Revenue

6 Months Ended

Jun. 30, 2022

U.S. Government Agreements, Grants and Licenses

Revenue

Revenue

The Company's accounts receivable included $165.6 million and $419.7 million related to amounts that were billed to customers and $29.0 million and $35.3 million related to amounts which had not yet been billed to customers as of June 30, 2022 and December 31, 2021, respectively. During the six months ended June 30, 2022, changes in the Company's accounts receivables and deferred revenue balances were as follows (in thousands):

	December 31, 2021		Additions	Deductions	June 30, 2022
Contract receivables:
Accounts receivable	$	454,993	808,713	(1,069,173)	$	194,533
Contract liabilities:
Deferred revenue(1)	$	1,595,472	49,107	(128,432)	$	1,516,147

(1)    Amount is comprised of $701.5 million and $1.4 billion of current Deferred revenue and $814.6 million and $172.5 million of non-current Deferred revenue as of June 30, 2022 and December 31, 2021, respectively.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied), excluding amounts related to sales-based royalties, was approximately $5 billion as of June 30, 2022. The timing to fulfill performance obligations related to grant agreements will depend on the results of the Company's research and development activities, including clinical trials, and delivery of doses. The timing to fulfill performance obligations related to APAs will depend on timing of product manufacturing, receipt of marketing authorizations for additional indications, delivery of doses based on customer demand, and the ability of the customer to request variant vaccine in place of the prototype NVX-CoV2373 under certain of our APAs. Failure to meet regulatory milestones, product volume, or delivery timing obligations under the Company’s APA agreements may require the Company to refund portions of upfront payments or result in reduced future payments, which could result in a material and adverse effect on our unsatisfied performance obligations. The remaining unfilled performance obligations not related to grant agreements or APAs are expected to be fulfilled in less than 12 months.

Grants

The Company recognized grant revenue as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
U.S. government partnership (“OWS”)	$	107,774	$	239,493	$	207,075	$	603,053
U.S. Department of Defense (“DoD”)	—		1,041		—		20,185
Coalition for Epidemic Preparedness Innovations (“CEPI”)	—		31,955		—		93,516
Bill & Melinda Gates Foundation (“BMGF”)	—		—		—		2,628
Total grant revenue	$	107,774	$	272,489	$	207,075	$	719,382

U.S. Government Partnership

The Company’s U.S. government partnership consists of an agreement (“the “OWS Agreement”) with Advanced Technology International, the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with the partnership formerly known as Operation Warp Speed (“OWS”). In July 2021, the U.S. government instructed the Company to prioritize alignment with the FDA on the Company's analytic methods before conducting additional U.S. manufacturing and further indicated that the U.S. government would not fund additional U.S. manufacturing until such alignment was made. In June 2022, the U.S. government agreed to the manufacture and delivery of approximately 3 million doses of NVX-CoV2373 under the OWS Agreement as the Company had completed alignment with the FDA’s analytic methods. The Company updated its estimate-at-completion to reflect the impact of this authorization to the recognition of the fixed fee under the contract. In July 2022, the Company formally modified the OWS Agreement to provide for an initial delivery to the U.S. government of approximately 3 million doses of NVX-CoV2373, and the Company modified its existing agreement with the U.S. Department of Defense (“DoD”) to provide for an initial delivery of approximately 0.2 million doses of NVX-CoV2373 (see Note 15).

Royalties and Other

During the three and six months ended June 30, 2022, the Company recognized $1.7 million and $9.2 million, respectively, in revenue related to sales-based royalties. During the three months ended June 30, 2022, the Company recognized a $20.0 million milestone payment upon the first sale of NVX-CoV2373 in Japan. During the three months ended June 30, 2021, the Company recognized $23.5 million in revenue related to sales-based royalties. During the three months ended March 31, 2021, the Company did not recognize any revenue related to sales-based royalties.

Advance Purchase Agreements (APAs)

Under the terms of the Company’s contracted supply commitment with Gavi, which includes the supply obligation of its licensed partner, Serum Institute of India Private Limited (“SIIPL”), 1.1 billion doses of NVX-CoV2373 are to be made available to countries participating in the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. The Novavax portion is a supply agreement that contemplates that the Company will manufacture and distribute 350 million doses. Under that agreement with Gavi, the Company received an upfront payment of $350 million from Gavi in 2021 and an additional payment of $350 million in the first quarter of 2022 related to the Company’s achieving WHO Emergency Use Listing. Although Novavax is prepared to deliver the quantities of NVX-CoV2373 doses to Gavi under the terms of the supply agreement, the Company was notified by Gavi of its intent to seek to revise the number and timing of doses of NVX-CoV2373 supplied by Novavax under such agreement. Furthermore, Gavi may seek partial or full recovery of the prior nonrefundable payments it has made to Novavax. The Company’s position is that Gavi has no contractual right to recover prior nonrefundable payments. To date, Novavax has not received an order from Gavi and the timing and quantities of future orders to deliver NVX-CoV2373 to the COVAX facility are unclear.

