e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarterly Period Ended		Commission File No.
June 30, 2005		0-26770

NOVAVAX, INC.

(Exact name of registrant as specified in its charter)


Delaware		22-2816046
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

508 Lapp Road, Malvern, PA		19355
(Address of principal executive offices)		(Zip code)

(484) 913-1200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

þ Yes o No

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Shares of Common Stock Outstanding at July 29, 2005: 43,553,876

NOVAVAX, INC.
Form 10-Q
For the Quarter Ended June 30, 2005

Table of Contents


		Page No.
Part I. Financial Information

Item 1	Financial Statements

	Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004		3

	Consolidated Statements of Operations for the three-month and six-month periods ended
	June 30, 2005 and 2004		4

	Consolidated Statements of Cash Flows for the six months ended
	June 30, 2005 and 2004		5

	Notes to the Consolidated Financial Statements		6

Item 2	Management's Discussion and Analysis of Financial
	Condition and Results of Operations		16

Item 3	Quantitative and Qualitative Disclosures about Market Risk		27

Item 4	Controls and Procedures		27

Part II. Other Information

Item 1	Legal Proceedings		28

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		28

Item 3	Defaults upon Senior Securities		28

Item 4	Submission of Matters to a Vote of Security Holders		28

Item 5	Other Information		29

Item 6	Exhibits		29

Signature			30

Certifications			31


Part I.		Financial Information


Item 1.		Financial Statements

NOVAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)


	June 30,			December 31,
	2005			2004
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,442		$	17,876
Trade accounts receivable, net of allowance for doubtful accounts of $765 and $752 as of June 30, 2005 and December 31, 2004, respectively		1,133			827
Inventory, net		1,400			3,464
Prepaid expenses and other current assets		1,329			1,770

Total current assets		8,304			23,937
Property and equipment, net		12,759			14,147
Goodwill		33,141			33,141
Other intangible assets, net		4,617			5,048
Other non current assets		1,477			1,720

Total assets	$	60,298		$	77,993


LIABILITIES and STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,230		$	3,242
Accrued expenses		3,747			4,140
Current portion of capital lease obligations and other liabilities		654			1,194

Total current liabilities		5,631			8,576


Convertible notes		35,000			35,000
Deferred rent		165			166
Non-current portion of capital lease obligations and other liabilities		808			970

Stockholders’ equity:
Preferred stock, $.01 par value, 2,000,000 shares authorized; no shares issued and outstanding		––			––
Common stock, $.01 par value, 100,000,000 shares authorized; 39,807,724 shares issued and 39,553,876 outstanding		398			398
Additional paid-in capital		167,511			167,496
Notes receivable from directors		(1,480	)		(1,480	)
Accumulated deficit		(145,322	)		(130,720	)
Treasury stock, 253,848 shares, cost basis		(2,413	)		(2,413	)

Total stockholders’ equity		18,694			33,281

Total liabilities and stockholders’ equity	$	60,298		$	77,993

The accompanying notes are an integral part of the consolidated financial statements.

NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
(unaudited)


	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
Revenues:
Net product sales	$	1,889		$	2,656		$	2,608		$	4,854
Contract research and development		426			286			669			1,246
Milestone and licensing fees		––			63			––			125

Total revenues		2,315			3,005			3,277			6,225


Operating costs and expenses:
Cost of products sold		2,027			1,501			4,006			1,763
Research and development		1,377			1,229			2,599			4,277
Selling and marketing		1,844			5,556			5,901			8,330
General and administrative		2,292			2,059			4,413			4,091

Total operating costs and expenses		7,540			10,345			16,919			18,461


Loss from operations		(5,225	)		(7,340	)		(13,642	)		(12,236	)


Interest expense, net		(491	)		(377	)		(960	)		(739	)


Net loss	$	(5,716	)	$	(7,717	)	$	(14,602	)	$	(12,975	)


Basic and diluted loss per share	$	(.14	)	$	(.22	)	$	(.37	)	$	(.37	)


Basic and diluted weighted average number of common shares outstanding		39,553,876			34,779,657			39,553,876			34,750,944

The accompanying notes are an integral part of the consolidated financial statements.

NOVAVAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


	Six months ended
	June 30,
	2005			2004
Operating Activities:
Net loss	$	(14,602	)	$	(12,975	)
Reconciliation of net loss to net cash used in operating activities:
Amortization		431			327
Depreciation		1,426			1,029
Retirement of capital assets		42			––
Provision for bad debts		12			59
Amortization of deferred financing costs		206			51
Deferred rent		(1	)		17
Non-cash stock compensation		15			––
Changes in operating assets and liabilities:
Trade accounts receivable		(318	)		(1,398	)
Inventory		2,063			108
Prepaid expenses and other assets		440			(1,442	)
Accounts payable and accrued expenses		(2,405	)		3,905
Facility exit costs		(85	)		––
Deferred revenue		––			(125	)
Other non current assets		38			(300	)

Net cash used in operating activities		(12,738	)		(10,744	)


Investing Activities:
Capital expenditures		(80	)		(902	)

Net cash used in investing activities		(80	)		(902	)


Financing Activities:
Principal payments of capital lease obligations		(616	)		(733	)
Proceeds from exercise of stock options and warrants		––			369

Net cash used in financing activities		(616	)		(364	)


