and potent. 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 health care 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 anticipated. 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 and most other non-U.S. based regulatory agencies continue 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 the results of their own tests for potency, safety and purity for each vaccine lot, if requested
by the relevant regulatory agency. They may also be required to submit samples of each vaccine lot to the agency 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 current Good Manufacturing Practices (“GMP”) 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 accelerated 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 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. In June 2019, we
announced that the FDA acknowledged that the accelerated approval pathway is available for NanoFlu.

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 regulatory authorities of that country
have approved an appropriate marketing application. FDA licensure does not guarantee 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.

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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.

In both domestic and
foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the
availability of reimbursement from third-party payers. Third-party payers include government authorities or programs, private health
insurers (including managed care plans) and other organizations. These third-party payers are increasingly challenging the price
and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement
status of newly approved healthcare products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate
the cost-effectiveness of our products. Our product candidates may not be considered cost-effective at certain prices. Adequate
third-party reimbursement may not be available in certain markets to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development. Third-party payers may also control access to, or manage utilization
of, our products with various utilization management techniques.

Within the U.S., if
we obtain appropriate approval in the future to market any of our product candidates, those products could potentially be covered
by various government health benefit programs as well as purchased by government agencies. The participation in such programs or
the sale of products to such agencies is subject to regulation. In exchange for coverage, we may be obligated to provide rebates
or offer discounts under government health programs or to government and private purchasers.

The U.S. and state
governments continue to propose and pass legislation designed to reform delivery of, or payment for, health care, including initiatives
to reduce the cost of healthcare. For example, in March 2010, the U.S. Congress enacted the Patient Protection and Affordable Care
Act and the Health Care and Education Reconciliation Act (“Healthcare Reform Act”) which includes changes to the coverage
and reimbursement of drug products under government health care programs. Under the Trump administration, there have been ongoing
efforts to modify or repeal all or certain provisions of the Healthcare Reform Act, and some modifications have been implemented.
Recently, there has been considerable public and government scrutiny in the U.S. of pharmaceutical pricing and proposals to address
the perceived high cost of pharmaceuticals. There have also been several recent state legislative efforts to address drug costs,
which generally have focused on increasing transparency around drug costs or limiting drug prices or price increases. Adoption
of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates if approved for
sale. We cannot predict the ultimate content, timing or effect of any federal and state reform efforts. There is no assurance that
federal or state health care reform will not adversely affect our future business and financial results.

Within the U.S., we
may be subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback
laws and false claims laws, for activities related to future sales of any of our product candidates that may in the future receive
regulatory and marketing approval. Anti-kickback laws generally prohibit a pharmaceutical manufacturer from soliciting, offering,
receiving or paying any remuneration to generate business, including the purchase, prescription or use of a particular drug. Although
the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance or court
decisions that apply the laws to particular industry practices. There is therefore a possibility that our practices might be challenged
under such anti-kickback laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented,
any claims for payment for reimbursed drugs or services to third party payers (including Medicare and Medicaid) that are false
or fraudulent.

Laws and regulations
have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical
manufacturers with marketed products. The laws and regulations generally limit financial interactions between manufacturers and
health care providers and/or require disclosure to the government and public of such interactions. Many of these laws and regulations
contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their
implementation, any future activities (if we obtain approval and/or reimbursement from federal healthcare programs for our product
candidates) could be subject to challenge.

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Manufacturing

Our primary manufacturing
facility is located in Uppsala, Sweden, where Novavax AB produces our Matrix adjuvants in an approximately 24,000 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, only one vendor has been qualified 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 strive to create
sustainable value by evaluating all options, including working to obtain non-dilutive funding, similar to our agreement with BMGF
related to our maternal RSV program, from both governmental and non-governmental funding sources, that would allow for:

• continued development
of our vaccine candidates until such vaccines can be licensed;

• retained commercial
rights in one or more major markets;

• product sales revenue;
and/or

• commercialization through
partners and other strategic relationships.

Employees

As of March 6, 2020,
we have 165 full-time employees, of whom 24 hold M.D. or Ph.D. degrees and 51 of whom hold other advanced degrees. Of our total
workforce, 127 are engaged primarily in research, development and manufacturing activities and 38 are engaged primarily in executive,
business development, finance and accounting, legal and administrative functions. None of our U.S. employees are represented by
labor unions or covered by collective bargaining agreements; 48 of our 49 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 Securities and Exchange Commission (“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. 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 “Investors”
or “News” sections. Accordingly, investors should monitor these portions of our website (www.novavax.com), in addition
to following our press releases, SEC filings and public conference calls and webcasts.

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.

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Item 1A. | RISK FACTORS

You should carefully
consider the following risk factors in evaluating our business. A number of risk factors could cause our actual results to differ
materially from those that are indicated by forward-looking statements. Some risks 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 we face. Additional risks and uncertainties of which we are unaware, 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 also should 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, 2019 was $1.4 billion. Our revenue for the
last three fiscal years was $18.7 million in 2019, $34.3 million in 2018, and $31.2 million in 2017. We may not be successful in
entering into collaborations, strategic alliances and marketing, distribution or licensing arrangements with other companies or
government agencies that result in significant revenue to offset our expenses. Our net losses for the last three fiscal years were
$132.7 million in 2019, $184.7 million in 2018, and $183.8 million in 2017.

Historically, our losses
have resulted predominantly from research and development expenses for our vaccine candidates, manufacturing-related expenses,
costs related to protection of our intellectual property and other general operating expenses. Our expenses have exceeded our revenue
since inception, and we believe our expenses will fluctuate over time, and may substantially increase some years, as a result of
continuing research and development efforts to support our vaccine development efforts, and, if our product candidates are approved,
future commercialization efforts.

Although certain specified
costs associated with the development of ResVax, our RSV vaccine program for infants via maternal immunization, may be reimbursed
under our contract with BMGF, we expect to continue to incur significant operating expenses and anticipate significant losses over
time as we seek to:

· | conduct clinical trials for RSV F Vaccine
and other potential vaccine candidates;
· | conduct preclinical studies for other
potential vaccine candidates;
· | work with third-party manufacturers to
commercially scale the manufacturing process; 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 may never achieve profitability and
may not sustain profitability, if achieved.

We have limited
financial resources and we may not 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 amounts 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 programs, commence future preclinical studies and clinical
trials, seek regulatory approvals and manufacture and market our products.

We anticipate seeking
such additional funds through a combination of public or private equity or debt financings, as well as potential collaborations,
strategic alliances and marketing, distribution or licensing arrangements and non-dilutive funding from governmental and non-governmental
funding entities, as well as other sources. While we may continue to apply for contracts or grants from academic institutions,
non-profit organizations and governmental entities, we may not be successful. Adequate additional funding may not 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 organization, 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 stockholders’
percentage ownership in the Company, which could be substantial. Future offerings also could have a material and adverse effect
on the price of our common stock.

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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, biotechnology
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 significant 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, our ability to execute our business plan as scheduled
would be compromised. Moreover, we rely and intend to rely on third-parties, including clinical research organizations, contract
manufacturing organizations and other important vendors and consultants. Global economic conditions may result in 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.

The United Kingdom’s
withdrawal from the European Union could result in increased regulatory and legal complexity, which may make it more difficult
for us to do business in Europe and impose additional challenges in securing regulatory approval of our product candidates in Europe.

The United Kingdom’s
exit from the European Union, or Brexit, and the related negotiations have caused political and economic uncertainty, including
in the regulatory framework applicable to our operations and vaccine candidates in the United Kingdom and the European Union, and
this uncertainty may persist for years. Brexit could, among other outcomes, disrupt the free movement of goods, services and people
between the United Kingdom and the European Union, and result in increased legal and regulatory complexities, as well as potential
higher costs of conducting business in Europe. For instance, preparations for Brexit have resulted in the decision to move the
European Medicines Agency from the United Kingdom to the Netherlands. This transition may cause disruption or delays in granting
clinical trial authorization or opinions for marketing authorization, disruption of importation and export of active substance
and other components of new drug formulations, and disruption of the supply chain for clinical trial product and final authorized
formulations.

The cumulative effects
of the disruption to the regulatory framework may add considerably to the development lead time to marketing authorization and
commercialization of products in the European Union and/or the United Kingdom. It is possible that there will be increased regulatory
complexities, which can disrupt the timing of our clinical trials and regulatory approvals. In addition, changes in, and legal
uncertainty with regard to, national and international laws and regulations may present difficulties for our clinical and regulatory
strategy. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would
prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability
to generate revenues and achieve and sustain profitability.

In addition, as a result
of Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the European
Union. Given these possibilities and others we may not anticipate, as well as the absence of comparable precedent, it is unclear
what financial, regulatory and legal implications the withdrawal of the United Kingdom from the European Union will have, how such
withdrawal will affect us, and the full extent to which our business could be adversely affected.

14

Inadequate funding
for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel,
prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies
from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the
FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels,
ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. Average
review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government
agencies on which our operations may rely, including those that fund research and development activities, is subject to the political
process, which is inherently fluid and unpredictable.

Disruptions at the
FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies,
which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several
times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government
employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of
the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further,
in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain
necessary capital in order to properly capitalize and continue our operations.

The Grant Agreement
with BMGF does not assure success of ResVax or that the vaccine candidate will be licensed by the FDA.

The grant agreement
we entered into with BMGF in September 2015 (the “Grant Agreement”) reimburses a portion of specified expenses associated
with the development of ResVax, 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 succeed with key clinical or development activities
could jeopardize our ability to obtain FDA licensure to sell this vaccine.

Even with the
Grant Agreement with BMGF, we may not be able to fully fund ResVax.

The Grant Agreement
reimburses a portion of specified expenses associated with the development of ResVax. Additional development activities likely
will be needed and BMGF may not reimburse us for any portion of these activities.

The results from
the Prepare trial, including that ResVax failed to meet the primary endpoint of the trial, will likely create challenges, some
of which may be significant, around further development of that vaccine.

While the Prepare results
suggest that ResVax is safe and is likely efficacious in more serious manifestations of RSV disease, the trial failed to achieve
its primary clinical endpoint. Not achieving the primary clinical endpoint has been viewed negatively by our investors. Although
the failure to achieve the primary endpoint in the trial is not evidence that the vaccine is not effective, it means that regulatory
agencies like the FDA and EMA are likely to require additional clinical trial data prior to licensure. This development may be
viewed negatively by our potential collaborators and partners, which may make the ongoing development of ResVax, and any other
RSV F Vaccine candidates, more challenging.

Collaborations
and contracts of our wholly owned subsidiary Novavax AB, with regional partners, such as Cadila and BMGF, as well as with international
providers, expose us to additional risks associated with doing business outside the U.S.

Swedish-based Novavax
AB is a wholly owned subsidiary of Novavax, Inc. We also have formed a joint venture with Cadila in India, have established a clinical
development agreement with BMGF and have entered into other agreements and arrangements with companies in other countries. We plan
to continue to enter into collaborations or partnerships with companies, non-profit organizations and local governments in various
parts of the world. Risks of conducting business outside the U.S. include negative consequences of:

· | the costs associated with seeking to comply
with multiple regulatory requirements that govern our ability to develop, manufacture and sell products in local markets;
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· | failure to comply with anti-bribery laws
such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;
· | new or changes in interpretations of existing
trade protections measures, including tariffs, embargoes 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;
· | new or changes in interpretations of existing
tax laws;
· | political instability and actual or anticipated
military or potential conflicts;
· | economic instability, inflation, recession
and interest rate fluctuations;
· | minimal or diminished protection of intellectual
property in many jurisdictions; 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 often
involve the licensing of our technology to our partner or entering into a distribution agreement, frequently on an exclusive basis.
Generally, 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 collaborations with us on a worldwide-scale. Also, these
regional relationships may make us an unattractive target for an acquisition.

We are a biotechnology
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 believe 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 manufacture, 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 concerns 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 often leads to increased investment, accelerating cumulative
losses. 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 clinical trials may identify safety or other previously
unknown problems with the product, which may result in regulatory approvals being suspended, limited to narrow the scope of the
approval, or revoked, which may otherwise prevent successful commercialization. Intense competition in the vaccine industry could
also limit the successful commercialization of any products for which we receive commercial approval.

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 significantly greater financial and technical resources,
experience and expertise in:

· | research and development;
· | preclinical testing;
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· | designing and implementing clinical trials;
· | regulatory processes and approvals;
· | production and manufacturing; and
· | sales and marketing of approved products.

Principal competitive
factors in our industry include:

· | the quality and breadth of an organization’s
technology;
· | management of the organization and the
execution of the organization’s strategy;
· | the skill and experience of an organization’s
employees and its ability to recruit and retain skilled and experienced employees;
· | an organization’s intellectual property
portfolio;
· | the range of capabilities, from target
identification and validation to drug discovery and development to manufacturing and marketing; and
· | the availability of substantial capital
resources to fund discovery, development and commercialization activities.

Large and established
companies, such as Merck & Co., Inc., GlaxoSmithKline plc, CSL Ltd, Sanofi Pasteur, SA, Pfizer Inc. and AstraZeneca, 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.

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. Even if our RSV vaccine candidate receives regulatory approval,
it may not achieve significant sales if other, more effective vaccines under development by our competitors are also approved.

Many seasonal influenza
vaccines are currently approved and marketed. 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, 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, intended to be more efficacious than those currently marketed. Our nanoparticle seasonal influenza vaccine candidate
may not prove to be more efficacious than current products or products under development by our competitors. Further, our third-party
manufacturing arrangements may not provide enough savings of time or money to provide the required differentiation for commercial
success.

Regardless of the disease,
smaller or early-stage companies and research institutions also may prove to be significant competitors, particularly through collaborative
arrangements with large and established pharmaceutical companies. As these companies 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 participant registration for clinical trials and in acquiring and in-licensing 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.

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. We may not 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.

17

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. Turnover in key executive positions resulting
in lack of management continuity and long-term history with our Company could result in operational and administrative inefficiencies
and added costs.

We may not be able
to attract qualified individuals for key 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 could hinder our ability to complete clinical trials successfully and otherwise 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 delay our development efforts.

We may have product
liability exposure.

The administration
of drugs or vaccines to humans, whether in clinical trials or after marketing approval, 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 fluctuates significantly.
Therefore, we may not be able to maintain insurance at a reasonable cost. We may not 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 that result from product liability claims. A successful claim may prevent us from obtaining
adequate product liability insurance in the future on commercially desirable terms, 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 participants
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 organizations. 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 the size of the contracts or grants to each
awardee. Even if we are able to satisfy the award requirements, we may not be a successful awardee. Therefore, we may not be able
to win any contracts or grants in a timely manner, if at all.

18

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, especially when our stock price is at a lower level compared to market
prices over recent years. 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 provisions, 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, 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 acquisition, partnering and in-licensing
of products, technologies and companies or the entry into strategic alliances and collaborations. The availability of high quality
opportunities is limited, and we may fail to identify candidates that we and our stockholders 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, manufacturing through third-party manufacturers 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 estimates could be wrong.

Security breaches
and other disruptions could compromise our information and expose us to liability, and our failure to comply with data protection
laws and regulations could lead to government enforcement actions, 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 business information and
data about our clinical participants, suppliers and business partners and personally identifiable information. 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,
 “hacktivists,” 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 infrastructure 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, 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. In addition,
privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent
or conflicting requirements, which can increase the costs incurred by us in complying with such laws. The European Union’s
General Data Protection Regulation (“GDPR”), which greatly increases the jurisdictional reach of European Union law
and became effective in May 2018, adds a broad array of requirements for handling personal data including the public disclosure
of significant data breaches, and imposes substantial penalties for non-compliance of up to the greater of €20 million or
4% of global annual revenue for the preceding financial year. Our efforts to comply with GDPR and other privacy and data protection
laws may impose significant costs and challenges that are likely to increase over time, and we could incur substantial penalties
or litigation related to violations of existing or future data privacy laws and regulations.

19

The comprehensive
2017 tax reform bill could adversely affect our business and financial condition.

On December 22, 2017,
President Trump signed into law legislation (the “Act”) that significantly revised the Internal Revenue Code of 1986,
as amended. The Act, among other things, contained significant changes to corporate taxation, including reduction of the corporate
tax rate from a top marginal rate of 35 percent (35%) to a flat rate of 21 percent (21%), limitation of the tax deduction for interest
expense to 30 percent (30%) of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating
losses to 80 percent (80%) of current-year taxable income and elimination of net operating loss carrybacks, one time taxation of
offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments
instead of deductions for depreciation expense over time, modifying or repealing many business deductions and credits, and puts
into effect the migration from a “worldwide” system of taxation to a territorial system. Notwithstanding the reduction
in the corporate income tax rate, the overall impact of the Act is uncertain and our business and financial condition could be
adversely affected. In addition, it is uncertain if and to what extent various states will conform to the Act.

