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Novavax Inc. Reports Operating Results (10-Q)

November 09, 2009 | About:
10qk

10qk

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Novavax Inc. (NVAX) filed Quarterly Report for the period ended 2009-09-30.

NOVAVAX INC is a specialty biopharmaceutical company engaged in the research, development and commercialization of proprietary products focused on women's health and infectious diseases. Their technology platforms involve the use of proprietary, microscopic, organized, non-phospholipid structures as vehicles for the delivery of a wide variety of drugs and other therapeutic products, including certain hormones, anti-bacterial and anti-viral products and vaccine adjuvants. Novavax Inc. has a market cap of $372.4 million; its shares were traded at around $3.99 with and P/S ratio of 350. Novavax Inc. had an annual average earning growth of 2.1% over the past 10 years.

Highlight of Business Operations:

Research and development costs decreased from $8.7 million for the three months ended September 30, 2008 to $5.3 million for the three months ended September 30, 2009, a decrease of $3.4 million, or 39%. Our research and development costs are incurred in support of the development of our VLP based vaccines. Research and development costs for the three months ended September 30, 2008 included $0.5 million related to the accrual of the remaining lease payments for the Companys Taft Court facility in Rockville, Maryland and $3.0 million related to milestone fees. The balance of the decrease can be attributed to a $0.1 million decrease in employee costs from 2008 to 2009.

Our net other income was $0.7 million for the three months ended September 30, 2009 compared to net other expense of $0.6 million for the three months ended September 30, 2008. The change in net interest other income (expense) resulted from an increase in interest income, a decrease in interest expense and realized gains related to three of the Companys auction rate securities due primarily to their redemption at par value. Interest income for the three months ended September 30, 2008 included the impact of the correction of an error previously discussed related to notes receivable from former directors. Interest expense for the three months ended September 30, 2009 decreased to $20,000 from $0.4 million for the three months ended September 30, 2008, a decrease of $0.4 million, or 95%. The decrease in interest expense is due to early retirement of $17.0 million of the Notes in April 2009 and the payment of the balance of the Notes in July 2009.

We recorded income from discontinued operations of $2.5 million for the three months ended September 30, 2008, which included revenue from discontinued operations of $3.5 million which related to the sale of Estrasorb. In the costs of products sold of $1.0 million in 2008, $0.5 million represents idle capacity costs at our manufacturing facility. The remaining $0.5 million represents the cost of Estrasorb sales to Graceway. In accordance with the supply agreement with Graceway, we sold Estrasorb at a price that was lower than our manufacturing costs. The excess cost over the product cost totaled $0.1 million for the nine months ended September 30, 2008. In August 2008, we completed our obligations to Graceway and exited the facility.

Net loss for the three months ended September 30, 2009 was $7.5 million or $0.08 per share, as compared to $7.8 million or $0.12 per share for the three months ended September 30, 2008, a decrease of $0.3 million or $0.04 per share. The decreased net loss was primarily due to an overall decrease in operating expenses and the change in net other income (expenses), partially offset by the conclusion of our discontinued operations. The weighted shares outstanding increased from 66,521,776 for the three months ended September 30, 2008 to 92,297,263 for the three months ended September 30, 2009 primarily as a result of the 12.5 million shares issued to Cadila, approximately 1.1 million shares issued to ROVI, approximately 5.4 million shares sold under the January Sales Agreement through Wm Smith, approximately 2.0 million shares issued in connection with the early retirement of $17.0 million of the Notes and approximately 1.0 million shares for the payment of the balance of the Notes.

Research and development costs decreased from $18.5 million in 2008 to $14.8 million in 2009, a decrease of $3.7 million, or 20%. Research and development costs for the nine months ended September 30, 2008 included $0.5 million related to the accrual of the remaining lease payments for the Companys Taft Court facility in Rockville, Maryland and $3.0 million related to milestone fees. The remaining decrease was primarily due to a $0.1 million decrease in employee related costs.

Net other expense increased from $0.6 million for 2008 to $1.2 million for 2009, an increase of $0.6 million, or 99%. Interest income decreased to $0.2 million for 2009 from $0.7 million for 2008, a decrease of $0.5 million. The decrease is primarily due to the correction of an error previously discussed related to notes receivable from former directors and a decrease in our average cash, cash equivalents and short-term investment balances, resulting from our continuing investment in research and development activities surrounding our vaccine candidates. Interest expense decreased from $1.3 million in 2008 to $0.8 million in 2009, a decrease of $0.5 million or 39%. The decrease in interest expense is due to the early retirement of $17.0 million of the Notes in April 2009 and the payment of the balance of the Notes in July 2009. Additionally, we recorded $1.3 million as other expense related to other than temporary impairment losses on our auction rate securities, which was partially offset by $0.7 million in realized gains.

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