Net change in cash and cash equivalents		(13,434	)		(12,010	)
Cash and cash equivalents at beginning of period		17,876			27,633


Cash and cash equivalents at end of period	$	4,442		$	15,623

The accompanying notes are an integral part of the consolidated financial statements.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.		Basis of Presentation

Novavax, Inc., a Delaware corporation (“Novavax” or “the Company”), was incorporated in 1987, and is a specialty biopharmaceutical company engaged in the research, development and commercialization of proprietary products using our topical drug delivery technology and the development of preventive vaccines and proteins for infectious diseases and cancers. The Company sells, markets, and distributes a line of prescription pharmaceuticals and prenatal vitamins. The Company’s principal technology platform involves the use of patented oil and water emulsions that the Company believes can be used as vehicles for the topical delivery of a wide variety of drugs and other therapeutic products, including hormones. In October 2003, the Company’s initial product candidate, ESTRASORB^®, the first topical emulsion for estrogen therapy, was approved for marketing by the Food and Drug Administration. The FDA approved ESTRASORB for the treatment of moderate to severe vasomotor systems (hot flashes) associated with menopausal women. Since its launch in June 2004, ESTRASORB prescription trends have not met the Company’s initial expectations, however, ESTRASORB continues to be an important product and asset to the Company. We are actively seeking a well established, global pharmaceutical partner that could provide the optimal opportunity and resources for ESTRASORB to be successful on a larger scale.

The Company plans to continue leveraging our technologies to develop other new product candidates to be marketed by the Company, co-promoted or licensed to other drug companies. While our main therapeutic areas of concentration have been women’s health and infectious diseases, we believe our technologies can be applied more broadly.

The products currently under development or in clinical trials by the Company will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercial use. There can be no assurance that the Company’s research and development efforts will be successful or that any of the Company’s potential products will prove to be safe and effective in clinical trial. Even if developed, these products may not receive regulatory approval or be successfully introduced and marketed at prices that would permit the Company to operate profitably. The Company also recognizes that the commercial launch of any product is subject to certain risks including, but not limited to, manufacturing scale-up and market acceptance. No assurance can be given that the Company can generate sufficient product revenue to become profitable or generate positive cash flow from operations at all or on a sustained basis.

The consolidated financial statements of Novavax for the three and six months ended June 30, 2005 and 2004 are unaudited. These financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2005.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Certain information in footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosures herein are adequate to make the information presented not misleading. We suggest that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.


2.		Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Inventories

Inventories consist of raw materials, work-in-process and finished goods, are priced at the lower of cost or market, using the first-in-first-out method, and were as follows:


	June 30, 2005			December 31, 2004
	(unaudited)
	(amounts in thousands)
Raw materials	$	324		$	351
Work-in-process		––			700
Finished goods		1,134			2,413

		1,458			3,464
Less: Inventory reserve		(58	)		—

	$	1,400		$	3,464

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The Company recognizes revenue in accordance with the provisions of Staff Accounting Bulletin No. 104, Revenue Recognition. For our product sales, revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, shipment of product to our distributor has occurred, the seller’s price to the buyer is fixed or determinable, and collectibility is reasonably assured. The Company recognizes these sales net of allowances for returns, rebates and chargebacks. A large part of our product sales are to distributors who resell the products to their customers. The Company provides rebates to members of certain buying groups who purchase from our distributors, to the distributors that sell to these customers at prices determined under contracts between us and the customer and to state agencies that administer various programs such as the federal Medicaid and Medicare programs. Rebate amounts are usually based upon the volume of purchases or by reference to a specific price for a product. The Company estimates the amount of the rebate that will be paid, and records the liability as a reduction of revenue when we record our sale of the products. Settlement of the rebate generally occurs from three to 12 months after sale. The Company regularly analyzes historical rebate trends and makes adjustments to recorded reserves for changes in trends and terms of rebate programs. In a similar manner, we estimate amounts for returns based on historical trends, distributor inventory levels and product prescription data and adjust those reserves as product returns occur. The shipping and handling costs the Company incurs are included in cost of sales in our accompanying statements of operations.

For up-front payments and licensing fees related to our contract research or technology, the Company defers and recognizes revenue as earned over the life of the related agreement. Milestone payments are recognized as revenue upon achievement of contract-specified events and when there are no remaining performance obligations. Revenue earned under current research contracts is recognized per the contracts’ terms and conditions for invoicing of costs incurred and the achievement of defined milestones.

Net Loss per Share

Basic loss per share is computed by dividing the net loss (the numerator) by the weighted average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted loss per share is similar to the computation of basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued (e.g. upon exercise of stock options). Potentially dilutive common shares are not included in the computation of diluted earnings per share if they are anti-dilutive. Net loss per share as reported was not adjusted for potential common shares, as they are anti-dilutive.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

Property and equipment are recorded at cost. Manufacturing equipment is generally depreciated over 7 to 10 years. Manufacturing leaseholds are amortized over the remaining lease term of our manufacturing facility, under the straight line method. Depreciation of other fixtures and equipment is also provided under the straight line method over the estimated useful lives of the assets, generally 3 to 7 years. Amortization of other leasehold improvements is provided over the shorter of the estimated useful lives of the improvements or the term of the respective lease. Repairs and maintenance costs are expensed as incurred.