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 approvals or achieve commercial viability;
· | third-party manufacturer facilities will
be unable or unwilling to scale-up manufacturing capabilities for our products in a cost-effective manner;
· | the products, if safe and effective, will
be difficult to manufacture on a large-scale or uneconomical to market;
· | third-party manufacturing facilities 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 regulation 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.

20

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;
· | submission 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 at commercial scale capable of passing FDA inspection;
· | submission to the FDA of a BLA or a NDA;
and
· | FDA approval of the BLA or NDA before
any commercial sale or shipment of the product.

These 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, which we may be unable to do without
conducting further clinical trials. Moreover, if the FDA grants regulatory approval of a product, the approval may be limited to
specific indications or limited with respect to its distribution. 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 regulatory authorities ultimately may not grant approval for commercial sale in
any jurisdiction, or may impose regulatory requirements that make further pursuit of approval uneconomical in one or more jurisdictions.
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, facilities to manufacture our vaccine
candidates at sufficient yields and at commercial-scale. We have limited experience manufacturing 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. We are dependent on third-party organizations
to conduct all of our vaccine manufacturing activities. If third-party manufacturing organizations are unable to manufacture our
vaccine candidates in clinical quantities or, when necessary, in commercial quantities and at sufficient yields, then we will need
to identify and reach supply arrangements with additional third-parties. 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 higher priority. We may not
be able to enter into any necessary additional 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.

Like influenza, a licensed
RSV vaccine would likely be seasonal in nature. If a seasonal vaccine is not available early enough in the season, we would likely
have difficulty selling that vaccine. For these reasons, any delay in the delivery of a seasonal vaccine could result in lower
sales volumes, lower sale prices, or no sales. Strains of the seasonal influenza change annually, which means that inventory of
seasonal vaccine cannot be sold during a subsequent influenza season. We believe that while RSV strains may also change annually,
our RSV F Vaccine is directed at highly-conserved epitopes that are unlikely to change annually, although that has not yet been
definitively demonstrated. Any delay in the manufacture of our vaccines could adversely affect our ability to sell the vaccines.

21

Our reliance on third-party
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 manufacturer 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 products might be sold; and
· | lack of capital funding.

As a result, any delay
or interruption could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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 acceptable 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 us. 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 requirements 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.

22

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 and clinical trials, and all of our vaccine manufacturing, we may encounter
delays in or lose some control over our efforts to develop products.

We are dependent on
third-party organizations to conduct some of our laboratory testing and clinical trials and all of our vaccine manufacturing 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 third-parties to conduct our laboratory testing, clinical trials and manufacturing activities.

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-parties does not relieve us of these
responsibilities and requirements. These third-parties may not successfully carry out their contractual duties or regulatory obligations
or meet expected deadlines. Furthermore, if our third-party manufacturer is producing materials or products for themselves or other
companies, our third-party manufacturer may be exposed to regulatory risks for the production of such materials and products. As
a result, failure to meet the regulatory requirements for the production of those materials and products may generally affect the
regulatory clearance of the third-party manufacturer’s facility, which could impact its ability to produce our materials
and products. Any of our third-party service providers 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 payer 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, but we cannot predict when, if at all, this relationship will lead to additional approved products, 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 may not be able to attract and retain qualified
sales personnel or otherwise develop this capability.

23

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 and 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;
· | 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.

There are significant
challenges associated with marketing seasonal influenza vaccines. For a seasonal vaccine to be accepted in the market, it must
demonstrate differentiation from other seasonal vaccines that are currently approved 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 influenza vaccine can be differentiated from other influenza 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 with a consistent and sufficiently high quality. We need a secure supply of raw material,
as well as back-up suppliers, or our adjuvant products may be delayed.

If reforms in
the health care industry make reimbursement for our potential products less likely, the market for our potential products will
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 (including managed care plans), and other organizations. Over the past
decade, the cost of health care has risen significantly, and there have been numerous proposals by legislators, regulators and
third-party health care payers to curb these costs. Some of these proposals have involved limitations on the amount of reimbursement
for certain products. Similar federal or state health care 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 realization 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.

24

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 our applications for marketing approval will depend on several factors, including
the following:

· | our ability to manufacture or obtain sufficient
quantities of materials for use in necessary preclinical studies and clinical trials;
· | regulatory agency review and approval
of proposed clinical trial protocols;
· | approval of clinical trials protocols
and informed consent forms by institutional review boards responsible for overseeing the ethical conduct of the trial;
· | the rate of participant enrollment and
retention, which is a function of many factors, including the size of the participant population, the proximity of participants
to clinical sites, the eligibility criteria for the clinical trial and the nature of the protocol;
· | unfavorable 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, result
in the suspension or termination of, or prevent further conduct of clinical studies or regulatory approval;
· | the availability of skilled and experienced
staff to conduct and monitor clinical trials and to prepare the appropriate regulatory applications; and
· | changes in the policies of regulatory
authorities for drug or vaccine approval during the period of product development.

We have limited experience
in conducting and managing the preclinical studies and clinical trials necessary to obtain regulatory 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. A number of companies in
the biotechnology 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 participants are being exposed to an unacceptable health risk. In addition, we or our collaborators 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, United Kingdom, 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.

25

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 after a product
gains regulatory approval, the product and the manufacturer of the product will be subject to continuing regulatory review, including
adverse event reporting 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 such
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. We cannot provide assurance that newly discovered or developed
safety issues will not arise following regulatory approval. With the use of any vaccine by a wide patient population, serious adverse
events may occur from time to time that did not arise in the clinical trials of the product or that initially appeared to be unrelated
to the vaccine itself and only with the collection of subsequent information were found to be causally related to the product.
Any such 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.

Fast Track Designation
by the FDA or other regulatory acceleration options may not actually lead to a faster development or regulatory review or approval
process and does not assure approval.

If a drug is intended
for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address an unmet medical
need for this condition, the drug sponsor may apply for FDA Fast Track Designation. However, Fast Track Designation does not ensure
that the drug sponsor will receive marketing approval or that approval will be granted within any particular timeframe. In January
2020, we announced that the FDA had granted Fast Track Designation for NanoFlu, our recombinant quadrivalent seasonal influenza
vaccine candidate. We may also seek Fast Track Designation for more of our other vaccine candidates. If we do seek Fast Track Designation
for our other vaccine candidates, we may not receive it, and even if we receive Fast Track Designation, we may not experience a
faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw Fast
Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast
Track Designation alone does not guarantee qualification for the FDA’s priority review procedures.

Obtaining a Fast Track
Designation does not change the standards for product approval, but may expedite the development or approval process. Even though
the FDA has granted such designation for NanoFlu, it may not actually result in faster clinical development or regulatory review
or approval. Furthermore, such a designation does not increase the likelihood that NanoFlu will receive marketing approval in the
U.S.

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.

Our facilities in Maryland
are subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory practices,
the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals,
microorganisms and various hazardous compounds used in connection with our research and development activities. In the U.S., these
laws include 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 individuals 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.

26

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 material 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 approval, coverage and reimbursement for such products from third-party payers
such as:

· | government health administration authorities
such as the Advisory Committee for Immunization Practices of the Centers for Disease Control and Prevention;
· | private health insurers;
· | managed care organizations;
· | pharmacy benefit management companies;
and
· | other healthcare related organizations.

Third-party payers
are increasingly challenging the prices charged for medical products and may deny coverage or offer inadequate levels 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 managed care organizations that control or
significantly influence utilization 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 and could adversely affect the prices that we receive for our
vaccine candidates, if approved. Some of these proposed and implemented reforms could result in reduced pharmaceutical pricing
or 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. For example, the Healthcare
Reform Act contained several cost containment measures that could adversely affect our future revenue, including, for example,
increased drug rebates under Medicaid for brand name prescription drugs, extension of Medicaid rebates to Medicaid managed care
organizations, and extension of so-called 340B discounted pricing on pharmaceuticals sold to certain healthcare providers. Additional
provisions of the healthcare reform laws that may negatively affect our future revenue and prospects for profitability include
the assessment of an annual fee based on our proportionate share of sales of brand name prescription drugs to certain government
programs, including Medicare and Medicaid, as well as mandatory discounts on drugs (including vaccines) sold to certain Medicare
Part D beneficiaries in the coverage gap (the so-called “donut hole”). Other aspects of healthcare reform, such as
expanded government enforcement authority and heightened standards that could increase compliance-related costs, could also affect
our business. In addition, we face uncertainties because there are ongoing federal legislative and administrative efforts to repeal,
substantially modify or invalidate some or all of the provisions of the Healthcare Reform Act. For example, in 2017, the President
announced that his administration will withhold the cost-sharing subsidies paid to health insurance exchange plans serving low-income
enrollees. The Act was also enacted at the end of 2017 and includes provisions that will affect healthcare insurance coverage and
payment, such as the elimination of the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning
in 2019 (the so-called “individual mandate”). The Bipartisan Budget Act of 2018 contained various provisions that affect
coverage and reimbursement of drugs, including an increase in the mandatory discounts on pharmaceuticals sold to certain Medicare
Part D beneficiaries in the coverage gap starting in 2019. The pharmaceutical industry has also been the subject of significant
publicity in recent years regarding the pricing of pharmaceutical products, including publicity and pressure resulting from prices
charged by pharmaceutical companies for new products as well as price increases by pharmaceutical companies on older products that
some people have deemed excessive. As a result, pharmaceutical product prices have been the focus of increased scrutiny by the
U.S. government, including certain state attorneys general, members of congress, presidential candidates and the United States
Department of Justice. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact
of potential legislation on us.

27

If our product
candidates obtain marketing approval, we will be subject to additional healthcare laws and our failure to comply with those laws
could have a material adverse effect on our results of operations and financial conditions.

Within the U.S., if
we obtain approval for any of our product candidates and begin commercializing them, our operations may be directly, or indirectly
through our customers, subject to additional healthcare regulation and enforcement by the federal and state governments. In addition
to the laws mentioned above, the laws that may affect our ability to operate include:

· | the Food, Drug and Cosmetic Act, which
among other things, strictly regulates drug product marketing and promotion and prohibits manufacturers from marketing such products
for off-label use;
· | the federal anti-kickback law, which prohibits,
among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce the referral
for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare
programs such as Medicare and Medicaid;
· | federal false claims laws which prohibit,
among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment
from Medicare, Medicaid, or other third-party payers that are false or fraudulent;
· | federal laws that require pharmaceutical
manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government
authorities or private entities, often as a condition of reimbursement under government healthcare programs;
· | the so-called “federal sunshine”
law (also known as “open payments”) which requires pharmaceutical and medical device manufacturers to report certain
financial interactions to the federal government for re-disclosure to the public;
· | the federal law known as HIPAA, which,
in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud
any healthcare benefit program or making false statements relating to healthcare matters;
· | state law equivalents of the above federal
laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including
commercial insurers, and state gift ban and transparency laws, many of which state laws differ from each other in significant ways
and often are not preempted by federal laws, thus complicating compliance efforts; and
· | state laws restricting interactions with
healthcare providers and other members of the healthcare community or requiring pharmaceutical manufacturers to implement certain
compliance standards.

Because of the breadth
of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business
activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any
of such laws or any other governmental regulations that apply to us, we may be subject to, on a corporate or individual basis,
penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion
from participation in federal and state healthcare programs and even imprisonment, any of which could materially adversely affect
our ability to operate our business and our financial results. In addition, the cost of implementing sufficient systems, controls,
and processes to ensure compliance with all of the aforementioned laws could be significant.

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 400 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 patent claims that are granted by the U.S. Patent and Trademark
Office (“USPTO”) or enforced by the federal courts. Therefore, we do not know whether any particular 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.

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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 unpatentable 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 be found 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 may 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.

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 suit 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.

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Even if we are successful,
litigation may result in substantial costs and distraction to our management. Even with a broad portfolio, 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 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.

The scope, validity,
and ownership of our patent claims may be challenged in various venues and, if we do not prevail, our ability to exclude competitors
may be harmed, potentially reducing our ability to succeed commercially.

We may be subject
to a variety of challenges from third-parties that relate to the scope of the claims or to their validity. Such challenges can
be mounted in post-grant review, ex parte re-examination, and inter partes review proceedings before the USPTO, or similar adversarial
proceedings in other jurisdictions. If we are unsuccessful in any such challenge, the scope of our claims could be narrowed or
could be invalidated. Any such outcome could impair our ability to exclude competitors from the market in those countries, potentially
impacting our commercial success.

Our patents may be
subject to various challenges related to ownership and inventorship, including interference or derivation proceedings. Third-parties
may assert that they are inventors on our patents or that they are owners of the patents. While we perform inventorship analyses
to insure that the correct inventors are listed on our patents, we cannot be certain that a court of competent jurisdiction would
arrive at the same conclusions we do. If we are unsuccessful in defending against ownership or inventorship challenges, a court
may require us to list additional inventors, may invalidate the patent, or may transfer ownership of the patent to a third-party.
Any of these outcomes may harm our ability to exclude competitors and potentially impact our commercial success. Further, if ownership
is transferred to a third-party we may be required to seek a license to those rights to preserve our exclusive ability to practice
the invention. Such a license may not be available on commercially reasonable terms, or at all. If we are unable to obtain a license,
we may be required to expend time, effort, and other resources to design around the patent. Any such license may be non-exclusive
and if a competitor is able to obtain a license from the third-party, our ability to exclude that competitor from the market may
be negatively impacted.

Even if we are ultimately
successful, defending any such challenges may cause us to incur substantial expenses and may require us to divert substantial financial
and management resources that we would otherwise be able to devote to our business.

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 have in the past,
and we expect in the future to license intellectual property from third-parties and that these licenses will be material to our
business. We will not own the patents or patent applications that underlie these licenses, and we may not control either the prosecution
or the enforcement of the patents. Under such circumstances, we may be forced to rely upon our licensors to properly prosecute
and file those patent applications and prevent infringement of those patents.

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 technologies 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.

Further, any disputes
regarding obligations in licenses may require us to take expensive and time-consuming legal action to resolve, and, even if we
are successful, may delay our ability to commercialize products and generate revenue. Further, if we are unable to resolve license
issues that arise we may lose rights to practice intellectual property that is required to make, use, or sell products. Any such
loss could compromise our development and commercialization efforts for current or future product candidates and/or may require
additional effort and expense to design around.

30

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.

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 unpatented technology we hold will afford us significant commercial
protection.

If we do not
obtain patent term extension and/or patent term adjustment in the United States under the Hatch-Waxman Act and similar extensions
in foreign countries, our ability to exclude competitors may be harmed.

In the United States,
the patent term is 20 years from the earliest U.S. non-provisional filing date. Extensions of patent term may be available under
certain circumstances. Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates,
we may be able to extend the term of one patent that covers a marketed product under the Drug Price Competition and Patent Term
Restoration Act of 1984, (the “Hatch-Waxman Amendments”) and similar legislation in the European Union.

The Hatch-Waxman Amendments
permit patent term extension of up to five years for a patent covering an approved product as compensation for effective patent
term lost during product development and the FDA regulatory review process. We may not receive any extension if we fail to apply
within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements.
Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term
of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be
shortened and our competitors may obtain approval to market competing products sooner.

Patent term covering
our products may also be extended for time spent during the prosecution of the patent application in the USPTO. This extension
is referred to as Patent Term Adjustment (“PTA”). The laws and regulations governing how the USPTO calculates the PTA
is subject to change and changes in the law can reduce or increase any such PTA. Further, the PTA granted by the USPTO may be challenged
by a third-party. If we do not prevail under such a challenge, the PTA may be reduced or eliminated, shortening the patent term,
which may negatively impact our ability to exclude competitors.

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 principal 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 expenditures 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.

31

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 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 respective affiliates
entered into various derivative transactions with respect to our common stock and/or to purchase our common 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 biotechnology companies in particular have experienced extreme
volatility that has often been unrelated to the operating performance of particular companies. From January 1, 2019 through December
31, 2019, the closing sale price of our common stock has been as low as $3.69 per share and as high as $46.80 per share. 1 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 innovations 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 health care
reform and reimbursement levels for new vaccines and other matters affecting our business and results, regardless of accuracy;

1 Share prices reflect the May 10, 2019 1-for-20
Reverse Stock Split.

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· | sales of substantial amounts of our stock
by us or existing stockholders (including stock by insiders or 5% stockholders);
· | development, spread or new announcements
related to pandemic diseases;
· | litigation;
· | public concern as to the safety of our
products;
· | significant set-backs or concerns with
the industry or the market as a whole;
· | regulatory inquiries, reviews and potential
action, including from the FDA or the SEC;
· | recommendations by securities analysts
or changes in earnings estimates; and
· | the other factors described in this Risk
Factors section.

In addition, the stock
market in general, and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations
that have particularly affected the market price for many of those companies. These fluctuations have often been unrelated to the
operating performance of these companies. These broad market fluctuations may cause the market price of our common stock to be
lower or more volatile than expected.

The Nasdaq Global
Select Market has a listing requirement; if a participating company no longer meets such requirements and fails to correct the
listing deficiency, its stock may be delisted.