Under the terms of the Company’s SARS-CoV-2 Vaccine Supply Agreement, originally entered into in October 2020 (the “Original UK Supply Agreement”) with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland (the “Authority”), the Authority agreed to purchase 60 million doses of NVX-CoV2373. In July 2022, the Company entered into an Amended and Restated SARS-CoV-2 Vaccine Supply Agreement (the “Amended and Restated UK Supply Agreement”) with the Authority, under which the Authority agreed to purchase a minimum of 1 million doses and up to an additional 15 million doses of NVX-CoV2373, with the number of additional doses contingent on the Company’s timely achievement of supportive recommendations from the Joint Committee on Vaccination and Immunisation (the “JCVI”) (see Note 15).

The Company has an APA with the European Commission (“EC”) acting on behalf of various European Union member states to supply a minimum of 20 million and up to 100 million initial doses of NVX-CoV2373, with the option for the EC to purchase an additional 100 million doses up to a maximum aggregate of 200 million doses in one or more tranches, through 2023. The Company is in the process of finalizing a revised delivery schedule for the remaining 42 million doses of the 70 million previously committed doses under the APA that were originally scheduled for delivery during the first and second quarters of 2022. In July and August 2022, the Company was notified by the EC that it was cancelling 5 million doses of its prior commitment originally scheduled for delivery in the first and second quarters of 2022, in accordance with the APA, and reducing the order to 65 million doses (see Note 15).

Collaboration, License, and Supply Agreements

Serum Institute

The Company previously granted SIIPL exclusive and non-exclusive licenses for the development, co-formulation, filling and finishing, registration, and commercialization of NVX-CoV2373. SIIPL agreed to purchase the Company’s Matrix-MTM adjuvant and the Company granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373. The Company and SIIPL equally split the revenue from SIIPL’s sale of NVX-CoV2373 in its licensed territory, net of agreed costs. The Company also has a supply agreement with SIIPL and Serum Life Sciences Limited (“SLS”) under which SIIPL and SLS supply the Company with NVX-CoV2373 for commercialization and sale in certain territories, as well as a contract development manufacture agreement with SLS, under which SLS manufactures and supplies finished vaccine product to the Company using antigen drug substance and Matrix-M™ adjuvant supplied by the Company. The Company has expanded its license and supply arrangements with SIIPL to include its proprietary COVID-19 variant antigen candidate(s) so that SIIPL can manufacture and commercialize a vaccine targeting COVID-19 variants, including the Omicron subvariants, and supply such variant vaccine to the Company.

Takeda Pharmaceutical Company Limited

The Company has a collaboration and license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) under which the Company granted Takeda an exclusive license to develop, manufacture, and commercialize NVX-CoV2373 in Japan. Under the agreement, Takeda purchases the Company’s Matrix-M™ adjuvant to manufacture NVX-CoV2373 and the Company is entitled to receive payments from Takeda based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of NVX-CoV2373 in the low to middle double-digit range. During the three months ended June 30, 2022, the Company recognized a milestone payment of $20.0 million upon the first sale in Japan.

SK bioscience, Co., Ltd.

The Company has a collaboration and license agreement with SK bioscience, Co., Ltd. (“SK bioscience”) to manufacture and commercialize NVX-CoV2373 for sale to the governments of Korea, Thailand, and Vietnam. SK bioscience pays a royalty in the low to middle double-digit range. Additionally, the Company has a manufacturing supply arrangement with SK bioscience under which SK bioscience supplies the Company with the antigen component of NVX-CoV2373 for use in the final drug product globally, including product to be distributed by the COVAX Facility, which was established to allocate and distribute vaccines equitably to participating countries and economies. In July 2022, the Company signed an additional agreement with SK bioscience for the technology transfer of the Company’s proprietary COVID-19 variant antigen materials so that SK bioscience can manufacture the drug substance targeting COVID-19 variants, including the Omicron subvariants (see Note 15). The companies also signed an agreement to manufacture and supply the Novavax COVID-19 vaccine in a prefilled syringe.

Other Supply Agreements

The Company continues to assess its manufacturing needs and intends to modify its global manufacturing footprint consistent with its contractual obligations to supply, and anticipated demand for, NVX-CoV2373, and in doing so, recognizes that significant costs may be incurred.