Property and equipment is comprised of the following:


	As of
	June 30, 2005			December 31, 2004
	(unaudited)
	(amounts in thousands)
Machinery and equipment	$	16,104		$	16,082
Leasehold improvements		1,441			1,437
Computer software and hardware		481			480

		18,026			17,999
Less accumulated depreciation.		(5,267	)		(3,852	)

	$	12,759		$	14,147

Accounting for Facility Exit Costs

In July 2004, the Company entered into a long-term agreement to lease a 32,900 square foot facility in Malvern, Pennsylvania, for the consolidation and expansion of corporate headquarters and product development activities. The lease, with a commencement date of September 15, 2004, has an initial term of ten years with two five year renewal options. Standard annual escalation rental rates are in effect during the initial lease term. With advance notice, the Company also has an option to lease adjoining space of 17,000 square feet, which could be built out for future manufacturing needs.

The Company applied the principles of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, in accounting for contract termination costs and associated costs that will continue to be incurred under the operating lease expiring on October 31, 2006 related to the Company’s former corporate offices located in Columbia, Maryland. For the year ended December 31, 2004, $252,000 was included in facility exit costs on the consolidated statement of operations, which represents the difference between the fair value of the remaining lease payments, reduced by current estimated sublease rentals that could be reasonably obtained.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A roll-forward of Facility Exit Cost liability is as follows:


				Non-
	Current			Current
	(in thousands)
Original amount expensed and set up as a liability	$	151		$	101
Lease payments applied to the liability		(28	)		(24	)

Balance as of December 31, 2004		123			77
Lease payments applied to the liability		(49	)		(33	)
Adjustment to original estimate		20			(22	)

Balance as of June 30, 2005	$	94		$	22

Goodwill and Intangible Assets

Goodwill principally results from business acquisitions. Assets acquired and liabilities assumed are recorded at their fair values; the excess of the purchase price over the value of the identifiable net assets acquired is recorded as goodwill. Other intangible assets are the result of product acquisitions, non-compete arrangements, and internally-discovered patents. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to impairment tests annually, or more frequently should indicators of impairment arise. As of June 30, 2005 the Company determined a reassessment of goodwill was necessary due to a substantial drop in the market value of the company’s stock since December 31, 2004 and below performance expectations of its product, ESTRASORB. The Company engaged an independent business valuation firm to assist in this assessment. and ultimately determined that there was no impairment of goodwill as of June 30, 2005. The Company utilizes a discounted cash flow analysis that includes profitability information, estimated future operating results, trends and other information in assessing whether the value of indefinite-lived intangible assets can be recovered. Under SFAS No. 142, goodwill impairment is deemed to exist if the carrying value of a reporting unit exceeds its estimated fair value. Other intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from five to 15 years. Amortization expense was $215,000 and $164,000 for the three months ending June 30, 2005 and 2004, respectively, and $431,000 and $327,000 for the six months ending June 30, 2005 and 2004, respectively.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2005 and December 31, 2004, the Company’s other intangible assets and related accumulated amortization consisted of the following (in thousands):


	As of June 30, 2005							As of December 31, 2004
	(unaudited)
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
Other intangible assets, net
Acquisition	$	148	$	(148	)	$	––	$	148	$	(148	)	$	––
ESTRASORB rights		2,514		(263	)		2,251		2,514		(136	)		2,378
AVC product acquisition		3,332		(2,142	)		1,190		3,332		(1,904	)		1,428
Patents		2,525		(1,349	)		1,176		2,525		(1,283	)		1,242

	$	8,519	$	(3,902	)	$	4,617	$	8,519	$	(3,471	)	$	5,048

Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board issued Statement No. 123 (revised) Share-Based Payment (“SFAS No. 123R”), which is a revision of Statement No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). SFAS No. 123R supersedes APB No. 25, Accounting for Stock Issued to Employees (“APB No. 25”), and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

SFAS No. 123R must be adopted in the first annual financial reporting period beginning after June 15, 2005. The Company will adopt SFAS No. 123R on January 1, 2006.

SFAS No. 123R permits public companies to adopt its requirements using one of two methods:

A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation (continued):

A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures either for (a) all prior periods presented or (b) prior interim periods of the year of adoption.

The Company plans to adopt SFAS No. 123R using the modified prospective method.

As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using the intrinsic value method permitted by APB No. 25 and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123R’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position. The impact of adoption of SFAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share below. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.

This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. The Company cannot estimate what those amounts will be in the future because they depend on, among other things, when employees exercise stock options. For the six months ended June 30, 2005 and 2004, the Company did not pay any taxes, therefore, there was no effect on operating cash flows for such excess tax deductions.

Had the Company applied the fair value principles of SFAS No. 123, for its employee options, its net loss for the three and six months ending June 30, 2005 and 2004 would have increased as follows:

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(unaudited)
	(Amounts in thousands, except per share data)
Net loss, as reported	$	(5,716	)	$	(7,717	)	$	(14,602	)	$	(12,975	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(1,025	)		(1,504	)		(1,970	)		(2,639	)

Pro forma net loss	$	(6,741	)	$	(9,221	)	$	(16,572	)	$	(15,614	)


Net loss per share:
Basic and diluted — as reported	$	(.14	)	$	(0.22	)	$	(.37	)	$	(.37	)
Basic and diluted — pro forma	$	(.17	)	$	(0.27	)	$	(.42	)	$	(.45	)

These pro forma amounts are not necessarily indicative of the future effects of applying the fair value-based method due to, among other things, the vesting period of the stock options and the fair value of additional stock options issued in future years.