The Nasdaq Global Select
Market (“Nasdaq”), on which our common stock is listed and traded, has listing requirements that include a $1 minimum
closing bid price requirement. On April 11, 2019, we received a notification letter from Nasdaq (the “Notice”) advising
us that for 30 consecutive business days preceding the date of the Notice, the bid price of our common stock had closed below this
$1.00 per share minimum closing bid price. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a compliance
period of 180 calendar days, or until October 8, 2019, to regain compliance with this requirement.

On May 8, 2019, our
stockholders approved the Reverse Stock Split, which became effective on May 10, 2019. On May 24, 2019, we received a notification
letter from Nasdaq advising us that our closing bid price of our common stock had been at $1.00 per share or greater for ten consecutive
business days and we had regained compliance with Nasdaq Listing Rule 5450(a)(2) accordingly. We continue to monitor the bid price
for our common stock. If we fail to satisfy the minimum closing bid price requirement or any other listing requirements in the
future, Nasdaq may elect, subject to any potential cure periods, to initiate a process that may delist our common stock. Should
such a delisting occur, it may adversely impact the liquidity and price of our common stock, impede our ability to raise capital
and would constitute a fundamental change under our Notes.

Provisions of
our Second Amended and Restated Certificate of Incorporation and Amended and Restated 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. For example, our organizational documents provide for 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.

33

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, capital 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 two facilities
in Gaithersburg, Maryland. Novavax AB leases a facility 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 continues
to review and assess real property requirements that may be necessary to address our current business plan.

Property Location | Approximate Square Footage | Brief Property Description
21FF Gaithersburg, MD | 53,000 | Research and development facility and offices
22FF Gaithersburg, MD | 40,000 | Executive, administrative, clinical and regulatory offices
Uppsala, Sweden | 24,000 | Adjuvant manufacturing and research and development facility and offices
Total square footage | 117,000

Item
3. LEGAL PROCEEDINGS

We currently have no
material pending legal proceedings.

Item
4. MINE SAFETY DISCLOSURES

Not applicable.

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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.” Our common stock was held by approximately 133 stockholders
of record as of March 6, 2020, one of which is Cede & Co., a nominee for Depository Trust Company (“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 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.

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, 2014, and reinvestments of all dividends.

Value of $100 invested on December 31,
2014 in stock or index, including reinvestment of dividends, for fiscal years ended December 31:

12/31/14 | 12/31/15 | 12/30/16 | 12/29/17 | 12/31/18 | 12/31/19
Novavax, Inc. | $ | 100.00 | $ | 141.48 | $ | 21.25 | $ | 20.91 | $ | 31.03 | $ | 3.36
Nasdaq Composite Index | $ | 100.00 | $ | 106.96 | $ | 116.45 | $ | 150.96 | $ | 146.67 | $ | 200.49
RUSSELL 2000 Growth Biotechnology Index | $ | 100.00 | $ | 111.17 | $ | 88.61 | $ | 141.64 | $ | 116.81 | $ | 170.48

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.

35
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, 2019, which have been
derived from our audited consolidated financial statements. The information below should be read in conjunction with our consolidated
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
for future periods.

Year Ended December 31,
2019(1) | 2018(2) | 2017(3) | 2016(4) | 2015(5)
(in thousands, except per share amounts)
Statements of Operations Data(6):
Revenue | $ | 18,662 | $ | 34,288 | $ | 31,176 | $ | 15,353 | $ | 36,250
Net loss | (132,694 | ) | (184,748 | ) | (183,769 | ) | (279,966 | ) | (156,937 | )
Basic and diluted net loss per share | (5.51 | ) | (9.99 | ) | (12.56 | ) | (20.68 | ) | (11.97 | )
Weighted average shares used in computing basic and diluted net loss per share | 24,100 | 18,488 | 14,633 | 13,540 | 13,112
As of December 31,
2019(1) | 2018(2) | 2017(3) | 2016(4) | 2015(5)
(in thousands)
Balance Sheet Data:
Cash and cash equivalents, marketable securities and restricted cash | $ | 82,180 | $ | 103,939 | $ | 186,427 | $ | 270,383 | $ | 268,062
Total current assets | 97,247 | 119,276 | 203,311 | 287,830 | 287,257
Working capital(7) | 71,452 | 73,737 | 129,636 | 221,424 | 210,763
Total assets(8) | 172,957 | 207,978 | 302,493 | 394,301 | 386,038
Long-term debt, less current portion(9) | 320,611 | 319,187 | 317,763 | 316,339 | 37
Accumulated deficit | (1,431,801 | ) | (1,299,107 | ) | (1,114,359 | ) | (929,996 | ) | (650,030 | )
Total stockholders’ (deficit) equity | (186,017 | ) | (167,935 | ) | (101,732 | ) | (5,546 | ) | 292,669
(1) | In 2019, we had sales of 13.0 million shares of common
stock resulting in net proceeds of approximately $98 million.
(2) | In 2018, we had sales of 2.9 million shares of common
stock resulting in net proceeds of approximately $100 million.
(3) | In 2017, we had sales of 2.5 million shares of common
stock resulting in net proceeds of approximately $63 million.
(4) | In 2016, we issued $325 million aggregate principal amount
of convertible senior unsecured notes resulting in net proceeds of approximately $315 million.
(5) | In 2015, we had sales of 1.5 million shares of common
stock resulting in net proceeds of approximately $204 million.
(6) | All share and per share amounts have been retroactively
restated for all periods presented to reflect the Reverse Stock Split (see Note 12 to the accompanying consolidated financial
statements).
(7) | Working capital is computed as the excess of current
assets over current liabilities.
(8) | In 2019, the Company adopted ASU 20160-02, Leases (Topic 842), in which the Company recorded right-of-use assets associated with its leases on the consolidated balance sheet
(see Note 7 to the accompanying consolidated financial statements).
(9) | Includes non-current portion of capital leases in 2015.
36
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 revenue and expense
levels and capital raising activities, including possible proceeds from our March 2020 Sales Agreement (defined below); obligations
under our Services Agreement (defined below) with Catalent Maryland, Inc. (formerly Paragon Bioservices, Inc.), a unit
of Catalent Biologics (“Catalent”); potential market sizes and demand for our product candidates; the efficacy, safety
and intended utilization 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; our expectations with
respect to the anticipated ongoing development and potential commercialization or licensure of ResVax; the expected timing and
content of regulatory actions; payments by the Bill & Melinda Gates Foundation (“BMGF”); our available cash
resources and usage and the availability of financing generally; expected future cash savings and expense reductions associated
with the Catalent transaction; plans regarding partnering activities, business development initiatives; the adoption of stock incentive
plans and amendments thereto; and other matters referenced herein. You generally can identify 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 contain these words.

Forward-looking statements
involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied
in the statements. Any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate or materially
different from actual results.

Because the risk factors
discussed in this Annual Report and other risk factors of which we are not aware could cause actual results or outcomes to differ
materially from those expressed or implied in any forward-looking statements made by or on behalf of us, 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 that could cause results to differ in the cautionary statements included in this Annual Report, particularly
those identified in Part I, Item 1A “Risk Factors” of this Annual Report. 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, level of activity, performance or achievement. Further, any forward-looking statement 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.

Overview

We are a late-stage
biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative
vaccines to prevent serious infectious diseases. Our vaccine candidates, including our lead candidates, NanoFlu™ and ResVax™,
are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit
differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines. Our technology
targets a variety of infectious diseases. We are also developing proprietary immune stimulating saponin-based adjuvants at Novavax
AB, our wholly owned Swedish subsidiary. Our lead adjuvant, Matrix-M™, has been shown to enhance immune responses and has
been well-tolerated in multiple clinical trials.

37

Product Pipeline

Program | Current Development Stage
Seasonal
 Influenza
· NanoFlu
(Older Adults) (1) | Phase 3
Respiratory
 Syncytial Virus (“RSV”)
· ResVax (2) (Infants
via Maternal Immunization) | Phase 3
· Older
Adults (1) | Phase 2
· Pediatrics | Phase 1
Combination
 Seasonal Influenza/RSV (1) | Preclinical
Ebola
 Virus (“EBOV”) (1) | Phase 1
Coronavirus
 (“COVID-19”) (1) | Preclinical

(1) Includes
Matrix-M adjuvant

(2) Supported
by a grant of up to $89.1 million from BMGF

A summary and status
of these vaccine programs follows:

Seasonal Influenza

NanoFlu Program (Older Adults)

Influenza is a world-wide
infectious disease with serious illness generally occurring in more susceptible populations such as children under 18 years old
and older adults, but also occurring in the general population. According to influenza vaccines forecasts by Datamonitor in 2013,
the market for seasonal influenza vaccines is expected to grow from approximately $3.2 billion in the 2015-16 flu season to approximately
$5.3 billion in the 2021-22 flu season (in the countries comprising the top seven markets). Recent flu seasons have shown an increase
in the influenza disease burden. For the 2017-18 flu season, the Centers for Disease Control and Prevention estimates that influenza
in the U.S. resulted in 48.8 million illnesses, 959,000 hospitalizations and 79,400 deaths, a dramatic increase across all categories
compared to previous years.

In October 2019,
we initiated a pivotal Phase 3 clinical trial of NanoFlu in older adults (65 years and older). This randomized, observer-blinded,
active-controlled trial will evaluate the immunogenicity and safety of NanoFlu with its proprietary Matrix-M adjuvant, compared
to a U.S.-licensed quadrivalent vaccine, Fluzone ® Quadrivalent. The trial’s primary objective is to demonstrate
non-inferior immunogenicity as measured by hemagglutination inhibition (“HAI”) titers of vaccine homologous influenza
strains compared to a licensed seasonal vaccine, and to describe its safety profile. In October 2019, we completed enrollment
of 2,652 healthy older adults across 19 clinical sites in the U.S. and we expect to report top-line clinical data by the end of
the first quarter of 2020. Positive data will support a subsequent U.S. biologics license application (“BLA”) and licensure
of NanoFlu using the U.S. Food and Drug Administration’s (“FDA”) accelerated approval pathway.

In
January 2020, we announced that the FDA granted NanoFlu Fast Track designation, which 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 approved products can reach the market expeditiously. Specifically, Fast Track designation facilitates meetings
to discuss all aspects of development to support licensure and provides the opportunity to submit sections of a BLA on a rolling
basis as data become available. This permits the FDA to review modules of the BLA as they are received instead of waiting for the
entire BLA submission. In addition, priority review (six-month review versus standard 10-month review) is an additional benefit
that may potentially be available for NanoFlu in the future.

38

In June 2019,
we announced that the FDA acknowledged that the accelerated approval pathway is available for NanoFlu. An accelerated approval
may be granted for certain biological products that have been studied for their safety and effectiveness in treating serious or
life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments. Such an approval will be based
on adequate and well-controlled clinical trials establishing that the biological product has an effect on a surrogate endpoint
that is reasonably likely to predict clinical benefit. For seasonal influenza vaccines, the HAI antibody response is considered
an acceptable surrogate marker of activity that is reasonably likely to predict clinical benefit. To be considered for accelerated
approval, a BLA for a new seasonal influenza vaccine should include results from one or more well-controlled studies designed to
meet immunogenicity endpoints along with a commitment to conduct confirmatory post-marketing studies of clinical effectiveness
in preventing influenza.

Respiratory Syncytial Virus (RSV)

Currently, there is
no approved RSV vaccine available to combat the estimated 64 million RSV infections that occur globally each year. We have identified
three susceptible target populations that we believe could benefit from the development of our respiratory syncytial virus fusion
(F) protein nanoparticle vaccine candidate (“RSV F Vaccine”) in different formulations: (1) infants via maternal
immunization, (2) older adults (60 years and older) and (3) children six months to five years old (“pediatrics”).
With our current estimates of the annual global cost burden of RSV in excess of $88 billion, we believe our RSV F Vaccine represents
a multi-billion dollar worldwide opportunity.

ResVax Program (Infants
via Maternal Immunization)

ResVax is our adjuvanted
RSV F Vaccine for infants via maternal immunization. RSV is the most common cause of lower respiratory tract infections (“LRTI”)
and the leading viral cause of severe lower respiratory tract disease in infants and young children worldwide. 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.

Data from our Prepare
trial, which was initiated in December 2015, was announced in February 2019. The Prepare trial was conducted to determine
whether ResVax reduced incidence of medically significant RSV-positive LRTI in infants through a minimum of the first 90 days of
life and up through the first six months of life. While these data did not meet the trial’s primary efficacy endpoint, it
did demonstrate efficacy against a secondary objective by reducing RSV LRTI hospitalizations in treated infants. ResVax is thus
the first RSV vaccine to show efficacy in a Phase 3 clinical trial, and in addition, showed important effects against a variety
of pre-specified exploratory endpoints and post-hoc analyses. This included a ~60% reduction in RSV-related severe hypoxemia and
a ~74% reduction in RSV-related, radiographically-confirmed pneumonia through day 90. As in previous clinical trials, ResVax also
showed favorable safety and tolerability results. In light of the fact that the trial failed to meet the primary endpoints, the
FDA and European Medicines Agency (“EMA”) recommended that we conduct an additional Phase 3 clinical trial to confirm
efficacy. BMGF has supported the Prepare trial for ResVax through a grant of up to $89.1 million; BMGF continues to financially
support our efforts to conduct certain follow-on analyses of the Phase 3 data. We are currently in discussions with multiple potential
commercial partners about the opportunity to bring ResVax to market globally, including assisting us with the regulatory licensure
pathways in the U.S., the European Union and other geographies.

39

RSV Older Adults
Program

Older adults (60 years
and older) are at increased risk for RSV disease due in part to immunosenescence, the age-related decline in the human immune system.
RSV infection can also lead to exacerbation of underlying co-morbidities such as chronic obstructive pulmonary disease, asthma
and congestive heart failure. In the U.S. alone, a reported RSV incidence rate of 5.5% in older adults would account for approximately
2.5 million infections per year. We estimate that approximately 900,000 medical interventions are caused by RSV disease in this
U.S. population each year. We followed up the 2016 Phase 3 clinical trial of our RSV F Vaccine, which failed to meet its pre-specified
primary or secondary efficacy objectives, with a 2017 Phase 2 clinical trial in older adults, to assess safety and immunogenicity
of one and two dose regimens of our RSV F Vaccine, with and without aluminum phosphate or our proprietary Matrix-M adjuvant. Immunogenicity
results from the 2017 trial indicate that both adjuvants increase the magnitude, duration and quality of the immune response versus
the non-adjuvanted RSV F Vaccine. We continue to assess the development opportunities for our RSV F Vaccine in older adults.

RSV Pediatrics
Program

By the age of five,
essentially all children will have been exposed to RSV and will likely develop natural immunity against the virus; however, children
under five remain vulnerable to RSV disease, offering a strong rationale for a pediatric vaccine that could offer enhanced protection.
In 2015, we announced positive results in our Phase 1 clinical trial evaluating the safety and immunogenicity of our RSV F Vaccine
in healthy children between two and six years of age. We continue to assess the development opportunities for our RSV F Vaccine
for pediatrics.

Combination Seasonal Influenza/RSV F
Vaccine

With the ongoing development
of our NanoFlu and RSV F Vaccine, a strong rationale exists for developing a combination respiratory vaccine that is designed to
protect susceptible populations against both diseases. Although testing is at an early stage, we believe that a combination vaccine
against both influenza and RSV may be achievable.

Ebola Virus

Ebola virus (“EBOV”)
is a filovirus that produces severe, often fatal illness in humans. Within the last decade, it has produced two large outbreaks
in Sub-Saharan Africa with high mortality. There are currently no licensed treatments proven to prevent EBOV, although a range
of blood, immunological and drug therapies are under development.

We have developed an
EBOV glycoprotein vaccine candidate (“Ebola GP Vaccine”) expressed in insect cells, using our core recombinant baculovirus
technology. In five separate studies, carried out in collaboration with the National Institute of Allergy and Infectious Disease,
active immunization with Ebola GP Vaccine was shown to be highly immunogenic and efficacious in preventing lethal disease in non-human
primates challenged with EBOV. Our 2015 Phase 1 clinical trial demonstrated that our Ebola GP Vaccine is highly immunogenic in
humans, well-tolerated and, in conjunction with our proprietary Matrix-M adjuvant, demonstrated marked antigen dose-sparing and
induced significant increases in neutralizing antibody titers. While we intend to advance our Ebola GP Vaccine, doing so will be
dependent upon funding or a partner.

Coronavirus

Coronaviruses (“CoV”),
so named for their “crown-like” appearance, are a large family of viruses that spread from animals to humans and include
diseases such as Middle East Respiratory Syndrome (“MERS”) and Severe Acute Respiratory Syndrome (“SARS”).
Historically, we developed a vaccine candidate against MERS, a novel coronavirus first identified in 2012, as well as a vaccine
candidate against SARS in 2005. In 2012, within weeks of obtaining the sequence of the circulating MERS strain, we successfully
produced a vaccine candidate designed to provide protection. Our MERS candidate was based on the major surface spike protein, which
we had previously identified as the antigen of choice in our work with our SARS vaccine candidate. In 2014, in collaboration with
the University of Maryland, School of Medicine, we published results that showed our MERS and SARS vaccine candidates both blocked
infection in laboratory studies.