In May 2005, the Company granted 182,434 restricted shares totaling $270,000 in value at the date of grant to various employees and officers of the Company which vests over a three-year period. In accordance with APB No. 25, for the three months ended June 30, 2005, $15,000 of non-cash stock compensation expense was included in total operating costs and expenses related to this restricted stock and additional paid-in capital was increased accordingly.

Sales and Issuance of Common Stock

There were no sales or issuances of common stock during the three or six month periods ended June 30, 2005. See Subsequent Events for a discussion of stock issuances subsequent to June 30, 2005.

NOVAVAX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Segment Information

The Company currently operates in one business segment, which is the research, development and commercialization of products focused on women’s health and infectious diseases. The Company is managed and operated as one business. A single management team that reports to the Chief Executive Officer comprehensively manages the entire business. The Company does not operate separate lines of business with respect to its products or product candidates. Accordingly, the Company does not have separately reportable segments as defined by FASB Statement No. 131, Disclosure about Segments of an Enterprise and Related Information.

Related Party Transactions

In March 2002, pursuant to the Novavax, Inc. 1995 Stock Option Plan, the Company approved the payment of the exercise price of options by two of its directors, through the delivery of full-recourse, interest-bearing promissory notes in the aggregate amount of $1,479,268. The borrowings accrue interest at 5.07% per annum and are secured by an aggregate of 261,667 shares of common stock owned by the directors. The notes are payable upon the earlier to occur of the following: (i) payable in full upon the date on which the director ceases for any reason to be a director of the Company, (ii) payable in part to the extent of net proceeds, upon the date on which the director sells all or any portion of the pledged shares or (iii) payable in full on March 21, 2007. As of June 30, 2005 and December 31, 2004, accrued interest receivable related to the borrowing was $246,000 and $209,000, respectively.

In addition, in April 2002, we executed a conditional guaranty of a brokerage margin account for a director, in the amount of $500,000. Prior to demanding payment from the Company, the brokerage firm must first make demand for payment to the director and then liquidate the account. Thereafter, if there remains a shortfall, the brokerage firm may demand payment from the Company. As of June 30, 2005 and December 31, 2004, the Company had not recorded any liability on its balance sheet related to this guarantee as we believe the possibility of required payment by the Company to be unlikely.

Restructuring of the Sales Force

In March, 2005, the Company implemented a measure to control expenses by reducing the size of its sales force. The total estimated cost to be incurred in connection with this restructuring was approximately $238,000. Included in this amount were one-time termination benefits of $129,000, all of which were paid as of June 30, 2005, auto lease contract termination costs of approximately $95,000, which are still included in accrued expenses as of June 30, 2005, and $14,000 of other associated costs, all of which were paid as of June 30, 2005. Included in the accompanying statements of operations for the three and six months ended June 30, 2005 are $32,000 and $206,000 related to these expenses, respectively.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion may contain statements that are not purely historical. Certain statements contained herein or as may otherwise be incorporated by reference herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding product sales, future product development and related clinical trials, and statements regarding future research and development, including Food and Drug Administration approval. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from those expressed or implied by such forward-looking statements.

Such factors include, among other things, the following: general economic and business conditions; competition; ability to enter into future collaborations with industry partners, including an ESTRASORB^® licensing agreement, unexpected changes in technologies and technological advances; ability to obtain rights to technology; ability to obtain and enforce patents; ability to commercialize and manufacture products; ability to establish and maintain commercial-scale manufacturing capabilities; results of clinical studies; progress of research and development activities; business abilities and judgment of personnel; availability of qualified personnel; changes in, or failure to comply with, governmental regulations; ability to obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity financing or otherwise; and other factors referenced herein.

All forward-looking statements contained in this quarterly report are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements, except as specifically required by law. Accordingly, past results and trends should not be used to anticipate future results or trends.

Recent Development

In July 2005, we completed an agent-led offering of 4,000,000 shares of common stock at $1.00 per share for gross proceeds of $4,000,000. The stock was issued pursuant to an existing shelf registration statement. Net proceeds were approximately $3.6 million.

Taking into effect this event, at June 30, 2005, on a pro-forma basis, our cash balance would have been approximately $8.0 million, total assets of approximately $63.9 million and stockholder’s equity of approximately $22.3 million.

Overview

Novavax is a specialty biopharmaceutical company engaged in the research, development and commercialization of proprietary products using our topical drug delivery technology and the development of preventive vaccines and proteins for infectious diseases. We sell, market, and distribute a line of prescription pharmaceuticals and prenatal vitamins. Our proprietary topical micellar nanoparticle (“MNP”) drug delivery platform, our principal technology platform, involves the use of patented oil and water nanoemulsions which can be used as vehicles for the delivery of a wide variety of drugs and other therapeutic products, including hormones. In October 2003, our initial product candidate, ESTRASORB, the first topical emulsion for estrogen therapy, was approved for marketing by the Food and Drug Administration. The FDA approved ESTRASORB for the treatment of moderate to severe vasomotor symptoms (hot flashes) associated with menopausal women, and we commercially launched this product in June 2004.