40

Recently, a new strain
of coronavirus (“COVID-19”) causing pneumonia-like symptoms has emerged in China, marking the beginning of a spread
of the virus across the globe. Researchers have now confirmed that the virus can spread via human-to-human transmission. There
are currently no licensed treatments proven to prevent COVID-19, although a range of vaccine candidates are under development.
We have successfully produced a vaccine candidate designed to provide protection against COVID-19. Using our recombinant nanoparticle
technology, we have generated antigen for our initial vaccine candidate derived from the coronavirus spike (S) protein. This
vaccine candidate has been engineered from the genetic sequence of COVID-19 virus and binds efficiently with the same human receptors
targeted by the virus, a critical aspect for effective vaccine protection. We intend to combine our proprietary Matrix-M adjuvant
into our experimental vaccine candidate to potentially provide an additional immune response. We were recently awarded initial
funding from the Coalition for Epidemic Preparedness Innovations (“CEPI”) to facilitate our development of a COVID-19
vaccine in preparation for potential future clinical trials. A subsequent CEPI award may be available to cover our program expenditures
through Phase 1 clinical trial results.

CPLB Joint Venture

CPL Biologicals Private
Limited (“CPLB”), our joint venture between Novavax and Cadila Pharmaceuticals Limited (“Cadila”), is actively
developing a number of vaccine candidates in India. CPLB is owned 20% by Novavax and 80% by Cadila.

Reverse Stock Split

On May 8, 2019,
following stockholders approval at a Special Meeting earlier that day, we filed a Certificate of Amendment to our Second Amended
and Restated Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of our issued and
outstanding common stock, par value $0.01, at a ratio of 1-for-20 (the “Reverse Stock Split”), effective as of May 10,
2019. We have retroactively restated all per share and share amounts, including stock options and restricted stock awards, in this
Annual Report for all periods presented to reflect the Reverse Stock Split.

Catalent Transaction

In July 2019,
we closed a transaction under an asset purchase agreement (the “Purchase Agreement”) with Catalent, pursuant to which
we sold to Catalent certain assets related to our biomanufacturing and development activities located at the facilities situated
at each of 20 Firstfield Road in Gaithersburg, MD 20878 and 9920 Belward Campus Drive in Rockville, MD 20850, for a purchase price
of (i) $18.0 million, including $1.5 million to be held in escrow for one year following the closing of the transaction, plus
(ii) an additional fee to purchase laboratory supplies of approximately $0.3 million, subject to certain adjustments. Pursuant
to the transactions contemplated by the Purchase Agreement, approximately 100 Novavax manufacturing and quality employees transferred
to Catalent, and we assigned two facility leases to Catalent. We also entered into other ancillary agreements upon the closing
of the transaction, including a Non-Commercial GMP Manufacturing Services Agreement pursuant to which we are required to purchase
$6.0 million in certain services from Catalent set forth therein, through July 31, 2020. The transaction was treated as an
asset disposition for accounting purposes. As a result of the transactions contemplated by the Purchase Agreement and related attrition
since March 1, 2019, we have reduced our headcount by more than 200 employees. In 2019, we recorded a gain on the disposition
of such assets of $9.0 million.

HHS BARDA Contract Close Out

In December 2019,
we amended our contract with the Department of Health and Human Services, Biomedical Advanced Research and Development Authority
(“HHS BARDA”) to close out the contract we were awarded by HHS BARDA in 2011. Pursuant to the amendment, HHS BARDA
agreed to pay us $7.5 million for the recovery of additional costs under the contract relating to the close out of indirect rates
for the remaining fiscal years 2013 through 2016. As a result of the amendment, we recorded revenue of $7.5 million in the fourth
quarter of 2019. Payment was received in the first quarter of 2020.

Sales of Common Stock

In March 2020,
we entered into an At Market Issuance Sales Agreement (“March 2020 Sales Agreement”), which allows us to issue
and sell up to $150 million in gross proceeds of our common stock. From March 2 through March 6, 2020, we sold 1.5 million
shares of common stock under the March 2020 Sales Agreement resulting in $18.6 million in net proceeds, leaving $131.1 million
remaining.

41

In January 2020,
we entered into an At Market Issuance Sales Agreement (“January 2020 Sales Agreement”), which allowed us to issue
and sell up to $100 million in gross proceeds of our common stock. During the first quarter of 2020, we sold 10.5 million shares
of common stock under the January 2020 Sales Agreement resulting in $98.7 million in net proceeds. The January 2020 Sales
Agreement was fully utilized at that time.

In December 2018,
we entered into an At Market Issuance Sales Agreement (“December 2018 Sales Agreement”), which allowed us to issue
and sell up to $100 million in gross proceeds of our common stock. During 2019, we sold 10.5 million shares of common stock under
the December 2018 Sales Agreement resulting in $59.5 million in net proceeds (this amount excludes $0.5 million received in
the first quarter of 2020 for shares traded in late December 2019). In January 2020, we sold 7.2 million shares of common
stock under the December 2018 Sales Agreement resulting in $38.5 million in net proceeds. The December 2018 Sales Agreement
was fully utilized at that time.

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 generally accepted accounting principles 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, particularly estimates relating to accounting
for revenue and long-lived assets 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.

Revenue

Our current revenue
primarily consists of revenue 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
efforts to obtain WHO prequalification of ResVax. The Grant Agreement does not provide a direct economic benefit to BMGF. Rather,
we entered into an agreement with BMGF to make a certain amount of ResVax available and accessible at affordable pricing to people
in certain low- and middle-income countries. Based on these circumstances, we do not consider BMGF to be a customer and concluded
the Grant Agreement is outside the scope of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic
606) (“Topic” 606”). Payments received under the Grant Agreement are considered conditional contributions
under the scope of ASC 958-605, Not-for-Profit Entities – Revenue Recognition , and are recorded as deferred revenue
until the period in which such research and development activities are performed and revenue can be recognized.

We analyzed the Grant
Agreement with BMGF to determine whether the payments received should be recorded as revenue or as a reduction to research and
development expenses. In reaching the determination that such payments should be recorded as revenue, we considered 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. Further, we have consistently applied our policy of presenting such amounts as revenue.

For arrangements that
are determined within the scope of Topic 606, we recognize revenue following the five-step model: (i) identify the contract(s) with
a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or
as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect
the consideration we are entitled to in exchange for the goods or services we transfer to our customer. At contract inception,
once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract
and determine the performance obligations, and assesses whether each promised good or service is distinct. We then recognize
as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.

42

We perform research
and development under grant, license and clinical development agreements. Payments received in advance of work performed are recorded
as deferred revenue.

Impairments of Long-Lived
Assets

We account for the
impairment of long-lived assets (including property and equipment and finite-lived intangible and right-of-use assets) by performing
an evaluation of the recoverability of the carrying value of 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 (group) in relation to the operating performance of the business and future undiscounted cash flows expected to result from
the use of these asset (groups). Impairment losses are recognized when the sum of expected future cash flows is less than the assets’
(group’s) carrying value.

Recent Accounting Pronouncements

See “Note 3―Summary
of Significant Accounting Policies” included in our Notes to Consolidated Financial Statements (under the caption “ Recent
Accounting Pronouncements ”).

Results of Operations for Fiscal Years
2019 and 2018

The following is a
discussion of the historical financial condition and results of operations of Novavax, including Novavax AB’s operations,
and should be read in conjunction with the consolidated financial statements 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.

For our discussion
of the year ended December 31, 2018, compared to the year ended December 31, 2017, please read Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations located in our 2018 Form 10-K.

Revenue:

2019 | 2018 | Change 2018 to 2019
Revenue (in thousands):
Total revenue | $ | 18,662 | $ | 34,288 | ($ | 15,626 | )

Revenue for 2019 was
$18.7 million as compared to $34.3 million for 2018, a decrease of $15.6 million, or 46%. Revenue for 2019 and 2018 was primarily
comprised of services performed under the Grant Agreement, the closeout of our HHS BARDA contract and, to a much lesser extent,
revenue from Novavax AB. Revenue decreased under the Grant Agreement by $22.3 million as a result of completing enrollment of the
Prepare trial in the second quarter of 2018, partially offset by $7.5 million in revenue for the recovery of additional costs under
the HHS BARDA contract relating to the close out of indirect rates for the remaining fiscal years 2013 through 2016.

We expect revenue in
2020 to be significantly lower than in 2019 as the Prepare trial and our HHS BARDA contract have both concluded.

43

Expenses:

2019 | 2018 | Change 2018 to 2019
Expenses (in thousands):
Research and development | $ | 113,842 | $ | 173,797 | $ | (59,955 | )
Gain on Catalent transaction | (9,016 | ) | — | (9,016 | )
General and administrative | 34,417 | 34,409 | 8
Total expenses | $ | 139,243 | $ | 208,206 | $ | (68,963 | )

Research and
Development Expenses

Research and
development expenses include salaries, stock-based compensation, laboratory supplies, consultants and subcontractors,
including external contract research organizations, 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 related to research and development activities, are also included in research and
development expenses. Research and development expenses decreased to $113.8 million for 2019 from $173.8 million for 2018, a
decrease of $60.0 million, or 34%. This decrease was primarily due to decreased development activities, including lower
clinical trial costs, of ResVax, and lower employee-related costs and other cost savings due to the Catalent transaction,
partially offset by our Phase 3 clinical trial of NanoFlu. At December 31, 2019, we had 127 employees dedicated to our research
and development programs versus 324 employees as of December 31, 2018. For 2020, we expect research and development
expenses overall to decrease primarily due to the completion of activities related to the conclusion of the Prepare trial and
lower employee-related and other costs resulting from the Catalent transaction, partially offset by our Phase 3 clinical
trial and development activities of NanoFlu.

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 was spread across multiple programs and our internal manufacturing clean-room
facility produced multiple vaccine candidates.

44

The following summarizes
our research and development expenses by functional area for the years ended December 31, 2019 and 2018 (in millions).

2019 | 2018
Manufacturing | $ | 64.3 | $ | 79.7
Vaccine Discovery | 6.6 | 6.4
Clinical and Regulatory | 42.9 | 87.7
Total research and development expenses | $ | 113.8 | $ | 173.8

We do not provide forward-looking
estimates of costs and time to complete our research programs due to the many uncertainties 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 significantly over the life of a project as a result
of a variety of factors, including:

· | the number of participants 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 participants;
· | the duration of treatment and follow-up;
· | the safety and efficacy profile of the vaccine candidate; and
· | the cost and timing of, and the ability to secure, regulatory approvals.

As a result of these
uncertainties, we are unable to determine with any significant degree of certainty the duration and completion costs of our research
and development projects or when, and to what extent, we will generate future cash flows from our research projects.

Gain on Catalent
Transaction

As a result of the
Catalent transaction (see discussion above), we recorded a gain of $9.0 million in 2019.

General and Administrative
Expenses

General and administrative
expenses were flat at $34.4 million. At December 31, 2019, we had 41 employees dedicated to general and administrative
functions versus 50 employees as of December 31, 2018. For 2020, we expect general and administrative expenses to continue
to be flat year-over-year.

Other Income (Expense):

2019 | 2018 | Change 2018
 to 2019
Other Income (Expense) (in thousands):
Investment income | $ | 1,512 | $ | 2,674 | $ | (1,162 | )
Interest expense | (13,612 | ) | (13,612 | ) | —
Other income (expense) | (13 | ) | 108 | (121 | )
Total other income (expense), net | $ | (12,113 | ) | $ | (10,830 | ) | $ | (1,283 | )

We had total other
expense, net of $12.1 million for 2019 compared to total other expense, net of $10.8 million for 2018, an increase of $1.3 million.
Our investment income decreased in 2019 as compared to 2018 due to lower marketable securities balances.

Net Loss:

2019 | 2018 | Change 2018
 to 2019
Net Loss (in thousands, except per share information):
Net loss | $ | (132,694 | ) | $ | (184,748 | ) | $ | 52,054
Net loss per share | $ | (5.51 | ) | $ | (9.99 | ) | $ | 4.48
Weighted average shares outstanding | 24,100 | 18,488 | 5,612
45

Net loss for 2019 was
$132.7 million, or $5.51 per share, as compared to $184.7 million, or $9.99 per share, for 2018, a decrease of $52.1 million. The
decrease in net loss was primarily due to decreased development activities, including lower clinical trial costs of ResVax, and
the $9.0 million gain recorded on the Catalent transaction, partially offset by decreased revenue under the Grant Agreement.

The increase in weighted
average shares outstanding for 2019 and 2018 is primarily a result of sales of our common stock in 2019 and 2018.

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 product candidates in various stages of development, and we believe our operating
expenses and capital requirements will fluctuate depending upon the timing of events, such as the scope, initiation, rate and progress
of our preclinical studies and clinical trials and other research and development activities. We have primarily funded our operations
with proceeds from the sale of common stock in equity offerings, the issuance of convertible debt and revenue under our Grant Agreement
with BMGF.

As of December 31,
2018, we had $82.2 million in cash and cash equivalents, marketable securities and restricted cash as compared to $103.9 million
as of December 31, 2018. These amounts consisted of $78.8 million in cash and cash equivalents and $3.4 million in restricted
cash as of December 31, 2019 as compared to $70.2 million in cash and cash equivalents, $22.0 million in marketable securities
and $11.8 million in restricted cash as of December 31, 2018.

The following table
summarizes cash flows for 2019 and 2018:

2019 | 2018 | Change 2018 to 2019
Summary of Cash Flows (in thousands):
Net cash (used in) provided by:
Operating activities | $ | (136,623 | ) | $ | (184,825 | ) | $ | 48,202
Investing activities | 38,492 | 28,596 | 9,896
Financing activities | 98,384 | 102,805 | (4,421 | )
Effect on exchange rate on cash, cash equivalents and restricted cash.. | (32 | ) | (48 | ) | 16
Net increase (decrease) in cash, cash equivalents and restricted cash | 221 | (53,472 | ) | 53,693
Cash, cash equivalents and restricted cash at beginning of year | 81,959 | 135,431 | (53,472 | )
Cash, cash equivalents and restricted cash at end of year | $ | 82,180 | $ | 81,959 | $ | 221

Net cash used in operating
activities decreased to $136.6 million for 2019, as compared to $184.8 million for 2018. The decrease in cash usage is primarily
due to decreased development activities, including lower clinical trial costs, of ResVax in 2019 as compared to 2018, $9.3 million
of one-time payments made in 2018 that included our lease termination fee and a milestone payment to Wyeth Holdings LLC and reduced
bonus payouts in the first quarter of 2019 as compared to the same period in 2018, partially offset by receipt of a $15 million
payment under the Grant Agreement with BMGF in 2018.

During 2019 and 2018,
our investing activities consisted primarily of purchases and maturities of marketable securities, $18.3 million in proceeds from
the Catalent transaction in 2019. In 2020, we expect our capital expenditures to slightly increase due to development activities
related to NanoFlu.

Our financing activities
consisted primarily of sales of our common stock under our At Market Issuance Sales Agreements and, to a much lesser extent, stock
option exercises and purchases under our employee stock purchase plan. In 2019, we received net proceeds of $97.4 million (this
amount excludes $0.5 million received in the first quarter of 2020 for shares traded in late December 2019) from selling shares
of common stock through our At Market Issuance Sales Agreements. During the first quarter of 2020, we received approximately $156
million in net proceeds from selling shares of common stock under our At Market Issuance Sales Agreements. In 2018, we completed
a public offering of our common stock resulting in net proceeds of approximately $54 million and received net proceeds of $46.2
million from selling shares of common stock through our At Market Issuance Sales Agreements.

46

Based on our most recent
cash flow forecast, we believe our current capital is sufficient to fund our operating plans for a minimum of twelve months from
the date that this Annual Report was filed. Additional capital may be required in the future to develop our vaccine candidates
through clinical development, manufacturing and commercialization.

Our ability to fund
the Company’s operations is dependent upon management’s plans, which include raising additional capital in the near
term primarily through a combination of equity and debt financings, collaborations, strategic alliances and marketing, distribution
or licensing arrangements and in the longer term, from revenue related to product sales, to the extent our product candidates receive
marketing approval and can be commercialized. New financings may not be available to the Company on commercially acceptable terms,
or at all. Also, any collaborations, strategic alliances and marketing, distribution or licensing arrangements may require us to
give up some or all of our rights to a product or technology, which in some cases may be at less than the full potential value
of such rights. If we are unable to obtain additional capital, we will assess the Company’s capital resources and may be
required to delay, reduce the scope of or eliminate one or more of our research and development programs, and/or downsize our organization.