Since its launch, ESTRASORB has been favorably accepted by those physicians who have prescribed it and the patients who have been using it for the treatment of moderate to severe vasomotor symptoms associated with menopause. However, to date, ESTRASORB prescription trends have not met our initial expectations. We attribute the slow start to the long lasting effects of the Women’s Health Initiative study, the unanticipated simultaneous approval and launch of a competitive product and an overall competitive market. During the first 12 months of marketing, management concluded that our marketing resources were not sufficiently available to us in order to generate the awareness of the product directly to the consumer. For that reason we have continually evaluated the effective optimization and sizing of our sales forces and have been seeking a well established, global pharmaceutical partner that could provide the optimal opportunity for ESTRASORB to be successful on a larger scale.

We will continue to focus our efforts on the development of additional compounds that use our proprietary topical MNP drug delivery platform that we believe have a high probability of technical success and that have a large market potential. As part of our research and development efforts, we intend to file or activate two Investigational New Drug Applications (INDs) with the FDA by the first quarter of 2006 for two of our product candidates. The table below summarizes our most advanced drug candidates currently in clinical or preclinical development.

We plan to continue leveraging our technologies to develop these and other new product candidates to be marketed by the Company, or co-promoted, or licensed to other drug companies.

We also conduct research and development on preventative vaccines and proteins for infectious diseases and cancers, and tolergens to prevent the initiation and progression of stroke, heart attack and other inflammatory diseases. Currently, the major impetus is the development and exploitation of our core Virus-like particle (“VLP”) technology for developing novel vaccines. VLPs are genetically-engineered particles that imitate the important three-dimensional structures of viruses but are composed of recombinant proteins and therefore are powerful immunogens but incapable of causing infection and disease. Our proprietary production technology for VLPs employs insect cells and the baculovirus expression system. We believe the main advantage of this technology is a more rapid production of a safe, effective, low-cost vaccine as compared to the labor-intensive egg-based and cell culture based production processes. Other key advantages of this technology are the ability to rapidly respond to emerging threats or new strains and the reduced risk of allergic reaction. Projects in development using our proprietary VLP technology include vaccines for HIV, SARS and pandemic and seasonal influenza. We are also developing E-selectin tolergen for the prevention of secondary strokes.

Critical Accounting Policies and Changes to Accounting Policies

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

There have been no material changes in our critical accounting policies or critical accounting estimates since December 31, 2004, nor have we adopted any accounting policy that has or will have a material impact on our consolidated financial statements. For further discussion of our accounting policies see Note 2 Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 3 in the Notes to the Consolidated Financial Statements for our Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Results of Operations

The following is a discussion of the historical consolidated financial condition and results of operations of Novavax, Inc. and its wholly-owned subsidiary and should be read in conjunction with the consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q. Additional information concerning factors that could cause actual results to differ materially from those in the Company’s forward-looking statements is contained from time to time in the Company’s SEC filings, including but not limited to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Three months ended June 30, 2005 (“2005”) compared to the three months ended June 30, 2004 (“2004”): (In thousands)

Revenues:


	2005			2004		$ Change			% Change
	(unaudited)			(unaudited)
Product Sales:
Vitamins	$	530		$	653	$	(123	)		-19	%
Gynodiol		297			238		59			25	%
AVC Cream		376			158		218			138	%
ESTRASORB		691			1,481		(790	)		-53	%
Other		(5	)		126		(131	)		-104	%

Total product sales		1,889			2,656		(767	)		-29	%
Contract research		426			286		140			49	%
Milestone and licensing fees		––			63		(63	)		-100	%

	$	2,315		$	3,005	$	(690	)		-23	%

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenues for the second quarter of 2005 were $2.3 million, which was $1.2 million higher than the first quarter of 2005 or 141%. Revenues for the second quarter 2005 consisted of product sales of $1.9 million, compared to $2.7 million in 2004; contract revenues of $0.4 million in 2005, compared to $0.3 million in 2004; and milestone and licensing fees of zero in 2005, compared to $0.1 million in 2004. Total revenues for the three months ended June 30, 2005 of $2.3 million, when compared to $3.0 million for 2004, decreased $0.7 million or 23%. The net decrease in 2005 product sales compared to 2004 is primarily attributable to the $1.5 million of initial commercial launch sales of ESTRASORB in June 2004 compared to $0.7 million of ESTRASORB sales in 2005. The major wholesalers depleted their initial launch inventories from June 2004 into the second quarter of 2005 and are now placing additional orders that correspond with their anticipated monthly resell levels.

The increase in contract revenue for 2005 as compared to 2004 is primarily attributable to the first milestone completion on a new contract for 2005. We currently have research contracts totaling over $2.0 million for 2005 and we expect that as contract milestones are met we will continue to see an increase in revenues in subsequent quarters.

Operating costs and expenses:


	2005		2004		$ Change			% Change
	(unaudited)		(unaudited)
Cost of sales	$	2,027	$	1,501	$	526			35	%
Research and development		1,377		1,229		148			12	%
Selling and marketing		1,844		5,556		(3,712	)		-67	%
General and administrative		2,292		2,059		233			11	%

	$	7,540	$	10,345	$	(2,805	)		-27	%

Cost of sales, which includes fixed idle capacity costs at our manufacturing facility, increased to $2.0 million in 2005, compared to $1.5 million in 2004. Of the $2.0 million cost of sales, $1.0 million was due to idle plant capacity costs at our ESTRASORB manufacturing facility, which was operating at higher production levels at this time last year. The remaining $1.0 million is lower than the $1.5 million in 2004 by 33% and correlates to 2005 revenues being lower than 2004 by $0.8 million or 29%. ESTRASORB cost of sales percentages will continue to be high until we can increase production volumes or partner the product, to offset the fixed costs related to the manufacturing process and facility. We are working to design alternative packaging solutions to further streamline production and lower costs of production.

Research and development costs increased from $1.2 million in 2004 to $1.4 million in 2005, or 11%. The increase of $0.2 million was due to research and development spending incurred to support the development of future products.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Selling and marketing costs were $1.8 million in 2005 compared to $5.5 million in 2004. The decrease of $3.7 million, or 67%, was primarily due to a $3.2 million decrease in marketing costs for 2005 compared to 2004 as higher marketing costs were incurred in 2004 for the commercial launch of ESTRASORB. A $0.5 million decrease in selling costs for 2005 compared to 2004 accounted the remaining difference which resulted from the restructuring of our sales force in March 2005.

General and administrative costs were $2.3 million in 2005 compared to $2.1 million in 2004. Increases in legal fees and business development costs accounted for the increase over 2004, offset by other cost saving measures implemented during 2004 and 2005.

Interest Income/(Expense):


	2005			2004			$ Change			% Change
	(unaudited)			(unaudited)
Interest income.	$	42		$	63		$	(21	)		-33	%
Interest expense		(533	)		(440	)		(93	)		-21	%

	$	(491	)	$	(377	)	$	(114	)		-30	%

Net interest expense was $0.5 million for 2005 compared to $0.4 million in 2004. Our 2004 interest expense related primarily to the promissory notes with King of $40.0 million in 2002 though July 2004, at which time such notes were redeemed and we issued new convertible notes totaling $35.0 million to a group of institutional investors. The 2005 increase in interest expense of $0.1 million is due to the increase in the amortization of deferred financing costs related to the new notes.

Net loss:


	2005			2004			$ Change			%Change
	(unaudited)			(unaudited)
Net loss	$	(5,716	)	$	(7,717	)	$	(2,001	)		26	%

Net loss per share	$	(.14	)	$	(.22	)	$	(.08	)		36	%

Weighted shares outstanding		39,553,876			34,779,657			4,774,219			14	%

Net loss for 2005 was $5.7 million or $(.14) per share, as compared to $7.7 million or $(.22) per share for 2004, a decrease of $2.0 million, or $.08 per share. The decrease is primarily due to the decrease in operating expenses of $2.8 million partially offset by the decrease in revenues of $0.7 million, all previously discussed.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six months ended June 30, 2005 (“2005”) compared to the six months ended June 30, 2004 (“2004”): (In thousands)

Revenues:


	2005		2004		$ Change			% Change
	(unaudited)		(unaudited)
Product Sales:
Vitamins	$	752	$	2,107	$	(1,355	)		-64	%
Gynodiol		335		613		(278	)		-45	%
AVC Cream		472		430		42			10	%
ESTRASORB		1,035		1,481		(446	)		-30	%
Other		14		223		(209	)		-94	%

Total product sales		2,608		4,854		(2,246	)		-46	%
Contract research		669		1,246		(577	)		-46	%
Milestone and licensing fees		––		125		(125	)		-100	%

	$	3,277	$	6,225	$	(2,948	)		-47	%

Revenues for 2005 consisted of product sales of $2.6 million, compared to $4.9 million in 2004; contract revenues of $0.7 million, compared to $1.2 million in 2004; and no milestone and licensing fees in 2005, compared to $0.1 million in 2004. Total revenues for 2005 were $3.3 million, as compared to $6.2 million for 2004, a $2.9 million or 47% decrease.

Of the total decrease in revenues, product sales accounted for $2.3 million. This decrease is primarily attributable to an overall reduction in sales of prenatal vitamins, Gynodiol, ESTRASORB and other products. In addition, in 2004 we filled substantial backorders for our newest prenatal vitamins which negatively effects the comparison to 2005. The reduction in 2005 product sales, other than for ESTRASORB, is primarily due to continued generic pressure on our prenatal line. The net decrease in ESTRASORB is primarily attributable to the $1.5 million of commercial launch sales in June 2004 compared to $1.0 million of ESTRASORB sales in 2005. The major wholesalers depleted their initial launch inventories from June 2004 into the second quarter of 2005 and are now placing additional orders that correspond with their anticipated monthly resell levels. In addition, $0.2 million of distributor services fees are included as an offset to revenue for 2005 which were not incurred in 2004.