Contractual Obligations

The following table
summarizes our contractual obligations as of December 31, 2019 (in thousands):

Contractual Obligations: | Total | Less than One Year | 1 – 3 Years | 3 – 5 Years | More than 5 Years
Operating
 leases | $ | 17,649 | $ | 2,927 | $ | 6,054 | $ | 4,843 | $ | 3,825
Convertible
 notes payable | 325,000 | — | — | 325,000 | —
Total
 contractual obligations | $ | 342,649 | $ | 2,927 | $ | 6,054 | $ | 329,843 | $ | 3,825

See Note 11 to the
consolidated financial statements included in the Annual Report regarding our convertible notes payable, which will mature on February 1,
2023, and bear cash interest of 3.75%, payable February 1 and August 1 of each year.

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,
2019, we had cash and cash equivalents of $78.8 million, $3.4 million in restricted cash and working capital of $71.5 million.

Our exposure to market
risk is primarily confined to our investment portfolio. As of December 31, 2019, 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 consolidated subsidiary, Novavax
AB, which is located in Sweden. A 10% decline in the exchange rate between the U.S. dollar and Swedish Krona would result in a
decline of stockholders’ deficit of approximately $2.4 million at December 31, 2019.

Our Notes have a fixed
interest rate and we have no additional material debt. As such, we do not believe that we are exposed to any material interest
rate risk as a result of our borrowing activities.

47
Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required
by this item is set forth on pages F-1 to F-25.

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 management, including its
principal executive and 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 reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles 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 authorizations 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, 2019. 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. Based on its assessment, our management has determined that, as of December 31,
2019, our internal controls over financial reporting are effective based on those criteria.

Ernst & Young
LLP has issued a report on our internal control over financial reporting. This report is included in the Reports of Independent
Registered Public Accounting Firm in Item 15.(a)(1).

48

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, 2019, and has concluded that there was no change that occurred
during the quarterly period ended December 31, 2019 that materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.

Item 9B. | OTHER INFORMATION

None.

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 2020 Annual Meeting of Stockholders scheduled
to be held in June 2020 (the “2020 Proxy Statement”). We expect to file the 2020 Proxy Statement within 120 days
after the close of the fiscal year ended December 31, 2019.

Item 11. | EXECUTIVE COMPENSATION

We incorporate herein
by reference the information required by this item concerning executive compensation to be contained in the 2020 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 2020 Proxy Statement.

The following table
provides our equity compensation plan information as of December 31, 2019. Under these plans, our common stock may be issued
upon the exercise of stock options and purchases under our Employee Stock Purchase Plan (“ESPP”). See also the information
regarding our stock options and ESPP in Note 13 to the consolidated financial statements included herewith.

49

Equity Compensation Plan Information

Plan Category | 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)
Equity compensation plans approved by security holders(1) | 4,992,792 | $39.32 | 520,054
Equity compensation plans not approved by security holders | N/A | N/A | N/A
(1) | Includes our 2015 Stock Incentive Plan, 2005 Stock Incentive Plan and ESPP. The weighted-average
exercise price in column (b) excludes restricted stock units, which are not subject to an exercise price.
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 consolidated
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 2020 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 2020
Proxy Statement.

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 Firm | F-2
Consolidated Balance Sheets as of December 31, 2019 and 2018 | F-4
Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2019, 2018 and 2017 | F-5
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2019, 2018 and 2017 | F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 | F-7
Notes to Consolidated Financial Statements | F-8
(2) | Financial Statement Schedules

Financial statement
schedules are omitted because they are not applicable, not required under the instructions or all the information required is 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 (**).

50

Confidential information
contained in exhibits marked with a caret (^) has been omitted because it (i) is not material and/or (ii) would be competitively
harmful if publically disclosed.

All other exhibits
listed have previously been filed with the SEC and are incorporated herein by reference.

Exhibit Number | Description
3.1 | Second Amended and Restated Certificate of Incorporation of the Registrant (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 (File No. 000-26770))
3.2 | Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 9, 2019 (File No. 000-26770))
3.3 | 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 (File No. 000-26770))
4.1 | 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 S-3, filed on December 31, 2019 (File No. 333-235761))
4.2 | Indenture (including form of Notes) with respect to Novavax, Inc.’s 3.75% Convertible Senior Notes due 2023, dated as of January 29, 2016, between Novavax, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on January 29, 2016 (File No. 000-26770))
4.3* | Description of Registrant’s Securities
10.1†† | Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013 (File No. 000-26770))
10.2†† | Amendment to Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Appendix 1 of the Registrant’s Definitive Proxy Statement filed on April 30, 2014 in connection with the Annual Meeting held on June 12, 2014 (File No. 000-26770))
10.3†† | 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 Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015 (File No. 000-26770))
10.4†† | 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 Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015 (File No. 000-26770))
10.5†† | Amended and Restated 2013 Employee Stock Purchase Plan (Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement filed on May 16, 2019 in connection with the Annual Meeting held on June 28, 2019 (File No. 000-26770))
10.6†† | Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filed on May 16, 2019 in connection with the Annual Meeting held on June 28, 2019 (File No. 000-26770))
10.7†† | 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 (File No. 000-26770))
51
10.8†† | 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 (File No. 000-26770))
10.9†† | Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017 (File No. 000-26770))
10.10†† | Form of Incentive Stock Option Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Performance- and Time-Based Vesting) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on November 16, 2016 (File No. 000-26770))
10.11†† | 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 on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770))
10.12†† | Form of Restricted Stock Unit Agreement granted under the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 18, 2019 (File No. 000-26770))
10.13†† | Form of Stock Appreciation Right Award Agreement granted under the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 7, 2019 (File No. 000-26770))
10.14†† | Form of Director Deferred Fee Agreement (Incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770))
10.15†† | 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 (File No. 000-26770))
10.16†† | 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 (File No. 000-26770))
10.17†† | Employment Agreement between Novavax, Inc. and John A. Herrmann dated April 1, 2012 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770))
10.18†† | Employment Agreement between Novavax, Inc. and John J. Trizzino dated March 3, 2014 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770))
10.19†† | Novavax, Inc. Amended and Restated Change in Control Severance Benefit Plan (Incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017 (File No. 000-26770))
10.20†† | 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 (File No. 000-26770))
10.21 | Lease Agreement for space at 9920 Belward Campus Drive 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 (File No. 000-26770))
52
10.22 | First Amendment to Lease Agreement for space at 9920 Belward Campus Drive between BMR-9920 Belward Campus Q, LLC (formerly 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 (File No. 000-26770))
10.23 | Second Amendment to Lease Agreement for space at 9920 Belward Campus Drive 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 (File No. 000-26770))
10.24 | Third Amendment to Lease Agreement for space at 9920 Belward Campus Drive between BMR-9920 Belward Campus Drive, LLC (formerly GP Rock One, LLC) and Novavax, Inc., dated February 29, 2016 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770))
10.25 | Fourth Amendment to Lease Agreement for space at 9920 Belward Campus Drive between BMR-9920 Belward Campus Drive, LLC (formerly GP Rock One, LLC) and Novavax, Inc., dated March 31, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 8, 2017 (File No. 000-26770))
10.26 | Fifth Amendment to Lease Agreement for space at 9920 Belward Campus Drive between ARE-MARYLAND NO. 46, LLC and Novavax, Inc., dated January 16, 2019 (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 18, 2019 (File No. 000-26770))
10.27 | Acknowledgment of Exercise of Second Extension Term Option and Second Extension Term Commencement Date for space at 9920 Belward Campus Drive between ARE-MARYLAND NO. 46, LLC and Novavax, Inc., dated April 26, 2019 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on May 2, 2019 (File No. 000-26770))
10.28 | Lease Agreement for space at 20 Firstfield Road 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 (File No. 000-26770))
10.29 | Lease Agreement for space at 22 Firstfield Road 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 (File No. 000-26770))
10.30 | Deed of Lease 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 Registrant’s Current Report on Form 8-K, filed on August 21, 2015 (File No. 000-26770))
10.31 | First Amendment to Deed of Lease 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 Registrant’s Current Report on Form 8-K, filed on August 21, 2015 (File No. 000-26770))
10.32 | Second Amendment to Deed of Lease for space at 21 Firstfield Road between BMR-Firstfield LLC (formerly Firstfield Holdco, LLC) and Novavax, Inc., dated as of March 31, 2017 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 8, 2017 (File No. 000-26770))
10.33 | Deed of Lease for space at 1201 Clopper Road between IP9 1201 Clopper Road, LLC and Novavax, Inc., dated May 3, 2016 (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770))
10.34 | First Amendment to Deed of Lease for space at 1201 Clopper Road between IP9 1201 Clopper Road, LLC and Novavax, Inc., dated August 23, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed on November 7, 2017 (File No. 000-26770))
53
10.35** | 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 the Registrant’s Quarterly Report on Form 10-Q/A for the quarter ended on March 31, 2011, filed on November 4, 2011 (File No. 000-26770))
10.36** | 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 (File No. 000-26770))
10.37** | 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 (File No. 000-26770))
10.38** | 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 (File No. 000-26770))
10.39** | Second Amended and Restated Joint Venture Agreement between Novavax, Inc. and Cadila Pharmaceuticals Limited, dated as of July 17, 2018 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed on November 7, 2018 (File No. 000-26770))
10.40** | Second Amended and Restated Novavax Product License Agreement between Novavax, Inc. and CPL Biologicals Private Limited, dated as of July 17, 2018 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed on November 7, 2018 (File No. 000-26770))
10.41** | Grant Agreement between Bill & 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 (File No. 000-26770))
10.42** | Global Access Commitments Agreement between Bill & 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 (File No. 000-26770))
10.43^ | Asset Purchase Agreement between Novavax, Inc. and Paragon Bioservices, Inc., dated June 26, 2019 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 7, 2019 (File No. 000-26770))
10.44 | 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 Registrant’s Current Report on Form 8-K, filed on January 29, 2016 (File No. 000-26770))
10.45 | 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 Registrant’s Current Report on Form 8-K, filed on January 29, 2016 (File No. 000-26770))
10.46 | Additional Base Call Option Transaction Confirmation, dated as of February 2, 2016, between Novavax and JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770))
10.47 | Additional Base Call Option Transaction Confirmation, dated as of February 2, 2016, between Novavax and Morgan Stanley & Co. LLC (Incorporated by reference to Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770))
14 | 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 (File No. 000-26770))
54
21* | Subsidiaries of the Registrant
23.1* | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act
32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 | The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 2019 and 2018, (ii) the Consolidated Statements of Operations for the three years in the period ended December 31, 2019, (iii) the Consolidated Statements of Comprehensive Loss for the three years in the period ended December 31, 2019, (iv) the Consolidated Statements of Changes in Stockholders’ Deficit for the three years in the period ended December 31, 2019, (v) the Consolidated Statements of Cash Flows for the three years in the period ended December 31, 2019, and (vi) the Notes to Consolidated Financial Statements.
Item 16. | FORM 10-K SUMMARY

Not applicable.

55

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
Stanley C. Erck
President and Chief Executive Officer

Date: March 11, 2020

Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

Name | Title | Date
/s/ Stanley C. Erck | President and Chief Executive Officer and Director (Principal Executive Officer) | March 11, 2020
Stanley C. Erck
/s/ John J. Trizzino | Senior Vice President, Chief Business Officer, Chief Financial Officer and Treasurer | March 11, 2020
John J. Trizzino | (Principal Financial and Principal Accounting Officer)
/s/ James F. Young | Chairman of the Board of Directors | March 11, 2020
James F. Young
/s/ Richard H. Douglas | Director | March 11, 2020
Richard H. Douglas
/s/ Gary C. Evans | Director | March 11, 2020
Gary C. Evans
/s/ Rachel K. King | Director | March 11, 2020
Rachel K. King
/s/ Michael A. McManus | Director | March 11, 2020
Michael A. McManus
/s/ Rajiv I. Modi | Director | March 11, 2020
Rajiv I. Modi
56

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2019, 2018 and 2017

Contents

Reports of Independent Registered Public Accounting Firm | F-2
Consolidated Balance Sheets as of December 31, 2019 and 2018 | F-4
Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 2019, 2018 and 2017 | F-5
Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2019, 2018 and 2017 | F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 | F-7
Notes to Consolidated Financial Statements | F-8
F- 1

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and Stockholders
of

Novavax, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated
balance sheets of Novavax, Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of
operations, comprehensive loss, changes in stockholders’ deficit, and cash flows for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2019, 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) (PCAOB), the Company’s internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 11,
2020 expressed an unqualified opinion thereon.

Adoption of ASU 2016-02

As discussed in Note 3 to the consolidated
financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU 2016-02, Leases (Topic 842).

Basis for Opinion

These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor
since 2014.

Tysons, Virginia

March 11, 2020

F- 2

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and Stockholders
of

Novavax, Inc.

Opinion on Internal Control over Financial
Reporting

We have audited Novavax, Inc.’s internal
control over financial reporting as of December 31, 2019, 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).
In our opinion, Novavax, Inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the
Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, changes in
stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2019, and the related
notes and our report dated March 11, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’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 the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audit in accordance with
the standards of the PCAOB. 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 internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal
Control Over Financial Reporting

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 dispositions 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 expenditures 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.

/s/ Ernst & Young LLP

Tysons, Virginia

March 11, 2020

F- 3

NOVAVAX, INC.

CONSOLIDATED BALANCE SHEETS

December 31,
2019 | 2018
(in thousands, except share and per share information)
ASSETS
Current assets:
Cash and cash equivalents | $ | 78,823 | $ | 70,154
Marketable securities | — | 21,980
Restricted cash | 2,947 | 10,847
Accounts receivable | 7,500 | —
Prepaid expenses and other current assets | 7,977 | 16,295
Total current assets | 97,247 | 119,276
Restricted cash | 410 | 958
Property and equipment, net | 11,445 | 28,426
Intangible assets, net | 5,581 | 6,541
Goodwill | 51,154 | 51,967
Other non-current assets | 7,120 | 810
Total assets | $ | 172,957 | $ | 207,978
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable | $ | 2,910 | $ | 9,301
Accrued expenses | 14,867 | 19,550
Accrued interest | 5,078 | 5,078
Deferred revenue | 1,678 | 10,010
Other current liabilities | 1,262 | 1,600
Total current liabilities | 25,795 | 45,539
Deferred revenue | 2,500 | 2,500
Convertible notes payable | 320,611 | 319,187
Other non-current liabilities | 10,068 | 8,687
Total liabilities | 358,974 | 375,913
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $0.01 par value, 2,000,000 shares authorized; no shares issued and outstanding at December 31, 2019 and 2018 | — | —
Common stock, $0.01 par value, 600,000,000 shares authorized at December 31, 2019 and 2018; and 32,399,352 shares issued and 32,352,416 shares outstanding at December 31, 2019 and 19,245,302 shares issued and 19,222,410 shares outstanding at December 31, 2018 | 324 | 192
Additional paid-in capital | 1,260,551 | 1,144,621
Accumulated deficit | (1,431,801 | ) | (1,299,107 | )
Treasury stock, 46,936 shares, cost basis at December 31, 2019 and 22,892 shares, cost basis at December 31, 2018 | (2,583 | ) | (2,450 | )
Accumulated other comprehensive loss | (12,508 | ) | (11,191 | )
Total stockholders’ deficit | (186,017 | ) | (167,935 | )
Total liabilities and stockholders’ deficit | $ | 172,957 | $ | 207,978

The accompanying notes are an integral part
of these financial statements.

F- 4

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,
2019 | 2018 | 2017
(in thousands, except per share information)
Revenue:
Government contract | $ | 7,500 | $ | — | $ | —
Grant and other | 11,162 | 34,288 | 31,176
Total revenue | 18,662 | 34,288 | 31,176
Expenses:
Research and development | 113,842 | 173,797 | 168,435
Gain on Catalent transaction | (9,016 | ) | — | —
General and administrative | 34,417 | 34,409 | 34,451
Total expenses | 139,243 | 208,206 | 202,886
Loss from operations | (120,581 | ) | (173,918 | ) | (171,710 | )
Other income (expense):
Investment income | 1,512 | 2,674 | 1,946
Interest expense | (13,612 | ) | (13,612 | ) | (14,072 | )
Other income (expense) | (13 | ) | 108 | 67
Net loss | $ | (132,694 | ) | $ | (184,748 | ) | $ | (183,769 | )
Basic and diluted net loss per share | $ | (5.51 | ) | $ | (9.99 | ) | $ | (12.56 | )
Basic and diluted weighted average number of common shares outstanding | 24,100 | 18,488 | 14,633

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS

Year Ended December 31,
2019 | 2018 | 2017
(in thousands)
Net loss | $ | (132,694 | ) | $ | (184,748 | ) | $ | (183,769 | )
Other comprehensive income (loss):
Net unrealized gains (losses) on marketable securities available-for-sale | 5 | 12 | (50 | )
Foreign currency translation adjustment | (1,322 | ) | (2,586 | ) | 3,247
Other comprehensive income (loss) | (1,317 | ) | (2,574 | ) | 3,197
Comprehensive loss | $ | (134,011 | ) | $ | (187,322 | ) | $ | (180,572 | )

The accompanying notes are an integral part
of these financial statements.

F- 5

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ DEFICIT Year Ended December 31, 2019, 2018 and 2017

Accumulated
Additional | Other | Total
Common
 Stock | Paid-in | Accumulated | Treasury | Comprehensive | Stockholders’
Shares | Amount | Capital | Deficit | Stock | Income(Loss) | Deficit
(in thousands, except share information)
Balance
 at December 31, 2016 | 13,585,070 | $ | 136 | $ | 938,578 | $ | (929,996 | ) | $ | (2,450 | ) | $ | (11,814 | ) | $ | (5,546 | )
Cumulative
 effect of adoption of ASU 2016-09 | — | — | 594 | (594 | ) | — | — | —
Non-cash
 compensation cost for stock options, ESPP and restricted stock | — | — | 19,809 | — | — | — | 19,809
Exercise
 of stock options/Purchases under ESPP | 54,676 | 1 | 1,151 | — | — | — | 1,152
Issuance
 of common stock, net of issuance costs of $1,065 | 2,544,495 | 25 | 63,400 | — | — | — | 63,425
Unrealized
 loss on marketable securities | — | — | — | — | — | (50 | ) | (50 | )
Foreign
 currency translation adjustment | — | — | — | — | — | 3,247 | 3,247
Net
 loss | — | — | — | (183,769 | ) | — | — | (183,769 | )
Balance
 at December 31, 2017 | 16,184,241 | 162 | 1,023,532 | (1,114,359 | ) | (2,450 | ) | (8,617 | ) | (101,732 | )
Non-cash
 compensation cost for stock options, ESPP and restricted stock | — | — | 18,314 | — | — | — | 18,314
Exercise
 of stock options/Purchases under ESPP | 120,561 | 1 | 2,744 | — | — | — | 2,745
Restricted
 stock cancelled | (938 | ) | — | — | — | — | — | —
Issuance
 of common stock, net of issuance costs of $4,265 | 2,941,438 | 29 | 100,031 | — | — | — | 100,060
Unrealized
 gain on marketable securities | — | — | — | — | — | 12 | 12
Foreign
 currency translation adjustment | — | — | — | — | — | (2,586 | ) | (2,586 | )
Net
 loss | — | — | — | (184,748 | ) | — | — | (184,748 | )
Balance
 at December 31, 2018 | 19,245,302 | 192 | 1,144,621 | (1,299,107 | ) | (2,450 | ) | (11,191 | ) | (167,935 | )
Non-cash
 compensation cost for stock options, RSUs, SARs and ESPP | — | — | 17,048 | — | — | — | 17,048
Exercise
 of stock options/Vesting of RSUs/Purchases under ESPP | 173,873 | 2 | 1,122 | — | (132 | ) | — | 992
Fractional
 shares purchased in stock split | — | — | — | — | (1 | ) | — | (1 | )
Issuance
 of common stock, net of issuance costs of $1,655 | 12,980,177 | 130 | 97,760 | — | — | — | 97,890
Unrealized
 gain on marketable securities | — | — | — | — | — | 5 | 5
Foreign
 currency translation adjustment | — | — | — | — | — | (1,322 | ) | (1,322 | )
Net
 loss | — | — | — | (132,694 | ) | — | — | (132,694 | )
Balance
 at December 31, 2019 | 32,399,352 | $ | 324 | $ | 1,260,551 | $ | (1,431,801 | ) | $ | (2,583 | ) | $ | (12,508 | ) | $ | (186,017 | )

The accompanying notes are an integral part
of these financial statements.

F- 6

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year
 Ended December 31,
2019 | 2018 | 2017
(in thousands)
Operating Activities:
Net loss | $ | (132,694 | ) | $ | (184,748 | ) | $ | (183,769 | )
Reconciliation
 of net loss to net cash used in operating activities:
Depreciation and amortization | 5,676 | 8,159 | 9,817
Loss (Gain) on disposal of property
 and equipment | 88 | (55 | ) | 269
Gain on Catalent transaction | (9,016 | ) | ― | ―
Non-cash impact of lease termination | ― | (4,381 | ) | ―
Amortization of debt issuance
 costs | 1,424 | 1,424 | 1,424
Lease incentives received | ― | ― | 1,933
Non-cash stock-based compensation | 17,048 | 18,314 | 19,809
Other | 4,869 | (2,396 | ) | 2,715
Changes in operating assets and
 liabilities:
Prepaid expenses and other assets | (4,202 | ) | 1,212 | 2,590
Accounts payable and accrued
 expenses | (11,485 | ) | (6,744 | ) | 5,192
Deferred
 revenue | (8,331 | ) | (15,610 | ) | (4,456 | )
Net cash
 used in operating activities | (136,623 | ) | (184,825 | ) | (144,476 | )
Investing Activities:
Capital expenditures | (1,857 | ) | (1,372 | ) | (4,189 | )
Proceeds
 from Catalent transaction | 18,333 | ― | ―
Purchases
 of marketable securities | (17,484 | ) | (120,150 | ) | (218,045 | )
Proceeds
 from maturities of marketable securities | 39,500 | 150,118 | 258,202
Net cash
 provided by investing activities | 38,492 | 28,596 | 35,968
Financing Activities:
Principal payments of capital
 leases | ― | ― | (37 | )
Net proceeds
 from sales of common stock | 97,392 | 100,060 | 63,425
Proceeds
 from the exercise of stock options and employee stock purchases | 992 | 2,745 | 1,152
Net cash
 provided by financing activities | 98,384 | 102,805 | 64,540
Effect of exchange rate on cash,
 cash equivalents and restricted cash | (32 | ) | (48 | ) | 142
Net increase (decrease) in cash,
 cash equivalents and restricted cash | 221 | (53,472 | ) | (43,826 | )
Cash, cash
 equivalents and restricted cash at beginning of year | 81,959 | 135,431 | 179,257
Cash,
 cash equivalents and restricted cash at end of year | $ | 82,180 | $ | 81,959 | $ | 135,431
Supplemental disclosure of non-cash activities:
Sale of
 common stock under the Sales Agreement not settled at year-end | $ | 497 | $ | ― | $ | ―
Capital
 expenditures included in accounts payable and accrued expenses | $ | 49 | $ | 519 | $ | 15
Supplemental disclosure of cash flow information:
Cash interest
 payments | $ | 12,188 | $ | 12,188 | $ | 12,188

The accompanying notes are an integral part
of these financial statements.

F- 7

NOVAVAX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019, 2018 and 2017

Note 1 – Organization

Novavax, Inc.
(“Novavax,” and together with its wholly owned subsidiary, Novavax AB, the “Company”) is a late-stage biotechnology
company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to
prevent serious infectious diseases. The Company’s vaccine candidates, including its lead candidates, NanoFlu TM and
ResVax TM , are genetically engineered, three-dimensional nanostructures of recombinant
proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally
occurring immunity or traditional vaccines. The Company’s technology targets a variety of infectious diseases.

Note 2 – Liquidity

Based on the Company’s
most recent cash flow forecast, the Company believes its current capital, which includes approximately $156 million in net proceeds
from sales of common stock under the At Market Issuance Sales Agreements during the first quarter of 2020, is sufficient to fund
its operating plans for a minimum of twelve months from the date that this Annual Report was filed. Additional capital may be required
in the future to develop its vaccine candidates through clinical development, manufacturing and commercialization.

The Company’s
ability to fund its operations is dependent upon management’s plans, which include raising additional capital in the near
term primarily through a combination of equity and debt financings, collaborations, strategic alliances and marketing, distribution
or licensing arrangements and in the longer term, from revenue related to product sales, to the extent its product candidates receive
marketing approval and can be commercialized. New financings may not be available to the Company on commercially acceptable terms,
or at all. Also, any collaborations, strategic alliances and marketing, distribution or licensing arrangements may require the
Company to give up some or all of its rights to a product or technology, which in some cases may be at less than the full potential
value of such rights. If the Company is unable to obtain additional capital, the Company will assess its capital resources and
may be required to delay, reduce the scope of or eliminate one or more of its research and development programs, and/or downsize
its organization.

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. All intercompany accounts and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of
the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“U.S.
GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 purchase. Cash and cash equivalents consist of the
following at December 31 (in thousands):

2019 | 2018
Cash | $ | 15,863 | $ | 6,750
Money market funds | 42,960 | 39,168
Asset-backed securities | 20,000 | 15,000
Corporate debt securities | — | 9,236
Cash and cash equivalents | $ | 78,823 | $ | 70,154

Cash equivalents are
recorded at cost, which approximate fair value due to their short-term nature.

F- 8

Marketable Securities

Marketable securities
consist of debt securities with maturities greater than three months from the date of purchase that have historically included
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 consideration 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
gains and losses on marketable securities are reported as a separate component of stockholders’ deficit until realized. Marketable
securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary”
is not intended to indicate a permanent decline in value. Rather, it means that the prospects for a near term recovery of value
are not necessarily favorable, or that there is a lack 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, including whether the Company will be required to sell a security prior to recovery of its amortized
cost basis, the investment issuer’s financial condition and business outlook 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) 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 asset-backed securities,
high-grade corporate debt securities and money market funds, 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 (“ASC 820”),
for financial and non-financial assets and liabilities.

ASC 820 discusses valuation
techniques, such as the market approach (comparable market prices), the income approach (present value of 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 measure 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 non-current restricted cash includes payments received under the Grant Agreement (as defined in Note 8) with the Bill &
Melinda Gates Foundation (“BMGF”) under which the Company was awarded a grant of up to $89.1 million, escrow funds
received in connection with the Catalent transaction (see Note 9) and cash collateral accounts under letters of credit that serve
as security deposits for certain facility leases. The Company will utilize the Grant Agreement funds as it incurs expenses for
services performed under the agreement. At December 31, 2019 and 2018, the restricted cash balances (both current and non-current)
consist of payments received under the Grant Agreement of $1.4 million and $10.8 million, respectively, $1.5 million held in escrow
received in connection with the Catalent transaction at December 31, 2019 and security deposits of $0.4 million and $1.0 million,
respectively.

F- 9

The
following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance
sheets that sum to the total of the same such amounts shown in the statement of cash flows at December 31 (in thousands):

2019 | 2018
Cash and cash equivalents | $ | 78,823 | $ | 70,154
Restricted cash current | 2,947 | 10,847
Restricted cash non-current | 410 | 958
Cash, cash equivalents and restricted cash | $ | 82,180 | $ | 81,959

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.

Leases

The
Company adopted the new leasing standard, Accounting Standards Update (“ASU”) 2016-02, Leases (Topic
842) on January 1, 2019 under the optional transition method (see Note 3 under the caption “ Recent Accounting Pronouncements ”).
Under the new standard, the Company determines if an arrangement is a lease or contains a lease at the inception of the contract.
For all leases, the Company determines the classification as either operating or financing.

Lease liabilities,
which represent the Company’s obligation to make lease payments arising from the lease, and corresponding right-of-use assets,
which represent the right to use an underlying asset for the lease term, are recognized at the commencement date of the lease based
on the present value of the fixed future payments over the lease term. The Company calculates the present value of future payments
using the discount rate implicit in the lease, if available, or the Company’s incremental borrowing rate.

For operating leases,
lease expense relating to fixed payments is recognized on a straight-line basis over the lease term and lease expense relating
to variable payments is recognized as incurred. For finance leases, the amortization of the asset is recognized over the shorter
of the lease term or useful life of the underlying asset.

Other Intangible Assets

The Company’s
intangible assets include proprietary adjuvant technology and collaboration agreements, which were measured at the estimated fair
values as of their acquisition dates. Amortization expense for intangible assets is recorded on a straight-line basis over the
expected useful lives of the assets, ranging for seven to 20 years.

Impairment of Long-Lived
Assets

Long-lived assets,
including property and equipment and finite-lived intangible and right-of-use 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. The
Company calculates the estimated fair value of a long-lived asset (group) using the income approach. Impairment losses are recognized
when the sum of expected future cash flows is less than the assets’ (group’s) carrying value.

Goodwill

Goodwill is subject
to impairment tests annually or more frequently should indicators of impairment arise. The Company has determined that, because
its only business is the development of recombinant vaccines, it operates as a single operating segment and has one reporting unit.
The Company primarily utilizes the market approach and, if considered necessary, 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. If considered necessary, the income approach is used to corroborate the results of the market
approach. 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.

F- 10

At December 31,
2019 and 2018, the Company used the market approach to determine if the Company had an impairment of its goodwill. The fair value
of the Company’s single reporting unit was substantially higher than its carrying value, resulting in no impairment to goodwill
at December 31, 2019 and 2018.

Equity Method Investment

The Company has an
equity investment in CPL Biologicals Private Limited (“CPLB”). The Company accounts for this investment 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 distributions up to the amount initially
invested or advanced.

Revenue Recognition

In May 2014, the
Financial Accounting Standards Board (“FASB”), issued ASU 2014-09, Revenue from Contracts with Customers (Topic
606) (“ASU 2014-09” or “Topic 606”), and subsequently issued amendments to ASU 2014-09, to supersede
nearly all existing revenue recognition guidance under U.S. GAAP. The new revenue standard became effective for the Company on
January 1, 2018 and was adopted using the modified retrospective method. The adoption of the new revenue standard as of January 1,
2018 did not materially change the Company’s timing of revenue recognition as the majority of its revenue continues to be
recognized under its Grant Agreement with BMGF (see discussion below). Since the Company did not identify any accounting changes
that impact its revenue recognition timing, no adjustment to accumulated deficit was required upon adoption.

Under the new revenue
standard for arrangements that are determined within the scope of Topic 606, the Company recognizes revenue following the five-step
model: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step
model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods
or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of
Topic 606, the Company assesses the goods or services promised within each contract and determines the performance obligations,
and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction
price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company performs
research and development under grant, license and clinical development agreements. Payments received in advance of work performed
are recorded as deferred revenue.

The Company’s
current revenue primarily consists of revenue under its Grant Agreement with BMGF (see Note 8). 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 efforts to obtain World Health Organization (“WHO”) prequalification
of its RSV F Vaccine for infants via maternal immunization (“ResVax™”). The Company’s Grant Agreement does
not provide a direct economic benefit to BMGF. Rather, the Company entered into an agreement with BMGF to make a certain amount
of ResVax available and accessible at affordable pricing to people in certain low- and middle-income countries. Based on these
circumstances, the Company does not consider BMGF to be a customer and concluded the Grant Agreement is outside the scope of Topic
606. Payments received under the Grant Agreement are considered conditional contributions under the scope of ASC 958-605, Not-for-Profit
Entities – Revenue Recognition , and are recorded as deferred revenue until the period in which such research and development
activities are performed and revenue can be recognized.

The Company analyzed
the Grant Agreement with BMGF to determine whether the payments received should be recorded as revenue or as a reduction to research
and development expenses. In reaching the determination that such payments should be recorded as revenue, management considered
a number of factors, including whether the Company is principal under the arrangement, and whether the arrangement is significant
to, and part of, the Company’s core operations. Further, management has consistently applied its policy of presenting such
amounts as revenue.

As
discussed in Note 8, the Company recorded revenue of $7.5 million as a result of the amendment the Company entered into with The
Department of Health and Human Services, Biomedical Advanced Research and Development Authority (“ HHS
BARDA”) in the fourth quarter of 2019 to close out the HHS BARDA contract.

F- 11

Stock-Based Compensation

The Company accounts
for stock-based compensation related to grants of stock options, stock appreciation rights, restricted stock awards and purchases
under the Company’s Employee Stock Purchase Plan, as amended and restated (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, which typically occurs ratably over periods ranging from six months to four years.

The expected term of
stock options and stock appreciation rights granted is 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 purchases under the
ESPP is based on the purchase periods included in the offering. The expected volatility is determined using historical volatilities
based on stock prices over a look-back period corresponding to the expected term. The risk-free interest rate is determined using
the yield available for zero-coupon U.S. Government issues with a remaining term equal to the expected term. 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
are recorded as compensation expense over the expected vesting period based on the fair value at the award date using the straight-line
method of amortization.

See Note 13 for
a further discussion on stock-based compensation.

Research and Development
Expenses

Research and development
expenses include salaries, stock-based compensation, laboratory supplies, consultants and subcontractors, including external contract
research organizations (“CROs”), and other expenses associated with the Company’s process development, manufacturing,
clinical, regulatory and quality assurance activities for its clinical development programs. In addition, related indirect costs
such as fringe benefits and overhead expenses are also included in research and development expenses. Research and development
activities are expensed as incurred.

Accrued Research and Development
Expenses

The Company accrues
research and development expenses, including clinical trial-related expenses, as the services are performed, which may include
estimates of those expenses incurred, but not invoiced. The Company uses information provided by third-party service providers
and CROs, invoices and internal estimates to determine the progress of work performed on the Company’s behalf. Assumptions
based on clinical trial protocols, contracts and participant enrollment data are also developed to determine and analyze these
estimates and accruals.