The decrease in contract revenue for 2005 as compared to 2004 is primarily due to the completion of several contracts during the first quarter of 2004 which resulted in final payments totaling $0.3 million, as well as $0.5 revenue recognized on the NIH contact that was later cancelled in July 2004. This was partially offset by $0.1 million for the completion of the first milestone on a new contract for 2005. We currently have research contracts totaling over $2.0 million for 2005 and we expect that as contract milestones are met we will continue to see an increase in revenues in subsequent quarters.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating costs and expenses:


	2005		2004		$ Change			% Change
	(unaudited)		(unaudited)
Cost of sales	$	4,006	$	1,763	$	2,243			127	%
Research and development		2,599		4,277		(1,678	)		-39	%
Selling and marketing		5,901		8,330		(2,429	)		-29	%
General and administrative		4,413		4,091		322			8	%

	$	16,919	$	18,461	$	(1,542	)		-8	%

Cost of sales, which includes fixed idle capacity costs at our manufacturing facility, increased to $4.0 million in 2005, compared to $1.8 million in 2004. Of the $4.0 million cost of sales, $2.5 million was due to idle plant capacity at our ESTRASORB manufacturing facility, which was operating at higher production levels at this time last year. The remaining $1.5 million for 2005 is lower than the $1.8 million for 2004 but is higher as a percentage of product revenues. ESTRASORB sales in 2005 were 40% of net product sales in 2005 as compared to 31% in 2004, and carry a higher cost of sales than our other products. In the initial periods of ESTRASORB production, the cost of sales percentages have been and will be unusually high until we increase production volumes or partner the product to offset the fixed costs related to the manufacturing process and facility. We are working to design alternative packaging solutions to further streamline production and lower costs of production.

Research and development costs decreased from $4.3 million in 2004 to $2.6 million in 2005. The decrease of $1.7 million, or 39%, was due to manufacturing start-up costs in 2004 being accounted for in the research and development category until April 2004. The 2004 manufacturing costs were incurred to prepare and validate the facility for GMP and Food and Drug Administration compliance and not to build inventory. Beginning in April 2004, manufacturing costs have been included in cost of sales, inventory or written off to idle capacity cost.

Selling and marketing costs were $5.9 million in 2005 compared to $8.3 million in 2004. The decrease of $2.4 million, or 29%, was primarily due to a $3.2 million decrease in marketing costs for 2005 compared to 2004. Marketing costs for 2004 were related to the initial product launch advertising and promotion for ESTRASORB. A $0.8 million increase in selling costs for 2005 compared to 2004 accounts for the remaining difference, and is due to a greater number sales personnel in the first quarter of 2005 as compared to the same period in 2004.

General and administrative costs were $4.4 million in 2005 compared to $4.1 million in 2004. Increases in legal fees and business development costs accounted for the increase over 2004, offset by other cost saving measures implemented during 2004 and 2005.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest Income/(Expense):


	2005			2004			$ Change			% Change
	(unaudited)			(unaudited)
Interest income.	$	103		$	145		$	(42	)		-29	%
Interest expense		(1,063	)		(884	)		(179	)		-20	%

	$	(960	)	$	(739	)	$	(221	)		-30	%

Net interest expense was $1.0 million in 2005 compared to $0.7 million in 2003. Our 2004 interest expense related primarily to the promissory notes with King of $40.00 million in 2003 through July 2004, at which time such notes were redeemed and we issued new convertible notes totaling $35.0 million to a group of institutional investors. The 2005 increase in interest expense of $0.2 million is due to the increase in the amortization of deferred financing costs related to the new notes.

Net loss:


	2005			2004			$ Change		%Change
	(unaudited)			(unaudited)
Net loss	$	(14,602	)	$	(12,975	)	$	1,612		12	%

Net loss per share	$	(.37	)	$	(.37	)	$	—		0	%

Weighted shares outstanding		39,553,876			34,750,944			4,802,932		22	%

Net loss for 2005 was $14.6 million or $(.37) per share, as compared to $13.0 million or $(.37) per share for 2004, an increase of $1.6 million or 12%, with no change in net loss per share, due to the issuance of additional shares in the second half of 2004. The increase in net loss is the result of decreased revenues of $2.9 million and the increase in net interest expense of $0.2 million, partially offset by decreased operating expenses of $1.6 million, all previously described.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Our capital requirements depend on numerous factors, including but not limited to product sales and returns, the ability to enter into a satisfactory license agreement for ESTRASORB, the ability to gain market share, the marketing and manufacturing costs related to the commercialization of ESTRASORB, 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 any patent claims and other intellectual property rights, competing technological and market developments, and changes in our product lines. We plan to have multiple products in various stages of product development and we believe our research and development as well as selling, marketing and general administrative expenses and capital requirements will continue to increase. Future activities, including efficiencies in commercial-scale manufacturing capabilities, and product development are subject to our ability to raise funds through debt or equity financing, or collaborative arrangements with industry partners.


	Six months
	ending
	June 30, 2005
	(in thousands)
Summary of Cash Flows:	(unaudited)
Net cash used in:
Operating activities	$	(12,738	)
Investing activities		(80	)
Financing activities		(616	)

Net change in cash and cash equivalents		(13,434	)
Beginning cash and cash equivalents		17,876

Ending cash and cash equivalents	$	4,442

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash and cash equivalents were $4.4 million at June 30, 2005, a decrease of $13.4 million from the December 31, 2004 balance of $17.9 million. Of the $13.4 million of cash used in the first six months of 2005, $12.7 million was used for operating activities, $0.1 million was used for investing activities and $0.6 million for financing activities. Operating activities consisted of the net loss of $14.6 million, as previously discussed, non-cash activities of $2.0 million, offset by $(0.2) million of net changes in balance sheet accounts. Working capital was $2.7 million at June 30, 2005 compared to $15.4 million at December 31, 2004. The decrease in working capital of $12.7 million was primarily due to the $12.7 million used for operating activities.