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 benefits
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, 2019 and 2018, the Company had no accruals
for interest or penalties related to income tax matters.

F- 12

Net Loss per Share

Net loss per share
is computed using the weighted average number of shares of common stock outstanding. At December 31, 2019, 2018 and 2017,
the Company had outstanding stock options and unvested restricted stock awards totaling 4,992,792, 2,975,481 and 2,325,670 underlying
shares of the Company’s common stock, respectively. At December 31, 2019 and 2018, the Company’s Notes (as defined
in Note 11) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common
stock price of $136.20 or higher. These and any shares due to the Company upon settlement of its capped call transactions are excluded
from the computation, as their effect is antidilutive.

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 $12.5 million and $11.2 million at December 31, 2019 and 2018,
respectively.

Segment Information

The Company manages
its business as one operating segment: the development of 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 February 2016,
FASB issued ASU 2016-02, Leases (Topic 842), subsequently amended in 2018 by ASU 2018-01, ASU 2018-10, ASU 2018-11
and ASU 2018-20 (collectively, “Topic 842”), that increases transparency and comparability among organizations by requiring
the recognition of right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing
arrangements for both lessees and lessors. Leases are classified as either finance or operating, with classification affecting
the pattern of expense recognition in the income statement. In connection with the adoption of Topic 842, the Company conducted
reviews of its facility and equipment operating leases and assessed contracts that may contain a right-of-use asset or embedded
leasing arrangement.

The Company adopted
Topic 842 on January 1, 2019 under the optional transition method, which does not require restatement of prior periods. The
Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward
its historical lease classification, its assessment of whether a contract is or contains a lease and its initial direct costs for
any leases that existed prior to adoption of the standard. The Company also elected to combine lease and non-lease components for
its facility leases and to exclude leases with an initial term of 12 months or less from its consolidated balance sheet and recognize
the associated lease payments in its consolidated statements of operations on a straight-line basis over the lease term. The Company’s
equipment leases had a remaining term of 12 months or less at the adoption date.

The
Company recorded approximately $12 million in total right-of-use assets, net of the deferred rent liability, and approximately
$22 million in total lease liabilities on its consolidated balance sheet as of January 1, 2019. Adoption of the standard did
not materially impact its consolidated statements of cash flows or results of operations. Subsequent to its adoption and as a result
of the Catalent transaction (see Note 9), the Company wrote-off right-of-use assets of $8.2 million and the associated lease
liabilities of $12.7 million.

F- 13

Not Yet Adopted

In January 2017,
the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017-04”), which
will simplify the goodwill impairment calculation by eliminating Step 2 from the current goodwill impairment test. The new standard
does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative goodwill impairment
test by comparing the fair value of its reporting unit to its carrying amount, but if the Company is required to recognize a goodwill
impairment charge, under the new standard, the amount of the charge will be calculated by subtracting the reporting unit’s
fair value from its carrying amount. Under the current standard, if the Company is required to recognize a goodwill impairment
charge, Step 2 requires it to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of
its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge is
calculated by subtracting the reporting unit’s implied fair value of goodwill from the goodwill carrying amount. The standard
will be effective January 1, 2020 for the Company and will be applied prospectively from the date of adoption. The adoption
of ASU 2017-04 will not have a material impact on the historical consolidated financial statements.

Note 4 – 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 (in thousands):

Fair
Value at December 31, 2019 | Fair Value
at December 31, 2018
Assets | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3
Money market funds(1) | $ | 42,960 | $ | ― | $ | ― | $ | 39,168 | $ | ― | $ | ―
Asset-backed securities(2) | ― | 20,000 | ― | ― | 19,997 | ―
Corporate debt securities(3) | ― | ― | ― | ― | 26,219 | ―
Total cash equivalents and marketable securities | $ | 42,960 | $ | 20,000 | $ | ― | $ | 39,168 | $ | 46,216 | $ | ―
Liabilities
Convertible notes payable | $ | ― | $ | 125,811 | $ | ― | $ | ― | $ | 197,935 | $ | ―
(1) | Classified as cash and cash equivalents as of December 31, 2019 and 2018, respectively (see
Note 3).
(2) | Includes $20,000 and $15,000 classified as cash and cash equivalents as of December 31, 2019
and 2018, respectively, on the consolidated balance sheets.
(3) | Includes $9,236 classified as cash and cash equivalents as of December 31, 2018 on the consolidated
balance sheets.

Fixed-income investments
categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor’s valuation models that use verifiable
observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids
provided by brokers or dealers or quoted prices of securities with similar characteristics. Pricing of the Company’s
Notes (as defined in Note 11) has been estimated using other observable inputs, including the price of the Company’s common
stock, implied volatility, interest rates and credit spreads among others.

During the years ended
December 31, 2019 and 2018, the Company did not have any transfers between Levels.

The amount in the Company’s
consolidated balance sheets for accounts payable and accrued expenses approximates its fair value due to its short-term nature.

F- 14

Note 5 – Marketable Securities

Marke table
securities classified as available-for-sale as of December 31, 2019 and 2018 were comprised of (in thousands):

December 31,
 2019 | December 31,
 2018
Amortized
 Cost | Gross Unrealized Gains | Gross
 Unrealized Losses | Fair
 Value | Amortized
 Cost | Gross
 Unrealized Gains | Gross
 Unrealized Losses | Fair
 Value
Asset- backed
 securities | $ | ― | $ | ― | $ | ― | $ | ― | $ | 4,999 | $ | $ | (2 | ) | $ | 4,997
Corporate
 debt securities | ― | ― | ― | ― | 16,986 | ― | (3 | ) | 16,983
Total | $ | ― | $ | ― | $ | ― | $ | ― | $ | 21,985 | $ | ― | $ | (5 | ) | $ | 21,980

Note 6 – Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amounts of goodwill
for the years ended December 31, 2019 and 2018 were as follows (in thousands):

Year Ended December 31,
2019 | 2018
Beginning balance | $ | 51,967 | $ | 53,563
Currency translation adjustments | (813 | ) | (1,596 | )
Ending balance | $ | 51,154 | $ | 51,967

Identifiable Intangible
Assets

Purchased intangible assets consisted of
the following as of December 31, 2019 and 2018 (in thousands):

December 31, 2019 | December 31, 2018
Gross
 Carrying Amount | Accumulated
 Amortization | Intangible
 Assets, Net | Gross
 Carrying Amount | Accumulated
 Amortization | Intangible
 Assets, Net
Finite-lived
 intangible assets:
Proprietary
 adjuvant technology | $ | 7,985 | $ | (2,562 | ) | $ | 5,423 | $ | 8,357 | $ | (2,263 | ) | $ | 6,094
Collaboration
 agreements | 3,606 | (3,448 | ) | 158 | 3,773 | (3,326 | ) | 447
Total
 identifiable intangible assets | $ | 11,591 | $ | (6,010 | ) | $ | 5,581 | $ | 12,130 | $ | (5,589 | ) | $ | 6,541

Amortization expense
for the years ended December 2019, 2018 and 2017 was $0.7 million, $0.7 million and $2.2 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 | Amount
2020 | $ | 557
2021 | 399
2022 | 399
2023 | 399
2024 | 399

Note 7 – Leases

The Company has operating
leases for its research and development and manufacturing facilities, corporate headquarters and offices and certain equipment.
At December 31, 2019, the facility leases have expirations that range from approximately 4 year to 7 years, some of which
include options to extend the leases or terminate the leases early. Options to extend the leases or terminate the leases early
are only included in the lease term when it is reasonably certain that the option will be exercised. The facility leases contain
provisions for future rent increases, and obligate the Company to pay building operating costs. Upon closing of the Catalent transaction
in July 2019, the Company assigned two of its manufacturing facility leases to Catalent (see Note 9). As a result, the Company
wrote-off the corresponding right-of-use (“ROU”) assets of $8.2 million and the associated lease liabilities of $12.7
million.

F- 15

Supplemental balance
sheet information related to leases as of December 31, 2019 was as follows (in thousands, except weighted-average remaining
lease term and discount rate):

Lease Assets and Liabilities | Classification | Amount
Assets:
Operating lease ROU assets | Other non-current assets | $ | 6,454
Liabilities:
Current operating lease liabilities | Other current liabilities | $ | 1,262
Non-current operating lease liabilities | Other non-current liabilities | 10,004
Total operating lease liabilities | $ | 11,266
Weighted-average remaining lease term (years) | 5.99
Weighted-average discount rate | 15.58 | %

Lease expense for the
operating and short-term leases for the year ended December 31 was as follows (in thousands):

2019
Operating lease expense | $ | 3,952
Short-term lease expense | 434
Total lease expense | $ | 4,386

Total facility rent
expense was approximately $5.0 million and $8.4 million for the years ended December 31, 2018 and 2017, respectively.

Supplemental cash flow
information related to leases for the year ended December 31, 2019 was as follows (in thousands):

Amount
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 5,060
ROU assets obtained in exchange for operating lease obligations | 16,534

As of December 31,
2019, maturities of lease liabilities were as follows (in thousands):

Year | Amount
2020 | $ | 2,927
2021 | 2,993
2022 | 3,061
2023 | 2,921
2024 | 1,922
Thereafter | 3,825
Total operating lease payments | 17,649
Less: imputed interest | (6,383 | )
Total operating lease liabilities | $ | 11,266

Note 8 – Grants, U.S. Government
Contract and Joint Venture

Bill & Melinda
Gates Foundation Grant Agreement

In support of the Company’s
development of ResVax, in September 2015, the Company entered into the grant agreement with BMGF (the “Grant Agreement”),
under which it was awarded a grant totaling up to $89.1 million (the “Grant”). The Grant supports development activities,
including the Company’s global Phase 3 clinical trial in pregnant women in their third trimester, product licensing efforts
and efforts to obtain WHO prequalification of ResVax. Unless terminated earlier by BMGF, the Grant Agreement will continue in effect
until the end of 2021. 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 a certain amount
of ResVax available and accessible at affordable pricing to people in certain low- and middle-income countries. Unless terminated
earlier 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.

F- 16

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 Agreement are restricted as to their use until expenditures contemplated
in the Grant Agreement are incurred. In 2019, the Company recognized revenue from the Grant of $8.4 million, and has recognized
approximately $81 million in revenue since the inception of the agreement. At December 31, 2019, the Company’s current
restricted cash and deferred revenue balances on the consolidated balance sheet represent its estimate of costs to be reimbursed
and revenue to be recognized, respectively, in the next twelve months under the Grant Agreement.

Coalition for Epidemic
Preparedness Innovations Award

In March 2020,
the Company was awarded initial funding of $4 million from the Coalition for Epidemic Preparedness Innovations (“CEPI”)
to facilitate its development of a new strain of the coronavirus vaccine (“COVID-19”) in preparation for potential
future clinical trials. A subsequent CEPI award may be available to cover the Company’s program expenditures through Phase
1 clinical trial results.

HHS BARDA Contract for
Recombinant Influenza Vaccines

HHS BARDA awarded the
Company a contract in 2011 for the development of both the Company’s quadrivalent seasonal and pandemic influenza virus-like
particle (“VLP”) vaccine candidates. The HHS BARDA contract was a cost-plus-fixed-fee contract, under which the Company
was reimbursed for allowable direct and indirect contract costs and a fixed-fee. The HHS
BARDA contract expired in accordance with its terms in September 2016 . Billings
under the contract were provisional, subject to adjustment after audit by the government, and were based on approved provisional
indirect billing rates, including fringe benefits, overhead and general and administrative expenses. These indirect rates were
subject to audit by HHS BARDA on an annual basis.

In December 2019,
the Company amended its contract with HHS BARDA to close out the contract. Pursuant to the amendment, HHS BARDA agreed to pay the
Company $7.5 million for the recovery of additional costs under the contract relating to the close out of indirect rates for the
remaining fiscal years 2013 through 2016. As a result of the amendment, the Company recorded revenue of $7.5 million in the fourth
quarter of 2019. Payment was received in the first quarter of 2020.

CPLB Joint Venture

In
2009, the Company formed a joint venture with Cadila Pharmaceuticals Limited (“Cadila”), CPLB, to develop and manufacture
vaccines, biological therapeutics and diagnostics in India. CPLB is owned 20% by the Company and 80% by Cadila. 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 the Company has provided no guarantee or commitment
to provide future funding, the Company has not recorded losses related to this investment. In July 2018, the Company amended
and restated its joint venture and license agreements with respect to CPLB to align them with its current and planned interactions
with CPLB. CPLB continues to be owned 20% by the Company and 80% by Cadila.

F- 17

Note 9 – Catalent Transaction

In
June 2019, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Catalent Maryland, Inc.
(formerly Paragon Bioservices, Inc.), a unit of Catalent Biologics (“Catalent”), pursuant to which the Company
agreed to sell to Catalent certain assets related to its biomanufacturing and development activities located at the facilities
situated at each of 20 Firstfield Road in Gaithersburg, MD 20878 and 9920 Belward Campus Drive in Rockville, MD 20850, for a purchase
price of (i) $18.0 million, including $1.5 million to be held in escrow for one year following the closing of the transaction,
plus (ii) an additional fee to purchase laboratory supplies of $0.3 million, subject to certain adjustments. The transaction
closed in July 2019. Pursuant to the transactions contemplated by the Purchase Agreement, approximately 100 Novavax manufacturing
and quality employees transferred to Catalent, and the Company assigned two facility leases to Catalent. The Company also entered
into other ancillary agreements upon the closing of the transaction, including a Non-Commercial GMP Manufacturing Services Agreement
pursuant to which the Company is required to purchase $6.0 million in certain services from Catalent set forth therein, through
July 31, 2020. The transaction was treated as an asset disposition for accounting purposes. In 2019, the Company recorded
a gain on the disposition of such assets of $9.0 million.

Note 10 – Other Financial Information

Prepaid Expenses
and Other Current Assets

Prepaid
expenses and other current assets consist of the following at December 31 (in thousands):

2019 | 2018
Laboratory supplies | $ | 4,376 | $ | 11,974
Other prepaid expenses and other current assets | 3,601 | 4,321
Prepaid expenses and other current assets | $ | 7,977 | $ | 16,295

Property and
Equipment, net

Property and equipment
is comprised of the following at December 31 (in thousands):

2019 | 2018
Machinery and equipment | $ | 9,946 | $ | 35,723
Leasehold improvements | 9,088 | 22,276
Computer hardware | 4,987 | 4,763
Construction in progress | 448 | 1,347
24,469 | 64,109
Less ― accumulated depreciation | (13,024 | ) | (35,683 | )
Property and equipment, net | $ | 11,445 | $ | 28,426

Depreciation expense
was approximately $5.1 million, $7.4 million and $7.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Accrued Expenses

Accrued
expenses consist of the following at December 31 (in thousands):

2019 | 2018
Employee benefits and compensation | $ | 7,504 | $ | 9,632
Research and development accruals | 6,175 | 8,476
Other accrued expenses | 1,188 | 1,442
Accrued expenses | $ | 14,867 | $ | 19,550
F- 18

Note 11 – Long-Term Debt

Convertible Notes

In the first quarter
of 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 are senior unsecured debt obligations and were issued
at par. The Notes were issued pursuant to an indenture dated January 29, 2016 (the “Indenture”), between the Company
and the trustee. The Company received $315.0 million in net proceeds from the offering after deducting underwriting fees and
offering expenses. The Notes 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 the Company’s common stock. As a result of the Company’s one-for-twenty reverse stock split (see Note
12) and pursuant to Section 14.04(a) of the Indenture, the Notes are initially convertible into approximately 2,385,800
shares of the Company’s common stock based on the initial conversion rate of 7.3411 shares of the Company’s common
stock per $1,000 principal amount of the Notes. This represents an initial conversion price of approximately $136.20 per
share of the Company’s common stock, representing an approximate 22.5% conversion premium based on the last reported
sale price of the Company’s common stock of $111.20 per share on January 25, 2016. In addition, the holders of the Notes
may require the Company to repurchase the Notes at par value plus accrued and unpaid interest following the occurrence of a Fundamental
Change (as described in the Indenture). If a holder of the Notes converts upon a Make-Whole Adjustment Event (as described in the
Indenture), they may be eligible to receive a make-whole premium through an increase to the conversion rate up to a maximum of
8.9928 shares per $1,000 principal amount of Notes (subject to other adjustments as described in the Indenture).

The Notes are accounted
for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts
in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or
nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and
(2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined
the Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation, and therefore
do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope
exception from derivative accounting, and also since the embedded conversion option does not need to be separately accounted for
as an equity component under ASC 470-20, the proceeds received from the issuance of the convertible debt were recorded as
a liability on the consolidated balance sheets.

In connection with
the issuance of the Notes, the Company also paid $38.5 million, including expenses, to enter into privately negotiated
capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions
are generally expected 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 $194.60 per share, which represented a premium of approximately 75% based on the last reported sale price
of the Company’s common stock of $111.20 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, there would nevertheless be dilution upon conversion of
the Notes to the extent that such market price exceeds the cap price. The Company evaluated the capped call transactions under
ASC 815-10, Derivatives and Hedging – Overall and determined that it should be accounted for as a separate
transaction and that the capped call transactions will be classified as an equity instrument.

The Company incurred
approximately $10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of the Notes, which
were recorded as a reduction to the Notes on the consolidated balance sheet. The $10.0 million of debt issuance costs is being
amortized and recognized as additional interest expense over the seven-year contractual term of the Notes on a straight-line basis,
which approximates the effective interest rate method. The Company also incurred $0.9 million of expenses related to the capped
call transactions, which were recorded as a reduction to additional paid-in-capital.

Total convertible notes
payable consisted of the following at (in thousands):

December 31, 2019 | December 31, 2018
Principal amount of Notes | $ | 325,000 | $ | 325,000
Unamortized debt issuance costs | (4,389 | ) | (5,813 | )
Total convertible notes payable | $ | 320,611 | $ | 319,187
F- 19

Interest expense incurred in connection
with the Notes consisted of the following for the years ended December 31 (in thousands):

2019 | 2018 | 2017
Coupon interest at 3.75% | $ | 12,188 | $ | 12,188 | $ | 12,188
Amortization of debt issuance costs | 1,424 | 1,424 | 1,424
Total interest expense on Notes | $ | 13,612 | $ | 13,612 | $ | 13,612

Note 12 – Stockholders’ Equity

On May 8, 2019,
the Company’s stockholders of record as of March 25, 2019 approved a one-for-twenty reverse stock split of the Company’s
outstanding common stock, which was effected on May 10, 2019. The number of authorized shares of common stock and preferred
stock of the Company was not affected and remains at 600,000,000 and 2,000,000, respectively, but the number of shares of common
stock outstanding as of May 10, 2019 was reduced from 469,453,883 to 23,472,574. The aggregate par value of the issued
common stock was reduced by reclassifying a portion of the par value amount of the outstanding common shares from Common stock
to Additional paid-in-capital for all periods presented. In addition, all per share and share amounts, including stock options
and restricted stock awards, have been retroactively restated in the accompanying consolidated financial statements and notes thereto
for all periods presented to reflect the reverse stock split.

In March 2020,
the Company entered into an At Market Issuance Sales Agreement (“March 2020 Sales Agreement”), which allows it
to issue and sell up to $150 million in gross proceeds of its common stock. From March 2 through March 6, 2020, the Company
sold 1.5 million shares of common stock under the March 2020 Sales Agreement resulting in $18.6 million in net proceeds, leaving
$131.1 million remaining.

In January 2020,
the Company entered into an At Market Issuance Sales Agreement (“January 2020 Sales Agreement”), which allowed
it to issue and sell up to $100 million in gross proceeds of its common stock. During the first quarter of 2020, the Company sold
10.5 million shares of common stock under the January 2020 Sales Agreement resulting in $98.7 million in net proceeds. The
January 2020 Sales Agreement was fully utilized at that time.

In
December 2018, the Company entered into an At Market Issuance Sales Agreement (“December 2018 Sales Agreement”),
which allowed it to issue and sell up to $100 million in gross proceeds of its common stock. During 2019, the Company sold 10.5
million shares of common stock under the December 2018 Sales Agreement resulting in $59.5 million in net proceeds (this amount
excludes $0.5 million received in the first quarter of 2020 for shares traded in late December 2019). During the first quarter
of 2020, the Company sold 7.2 million shares of common stock resulting in $38.5 million in net proceeds. The December 2018
Sales Agreement was fully utilized at that time.

In April 2018,
the Company completed a public offering of 1.7 million shares of its common stock, including 0.2 million shares of common stock
that were issued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price
of $33.00 per share resulting in net proceeds, net of offering costs of $3.6 million, of approximately $54 million.

In December 2017,
the Company entered into an At Market Issuance Sales Agreement (“December 2017 Sales Agreement”), which allowed
it to issue and sell up to $75 million in gross proceeds of its common stock. During 2018, the Company sold 0.9 million shares
of common stock under the December 2017 Sales Agreement resulting in $35.9 million in net proceeds. During the first quarter
of 2019, the Company sold 2.5 million shares of common stock resulting in $37.9 million in net proceeds. The December 2017
Sales Agreement was fully utilized at that time.

In January 2017,
the Company entered into an At Market Issuance Sales Agreement (“January 2017 Sales Agreement”), which allowed
it to issue and sell up to $75 million in gross proceeds of its common stock. During 2017, the Company sold 2.5 million shares
of common stock under the January 2017 Sales Agreement resulting in $63.4 million in net proceeds. During the first quarter
of 2018, the Company sold 0.3 million shares of common stock resulting in $10.3 million in net proceeds. The January 2017
Sales Agreement was fully utilized at that time.

F- 20

Note 13 – Stock-Based Compensation

Stock Options

The 2015 Stock Incentive
Plan, as amended (“2015 Plan”), was 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 3,800,000 shares of common stock under equity awards granted under the 2015 Plan, which includes an increase
of 1,000,000 shares approved for issuance under the 2015 Plan at the Company’s 2019 annual meeting of stockholders. All such
shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.

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 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 one to four years.

Stock Options and Stock Appreciation Rights

The following is a summary of stock options
and stock appreciation rights activity under the 2015 Plan and the 2005 Plan for the year ended December 31, 2019:

2015 Plan | 2005 Plan
Stock Options | Weighted- Average Exercise Price | Stock Options | Weighted- Average Exercise Price
Outstanding at January 1, 2019 | 2,392,567 | $ | 62.41 | 582,616 | $ | 65.72
Granted | 1,620,721 | $ | 5.98 | — | $ | —
Exercised | (1,514 | ) | $ | 27.42 | (1,500 | ) | $ | 11.20
Canceled | (623,073 | ) | $ | 61.29 | (79,336 | ) | $ | 76.42
Outstanding at December 31, 2019 | 3,388,701 | $ | 35.64 | 501,780 | $ | 64.19
Shares exercisable at December 31, 2019 | 1,017,774 | $ | 80.55 | 501,780 | $ | 64.19
Shares available for grant at December 31, 2019 | 228,335

In the third quarter
of 2019, the Company granted 192,400 stock appreciation rights with a weighted-average exercise price of $5.95 under the 2015 Plan.
In addition, due to the limitations on the equity awards currently available under the 2015 Plan, the Company granted 1,014,200
stock options to certain employees with a weighted-average exercise price of $5.95 under the 2015 Plan that are subject to approval
at the Company’s annual meeting of stockholders in June 2020. As these stock options have not yet been approved by the
Company’s stockholders, the Company will not record any stock-based compensation expense for these awards until such time
these awards are approved by the stockholders and a measurement date occurs.

F- 21

The fair value of stock
options and stock appreciation rights (not including awards that are subject to approval at the Company’s annual meeting
of stockholders in June 2020) granted under the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing
model with the following assumptions:

2019 | 2018 | 2017
Weighted average Black-Scholes fair value of stock options and SARs granted | $4.98 | $34.80 | $21.20
Risk-free interest rate | 1.5%-2.6% | 2.3%-3.1% | 1.6%-2.3%
Dividend yield | 0% | 0% | 0%
Volatility | 105.4%-134.1% | 93.3%-115.6% | 88.9%-114.1%
Expected term (in years) | 3.9-7.5 | 4.1-7.5 | 4.1-7.5
Expected forfeiture rate | N/A | N/A | N/A

The Company used the
Monte Carlo simulation model to determine the fair value of its 0.1 million stock options containing a market condition that were
granted in 2016 (the “Performance Options”). The fair value of the Performance Options was estimated with the following
assumptions: 99.11% volatility, a 1.74% risk-free interest rate, 5.62% forfeiture rate and 0% dividend yield, which resulted in
fair values of $14.80 to $18.40 per share, and expected terms of 1.35 years to 3.50 years.

The total aggregate
intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights outstanding under
the 2015 Plan and 2005 Plan as of December 31, 2019 was $0 million and 7.9 years, respectively. The total aggregate intrinsic
value and weighted-average remaining contractual term of stock options and stock appreciation rights exercisable under the 2015
Plan and 2005 Plan as of December 31, 2019 was $0 million and 5.6 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 stock options and stock appreciation rights) that would have been
received by the holders had all stock option and stock appreciation rights holders exercised their stock options and stock appreciation
rights on December 31, 2019. This amount is subject to change based on changes to the closing price of the Company’s
common stock. The aggregate intrinsic value of stock options exercised and vesting of restricted stock awards for 2019,
2018 and 2017 was $0.5 million, $0.4 million and $0.1 million, respectively.

Employee Stock Purchase Plan

The Employee Stock
Purchase Plan, as amended (the “ESPP”), was approved at the Company’s annual meeting of stockholders in June 2013.
The amount of shares authorized for issuance under the ESPP was increased by 200,000 shares at the Company’s 2019 annual
meeting of stockholders. The ESPP currently authorizes an aggregate of 597,500 shares of common stock to be purchased, and
the aggregate amount of shares will continue to increase 5% on each anniversary of its adoption up to a maximum of 600,000 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, 2019, there were 291,719 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:

2019 | 2018 | 2017
Range of Black-Scholes fair values of ESPP shares granted | $2.57-$35.00 | $7.20-$70.64 | $9.00-$109.40
Risk-free interest rate | 1.2%-2.6% | 0.7%-2.2% | 0.4%-1.1%
Dividend yield | 0% | 0% | 0%
Volatility | 52.2%-171.6% | 52.2%-203.8% | 46.0%-267.8%
Expected term (in years) | 0.5-2.0 | 0.5-2.0 | 0.5-2.0
Expected forfeiture rate | N/A | N/A | N/A
F- 22

Restricted Stock Units

The following is a
summary of restricted stock units activity for the year ended December 31, 2019:

Number of Shares | Per Share Weighted- Average Fair Value
Outstanding and Unvested at January 1, 2019 | ― | $ | ―
Restricted stock units granted | 1,251,609 | $ | 6.43
Restricted stock units vested | (72,637 | ) | $ | 10.40
Restricted stock units forfeited | (76,661 | ) | $ | 9.61
Outstanding and Unvested at December 31, 2019 | 1,102,311 | $ | 5.95

The Company recorded
stock-based compensation expense for awards issued under the above mentioned plans in the consolidated statements of operations
as follows (in thousands):

Year Ended December 31,
2019 | 2018 | 2017
Research and development | $ | 8,436 | $ | 10,575 | $ | 11,750
General and administrative | 8,612 | 7,739 | 8,059
Total stock-based compensation expense | $ | 17,048 | $ | 18,314 | $ | 19,809

As of December 31,
2019, there was approximately $26 million of total unrecognized compensation expense related to unvested stock options, stock appreciation
rights, restricted stock units and the ESPP. This unrecognized non-cash compensation expense is expected to be recognized over
a weighted-average period of 1.6 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
and awards that require approval by the stockholders.

Note 14 – Employee Benefits

The Company maintains
a defined contribution 401(k) retirement plan, pursuant to which employees 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
100% of the first 3% of the participants’ deferral, and 50% on the next 2% of the participants’ deferral, up to a potential
4% Company match. The Company’s matching contributions to the 401(k) plan vest immediately. Under its 401(k) plan,
the Company has recorded expense of $1.0 million, $1.2 million and $1.5 million in 2019, 2018 and 2017, 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 $0.7 million, $0.8 million and $0.5 million in 2019, 2018 and 2017, respectively.

Note 15 – Income Taxes

The Company’s
loss from operations before income tax expense by jurisdiction for the years ended December 31 are as follows (in thousands):

2019 | 2018 | 2017
Domestic | $ | (124,189 | ) | $ | (176,290 | ) | $ | (173,749 | )
Foreign | (8,505 | ) | (8,458 | ) | (10,020 | )
Total net loss | $ | (132,694 | ) | $ | (184,748 | ) | $ | (183,769 | )

As a result of current
and historical losses, there is no income tax provision for the years ended December 31, 2019, 2018 and 2017.

F- 23

Deferred tax assets
(liabilities) consist of the following at December 31 (in thousands):

2019 | 2018
Deferred tax assets:
Federal and State net operating loss carryforward | $ | 293,736 | $ | 270,177
Foreign net operating loss carryforward | 13,520 | 12,321
Research tax credits | 37,066 | 33,633
Non-cash stock-based compensation | 13,679 | 10,888
Original discount interest | 4,326 | 5,687
Other | 5,957 | 7,987
Total deferred tax assets | 368,284 | 340,693
Valuation allowance | (365,772 | ) | (337,515 | )
Net deferred tax assets | $ | 2,512 | $ | 3,178
Deferred tax liabilities:
Intangibles | (1,279 | ) | (1,492 | )
Other | (1,233 | ) | (1,686 | )
Total deferred tax liabilities | (2,512 | ) | (3,178 | )
Net deferred tax assets | $ | — | $ | —

The valuation allowance
increased by $28.3 million and $37.7 million for the years ended December 31, 2019 and 2018, respectively, due to increases
in deferred tax assets. 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, 2019
and 2018 as management believes it is more likely than not that the assets will not be realizable.

The differences between
the U.S. federal statutory tax rate and the Company’s effective tax rate are as follows:

2019 | 2018 | 2017
Statutory federal tax rate | (21 | )% | (21 | )% | (34 | )%
State income taxes, net of federal benefit | (2 | )% | (3 | )% | (3 | )%
Research and development and other tax credits | (3 | )% | (3 | )% | (2 | )%
Other | 1 | % | 1 | % | (1 | )%
Change in tax rate | 3 | % | 5 | % | 70 | %
Change in valuation allowance | 22 | % | 21 | % | (30 | )%
Income tax provision | 0 | % | 0 | % | 0 | %

The change in the state
tax rate from 2018 to 2019 is primarily related to changes in applicable state apportionment factors; whereas the change in the
federal tax rate in 2017 resulted from the enactment of the Tax Cuts and Jobs Act of 2017.

As of December 31,
2019, the Company had net operating losses and research tax credits available as follows (in thousands):

Amount
Federal and State net operating losses expiring through the year 2037 | $ | 965,284
Federal and State net operating losses (no expiration) | 284,084
Foreign net operating losses (no expiration) | 36,972
Research tax credits expiring through the year 2039 | 61,455

Utilization of the
net operating loss carryforwards and credits may be subject to an annual limitation due to ownership change of the Company. The
Company does not expect such limitation, if any, to impact the use of the net operating losses and business tax credits.

At December 31,
2019 and 2018, the Company did not have any unrecognized tax benefits. To the extent 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 twelve months.

The Company files income
tax returns in the U.S. federal jurisdiction and in various states, as well as in Sweden. The Company had U.S. tax net operating
losses and credit carryforwards that are subject to examination from 2000 through 2019. The tax returns of the Company may be subject
to examination for a number of years beyond the year in which the losses were generated for tax purposes as a portion of these
carryforwards may be utilized in the future. The returns in Sweden are subject to examination from 2014 through 2019.

F- 24

The Company’s
policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2019
and 2018, the Company had no accruals for interest or penalties related to income tax matters.

Note 16 – Related Party Transaction

In July 2017,
the Company entered into a consulting agreement with Dr. Sarah Frech, the spouse of Mr. Stanley C. Erck, the Company’s
President and Chief Executive Officer. Dr. Frech is a seasoned biotechnology executive with significant experience managing
multiple clinical programs. Under the agreement, Dr. Frech provided clinical development and operations services related to
the Company’s Phase 3 clinical trial of ResVax and other professional services. The agreement terminated in July 2019.
In 2019, 2018 and 2017, the Company incurred $0.1 million, $0.3 million and $0.2 million, respectively, in consulting expenses
under the agreement. No amount was due and unpaid for services performed under the agreement at December 31, 2019.

Note 17 – Quarterly Financial
Information (Unaudited)

The Company’s
unaudited quarterly information for the years ended December 31, 2019 and 2018 is as follows:

Quarter Ended
March 31 | June 30 | September 30 | December 31
(in thousands, except per share data)
2019:
Revenue(1) | $ | 3,982 | $ | 3,357 | $ | 2,507 | $ | 8,816
Net loss | $ | (43,218 | ) | $ | (39,603 | ) | $ | (18,043 | ) | $ | (31,830 | )
Net loss per share | $ | (2.11 | ) | $ | (1.69 | ) | $ | (0.74 | ) | $ | (1.13 | )

(1) Quarter ended December 31, 2019 includes $7.5 million relating to HHS BARDA (see Note 8).

Quarter Ended
March 31 | June 30 | September 30 | December 31
(in thousands, except per share data)
2018:
Revenue | $ | 9,653 | $ | 10,773 | $ | 7,735 | $ | 6,127
Net loss | $ | (46,352 | ) | $ | (44,492 | ) | $ | (44,570 | ) | $ | (49,334 | )
Net loss per share | $ | (2.75 | ) | $ | (2.37 | ) | $ | (2.33 | ) | $ | (2.57 | )

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 twelve-month period.

F- 25

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