As previously mentioned in the Recent Development section, on July 5, 2005, the Company completed an offering of 4,000,000 shares of common stock at $1.00 per share. The stock was issued pursuant to an existing shelf registration statement. The net proceeds after deducting underwriter, legal, accounting and other miscellaneous fees were approximately $3.6 million. As of June 30, on a pro-forma basis, our cash balance would have been approximately $8.0 million. We intend to use the proceeds from this offering for general corporate purposes, including but not limited to our internal research and development programs, such as preclinical and clinical testing and studies of our product candidates and the development of new technologies, and general working capital.

During the remainder of 2005, we anticipate lower cash requirements than we experienced during the first half of 2005 primarily due to the reduction in our sales force that occurred in March 2005 and the reduction in marketing costs. Partially offsetting this is an anticipated increase in research and development expenditures as new product candidates progress to the Investigational New Drug stage. Sales of ESTRASORB have been below our expectations and our 2005 sales for ESTRASORB and subsequent cash receipts will not offset related sales and manufacturing expenses. In summary, we expect our quarterly use of cash to decrease over the remainder of 2005.

We will continue to pursue obtaining capital through product licensing, co-development arrangements on new products, or the public or private sale of securities of the Company. We have demonstrated our ability to obtain capital, as required; however, there can be no assurance that we will be able to obtain additional capital or, if such capital is available, that the terms of any financing will be satisfactory to the Company. Based on our assessment of the availability of capital and our business operations as currently contemplated, in the absence of new financings, licensing arrangements or partnership agreements, we believe we will have adequate resources through 2005. If we are unable to obtain additional capital, we will continue to assess our capital resources and based on those resources we may be required to delay, reduce the scope of, or eliminate one or more of our product research and development programs, downsize our organization, reduce or defer our marketing expenses or reduce general and administrative infrastructure.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Item 3.		Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes during the period from the end of our last fiscal year through June 30, 2005 to the information concerning the Company’s quantitative and qualitative disclosures about market risk set forth in Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 as filed with the SEC.


Item 4.		Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluation the cost-benefit relationship of possible controls and procedures.

Evaluation

The Company carried out an evaluation, under the supervision, and with the participation, of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2005. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2005. Such evaluation did not identify any change in the Company’s internal controls over financial reporting during the quarter ended June 30, 2005 that could materially affect the internal control over financial reporting.

Part II. Other Information

Item 1 – Legal Proceedings

The Company is a defendant in a lawsuit filed by a former director alleging that the Company wrongfully terminated the former director’s stock options. Management believes that the termination and cancellation of the options was in accordance with the terms of the option agreements, following his termination for cause in 1997 by a former parent company, IGI, Inc., and the lawsuit is without merit and intends to vigorously defend the claim. Management cannot reasonably estimate the liability, if any, related to this claim, or the likelihood of an unfavorable settlement. Accordingly, no liability related to this contingency is accrued in the consolidated balance sheet as of June 30, 2005. Any unfavorable determination however, may have a material adverse impact on future operating results.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3 – Defaults upon Senior Securities

Not applicable.

Item 4 – Submission of Matters to a Vote of Security Holders

At the Company’s Annual Meeting of Stockholders held on May 4, 2005, the following proposals were adopted by the votes specified below:

To elect two directors as Class I directors to serve of the Board of Directors for a three-year term expiring at the 2008 Annual Meeting of Stockholders:


	FOR		WITHHELD
Denis M. O’Donnell, M.D.		33,441,605		3,063,060
Nelson M. Sims		33,233,109		3,271,466

In addition to the two Class I Directors elected at this year’s Annual Meeting of Stockholders, the Board is composed of three Class II Directors and three Class III Directors. The continuing Class II Directors, whose terms will expire at the Company’s 2006 Annual Meeting, are Gary C. Evans, John O. Marsh, Jr. and J. Michael Lazarus. The continue Class III Directors, whose terms will expire at the Company’s 2007 Annual Meeting, are Susan B. Bayh, Mitchell J. Kelly and Michael A. McManus, Jr. Subsequent to the Annual Meeting Ms. Bayh have resigned as a directors. On August 8, 2005, Mr. Sims retired as a director.

2. To approve the Novavax, Inc. 2005 Stock Incentive Plan


FOR	AGAINST	ABSTAIN
17,289,403	2,754,779	145,062

To approve the issuance of the share of Common Stock, $.01 par value, of the Company issuable with respect to senior convertible notes in the aggregate principal amount of $35,000,000 issued to certain qualified institutional buyers and accredited investors.


FOR	AGAINST	ABSTAIN
17,864,913	2,021,981	302,350

To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for the current fiscal year ending December 31, 2005


FOR	AGAINST	ABSTAIN
28,122,826	8,262,889	118,950

Item 5 – Other Information

On August 8, 2005, Nelson M. Sims retired as President and Chief Executive Officer of the Company and a director of the Company. Also, on August 8, 2005, Dr. Rahul Singhvi was elected President and Chief Executive Officer and a director of the Company and Ray Hage was elected Chief Operating Officer.

Item 6 – Exhibits

	10.1		Lease Agreement, effective as of April 1, 2005 by, and between United HealthCare Services, Inc., a Minnesota corporation and the Company.

	31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Nelson M. Sims, President and Chief Executive Officer of the Company.

	32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Dennis W. Genge, Vice President and Chief Financial Officer of the Company.


	NOVAVAX, INC. (Registrant)
Date: August 9, 2005	By:	/s/ Dennis W. Genge
	Dennis W. Genge
	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)